--------------------------------------------------------------------------------

Exhibit 10.1
 

 
SUBLEASE
 
THIS SUBLEASE (this “Sublease”) is entered into as of ______________________,
2012 (the “Effective Date”) by and between TYCO HEALTHCARE GROUP LP, a Delaware
limited partnership (“Sublandlord”), and SUPPORT.COM, a Delaware corporation
(“Subtenant”).
 
WITNESSETH:
 
A.            Under that certain Lease dated as of November 3, 2006 (the “Prime
Lease”) between HCP LS Redwood City, LLC (the “Prime Landlord”), as successor to
Slough Redwood City, LLC, as landlord, and Sublandlord, as successor in interest
to FoxHollow Technologies, Inc., as tenant, the Prime Landlord leased to
Sublandlord certain premises described in the Prime Lease as the “Premises”,
which premises are commonly known as 900 Chesapeake Drive, Redwood City,
California (the “Prime Premises”).
 
B.            Under the terms and conditions of this Sublease, Subtenant desires
to sub-sublease from Sublandlord a portion of the Prime Premises containing
approximately 21,620 rentable square feet of space (the “Premises”) located on
the second floor of the Prime Premises, which portion is more particularly shown
on Exhibit A, attached hereto and incorporated herein.
 
NOW THEREFORE, in consideration of the mutual covenants set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Sublandlord and Subtenant agree as follows:
 
ARTICLE 1
DEFINITIONS
 
Section 1.1         Defined Terms.  Capitalized terms used herein and not
otherwise defined shall have the same meanings given to them in the Prime Lease.
 
ARTICLE 2
DEMISE; TERM
 
Section 2.1         Demise.  Conditioned upon receipt by Sublandlord of Prime
Landlord’s Consent (hereinafter defined) as required by Article 11 of the Prime
Lease, Sublandlord hereby subleases and demises to Subtenant, and Subtenant
hereby takes and subleases from Sublandlord, the Premises on the terms and
conditions and subject to the provisions set forth herein.
 
Section 2.2         Commencement Date.  The term (the “Term”) of this Sublease
shall commence on August 1, 2012 (the “Commencement Date”).
 
Section 2.3         Expiration Date.  Subject to the terms, covenants, or
conditions of this Sublease, the Term shall end at 11:59 p.m. on February 18,
2017, provided that if the Prime Lease terminates or expires earlier, for any
reason whatsoever, then this Sublease shall also terminate at such date and
time.  The date of expiration of this Sublease shall be referred to herein as
the “Expiration Date.”
 
 
Page 1 of 20

--------------------------------------------------------------------------------

 

Section 2.4         Early Access.  Upon the later of (i) Sublandlord’s receipt
of Prime Landlord’s Consent, or (ii) April 1, 2012, Sublandlord will provide
Subtenant with access to the Premises for the purpose of installing cables,
network equipment, and furniture and performing the Improvement Work
(hereinafter defined) approved by Sublandlord under Article 5 of this
Sublease.  Subtenant has no right to conduct business or otherwise use the
Premises during such early entry period.  Subtenant’s access shall be subject to
the following conditions: (1) Sublandlord is given prior written notice of any
such entry, (2) Subtenant has delivered to Sublandlord evidence that the
insurance required to be maintained by Subtenant under this Sublease has been
obtained, and (3) Subtenant shall indemnify, defend, and hold Sublandlord
harmless from any loss or damage to property or the Prime Premises, and any
death or personal injury to any person or persons arising out of such entry into
the Premises.  Any work in the Premises shall be performed in accordance with
Article 5 of this Sublease.  Any early entry by Subtenant shall be on the terms
of this Sublease, but no Rent shall accrue during the early entry
period.  Subtenant shall conduct its activities therein at its risk and
expense.  As used herein, “Improvement Work” means the construction of 3-6
private offices or conference rooms and a reception area in the Premises.
 
ARTICLE 3
CONDITION OF THE PREMISES; USE; ACCESS
 
Section 3.1         AS-IS Condition of Premises.  Subtenant accepts the Premises
“AS-IS” in its presently existing condition, and Sublandlord shall not be
required to perform any demolition work, improvement work, or tenant-finish work
therein or to provide any allowances therefor.  Subtenant acknowledges that (a)
it was given a full opportunity to inspect the Premises; (b) as of the
Commencement Date, Subtenant has inspected the Premises; and (c) neither
Sublandlord nor its agents or employees have made any representations or
warranties regarding the Premises, the condition of the Premises, or the
suitability or fitness of the Premises for the conduct of Subtenant’s business,
or for any other purpose.
 
Section 3.2         Permitted Uses.  To the extent permitted by the Prime Lease
and under the terms and conditions of the Prime Lease, Subtenant shall use and
occupy the Premises only for general office use, and for no other purpose
whatsoever.  Subtenant’s use is subject to receipt of all necessary approvals
from the City of Redwood City and all other governmental agencies with
jurisdiction.  Subtenant shall not use or occupy or suffer or permit the use or
occupancy of the Premises or any part thereof in any manner which, in Landlord’s
or Sublandlord’s judgment, might adversely affect or interfere (i) with any
services required to be furnished by Landlord, or (ii) with the proper and
economical rendition of any such service or (iii) with the use or enjoyment of
any part of the Building by Landlord, Sublandlord, or any other tenant,
subtenant or occupant.  Subtenant shall comply with all laws relating to the
use, condition, access to, and occupancy of the Premises and will not commit
waste.
 
Section 3.3         Access.  Either Sublandlord or a property management company
hired by Sublandlord shall control access to the Premises and the Prime Premises
by using a badging system or other program developed by Sublandlord.  Subtenant
shall cooperate with such system or program.  In connection with such system,
Sublandlord has the right to enter the Premises under the terms and conditions
of Section 12.1 of the Prime Lease.  Subtenant acknowledges that Sublandlord
shall have no obligation to provide guard service or other security measures for
the benefit of the Premises.  Subtenant hereby assumes all responsibility for
the protection of Subtenant and its agents, employees, contractors, invitees and
guests, and the property thereof, from acts of third parties, including keeping
doors locked and other means of entry to the Premises closed.
 
 
Page 2 of 20

--------------------------------------------------------------------------------

 

Section 3.4         Server Room. Notwithstanding anything to the contrary
contained herein, Sublandlord shall have an easement to enter and use that
certain server room located within the Premises for the installation,
maintenance, repair, replacement and vertical distribution of various types of
cabling and wiring and any equipment that may be required in connection
therewith from time to time during the Term.  Subtenant shall permit
Sublandlord, and Sublandlord's agents and contractors, access to such server
room upon at least one (1) Business Days’ notice, except in the event of an
emergency when no prior notice is necessary.  In addition, Sublandlord has an
easement to maintain in place the existing conduits, cabling, wiring, and
equipment in the server room.  Sublandlord shall use commercially reasonable
efforts to minimize any interference with the Subtenant’s use and occupancy of
the Premises by reason of the exercise of Sublandlord’s rights under this
section.
 
                   Section 3.5          Hazardous Substances.  It is
acknowledged and agreed that Subtenant shall have no liability or responsibility
to remediate the Premises (or to reimburse Sublandlord for the costs of the
same) with respect to any hazardous substances (as defined in the Prime Lease)
on, under, or in the Premises to the extent that any such hazardous substances
are in existence in the Premises before the Commencement Date, except to the
extent any inspection, clean-up, removal, or remediation results from or is
required in connection with the Improvement Work or any alterations or work
performed by Subtenant to the Premises.
 
ARTICLE 4
RENT
 
Section 4.1         Fixed Rent.  Commencing upon the Commencement Date,
Subtenant shall pay to Sublandlord, without notice, billing, demand, deduction,
offset or abatement, in lawful money of the United States of America, fixed rent
(“Fixed Rent”) in the following amounts during the following period of time:
 
 
Time Period
Fixed Rent Per Square Foot of the Premises Per Month
Monthly Fixed Rent
August 1, 2012 – December 31, 2012
$1.09
$23,565.80
January 1, 2013 –
June 30, 2013
$1.55
$33,511.00
July 1, 2013 –
June 30, 2014
$1.60
$34,592.00
July 1, 2014 –
June 30, 2015
$1.65
$35,673.00
July 1, 2015 –
June 30, 2016
$1.70
$36,754.00
July 1, 2016 –
February 18, 2017
$1.75
$37,835.00

 
 
3 of 21

--------------------------------------------------------------------------------

 
 
Fixed Rent shall be paid to the notice address for Sublandlord set forth in
Section 14.1 of this Sublease.  Fixed Rent is payable in equal monthly
installments in the amount of the Monthly Fixed Rent for the applicable time
period, and such amount is due in advance on or before the first day of each and
every calendar month during the Term, provided, however, that 1 monthly
installment of Fixed Rent (i.e., Fixed Rent for December 2012) is due and
payable on the Effective Date.  If the Commencement Date is not the first day of
a calendar month, then the first monthly installment of Fixed Rent shall be
prorated based upon the number of days during the month from and after the
Commencement Date until and including the last day of the calendar month in
which the Commencement Date occurs.  In addition, the monthly installment of
Fixed Rent due for any partial month at the end of the Term shall be prorated
based upon the number of days remaining in the month from and after the last day
of the Term.
 
Notwithstanding anything above to the contrary, Fixed Rent shall be
conditionally abated during the first four months of the Term.  Commencing with
the first day of the fifth month of the Term, Subtenant shall make Fixed Rent
payments as otherwise provided herein.  Notwithstanding such abatement of Fixed
Rent all other sums due under this Sublease shall be payable as provided in this
Sublease.  This abatement of Fixed Rent is conditioned upon Subtenant’s full and
timely performance of all of its obligations under the Sublease.  If at any time
during the Term a default by Subtenant occurs, and said default remains uncured
beyond any applicable notice and cure period (and any extensions thereof), then
the abatement of Fixed Rent provided for in this section shall immediately
become void, and Subtenant shall promptly pay to Landlord, in addition to all
other amounts due to Sublandlord under this Sublease, the full amount of all
Fixed Rent herein abated.
 
Section 4.2         Additional Rent.  Subtenant shall pay to Sublandlord
additional rent (“Additional Rent”) consisting of all other sums of money as
shall become due and payable by Subtenant hereunder (for default in the payment
of which Sublandlord shall have the same remedies as for a default in the
payment of Fixed Rent).  If not otherwise specified in this Sublease, then
Additional Rent shall be payable within 20 Business Days after delivery of an
invoice from Sublandlord.  Fixed Rent and Additional Rent are herein
collectively called “Rent.”  There shall be no abatement of, deduction from,
counterclaim or setoff against Rent, and the obligations of Subtenant with
respect to any Additional Rent shall survive the expiration or any sooner
termination of the Term.  Subtenant shall pay to Sublandlord, as Additional
Rent, any and all sums of money that  are or may become payable by Sublandlord
to Prime Landlord under the Prime Lease caused by the actions or omissions of
Subtenant or any of Subtenant’s agents, employees, affiliates, contractors,
invitees, subtenants, assignees, or anyone claiming by, through or under
Subtenant (each, including Subtenant, a “Subtenant Party”) and any and all
charges of Prime Landlord under the Prime Lease to the extent related to a
request by Subtenant or caused by Subtenant’s failure to perform its obligations
under this Sublease.
 
 
4 of 21

--------------------------------------------------------------------------------

 
 
ARTICLE 5
ALTERATIONS
 
Section 5.1         Alterations.  Subtenant acknowledges that notwithstanding
anything to the contrary contained in the Prime Lease, including without
limitation Section 7.1 thereof, Subtenant is not authorized to make or do any
alterations, modifications or improvements in or to the Premises without first
obtaining the written approval of Sublandlord, such consent not to be
unreasonably withheld, and which may be conditioned upon, among other things,
Subtenant’s agreement to remove any such alterations, modifications or
improvements at Subtenant’s sole expense prior to the expiration or termination
of the Term, unless Prime Landlord otherwise requires such alterations,
modifications or improvements to remain.
 
Section 5.2         Sublandlord Costs.  Subtenant shall reimburse Sublandlord
for all out-of-pocket costs payable by Sublandlord with regard to reviewing any
proposed alterations and all other reasonable out-of-pocket costs Sublandlord
may incur in connection with reviewing Subtenant’s proposed alterations
including, without limitation, engineer’s, architects, attorney’s and other
consultants’ fees and costs.
 
ARTICLE 6
DAMAGE TO OR DESTRUCTION OF THE PREMISES
 
Section 6.1         Termination.  If the Building or Premises are damaged by
fire or other casualty and Sublandlord shall, pursuant to the terms of the Prime
Lease, elect to terminate the Prime Lease, then this Sublease shall cease and
terminate on the date of termination of the Prime Lease, and Rent shall be
apportioned from the time of the damage.  Otherwise, this Sublease shall remain
in full force and effect.  Sublandlord shall have no obligation hereunder to
repair any portion of the Building or Premises, whether or not this Sublease
shall be terminated, which obligation shall be Prime Landlord’s to the extent
required under the Prime Lease.  If all or any part of the Premises is damaged
and this Sublease is not terminated, then Subtenant shall (to the extent that
Prime Landlord is not so obligated) promptly and with due diligence repair and
restore any personal property, leasehold improvements, and alterations installed
in the Premises.
 
ARTICLE 7
INSURANCE
 
Section 7.1         Required Coverage.  Subtenant shall maintain, at its
expense, for the Term, the insurance required to be obtained by Sublandlord as
“Tenant” under the Prime Lease, and such coverage shall meet or exceed the
requirements for Sublandlord’s coverage under the Prime Lease including without
limitation Sections 10.1(a) and (e) of the Prime Lease.  Subtenant shall name
Sublandlord, Prime Landlord, and designees of each as additional insureds.  All
such policies shall be issued by reputable insurance companies reasonably
approved by Sublandlord and Prime Landlord, and such policies cannot be modified
or cancelled without at least 30 days’ prior written notice to Sublandlord.  On
or before the earlier of the Commencement Date or the date of early access under
Section 2.4 of this Sublease, Subtenant shall furnish to Sublandlord said
policies or certificates thereof evidencing that the required coverage is being
maintained, together with such evidence as Sublandlord shall deem reasonably
satisfactory of the payment of premiums thereon.
 
 
5 of 21

--------------------------------------------------------------------------------

 
 
ARTICLE 8
SUBTENANT’S INDEMNITY

Section 8.1         Subtenant’s Indemnity.  Subtenant shall indemnify, defend
and hold harmless Sublandlord and its affiliates and their respective officers,
directors and employees from and against any and all claims, suits, judgments,
losses, costs, obligations, damages, expenses, and liabilities including,
without limitation, reasonable attorneys’ fees and disbursements (collectively,
“Claims”) in any way arising out of, relating to, or connected with (a) any
breach, default or failure to perform on the part of a Subtenant Party under
this Sublease, (b) any act or omission of a Subtenant Party that constitutes a
default under the Prime Lease, (c) any negligence or willful misconduct of a
Subtenant Party, (d) the use or occupancy of the Premises by a Subtenant Party,
(e) any holdover by a Subtenant Party beyond the expiration of the Term, and (f)
any actions taken by Sublandlord following Subtenant’s request of Sublandlord to
take action pursuant to the terms hereof or the Prime Lease.  The provisions of
this section shall survive the expiration or earlier termination of this
Sublease.
 
ARTICLE 9
SUBLEASE; ASSIGNMENT

Section 9.1         Prohibition.  Subtenant shall not (a) assign this Sublease,
(b) permit this Sublease to be assigned by operation of law or otherwise, (c)
sublease the Premises in whole or in part, (d) permit the Premises or any
portion therein to be occupied by any person(s) other than Subtenant, or (e)
pledge or encumber this Sublease, the term and estate hereby granted or the
rentals hereunder (collectively, a “Transfer”) without first obtaining in each
instance Prime Landlord’s consent and Sublandlord’s consent.
 
Section 9.2         Consent Conditions.  If (i) Prime Landlord has consented to
the proposed Transfer and (ii) Subtenant is not in default of any of Subtenant’s
obligations under this Sublease beyond any applicable cure period, then
Sublandlord’s consent (which must be in writing and in form reasonably
satisfactory to Sublandlord) to the proposed Transfer shall not be unreasonably
withheld, conditioned, or delayed.
 
Section 9.3         Permitted Transfer.  Notwithstanding Section 9.1 above,
Subtenant has the right to assign this Sublease without Sublandlord’s consent to
any entity that wholly owns  Subtenant or is wholly owned by Subtenant, provided
that Subtenant gives notice to Sublandlord at least 10 days before any such
permitted transfer is effective.
 
 
6 of 21

--------------------------------------------------------------------------------

 

Section 9.4         Miscellaneous Transfer Provisions.  Subtenant shall be
solely responsible for all costs required to be paid to Prime Landlord pursuant
to the terms of the Lease in connection with the review, consideration, and
documentation of any Transfer proposed by Subtenant hereunder.  The acceptance
of rent by Sublandlord from any other person shall not be deemed to be a waiver
by Sublandlord of any provision of this Sublease or to be a consent to any
Transfer.  Consent to one Transfer shall not be deemed to constitute consent to
any subsequent  Transfer.  Each Transfer shall be subject to all of the
covenants, agreements, terms, provisions and conditions contained in this
Sublease.  Notwithstanding anything herein to the contrary, Subtenant shall and
will remain fully liable for the payment of Rent and for the performance of all
the covenants, agreements, terms, provisions, and conditions contained in this
Sublease on the part of Subtenant to be performed.  Subtenant further agrees
that notwithstanding any such subletting, no other and further subletting of the
Premises by Subtenant or any person claiming through or under Subtenant shall or
will be made except upon compliance with and subject to the provisions of this
section.  If Sublandlord shall decline to give its consent to any proposed
Transfer in circumstances where it has been determined that Sublandlord had the
right to do so under this Sublease, then Subtenant shall indemnify, defend and
hold harmless Sublandlord against and from any and all loss, liability, damages,
costs and expenses (including, but not limited to, reasonable counsel fees)
resulting from any claims that may be made against Sublandlord by the proposed
assignee or sublessee or by any brokers, finders or other persons claiming a
commission, finder’s fee or similar compensation in connection with the proposed
Transfer.  If this Sublease is assigned, or if the Premises or any part thereof
is subleased or occupied by anybody other than Subtenant, Sublandlord may, after
default by Subtenant beyond applicable notice and grace periods expressly
provided for in this Sublease, collect rent from the assignee, subtenant, or
occupant, and apply the net amount collected to the Rent herein reserved, but no
assignment, subleasing, occupancy or collection shall be deemed a waiver of the
provisions of this Sublease, the acceptance of the assignee, subtenant or
occupant as Subtenant, or a release of Subtenant from the further performance by
Subtenant of covenants on the part of Subtenant contained in this Sublease.
 
Section 9.5         Excess Compensation.  If Prime Landlord and Sublandlord
approve a Transfer, then Subtenant shall pay to Sublandlord, immediately upon
receipt thereof, 50% of the excess of (1) all compensation and rent received by
Subtenant for a Transfer less the costs reasonably incurred by Subtenant with
unaffiliated third parties in connection with such Transfer (i.e., brokerage
commissions, sublease review and consent fees and tenant finish work) over
(2) the Rent under this Sublease allocable to the portion of the Premises
covered thereby.
 
ARTICLE 10
SURRENDER; HOLDOVER
 
Section 10.1       Surrender of Premises.  Subtenant shall at Subtenant’s sole
expense and no later than the Expiration Date or earlier termination of this
Sublease and subject to all of the terms of this Sublease and the Prime Lease,
vacate and surrender the Premises to Sublandlord in the condition that
Sublandlord is required to surrender the Premises to Prime Landlord under the
Prime Lease (including without limitation items that Subtenant is permitted and
elects to remove or is required to remove under the provisions of the Prime
Lease).  Notwithstanding the foregoing, in connection with the surrender of the
Premises, Subtenant has no obligation to remove any alterations existing in the
Premises and installed by Sublandlord before the Effective Date.
 
 
7 of 21

--------------------------------------------------------------------------------

 
 
Section 10.2       Holdover by Subtenant.  In addition to the holdover
provisions set forth in the Prime Lease, Subtenant shall indemnify and hold
harmless Sublandlord for, from, and against any and all liabilities, losses,
obligations, damages (direct or indirect), penalties, claims, costs and expenses
(including, without limitation, reasonable attorneys’ fees and other charges)
that are paid, suffered or incurred by Sublandlord as a result of the failure
of, or the delay by, Subtenant in so surrendering the Premises including,
without limitation, all sums payable by Sublandlord to Prime Landlord, or other
liabilities of Sublandlord to Prime Landlord under the Prime Lease resulting
from such delay.  Notwithstanding anything to the contrary contained in this
Sublease, the acceptance of any rent paid by Subtenant shall not preclude
Sublandlord from commencing and prosecuting a holdover or summary eviction
proceeding.
 
ARTICLE 11
DEFAULT
 
Section 11.1       Default.  Any act or omission by Subtenant that would
constitute a breach or default by the Tenant under the Prime Lease shall
constitute a default on the part of Subtenant hereunder.  In addition, Subtenant
shall be in default under this Sublease in the event: (i) Subtenant fails to pay
any installment of Fixed Rent or Additional Rent or any other sum payable by it
hereunder; or (ii) Subtenant fails to perform or violates any non-monetary
covenant or condition set forth herein and such default or violation continues
for 15 days after written notice thereof is delivered to Subtenant (or if such
default is of a nature such that it is curable but cannot practicably be cured
within 15 days, then, so long as Subtenant commences such cure within the
initial 15 days and is diligently taking all steps necessary to effect such
cure, Subtenant shall have additional time to effect such cure, not to exceed 30
days, unless such additional time will cause a default to extend past any
applicable cure period under the Prime Lease, in which case the cure period
under this Sublease shall be shortened to 2 days less than the cure period under
the Prime Lease).  In the event of any breach or default by Subtenant hereunder
or under the Prime Lease, Sublandlord shall have each and all of the rights and
remedies afforded Prime Landlord under the Prime Lease.  In addition to such
rights or remedies afforded to Prime Landlord under the Prime Lease, Sublandlord
shall have the right, but not the obligation to cure any such breach or default
by Subtenant (and enter upon the Premises in connection therewith if necessary),
without being liable for damages, and Subtenant shall thereupon be obligated to
reimburse Sublandlord immediately upon demand for all costs (including costs of
settlements, defense, court costs and attorneys’ fees) that Sublandlord may
incur in effecting the cure of such breach or default, plus interest thereon at
the interest rate set forth in the Prime Lease.
 
Section 11.2       Right to Cure Subtenant’s Defaults.  If Subtenant shall at
any time fail to make any payment or perform any other obligation of Subtenant
hereunder within the applicable cure period, if any, then Sublandlord shall have
the right, but not the obligation, after 10 days’ notice to Subtenant, or
without notice to Subtenant in the case of any emergency or to avoid a default
under the Prime Lease, and without waiving or releasing Subtenant from any
obligations of Subtenant hereunder, to make such payment or perform such other
obligation of Subtenant in such manner and to such extent as Sublandlord shall
deem reasonably necessary, and in exercising any such right, to pay any
reasonable and direct costs and expenses, employ attorneys, and incur and pay
reasonable attorneys’ fees.  Subtenant shall pay to Sublandlord upon demand all
sums so paid by Sublandlord and all reasonable and direct costs and expenses of
Sublandlord in connection therewith.
 
 
8 of 21

--------------------------------------------------------------------------------

 
 
ARTICLE 12
PRIME LEASE
 
Section 12.1       Incorporation of Prime Lease.  Subtenant hereby acknowledges
and agrees that it has received and reviewed a copy of the Prime Lease.  Except
as otherwise set forth below, and to the extent consistent with the provisions
of this Sublease, the terms, provisions, covenants, and conditions of the Prime
Lease are hereby incorporated by reference as if set forth at length herein on
the following basis: Subtenant hereby assumes and agrees to perform all of the
obligations of Sublandlord under the Prime Lease with respect to the Premises,
accruing or payable during the Term in the manner and time required under the
Prime Lease.  The term “Landlord” therein shall refer to Sublandlord herein, its
successors and assigns; the term “Tenant” therein shall refer to Subtenant
herein, its permitted successors and assigns; the term “Premises” therein shall
refer to the Premises; and the term “Lease” therein shall refer to this
Sublease.  Notwithstanding anything herein to the contrary, the following
sections or articles of the Prime Lease are not incorporated:  The term
“Premises” as set forth in Section 1.1(a) except to the extent that the same is
applicable to the Premises under this Sublease, and the terms (and any related
references) “Service Annex”, “Exterior Storage Area”, and “Emergency Generator
Area”, Sections 2.1, 2.2, 2.3, 2.6, and 3.1 (except the first and last sentences
of Section 3.1(d), which are incorporated herein by reference), Article 5,
Sections 7.2(c), 8.1(b), 9.1, 9.6(c), 10.1(b), 10.1(c), 10.1(d), 10.6, 11.1,
11.2(b), and 11.2(c), lines 8 through 18 of Section 15.1, Article 16, Sections
17.1, 17.15, 17.16, and 17.20, and Exhibit B.  In addition, in the event of any
conflict between the terms of the Prime Lease and this Sublease, then as between
Sublandlord and Subtenant, the terms of this Sublease shall prevail.  Any
reference in the Prime Lease to the obligations assumed by Subtenant hereunder
which accrue during the Term shall survive and extend beyond the termination of
this Sublease.  This Sublease is subject to the terms, covenants, agreements,
provisions, and conditions of the Prime Lease; and the expiration or termination
of the Prime Lease shall automatically cause a termination of this Sublease.  If
Sublandlord receives notice from Prime Landlord that (i) Sublandlord is in
default under the Prime Lease and such default would give Prime Landlord the
right, immediately or after the lapse of a period of time, to cancel or
terminate the Prime Lease, or (ii) the Prime Lease is terminating, then in
either event, Sublandlord shall, within three (3) Business Days of receipt of
such notice, provide a copy of such notice to Subtenant.
 
Section 12.2       Landlord Right.  In any case where under the Prime Lease,
Prime Landlord reserves or is granted any right, including, without limitation,
the right to enter the Premises, said right shall inure to the benefit of Prime
Landlord as well as Sublandlord with respect to the Premises.
 
Section 12.3       Consent. In any case where under the Prime Lease the consent
or approval of Prime Landlord is required, the consent or approval of both Prime
Landlord and Sublandlord shall be required.  In determining whether to grant or
withhold any consent or approval hereunder, Sublandlord may expressly condition
the same upon the consent or approval of Prime Landlord.  If Subtenant requests
the consent of Sublandlord under any provisions of this Sublease, then Subtenant
shall, as a condition to doing any such act and the receipt of such consent,
reimburse Sublandlord for any and all reasonable costs and expenses incurred by
Sublandlord in connection therewith, including, without limitation, reasonable
attorneys’ fees and amounts charged by Prime Landlord.
 
 
9 of 21

--------------------------------------------------------------------------------

 

Section 12.4       Indemnification Under Prime Lease.  As of the Effective Date,
any provisions in the Prime Lease requiring indemnification by Sublandlord of
Prime Landlord (and its partners, shareholders, officers, directors, affiliates,
agents, employees and contractors) or releasing Prime Landlord from liability
shall be deemed an indemnification or release, as applicable, running from
Subtenant to both Prime Landlord and Sublandlord (and their partners,
shareholders, officers, directors, affiliates, agents, employees and
contractors).  Each and every indemnification set forth in this Sublease, or
incorporated into this Sublease from the Prime Lease, shall survive the
expiration or earlier termination of the Term of this Sublease.
 
Section 12.5       Time Limits.  Wherever there are time limits contained in the
Prime Lease (i) calling or allowing for the service of notice by the Tenant
thereunder, (ii) pertaining to events of default by the Tenant thereunder, or
(iii) within which the Tenant thereunder must perform any act or observe any
term, covenant or condition thereunder, the same shall be deemed amended for the
purposes of this Sublease to provide for time limits of 3 days less and
deadlines that are 3 days earlier than those provided for in the Prime Lease.
 
Section 12.6       Landlord Covenants, Representations and Warranties.  Any
covenant, representation, warranty, or other undertaking of Prime Landlord in
the Prime Lease shall not be deemed to be made by, or otherwise constitute
obligations of, Sublandlord under this Sublease.  Sublandlord shall use
commercially reasonable efforts to cause Prime Landlord to perform its
obligations under the Prime Lease and to assist Subtenant, at Subtenant’s sole
expense and without liability to Sublandlord, in seeking: (i) such services and
rights from Prime Landlord; and (ii) Prime Landlord’s consent to any action for
which the Prime Lease or this Sublease require Prime Landlord’s consent;
provided such commercially reasonable efforts shall not require Sublandlord to
incur any out-of-pocket expenses to cause Prime Landlord to perform its
obligations under the Prime Lease unless Subtenant agrees in writing to pay, and
does pay, such expenses as and when incurred.
 
Section 12.7       Subtenant Action.  Subtenant shall not take any action or
fail to take any action in connection with the Premises as a result of which
Sublandlord would be in violation of any of the provisions of the Prime Lease,
and Subtenant hereby agrees to defend, indemnify, and hold Sublandlord harmless
from and against all loss, cost, liability, damage, and expense (including, but
not limited to, reasonable attorneys’ fees and court costs) caused by or arising
out of Subtenant’s action or inaction as a result of which Sublandlord is
alleged and/or determined to be in violation of any of the provisions of the
Prime Lease.
 
Section 12.8       Compliance with Prime Lease.  So long as this Sublease is in
effect and Subtenant is not in default under this Sublease beyond any cure
period expressly provided in this Sublease, Sublandlord shall comply with its
obligations under the Prime Lease, the failure of which would reasonably be
likely to result in Prime Landlord bringing an action to terminate the Prime
Lease.
 
 
10 of 21

--------------------------------------------------------------------------------

 
 
ARTICLE 13
BROKERAGE
 
Section 13.1      Representation and Indemnification.  Subtenant represents that
in the negotiation of this Sublease it has not dealt with any real estate broker
or salesman other than Jones Lang LaSalle (“Subtenant’s Broker”) and CBRE, Inc.
(collectively, the “Brokers”), and Subtenant shall indemnify Sublandlord and
hold it harmless from any and all losses, damages and expenses arising out of
any inaccuracy or alleged inaccuracy of such representation, including court
costs and reasonable attorneys’ fees.  Sublandlord shall have no liability for
brokerage commissions arising out of a sublease or assignment by Subtenant, and
Subtenant shall and does hereby indemnify Sublandlord and hold Sublandlord
harmless from any and all liability for brokerage commissions arising out of any
such sublease or assignment.  Sublandlord represents that in the negotiation of
this Sublease it has not dealt with any real estate broker or salesman other
than the Brokers, and Sublandlord shall indemnify Subtenant and hold it harmless
from any and all losses, damages, and expenses arising out of any inaccuracy or
alleged inaccuracy of such representation, including court costs and reasonable
attorneys’ fees.  Sublandlord shall pay a commission to Subtenant’s Broker under
a separate agreement.
 
ARTICLE 14
NOTICES
 
Section 14.1       Notices.  Any notice, demand, consent, approval, direction,
agreement or other communication required or permitted hereunder or under any
other documents in connection herewith shall be in writing and shall be directed
as follows:
 
If to Sublandlord:
 
Covidien
15 Hampshire Street
Mansfield, Massachusetts 02048
Attn: Michael T. Cowhig, Jr.

With a copy to:
 
Husch Blackwell LLP
190 Carondelet Plaza, Suite 600
St. Louis, MO 63105
Attn: Melissa Smith-Groff, Esq.

If to Subtenant:
 
Support.com
900 Chesapeake Drive
Redwood City, CA
Attn: Shelly Schaffer

or to such changed address as a party hereto shall designate to the other
parties hereto from time to time in writing.  Notices shall be (i) personally
delivered (including delivery by Federal Express, United Parcel Service or other
comparable nation-wide overnight courier service) to the offices set forth
above, in which case they shall be deemed delivered on the date of delivery (or
first Business Day thereafter if delivered other than on a Business Day or after
5:00 p.m. Eastern Time to said offices); or (ii) sent by certified mail, return
receipt requested, in which case they shall be deemed delivered on the date
shown on the receipt unless delivery is refused or delayed by the addressee in
which event they shall be deemed delivered on the third day after the date of
deposit in the U.S. Mail.
 
 
11 of 21

--------------------------------------------------------------------------------

 
 
ARTICLE 15
SECURITY DEPOSIT
 
Section 15.1       Security Deposit.  Simultaneously with Subtenant’s execution
of this Sublease, Subtenant shall deliver to Sublandlord, as security for the
faithful performance and observance by Subtenant of all of the terms, covenants,
and conditions of this Sublease on Subtenant’s part to be performed and
observed, a security deposit in the amount of $37,835.00.  If Subtenant defaults
with respect to any provision of this Sublease, including payment of the Rent,
Sublandlord may use, apply, draw upon or retain all or any part of the Security
Deposit to the extent necessary for the payment of any Rent, or to compensate
Sublandlord for any other loss, cost or damage which Sublandlord may suffer by
reason of Subtenant’s default.  If any portion of the Security Deposit is so
used, applied, or drawn upon, Subtenant shall, within 10 days after notice
thereof, deposit cash with Sublandlord in an amount sufficient to restore the
Security Deposit to its original amount.  Subtenant’s failure to do so shall be
a breach of this Sublease.  Sublandlord shall not, unless otherwise required by
law, be required to keep the Security Deposit separate from its general funds,
nor pay interest to Subtenant.  If Subtenant shall fully and faithfully perform
every provision of this Sublease to be performed by it, the Security Deposit or
any balance thereof shall be returned to Subtenant (or to the last transferee of
Subtenant’s interest hereunder) after the expiration of the Term (or sooner
termination of this Sublease) and upon Subtenant’s vacation of the Premises in
accordance with this Sublease.  If the Sublease is assigned, then the Security
Deposit shall be transferred to the assignee, and thereupon Sublandlord shall be
discharged from further liability with respect thereto.
 
ARTICLE 16
FURNITURE
 
Section 16.1       Lease of Furniture.  In consideration of the obligations of
Subtenant under this Sublease, Sublandlord leases to Subtenant  the items of
furniture and furnishings described and/or identified on Exhibit C attached
hereto  (the “Furniture”).  Subtenant agrees to accept the Furniture on the
Commencement Date “as is, where is, with all faults”, and without representation
or warranty of any kind, nature or description relative to the same, including
representations concerning merchantability, fitness or fitness for a particular
purpose, all of which are hereby expressly disclaimed by Sublandlord and waived
by Subtenant.  During the Term, Subtenant shall (x) insure the Furniture against
loss or damage by fire or other casualty (and all of the provisions of this
Sublease applicable to insurance required to be carried by Subtenant shall be
applicable thereto) and (y) maintain the Furniture in at least as good a
condition and working order as when delivered to Subtenant, subject to
reasonable wear and tear and damage by fire or other casualty.  Upon request by
Sublandlord, Subtenant shall deliver to Sublandlord within 5 Business Days of
such request, evidence that Subtenant is maintaining the insurance coverage with
regard to the Furniture as required pursuant to this section.
 
 
12 of 21

--------------------------------------------------------------------------------

 

Section 16.2       Transfer of Furniture.  As of August 1, 2015 (the “Furniture
Transfer Date”), and provided Subtenant is not in default under this Sublease,
or at Sublandlord’s option following a termination of this Sublease before such
date, Sublandlord shall be deemed to have transferred, conveyed, and delivered
to Subtenant all of the Furniture then in the Premises in its “as is, where is
condition, with all faults”, and without representation or warranty of any kind,
nature or description relative to the same, including representations concerning
merchantability, fitness or fitness for a particular purpose.  Sublandlord and
Subtenant hereby agree that little or no value will be attributable to the
Furniture at the time of the transfer of the Furniture to Subtenant and that no
part of the Fixed Rent payable by Subtenant hereunder will be attributable to
the transfer of the Furniture by Sublandlord to Subtenant.  Notwithstanding the
foregoing, if sales tax is due to the City of Redwood City or State of
California in connection with the transfer of the Furniture to Subtenant under
this Sublease (“Sales Tax”), Subtenant hereby agrees to pay as and when due such
amounts, and Subtenant further agrees to save, defend, indemnify and hold
Sublandlord harmless from any obligation for any Sales Tax which may now or
hereafter be imposed upon Sublandlord or Subtenant in connection with such
transfer of the Furniture, including interest and penalties thereon, and any
loss, liability, cost or expense that Sublandlord may incur by reason of
Subtenant’s failure to pay the Sales Tax in a timely manner.  The provisions of
the preceding sentence shall survive the expiration or earlier termination of
this Sublease.  If this Sublease is terminated before the Furniture Transfer
Date, as a result of a default by Subtenant, then Sublandlord shall retain
ownership of the Furniture (unless Sublandlord elects to have transferred the
Furniture to Subtenant as provided above) and Subtenant shall surrender the
Furniture to Sublandlord in at least as good a condition and working order as
when delivered to Subtenant, subject to reasonable wear and tear and damage by
fire or other casualty.
 
ARTICLE 17
LANDLORD RIGHTS; LIMITATION OF OBLIGATIONS; APPROVAL
 
Section 17.1       Prime Landlord Rights. Subtenant acknowledges any rights
specifically reserved by Prime Landlord under the Prime Lease; and Subtenant
further acknowledges that its possession and use of the Premises is subject to
such rights.  Except as may be otherwise set forth herein, Subtenant hereby
releases Sublandlord from all liability in connection with Prime Landlord’s
exercise of such rights.  Sublandlord shall not incur any liability whatsoever
to Subtenant for any injury, inconvenience, incidental or consequential damages
incurred or suffered by Subtenant as a result of the exercise by Prime Landlord
of any of the rights reserved to Prime Landlord under the Prime Lease, nor shall
such exercise constitute a constructive eviction or a default by Sublandlord
hereunder.  Subtenant’s obligations to pay Rent and any other charges due under
this Sublease shall not be reduced or abated in the event that Prime Landlord
fails to provide any service, to perform any maintenance or repairs, or to
perform any other obligation of Prime Landlord under the Prime
Lease.  Notwithstanding anything herein to the contrary, to the extent
Sublandlord is entitled to any abatement under the Prime Lease for interruption
of any service affecting the Premises during the Term or otherwise under the
Prime Lease, Subtenant shall be entitled to the same abatement of Rent on its
behalf, but only to the extent that (i) such abatement is actually received by
Sublandlord, and (ii) Subtenant is not in default hereunder beyond any
applicable cure period expressly provided for in this Sublease.
 
 
13 of 21

--------------------------------------------------------------------------------

 

Section 17.2       Obligations and Liability under Prime Lease.  Notwithstanding
anything to the contrary contained in this Sublease or the Prime Lease (as
incorporated into this Sublease), Subtenant agrees that Sublandlord shall not be
obligated to perform, and shall not be liable or responsible for the performance
by or failure of performance by Prime Landlord, of any of its obligations under
the Prime Lease or under law (including without limitation provide services;
comply with any laws or requirements of governmental authorities for the
maintenance or operation of the Premises; provide any reimbursements, credits,
rebates allowance or other concession or pay any costs; maintain, repair,
restore, alter, service or insure the Premises (including without limitation any
obligations to rebuild, repair or restore the Premises)); and Subtenant shall
have no claim against Sublandlord for any default of the Prime
Landlord.  Sublandlord does not warrant that any of the services referred to in
this Sublease, or any other services that Prime Landlord may supply, will be
free from interruption, and Subtenant acknowledges that any such services may
become unavailable or be suspended by reason of accident, repairs, inspections,
alterations or improvements, or by delays beyond a party’s reasonable control,
including without limitation, governmental restrictions or  regulations, order
of civil or military authority, governmental preemption, strikes, labor
disputes, lock-outs, shortage of labor or materials, default of any building or
construction contractor, Acts of God, fire, earthquake, floods, explosions,
actions of the elements, extreme weather conditions, enemy action, civil
commotion, riot or insurrection, fire or other unavoidable casualty.
 
ARTICLE 18
EFFECTIVENESS; RECOGNITION AGREEMENT

Section 18.1      Consent.  This Sublease is expressly conditioned upon Prime
Landlord’s written consent thereto (the “Consent”), and this Sublease shall not
take effect unless and until the Consent has been obtained.  Promptly following
delivery of an executed original of this Sublease by Subtenant to Sublandlord,
Sublandlord will request the Consent.  In connection with requesting such
Consent, Sublandlord shall (i) have no liability to Subtenant in the event that
Prime Landlord does not give the Consent, and (ii) not be required to pay any
consideration to Prime Landlord in order to obtain such Consent in excess of
fees and reimbursements expressly provided for in the Prime Lease (such excess,
the “Additional Compensation”), or to commence a legal proceeding against Prime
Landlord.  If Prime Landlord requests or requires to be paid Additional
Compensation in order to obtain such Consent, and Sublandlord elects not to pay
the same, then Sublandlord shall notify Subtenant, and Subtenant shall have the
right (but not the obligation) to pay such Additional Compensation within 10
days after Sublandlord’s notice to Subtenant that Sublandlord has elected not to
pay the same.  Subtenant shall furnish all reasonably requested information and
documentation requested by Prime Landlord under the Prime Lease in evaluating
the request for the Consent.
 
Section 18.2       Termination.  If the Consent is not obtained within forty
five (45) days after the Effective Date, then either party may terminate this
Sublease upon written notice at any time prior to Sublandlord obtaining the
Consent.
 
 
14 of 21

--------------------------------------------------------------------------------

 
 
ARTICLE 19
SIGNAGE

Section 19.1       Signage.  Notwithstanding anything to the contrary contained
in Section 7.5 of the Prime Lease, Subtenant’s right to signage within the
Building shall be limited to having its name included on the Building monument
sign, as well as on any internal directory signs located within the Building,
all at Subtenant’s sole cost and expense.  All such signage shall be subject to
the requirements of the Prime Lease and Prime Landlord’s approval rights
thereunder.
 
ARTICLE 20
PARKING

Section 20.1       Parking.  Subtenant shall be entitled to the non-exclusive
and non-reserved use of three (3) automobile parking stalls per 1,000 rentable
square feet of space in the Premises.  Sublandlord reserves all rights with
respect to any designated visitor parking spots described in Section 17.20 of
the Prime Lease.
 
ARTICLE 21
MISCELLANEOUS

Section 21.1       No Recording.  Subtenant shall not record this Sublease or
any memorandum of this Sublease without the prior written consent of
Sublandlord, which consent may be withheld or denied in the sole and absolute
discretion of Sublandlord, and any recordation by Subtenant shall be a material
breach of this Sublease.  Subtenant grants to Sublandlord a power of attorney to
execute and record a release releasing any such recorded instrument of record
that was recorded without the prior written consent of Sublandlord.
 
Section 21.2       Waiver of Right to Jury Trial.  Sublandlord and Subtenant
hereby mutually waive, to the extent permitted by law, the right to a jury trial
in any action or legal proceeding between the parties arising out of this
Sublease or Subtenant’s occupancy of the Premises.
 
Section 21.3       Integration; Successors and Assigns, etc.  This Sublease
(including the exhibits hereto which are hereby made a part hereof) contains the
entire agreement between the parties, and any agreement hereafter made shall be
ineffective to change, modify or discharge it in whole or in part unless such
agreement is in writing and signed by the party against whom enforcement of the
change, modification or discharge is sought.  This Sublease shall bind and inure
to the benefit of the parties hereto and their respective successors and their
respective assigns.
 
Section 21.4       Time of Essence.  Time is of essence in respect of each and
every term, covenant and condition of this Sublease.
 
Section 21.5      Severability.  If any of the provisions of this Sublease or
the application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Sublease, or the application of
such provision or provisions to persons or circumstances other than those as to
whom or which it is held invalid or unenforceable, shall not be affected
thereby, and every provision of this Sublease shall be valid and enforceable to
the fullest extent permitted by law.
 
 
15 of 21

--------------------------------------------------------------------------------

 

Section 21.6       Business Days Definition.  Any reference to “Business Days”
means all days except Saturdays, Sundays, and the days on which banking
institutions in Redwood City, California are authorized or obligated under law
to be closed.
 
Section 21.7       Representations and Warranties of Subtenant. Subtenant hereby
represents and warrants to Sublandlord that (i) each person signing this
Sublease on behalf of Subtenant is duly authorized to execute and deliver this
Sublease on behalf of Subtenant; and (ii) the execution, delivery and
performance of this Sublease has been duly and validly authorized in accordance
with the relevant organizational documents of Subtenant.
 
Section 21.8       Representations and Warranties of Sublandlord. Sublandlord
hereby represents and warrants to Subtenant that (i) each person signing this
Sublease on behalf of Sublandlord is duly authorized to execute and deliver this
Sublease on behalf of Sublandlord; (ii) the execution, delivery and performance
of this Sublease has been duly and validly authorized in accordance with the
relevant organizational documents of Sublandlord; (iii) the Prime Lease is in
full force and effect; and (iv) Sublandlord has not caused any of the
circumstances described in Section 14 of the Prime Lease to occur and remain
uncured.
 
Section 21.9       Counterparts.  This Sublease may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties hereto and delivered to each of the other parties
hereto.  The exchange of signature pages by facsimile or portable document
format (.pdf) transmission shall constitute effective delivery of such signature
pages and may be used in lieu of the original signature pages for all purposes.
 
                    Section 21.10     Recitals.  The recitals set forth at the
beginning of this Sublease are incorporated into this Sublease by reference as
if fully set forth herein.
 
[Remainder of Page Intentionally Blank; Signatures Appear on Next Two Pages]
 
 
16 of 21

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF Sublandlord has duly executed this Sublease as of the day and
year first above written.
 

 
SUBLANDLORD:
     
TYCO HEALTHCARE GROUP LP
       
By:
   
Name:
   
Title:
 

 
17 of 21

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF Subtenant has duly executed this Sublease as of the day and
year first above written.
 

 
SUBTENANT:
       
SUPPORT.COM
       
By:
   
Name:
   
Title:
 

 
 
18 of 21

--------------------------------------------------------------------------------

 

EXHIBIT A
 
Premises
 
[diagram.jpg]

 
19 of 21

--------------------------------------------------------------------------------

 

EXHIBIT B
 
Prime Lease
  
LEASE

   
Landlord:
Slough Redwood City, LLC
   
Tenant:
FoxHollow Technologies, Inc.
   
Date:
November 3, 2006

TABLE OF CONTENTS
 
1.
PROPERTY
1
 
1.1
Lease of Premises
1
 
1.2
Landlord’s Reserved Rights
2
2.
TERM
2
 
2.1
Term
2
 
2.2
Early Possession
3
 
2.3
Condition of Premises
5
 
2.4
Acknowledgment of Rent Commencement Date
9
 
2.5
Holding Over
9
 
2.6
Options to Extend Term
10
3.
RENTAL
10
 
3.1
Minimum Rental
10
   
(a)
Rental Amounts
10
   
(b)
Rental Amounts During First Extended Term
11
   
(c)
Rental Amounts During Second Extended Term
11
   
(d)
Square Footage of Premises
12
 
3.2
Late Charge
12
4.
TAXES
13
 
4.1
Personal Property
13
 
4.2
Real Property
13
5.
OPERATING EXPENSES
13
 
5.1
Payment of Operating Expenses
13
 
5.2
Definition of Operating Expenses
14
 
5.3
Determination of Operating Expenses
16
 
5.4
Final Accounting for Expense Year
16
 
5.5
Proration
17
6.
UTILITIES
18
 
6.1
Payment
18
 
6.2
Interruption
18
7.
ALTERATIONS; SIGNS
19
 
7.1
Right to Make Alterations
19
 
7.2
Title to Alterations
19
 
7.3
Tenant Trade Fixtures
21
 
7.4
No Liens
22
 
7.5
Signs
22
8.
MAINTENANCE AND REPAIRS
22

 
 
 

--------------------------------------------------------------------------------

 
 

           
8.1
Landlord’s Obligation for Maintenance
22
   
(a)
Repairs and Maintenance
22
   
(b)
Tenant’s Remedy
23
 
8.2
Tenant’s Obligation for Maintenance
23
   
(a)
Good Order, Condition and Repair
23
   
(b)
Landlord’s Remedy
24
   
(c)
Condition upon Surrender
24
9.
USE OF PROPERTY
24
 
9.1
Permitted Use
24
 
9.2
[Intentionally Deleted]
24
 
9.3
No Nuisance
24
 
9.4
Compliance with Laws
25
 
9.5
Liquidation Sales
25
 
9.6
Environmental Matters
25
10.
INSURANCE AND INDEMNITY
32
 
10.1
Insurance
32
 
10.2
Quality of Policies and Certificates
34
 
10.3
Workers’ Compensation; Employees
35
 
10.4
Waiver of Subrogation
35
 
10.5
Increase in Premiums
35
 
10.6
Indemnification
36
 
10.7
Blanket Policy
36
11.
SUBLEASE AND ASSIGNMENT
36
 
11.1
Assignment and Sublease of Building
36
 
11.2
Rights of Landlord
37
12.
RIGHT OF ENTRY AND QUIET ENJOYMENT
39
 
12.1
Right of Entry
39
 
12.2
Quiet Enjoyment
39
13.
CASUALTY AND TAKING
39
 
13.1
Damage or Destruction
39
 
13.2
Condemnation
41
 
13.3
Reservation of Compensation
42
 
13.4
Restoration of Improvements
42
14.
DEFAULT
43
 
14.1
Events of Default
43
   
(a)
Abandonment
43
   
(b)
Nonpayment
43
   
(c)
Other Obligations
43
   
(d)
General Assignment
43
   
(e)
Bankruptcy
43
   
(f)
Receivership
44
   
(g)
Attachment
44
   
(h)
Insolvency
44
 
14.2
Remedies upon Tenant’s Default
44
 
14.3
Remedies Cumulative
45

 
 
- ii -

--------------------------------------------------------------------------------

 
 

         
15.
SUBORDINATION, ATTORNMENT AND SALE
45
 
15.1
Subordination to Mortgage
45  
15.2
Sale of Landlord’s Interest
46
 
15.3
Estoppel Certificates
46
 
15.4
Subordination to CC&R’s
46
 
15.5
Mortgagee Protection
47
16.
SECURITY
48
 
16.1
Deposit
48
   
(a)
Cash Security Deposit
48
   
(b)
 Letter of Credit
48
17.
MISCELLANEOUS
50
 
17.1
 Notices
50
 
17.2
Successors and Assigns
51  
17.3
No Waiver
51
 
17.4
Severability
51
 
17.5
Litigation Between Parties
52
 
17.6
Surrender
52
 
17.7
Interpretation
52
 
17.8
Entire Agreement
52
 
17.9
Governing Law
52
 
17.10
No Partnership
52
 
17.11
Financial Information
52
 
17.12
Costs
53
 
17.13
Time
53
 
17.14
Rules and Regulations
53
 
17.15
Brokers
53
 
17.16
Memorandum of Lease
54
 
17.17
Organization Authority
54
 
17.18
Execution and Delivery
54
 
17.19
Survival
54
 
17.20
Parking
54
 
17.21
Approvals
55

 
EXHIBITS
     
EXHIBIT A- 1
Site Plan (The Center)
   
EXHIBIT A-2
Building Plan/Service Annex
   
EXHIBIT B
Workletter
   
EXHIBIT C
Form of Acknowledgment of Rent Commencement Date
   
EXHIBIT D
Service Annex Space Allocation; Landlord Priority Area
 

 
 
- iii -

--------------------------------------------------------------------------------

 
 
LEASE
 
THIS LEASE (“Lease”) is made and entered into as of November 3, 2006 (the
“Lease Commencement Date”), by and between SLOUGH REDWOOD CITY, LLC, a Delaware
limited liability company (“Landlord”), and FOXHOLLOW TECHNOLOGIES, INC., a
Delaware corporation (“Tenant”).
 
THE PARTIES AGREE AS FOLLOWS:
 
1. PROPERTY
 
                1.1           Lease of Premises.
 
(a)           Landlord leases to Tenant and Tenant hires and leases from
Landlord, on the terms, covenants and conditions hereinafter set forth, the
premises (the “Premises”) of 45,794 square feet of space (subject to the
measurement provisions in Section 3.1(d) below) consisting of (i) the building
commonly known as 900 Chesapeake Drive (the “Building”) located in the Britannia
Seaport Centre (referred to interchangeably herein as the “Center” or the
“Property”) in the City of Redwood City, County of San Mateo, State of
California; (ii) those portions of the Service Annex (as defined in Section 2.3
below) designated as being either for the exclusive use of the occupant of the
Building, or for shared, nonexclusive use by the occupant of the Building and
the occupant of the Adjacent Building (as defined in Section 2.3 below); and
(iii) the Exterior Storage Area and Emergency Generator Area (as described in
Section 2.3 below) immediately adjacent to the Building, which Exterior Storage
Area and Emergency Generator Area, respectively, are for the exclusive use of
the occupant of the Building but are not fully enclosed and therefore are not
included in the square footage calculation for the Premises. The location of the
Building within the Center is depicted on the site plan attached hereto as
Exhibit A-1 and incorporated herein by this reference (the “Site Plan”); the
footprint of the Building is depicted on the drawing attached hereto as Exhibit
A-2 and incorporated herein by this reference (the “Building Plan”). The parking
areas, driveways, sidewalks, landscaped areas and other portions of the Center
that lie outside the exterior walls of the buildings now or hereafter existing
from time to time in the Center, as depicted in the Site Plan and as hereafter
modified by Landlord from time to time in accordance with the provisions of this
Lease, are sometimes referred to herein as the “Common Areas.”
 
(b)           As an appurtenance to Tenant’s leasing of the Premises pursuant to
Section 1.1 (a), Landlord hereby grants to Tenant, for the benefit of Tenant and
its employees, suppliers, shippers, customers and invitees, during the term of
this Lease, the non-exclusive right to use, in common with others entitled to
such use, (i) those portions of the Common Areas improved from time to time for
use as parking areas, driveways, sidewalks, landscaped areas, or for other
common purposes, and (ii) all access easements and similar rights and privileges
relating to or appurtenant to the Center and created or existing from time to
time under any access easement agreements, declarations of covenants, conditions
and restrictions, or other written agreements now or hereafter of record with
respect to the Center, subject however to any

 
 

--------------------------------------------------------------------------------

 

limitations applicable to such rights and privileges under applicable law, under
this Lease and/or under the written agreements creating such rights and
privileges.
 
                1.2           Landlord’s Reserved Rights. To the extent
reasonably necessary to permit Landlord to exercise any rights of Landlord and
discharge any obligations of Landlord under this Lease, Landlord shall have, in
addition to the right of entry set forth in Section 12.1 hereof, the following
rights: (i) to make changes to the Common Areas, including, without limitation,
changes in the location, size or shape of any portion of the Common Areas, and
to construct and/or relocate parking structures and/or parking spaces in the
Center; (ii) to close temporarily any of the Common Areas for maintenance or
other reasonable purposes; (iii) to construct, alter or add to other buildings
and Common Area improvements in the Center; (iv) to use the Common Areas while
engaged in making additional improvements, repairs or alterations to the Center
or any portion thereof; and (v) to do and perform such other acts with respect
to the Common Areas and the Center as may be necessary or appropriate. Landlord
shall not exercise rights reserved to it pursuant to this Section 1.2 in such a
manner as to cause any material diminution of Tenant’s rights, or any material
increase of Tenant’s obligations, under this Lease, or in such a manner as to
leave Tenant without reasonable parking or reasonable access to the Premises or
otherwise to materially impair Tenant’s ability to conduct its activities in the
normal manner; provided, however, that the foregoing shall not limit or restrict
Landlord’s right to undertake reasonable construction activity and Tenant’s use
of the Premises shall be subject to reasonable temporary disruption incidental
to such activity diligently prosecuted.
 
2. TERM
 
2.1           Term.
 
(a)   The term of this Lease shall commence on the Lease Commencement Date as
defined above. Tenant’s obligation to pay Operating Expenses under this Lease
shall commence on February 1, 2007, as provided in Section 5.3 below. Tenant’s
obligation to pay minimum rental under this Lease shall commence on the earlier
to occur of (i) the later of March 1, 2007 or the date which is one (1) month
after the date of Substantial Completion (as defined below) of Landlord’s Work
pursuant to Section 2.3 below, or (ii) the date which is one (1) month after the
date on which Tenant commences actual business operations in at least a material
portion of the Premises (the earlier of the applicable dates determined under
the foregoing clauses (i) and (ii) being hereinafter referred to as the “Rent
Commencement Date”) and shall end on the day immediately preceding the tenth
(10th) anniversary of the Rent Commencement Date (the “Termination Date”),
unless sooner terminated or extended as hereinafter provided.
 
                                (b)   Notwithstanding the foregoing provisions:
 
(i)            The Rent Commencement Date shall be delayed by one (1) day for
each day, if any, by which Tenant’s Substantial Completion of the Tenant
Improvements to be constructed initially in the Premises by Tenant pursuant to
this Lease and the Workletter, as defined below (“Tenant’s Initial Work”) is
delayed beyond February 1, 2007 by one or more Landlord Delays. “Substantial
Completion” means completion in

 
- 2 -

--------------------------------------------------------------------------------

 

all material respects, subject only to completion of punch list items that do
not materially impair Tenant’s use of the Premises; similar phrases (such as
“Substantially Completed”) shall have the same substantive meaning, with such
grammatical modification as may be necessary to fit the specific context in
which the phrase is used. “Landlord Delay” means any actual and material delay
in Substantial Completion of Tenant’s Initial Work to the extent caused by (A)
any delay by Landlord, beyond the applicable response periods prescribed in the
Workletter, in responding to any request by Tenant for approval of plans,
specifications or changes pursuant to the Workletter, or (B) any delay, after
January 19, 2007, in the Substantial Completion of Landlord’s Work (as defined
below); provided that no Landlord Delay shall be deemed to commence prior to the
later to occur of (x) the date of actual commencement of the actual and material
delay in completion of Tenant’s Initial Work or (y) the date Tenant notifies
Landlord in writing that Tenant believes a Landlord Delay has commenced, which
notice shall describe in reasonable detail the nature of the event claimed by
Tenant to constitute the Landlord Delay and the nature of the actual delay
claimed by Tenant to be occurring in the construction of Tenant’s Initial Work.
 
(ii)           In applying the provisions of subparagraph (b)(i) above and
Section 2.2(a) below, Tenant and Landlord shall each us reasonable, good faith
efforts to identify and adopt any commercially reasonable “work arounds” or
alternative plans to avoid or minimize the adverse impact of any Landlord
Delays, provided that the phrase “commercially reasonable” shall not be
construed to require either party to incur any material increase in such party’s
costs, net of any economic benefits reasonably accruing to such party, in order
to mitigate the effects of a Landlord Delay.
 
2.2           Early Possession. Tenant shall have the right to enter and use the
Premises for the purpose of constructing tenant improvements in the Premises
(subject to all the terms and conditions of Article 7 below and of the
Workletter as defined below), installing fixtures and furniture, laboratory
equipment, computer equipment, telephone equipment, low-voltage data wiring and
personal property and performing other similar work preparatory to the
commencement of Tenant’s business in the Premises, beginning upon the date
Landlord notifies Tenant in writing that the Premises are available for such
early access by Tenant (the “Construction Access Date”), which Construction
Access Date shall in all events be no later than five (5) business days after
the Lease Commencement Date. Such right of Tenant to enter early to construct
tenant improvements shall be subject to Landlord’s right concurrently to perform
or complete the performance of Landlord’s Work (including, but not limited to,
any applicable provisions of this Lease or of the Workletter relating to
relative priorities of Landlord’s Work and of Tenant’s concurrent activities in
the Premises). Tenant’s early occupancy and possession pursuant to this Section
2.2 shall be subject to and upon all of the terms and conditions of this Lease
(including, but not limited to, conditions relating to the payment of utilities
and maintenance of required insurance by Tenant), except that Tenant shall have
no obligation to pay minimum rental for any period prior to the Rent
Commencement Date, Tenant shall have no obligation to pay Operating Expenses for
any period prior to February 1, 2007 (as provided in Section 5.3 below), and
such early possession shall not advance or otherwise affect the Rent
Commencement Date or Termination Date determined under

 
- 3 -

--------------------------------------------------------------------------------

 

Section 2.1. Tenant shall indemnify Landlord and its agents and employees to the
extent provided in Section 10.6(a) below and in Paragraph 4(c) of the Workletter
in connection with Tenant’s early entry upon the Premises hereunder.
 
(a)           During all periods when both parties and/or their respective
contractors or consultants are concurrently performing work on the Property or
in the Premises prior to the Rent Commencement Date, subject to the express
provisions of this paragraph (a) and its subparagraphs, neither party shall
unreasonably interfere with or delay the work of the other party and/or its
contractors or consultants, and both parties shall mutually coordinate and
cooperate with each other, and shall cause their respective contractors and
consultants to work in harmony with and to mutually coordinate and cooperate
with the other’s contractors and consultants, respectively, to minimize any
interference or delay by either party with respect to the other party’s work.
The coordination and cooperation obligations set forth in this paragraph shall
be subject to the following:
 
(i)            As Tenant proceeds with the design and planning of Tenant’s
Initial Work and as Landlord proceeds with its planning for Landlord’s Work
pursuant to Section 2.3(a) below, the parties agree to cooperate diligently,
reasonably and in good faith to develop a mutually agreeable construction
schedule for Landlord’s Work and for Tenant’s Initial Work (any such
construction schedule mutually approved by the parties, and as modified from
time to time [if applicable] by mutual agreement of the parties, being referred
to in this Lease as the “Approved Construction Schedule”). To the extent
Landlord completes and delivers the principal elements of Landlord’s Work within
the time deadlines established in the Approved Construction Schedule (if any),
it shall be conclusively presumed that the timing of Landlord’s completion and
delivery of such elements did not give rise to any Landlord Delay. If the
parties fail or are unable to agree upon an Approved Construction Schedule, such
failure or inability shall not affect or impair in any manner the validity of
this Lease and the Workletter, or of the respective obligations of the parties
hereunder and thereunder.
 
(ii)           During the period prior to January 20, 2007 (the “Landlord
Priority Period”), in the event of any irreconcilable conflict or interference
between the work of Landlord’s workers, mechanics and contractors and the work
of Tenant’s workers, mechanics and contractors which affects the work of one or
both parties either (A) within the area designated “5’ Wide Landlord Priority
Area” or “5’ Wide Landlord Priority” on the Service Annex drawings attached
hereto as Exhibit D and incorporated herein by this reference (the “Service
Annex Plan”) or (B) on or about the roof of the Building or (C) on the exterior
of the Building or in the Common Areas (collectively, the “Landlord Priority
Area”), Landlord and Tenant shall resolve such conflict or interference by a
reasonable resequencing or rescheduling of Tenant’s remaining work to avoid the
conflict or interference with Landlord’s Work. After the Landlord Priority
Period, or in the event of any irreconcilable conflict or interference affecting
the work of one or both parties outside the Landlord Priority Area, Landlord and
Tenant shall resolve such conflict or interference by a reasonable resequencing
or rescheduling of Landlord’s remaining work to avoid the conflict or
interference with Tenant’s Initial Work.

 
- 4 -

--------------------------------------------------------------------------------

 

                2.3           Condition of Premises. Tenant has had an
opportunity to inspect the condition of the Premises and agrees to accept the
Premises “as is” in their condition existing as of the date of this Lease,
without any obligation on the part of Landlord to improve, alter, repair or
clean the Premises in any way for Tenant’s occupancy hereunder, except as
otherwise expressly provided herein. Notwithstanding the foregoing:
 
(a)           Landlord shall deliver the Premises and all Building systems and
existing improvements in “as is” condition, except that Landlord shall, at
Landlord’s sole expense, perform all work necessary to cause the following
(collectively, “Landlord’s Work”) to be true as soon as practicable after the
Construction Access Date (and in all events prior to the Rent Commencement Date,
in all material respects, subject only to completion of punch list items that do
not materially impair Tenant’s use of the Premises) and to remain true through
the date which is six (6) months after the Rent Commencement Date; provided,
however, that to the extent any of the following becomes untrue after delivery
of Landlord’s Completion Notice (as defined below) as a result of any
modifications or improvements made by Tenant or its contractors (subject to the
provisions of Section 2.3(e) below), or as a result of any damage occurring in
the course of Tenant’s use or occupancy of the Premises (including [without
limitation] damage arising from excessive use, misuse, negligence or willful
misconduct by Tenant or its contractors or employees, or as a result of any
failure by Tenant to observe reasonable and customary preventive maintenance
procedures, or from any other similar cause, but excluding any damage in the
nature of ordinary wear and tear, which for purposes of this provision shall be
construed to include [without limitation] system or equipment failures, defects
or other operational deficiencies to the extent arising or occurring in the
course of ordinary use and operation of Building systems and existing
improvements in an ordinary and reasonable manner and not attributable to the
kinds of aggravating factors listed at the beginning of this parenthetical),
then Landlord shall not be responsible for correction of the applicable
conditions under this Section 2.3 and the responsibilities of the parties with
respect to the repair or correction of the applicable conditions shall instead
be governed by Article 8 and any other applicable provisions of this Lease other
than this Section 2.3:
 
(i)        the Building roof shall be in good and watertight condition;
 
(ii)           the structural elements of the Building and all existing Building
systems (including, but not limited to, mechanical, electrical, plumbing and
life safety systems), utilities serving the Premises, Building glazing, Building
roll-up doors (if any) and other existing improvements in the Premises shall be
in good working condition and operable in their current locations (provided that
nothing in this subparagraph (ii) shall require Landlord to perform any seismic
upgrade of the Building structure which is not otherwise required under
applicable law);
 
(iii)      the walkways, parking lots, driveways and landscaping in the Common
Areas shall be in good working condition;
 
(iv)         the Premises and existing improvements therein, as delivered to
Tenant, shall comply and conform with all applicable laws, ordinances,
regulations and

 
- 5 -

--------------------------------------------------------------------------------

 

building codes (including, but not limited to, the Americans with Disabilities
Act (“ADA”)). and
 
(v)           Landlord shall have Substantially Completed construction of those
portions of the Service Annex designated for exclusive or shared use by the
occupant of the Building, including all systems and improvements reasonably
required for the contemplated use thereof, in accordance with Section 2.3(d)
below.
 
To the extent it is not reasonably practicable for Landlord’s Work to be
completed by the Construction Access Date, Landlord shall thereafter continue to
proceed diligently and with reasonable efforts to complete Landlord’s Work as
promptly as practicable thereafter, and Landlord and Tenant shall continue to
cooperate reasonably and in good faith with one another (and cause their
respective consultants and contractors to cooperate reasonably and in good faith
with one another) in the manner described in Section 2.2 above in connection
with the concurrent performance of their respective work in the Building.
Following Landlord’s written notice to Tenant that Landlord has completed
Landlord’s Work and is delivering the Premises and the existing Building systems
and improvements in the condition required above in this paragraph (“Landlord’s
Completion Notice”), Tenant shall thereafter during the term of this Lease be
responsible (subject, however, to any corrective obligations of Landlord as
expressly set forth in this Section 2.3) for maintenance, repair and/or
replacement of all such systems and improvements to the extent required in
accordance with Article 8 hereof. Notwithstanding the preceding sentence, if
Landlord’s obligations with respect to Landlord’s Work under this paragraph are
violated in any respect, then it shall be the obligation of Landlord, after
receipt of written notice from Tenant setting forth with specificity the nature
of the violation, to correct promptly and diligently, at Landlord’s sole cost,
the condition(s) constituting such violation; provided, however, that Tenant’s
failure to give such written notice to Landlord regarding any alleged violation
within six (6) months after the Rent Commencement Date shall give rise to a
conclusive and irrebuttable presumption that Landlord has complied with all
Landlord’s obligations under this paragraph. TENANT ACKNOWLEDGES THAT THE
WARRANTIES AND/OR OBLIGATIONS CONTAINED IN THIS SECTION 2.3 ARE IN LIEU OF ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PHYSICAL CONDITION OF
THE PREMISES, BUILDING SYSTEMS AND EXISTING IMPROVEMENTS IN THE PREMISES, AND
THAT LANDLORD MAKES NO OTHER WARRANTIES EXCEPT AS EXPRESSLY SET FORTH IN THIS
SECTION 2.3.
 
 
(b)          As set forth in the Workletter attached hereto as Exhibit B and
incorporated herein by this reference (the “Workletter”), Landlord shall provide
Tenant with a tenant improvement allowance in the amount of up to Ten Dollars
($10.00) per square foot, equivalent to an aggregate allowance of up to Four
Hundred Fifty-Seven Thousand Nine Hundred Forty Dollars ($457,940) (the “Tenant
Improvement Allowance”) towards the construction of Tenant Improvements by
Tenant in the Premises. Tenant’s construction of such Tenant Improvements shall
be governed by the provisions of Article 7 hereof and of the Workletter, and
such Tenant Improvements shall be constructed in compliance with all of the
provisions thereof (including, without limitation, all conditions relating to
Landlord’s approval of plans and specifications), as well as the provisions of
this Section 2.3. The Tenant Improvement Allowance shall not be used or useable
by Tenant for any moving or relocation

 
- 6 -

--------------------------------------------------------------------------------

 

expenses of Tenant, or for any cost or expense associated with any moveable
furniture, trade fixtures, personal property or any other item or element which,
under the applicable provisions of this Lease, will not become Landlord’s
property and remain with the Building upon expiration or termination of this
Lease. Any portion of the Tenant Improvement Allowance which has not been
claimed or drawn by Tenant within two (2) years after the Rent Commencement Date
shall expire and shall no longer be available to Tenant thereafter. Additional
conditions and procedures relating to the disbursement of the Tenant Improvement
Allowance shall be as set forth in the Workletter or as otherwise reasonably
prescribed in writing by Landlord. The Tenant Improvement Allowance is provided
as part of the basic consideration to Tenant under this Lease and will not
result in any rental adjustment or additional rent beyond the rental amounts
expressly provided in Section 3.1 hereof, nor shall any expiration of any
portion of the Tenant Improvement Allowance as provided above result in any
credit against or other adjustment with respect to the rental amounts set forth
in Section 3.1 hereof.
 
(c)   Landlord warrants to Tenant that the Premises as they exist on the date of
Landlord’s Completion Notice, but without regard to Tenant’s improvements
therein or to the particular use for which Tenant will occupy the Premises,
shall not violate any covenants or restrictions of record, and shall comply and
conform with all applicable laws, building codes, regulations and ordinances in
effect on the date of Landlord’s Completion Notice. Tenant warrants to Landlord
that the Tenant Improvements and any other improvements constructed by Tenant
from time to time shall comply and conform with all applicable laws, building
codes, regulations and ordinances in effect at the time such improvements are
placed in service. Without limiting the generality of the foregoing, the parties
acknowledge that Landlord shall be responsible for ADA and building code
compliance and conformance for all improvements in the Building and Common Areas
as they exist on the date of Landlord’s Completion Notice (except to the extent,
if any, that the compliance and conformance of such improvements in the Building
and/or Common Areas are affected by the improvements constructed by Tenant or by
Tenant’s particular use of the Premises) and that Tenant shall be responsible
for ADA and building code compliance required in connection with or as a result
of improvements constructed by Tenant. If it is determined that any of these
warranties has been violated, then it shall be the obligation of the warranting
party, after written notice from the other party, to correct the condition(s)
constituting such violation promptly, at the warranting party’s sole cost and
expense. TENANT ACKNOWLEDGES THAT EXCEPT AS EXPRESSLY SET FORTH IN THIS LEASE,
NEITHER LANDLORD NOR ANY AGENT OF LANDLORD HAS MADE ANY REPRESENTATION OR
WARRANTY AS TO THE PRESENT OR FUTURE SUITABILITY OF THE CENTER OR THE PREMISES
FOR THE CONDUCT OF TENANT’S BUSINESS OR PROPOSED BUSINESS THEREIN.
 
(d)   As part of Landlord’s Work, Landlord shall construct in a good and
workmanlike manner and in compliance with all applicable laws, ordinances, rules
and regulations a combined service yard and loading area and related systems and
improvements (collectively, the “Service Annex”) located in the area between the
Building and the adjacent building located at 800 Chesapeake Drive (the
“Adjacent Building”) and serving both the Building and the Adjacent Building.

 
- 7 -

--------------------------------------------------------------------------------

 
 
(i)            The parties intend that the Service Annex will include (but not
necessarily be limited to) appropriate areas for vehicle deliveries, trash and
hazardous materials storage, future emergency generator areas, and an elevator
suitable for freight/passenger use to serve second floor spaces in the Building
and the Adjacent Building, and that the Service Annex will also include areas in
which systems and equipment can be installed by or at the request of the
respective tenants of the Building and the Adjacent Building to support their
occupancy of and operations in the Building and the Adjacent Building,
respectively.
 
(ii)           The approximate location of the Service Annex is shown on the
Building Plan. Also shown on the Building Plan are two areas immediately
adjacent to the Building, designated respectively as “Chemical Storage
Enclosure” (the “Chemical Storage Area”) and “Emergency Generator Enclosure”
(the “Emergency Generator Area”), which areas are for the exclusive use of the
occupant of the Building and shall be deemed to be part of the Service Annex for
purposes of Landlord’s construction obligations under this Section 2.3, but are
not enclosed and are therefore not included in the calculation of the square
footage of the Premises and/or of the Service Annex for purposes of any formulas
or other calculations under this Lease that are based on the square footage of
the Premises and/or of the Service Annex.
 
(iii)          As part of the design and development of the Service Annex,
Landlord has designated various portions of the Service Annex for exclusive use
by the occupant of the Building, for exclusive use by the occupant of the
Adjacent Building, or for shared, nonexclusive use by the occupant of the
Building and the occupant of the Adjacent Building. The interior layout of the
Service Annex as presently under construction, including Landlord’s designation
of shared areas and exclusive-use areas for the Building and the Adjacent
Building, respectively, is shown on the Service Annex Plan. Landlord agrees that
to the extent Tenant’s operations in the Building do not require installation of
HVAC or other mechanical equipment in the area designated as “900 Mechanical
Room” on the second floor layout contained in the Service Annex Plan, Tenant may
use that exclusive use area for storage or other purposes reasonably ancillary
to Tenant’s use and occupancy of the Building, subject to (A) compliance by
Tenant, at Tenant’s expense, with all applicable laws, ordinances, regulations
and requirements (if any) triggered by the particular nature of such alternative
use, including (but not limited to) indicating Tenant’s proposed storage use on
its drawings submitted to the City of Redwood City for the Tenant Improvements
and obtaining an appropriate permit from the City of Redwood City for any
construction work to be performed by Tenant in that area, and (B) Landlord’s
prior written approval (which shall not be unreasonably withheld, conditioned or
delayed, but may be conditioned upon restoration by Tenant at the termination or
expiration of the term of this Lease, to the extent such a condition is
contemplated or permitted under Article 7 of this Lease), to the extent Tenant’s
proposed storage use involves construction of any improvements that would impair
or otherwise be incompatible with use of such area as a mechanical room by any
future tenant of the Building, or to the extent Tenant’s proposed storage use
involves modification, removal

 
- 8 -

--------------------------------------------------------------------------------

 

or elimination of Building systems which have been installed by Landlord in such
area or which would otherwise customarily be located in that area.
 
(iv)          The Service Annex as heretofore designed and as already under
construction as of the Lease Commencement Date has been determined by Landlord
to contain a total of 7,988 square feet, measured from exterior faces of
exterior walls and from the interior faces of common walls shared with the
Building or the Adjacent Building. For purposes of measuring the square footage
of the Premises under this Lease (including, but not limited to, measurements
contemplated in Section 3.1(d) below), Landlord has allocated the square footage
of the Service Annex between the Building and the Adjacent Building in the
manner shown in the Service Annex Plan, and has determined that the portion of
the Service Annex square footage allocable to the Building is 4,118 square feet
and that the portion allocable to the Adjacent Building is 3,870 square feet,
consisting in the case of each respective building of 50% of the square footage
of shared use areas and 100% of the square footage of that building’s exclusive
use areas. Landlord has shared the plans and square footage allocations for the
Service Annex with Tenant, and the parties have mutually approved the foregoing
square footage measurements and allocations and agreed that such measurements
and allocations shall be final and binding for purposes of this Lease.
 
(e)           Paragraph 2(b) of the Workletter contains various specific
provisions regarding the allocation of certain costs and of certain legal
compliance responsibilities between Landlord and Tenant. The provisions of this
Section 2.3 with respect to legal compliance responsibilities and expenses are
subject to such specific allocation provisions set forth in the Workletter,
which provisions are incorporated herein and shall be deemed to be part of this
Section 2.3 as if fully set forth herein.
 
2.4   Acknowledgment of Rent Commencement Date. Promptly following the Rent
Commencement Date, Landlord and Tenant shall execute a written acknowledgment of
the Rent Commencement Date, Termination Date and related matters, substantially
in the form attached hereto as Exhibit C (with appropriate insertions), which
acknowledgment shall be deemed to be incorporated herein by this reference.
Notwithstanding the foregoing requirement, the failure of either party to
execute such a written acknowledgment shall not affect the determination of the
Rent Commencement Date, Termination Date and related matters in accordance with
the provisions of this Lease.
 
2.5   Holding Over. If Tenant holds possession of the Premises or any portion
thereof after the term of this Lease with Landlord’s written consent, then
except as otherwise specified in such consent, Tenant shall become a tenant from
month to month at one hundred twenty-five percent (125%) of the minimum rental
and otherwise upon the terms herein specified for the period immediately prior
to such holding over and shall continue in such status until the tenancy is
terminated by either party upon not less than thirty (30) days prior written
notice. If Tenant holds possession of the Premises or any portion thereof after
the term of this Lease without Landlord’s written consent, then Landlord in its
sole discretion may elect (by written notice to Tenant) to have Tenant become a
tenant either from month to month or at will, at one hundred fifty percent
(150%) of the minimum rental (prorated on a daily basis for an at-will tenancy,
if

 
- 9 -

--------------------------------------------------------------------------------

 

applicable) and otherwise upon the terms herein specified for the period
immediately prior to such holding over, or may elect to pursue any and all legal
remedies available to Landlord under applicable law with respect to such
unconsented holding over by Tenant. Tenant shall indemnify and hold Landlord
harmless from any loss, damage, claim, liability, cost or expense (including
reasonable attorneys’ fees) resulting from any delay by Tenant in surrendering
the Premises or any portion thereof, including but not limited to any claims
made by a succeeding tenant by reason of such delay. Acceptance of rent by
Landlord following expiration or termination of this Lease shall not constitute
a renewal of this Lease.
 
2.6           Options to Extend Term. Tenant shall have the option to extend the
term of this Lease, at the minimum rental set forth in Section 3.l (b) or (c)
(as applicable) and otherwise upon all the terms and provisions set forth herein
with respect to the initial term of this Lease, for up to two (2) additional
periods of five (5) years each, the first such period commencing upon the
expiration of the initial term hereof and, if such first extension period is
duly elected by Tenant, the second such period commencing upon the expiration of
the first extended term. Exercise of such option with respect to the first
extended term shall be by written notice to Landlord at least nine (9) months
and not more than twelve (12) months prior to the expiration of the initial term
hereof. Exercise of such option with respect to the second extended term, if the
first extended term is duly elected by Tenant, shall be by written notice to
Landlord at least nine (9) months and not more than twelve (12) months prior to
the expiration of the first extended term. If Tenant is in default hereunder,
beyond any applicable notice and cure periods, on the date of such notice or on
the date the applicable extended term is to commence, then the exercise of the
applicable option shall be of no force or effect, the applicable extended term
shall not commence and this Lease shall expire at the end of the then current
term hereof (or at such earlier time as Landlord may elect pursuant to the
default provisions of this Lease). If Tenant properly exercises one or both
extension options under this Section, then all references in this Lease (other
than in this Section 2.6) to the “term” of this Lease shall be construed to
include the extension term(s) thus elected by Tenant. Except as expressly set
forth in this Section 2.6, Tenant shall have no right to extend the term of this
Lease beyond its prescribed term.
 
3. RENTAL
3.1           Minimum Rental.
 
(a)           Rental Amounts. Tenant shall pay to Landlord as minimum rental for
the Premises, in advance, without deduction, offset, notice or demand, on or
before the Rent Commencement Date and on or before the first day of each
subsequent calendar month of the initial term of this Lease, the following
amounts per month (subject to adjustment under Section 3.1(d) below, if
applicable):

 
- 10 -

--------------------------------------------------------------------------------

 
 

     
Approx.
 
Monthly
Months
 
PSF/mo
 
Minimum Rental
           
01 -   12
   
$2.200
 
$ 100,746.80
13 -   24
   
$2.277
 
$ 104,272.94
25 -   36
   
$2.357
 
$ 107,922.49
37 -   48
   
$2.439
 
$ 111,699.78
49 -   60
   
$2.525
 
$ 115,609.27
61 -   72
   
$2.613
 
$ 119,655.59
73 -   84
   
$2.704
 
$ 123,843.54
85 -   96
   
$2.799
 
$ 128,178.06
97 - 108
   
$2.897
 
$ 132,664.30
109 - 120
   
$2.998
 
$ 137,307.55

 
If the obligation to pay minimum rental hereunder for the initial term or for
any renewal term commences on other than the first day of a calendar month or if
the initial term or any renewal term of this Lease terminates on other than the
last day of a calendar month, the minimum rental for such first or last month of
the applicable initial or renewal term of this Lease, as the case may be, shall
be prorated based on the number of days the applicable term of this Lease is in
effect during such month. If an increase in minimum rental becomes effective on
a day other than the first day of a calendar month, the minimum rental for that
month shall be a blend of the two applicable rates, each prorated for the
portion of the month during which such rate is in effect.
 
(b)           Rental Amounts During First Extended Term. If Tenant properly
exercises its first renewal option pursuant to Section 2.6 hereof, then the
monthly minimum rental during the first extended term shall be as follows:
 

   
Approx.
 
Monthly
Months
 
PSF/mo
 
Minimum Rental
         
01 - 12
 
$3.103
 
$ 142,113.31
13 - 24
 
$3.212
 
$ 147,087.28
25 - 36
 
$3.324
 
$ 152,235.33
37 - 48
 
$3.441
 
$ 157,563.57
49 - 60
 
$3.561
 
$ 163,078.29

 
(c)           Rental Amounts During Second Extended Term. If Tenant properly
exercises its second renewal option pursuant to Section 2.6 hereof, then the
monthly minimum rental during the second extended term shall be as follows:

 
- 11 -

--------------------------------------------------------------------------------

 
 

   
Approx.
 
Monthly
Months
 
PSF/mo
 
Minimum Rental
         
01 - 12
 
$3.686
 
$ 168,786.03
13 - 24
 
$3.815
 
$ 174,693.54
25 - 36
 
$3.948
 
$ 180,807.82
37 - 48
 
$4.086
 
$ 187,136.09
49 - 60
 
$4.230
 
$ 193,685.86

 
(d)           Square Footage of Premises. The Building was fully constructed
prior to the date of this Lease, has been measured by Landlord’s Architect and,
applying the measurement formula customarily used by Landlord to measure square
footage of buildings in the Center, has been determined to contain 41,675 square
feet, which measurement is final and binding on the parties, is hereby accepted
by the parties for all purposes under this Lease and is not subject to
remeasurement or adjustment. The square footage of the Premises, for all
purposes under this Lease (including, without limitation, calculation of minimum
rental payments under Sections 3.1(a) through (c), calculation of the Tenant
Improvement Allowance, and calculation of Tenant’s Operating Cost Share under
Article 5), shall consist of the sum of such Building square footage and the
Service Annex square footage of 4,119 square feet allocated to the Building
pursuant to Section 2.3(d)(iv) above, for a total of 45,794 square feet for the
Premises (excluding the Chemical Storage Area and the Emergency Generator Area,
as provided in Section 2.3(d) above). Such total square footage measurement is
final and binding on the parties, is hereby accepted by the parties for all
purposes under this Lease and is not subject to remeasurement or adjustment.
 
3.2           Late Charge. If Tenant fails to pay when due rental or other
amounts due Landlord hereunder, such unpaid amounts shall bear interest for the
benefit of Landlord at a rate equal to the lesser of ten percent (10%) per annum
or the maximum rate permitted by law, from the date due to the date of actual
payment. In addition to such interest, Tenant shall pay to Landlord a late
charge in an amount equal to five percent (5%) of any installment of minimum
rental and any other amounts due Landlord if not paid in full on or before the
fifth (5th) day after such rental or other amount is due; provided, however,
that for the first instance of late payment during any period of twelve (12)
consecutive calendar months during the term of this Lease, Tenant shall not be
required to pay such late charge unless Tenant has failed to pay the past-due
amount within three (3) days after Landlord has given Tenant written notice that
such amount is past due. Tenant acknowledges that late payment by Tenant to
Landlord of rental or other amounts due hereunder will cause Landlord to incur
costs not contemplated by this Lease, including, without limitation, processing
and accounting charges and late charges which may be imposed on Landlord by the
terms of any loan relating to the Center. Tenant further acknowledges that it is
extremely difficult and impractical to fix the exact amount of such costs and
that the late charge set forth in this Section 3.2 represents a fair and
reasonable estimate thereof. Acceptance of any late charge by Landlord shall not
constitute a waiver of Tenant’s default with respect to overdue rental or other
amounts, nor shall such acceptance prevent Landlord from exercising any other
rights and remedies available to it. Acceptance of rent or other payments by
Landlord shall not constitute a waiver of late charges or interest accrued with
respect to such rent or other payments or any prior installments thereof, nor of
any other defaults

 
- 12 -

--------------------------------------------------------------------------------

 

by Tenant, whether monetary or non-monetary in nature, remaining uncured at the
time of such acceptance of rent or other payments.
 
4. TAXES
 
4.1   Personal Property. From and after the Rent Commencement Date (or, in the
case of items brought onto the Property by Tenant prior to the Rent Commencement
Date, from and after the date such items are brought onto the Property by
Tenant), Tenant shall be responsible for and shall pay prior to delinquency all
taxes and assessments levied against or by reason of any and all alterations,
additions and items existing on or in the Premises from time to time during the
term of this Lease and taxed as personal property rather than as real property,
including (but not limited to) all personal property, trade fixtures and other
property placed by Tenant on or about the Premises. Upon request by Landlord,
Tenant shall furnish Landlord with satisfactory evidence of Tenant’s payment
thereof. If at any time during the term of this Lease any of said alterations,
additions or personal property, whether or not belonging to Tenant, shall be
taxed or assessed as part of the Center, then such tax or assessment shall be
paid by Tenant to Landlord within fifteen (15) days after presentation by
Landlord of copies of the tax bills in which such taxes and assessments are
included and shall, for the purposes of this Lease, be deemed to be personal
property taxes or assessments under this Section 4.1.
 
4.2   Real Property. To the extent any real property taxes and assessments on
the Premises are assessed directly to Tenant, Tenant shall be responsible for
and shall pay prior to delinquency all such taxes and assessments levied against
the Premises. Upon request by Landlord, Tenant shall furnish Landlord with
satisfactory evidence of Tenant’s payment thereof. To the extent the Premises
are taxed or assessed to Landlord following the Rent Commencement Date, such
real property taxes and assessments shall constitute Operating Expenses (as that
term is defined in Section 5.2 of this Lease) and shall be paid in accordance
with the provisions of Article 5 of this Lease. Notwithstanding the foregoing
provisions, if real property taxes and assessments on the Service Annex are
assessed directly to Tenant (which the parties do not expect to be the case),
Tenant shall only be required to bear a share of such Service Annex taxes and
assessments proportional to the percentage of square footage of the Service
Annex that is allocated to the Building, and Landlord shall reimburse Tenant or
cause Tenant to be reimbursed for the portion of such Service Annex taxes and
assessments allocable to the Adjacent Building.
 
5. OPERATING EXPENSES
 
5.1           Payment of Operating Expenses.
 
(a)            Tenant shall pay to Landlord, at the time and in the manner
hereinafter set forth, as additional rental, Tenant’s Operating Cost Share of
the Operating Expenses defined in Section 5.2, subject to adjustment pursuant to
Section 5.1(b) when applicable. For purposes of this Section 5.1, “Tenant’s
Operating Cost Share” shall be: (i) in the case of Operating Expenses that are
reasonably allocable solely to the Building, one hundred percent (100%); (ii) in
the case of Operating Expenses that are reasonably attributable to the Service
Annex, fifty-one and fifty-six hundredths percent (51.56%) a percentage amount
equal to the percentage of the total square footage of the Service Annex that is
included in the Premises pursuant to

 
- 13 -

--------------------------------------------------------------------------------

 
 
Section 2.3(d) and Section 3.1(d) above; and (iii) in the case of Operating
Expenses that are determined and allocated on a Center-wide basis, seven and
twenty-eight hundredths percent (7.28%).
 
(b)          Tenant’s Operating Cost Share as specified in Section 5.1(a) with
respect to matters allocable to the entire Center is based upon an area of
45,794 square feet for the Premises and upon an aggregate area of 628,867 square
feet for all of the buildings presently located in the Center. Tenant’s
Operating Cost Share as specified in Section 5.1(a) with respect to matters
reasonably attributable to the Service Annex is based upon 4,119 square feet of
the Service Annex being allocated to the Building and upon a total square
footage of 7,988 square feet for the Service Annex. If the actual area of the
Premises or of any of the buildings existing from time to time in the Center
changes for any reason (including, but not limited to, modification of existing
buildings, construction of new buildings in the Center, or construction of new
buildings on any adjacent property owned by Landlord and operated, for common
area purposes, on an integrated basis with the Center), then Tenant’s Operating
Cost Share shall be adjusted proportionately to reflect the new actual areas of
the Premises and/or such other buildings, as applicable, as determined
reasonably and in good faith by Landlord’s architect on the same basis of
measurement as applied in determining the existing square footage of the
Building.
 
5.2           Definition of Operating Expenses.
 
(a)           Subject to the exclusions and provisions hereinafter contained and
the allocation principles set forth in Section 5.1, the term “Operating
Expenses” shall mean, without duplication, all costs and expenses actually
incurred by Landlord for management, operation and maintenance of the Building
and the Center, including, without limitation, costs and expenses of (i)
insurance (which may include, at Landlord’s option, environmental and seismic
insurance as part of or in addition to any casualty or property insurance
policy), property management, landscaping, and the operation, repair and
maintenance of buildings and Common Areas; (ii) all utilities and services;
(iii) real and personal property taxes and assessments or substitutes therefor
levied or assessed against the Center or any part thereof, including (but not
limited to) any possessory interest, use, business, license or other taxes or
fees, any taxes imposed directly on gross rents or services, any assessments or
charges for police or fire protection, housing, transit, open space, street or
sidewalk construction or maintenance or other similar services from time to time
by any governmental or quasi-governmental entity, and any other new taxes on
landlords in addition to taxes now in effect (except that assessments which are
permitted to be paid over a period of time and are customarily paid over such a
period shall be includable in Operating Expenses on a current basis as if they
were paid over the full period for which such installments would customarily be
paid); (iv) supplies, equipment, utilities and tools used in management,
operation and maintenance of the Center; (v) capital improvements to the Center
or the improvements therein, amortized over the useful life of such capital
improvements as determined reasonably and in good faith by Landlord’s
accountants on the basis of generally accepted accounting principles,
consistently applied, or on the basis of applicable tax accounting principles,
(aa) which reduce or will cause future reduction of other items of Operating
Expenses for which Tenant is otherwise required to contribute or (bb) which are
required by law, ordinance, regulation or order of any governmental authority
(excluding,
 
 
- 14 -

--------------------------------------------------------------------------------

 
 
however, any such expenses incurred by Landlord in complying with Landlord’s
obligations under Section 2.3 above) or (cc) of which Tenant has use or which
benefit Tenant, and which in either event are reasonably consistent with the
nature and quality of the Center as a first-class office and research and
development campus, or (dd) which constitute capital repairs or replacements
made by Landlord pursuant to Landlord’s responsibilities under Section 8.1(a)
hereof; and (vi) any other costs (including, but not limited to, any parking or
utilities fees or surcharges not otherwise specifically addressed elsewhere in
this Lease) allocable to or paid by Landlord, as owner of the Center, pursuant
to any applicable laws, ordinances, regulations or orders of any governmental or
quasi-governmental authority or pursuant to the terms of the Master Declaration
(as hereinafter defined) or of any other declarations of covenants, conditions
and restrictions now or hereafter affecting the Center or any other property
over which Tenant has non-exclusive usage rights as contemplated in Section
1.1(b) hereof. Operating Expenses shall not include any costs attributable to
the initial construction of buildings or Common Area improvements in the Center,
nor any costs attributable to buildings the square footage of which is not taken
into account in determining Tenant’s Operating Cost Share under Section 5.1 for
the applicable period. The distinction between items of ordinary operating
maintenance and repair and items of a capital nature shall be made in accordance
with generally accepted accounting principles applied on a consistent basis or
in accordance with tax accounting principles, as determined reasonably and in
good faith by Landlord’s accountants.
 
(b)           Notwithstanding any other provisions of this Section 5.2, the
following shall not be included within Operating Expenses: (i) rent paid to any
ground lessor; (ii) the cost of constructing tenant improvements for any other
tenant of the Center; (iii) the costs of special services, goods or materials
provided to any other tenant of the Center and not offered or made available to
Tenant; (iv) repairs covered by proceeds of insurance or from funds provided by
Tenant or any other tenant of the Center, or as to which any other tenant of the
Center is obligated to make such repairs or to pay the cost thereof; (v) legal
fees, advertising costs or other related expenses incurred by Landlord in
connection with the leasing of space to individual tenants of the Center; (vi)
repairs, alterations, additions, improvements or replacements needed to rectify
or correct any defects in the design, materials or workmanship of the Building,
the Center or the Common Areas; (vii) damage and repairs necessitated by the
negligence or willful misconduct of Landlord or of Landlord’s employees,
contractors or agents; (viii) executive salaries or salaries of service
personnel to the extent that such personnel perform services other than in
connection with the management, operation, repair or maintenance of the Building
or the Center; (ix) Landlord’s general overhead expenses not related to the
Building or the Center; (x) legal fees, accountants’ fees and other expenses
incurred in connection with disputes with tenants or other occupants of the
Center, or in connection with the enforcement of the terms of any leases with
tenants or the defense of Landlord’s title to or interest in the Center or any
part thereof; (xi) costs incurred due to a violation by Landlord or any other
tenant of the Center of the terms and conditions of any lease; (xii) costs of
any service provided to Tenant or to other occupants of the Center for which
Landlord is reimbursed other than through recovery of Operating Expenses; (xiii)
personal property taxes due and payable by any other tenant of the Center; (xiv)
costs incurred by Landlord in connection with an event of casualty or
condemnation governed by Article 13 of this Lease (including, but not limited
to, any applicable deductible and/or coinsurance amounts under applicable
insurance policies with respect to any
 
 
- 15 -

--------------------------------------------------------------------------------

 
 
seismic event); (xv) taxes or assessments in the nature of a tax on Landlord’s
net income, or in the nature of an inheritance, gift, estate or death tax; (xvi)
costs to comply with Landlord’s obligations under Section 2.3 of this Lease;
(xvii) costs incurred in connection with the presence of any hazardous substance
or hazardous waste (as such terms are defined in Section 9.6) on, under or about
the Property or the Center (but in the event of any use or release of such a
hazardous substance or hazardous waste by Tenant or related parties as described
in Section 9.6, Tenant’s responsibility therefor shall be determined pursuant to
Section 9.6); (xviii) interest, charges and fees incurred on debt; (xix) costs
in the nature of depreciation, amortization or other expense reserves, except in
connection with any amortization of capital expenditures that is expressly
authorized under any provision of this Lease; (xx) wages, compensation and labor
burden for any employee not stationed at the Center on a substantially full-time
basis; (xxi) costs incurred in connection with any construction of additional
buildings in the Center or any expansion of existing buildings in the Center,
including (but not limited to) any costs to build any parking structure required
to accommodate any necessary additional parking; (xxii) property management fees
to the extent they exceed, for any applicable period, three percent (3%) of the
minimum rent payable under this Lease for the same period (provided that during
the period, if any, from February 1, 2007 until the Rent Commencement Date, the
foregoing limitation shall be applied using a deemed minimum rental amount at
the monthly rate that will become payable immediately after the Rent
Commencement Date); and (xxiii) costs or expenditures for capital repairs,
replacements and improvements (as determined pursuant to Section 5.2(a) above)
in excess of the amortized amounts which are expressly authorized to be included
as Operating Expenses under the provisions of clause (v) of Section 5.2(a) above
or under any other applicable provision of this Lease.
 
5.3           Determination of Operating Expenses. On or before February 1,
2007, and during the last month of each calendar year of the term of this Lease
(“Expense Year”), or as soon thereafter as practical, Landlord shall provide
Tenant notice of Landlord’s estimate of the Operating Expenses for the ensuing
Expense Year or applicable portion thereof. On or before February 1, 2007 and on
or before the first day of each subsequent month during the term of this Lease,
Tenant shall pay to Landlord Tenant’s Operating Cost Share of the portion of
such estimated Operating Expenses allocable (on a prorata basis) to such month;
provided, however, that if such notice is not given in the last month of an
Expense Year, Tenant shall continue to pay on the basis of the prior year’s
estimate, if any, until the month after such notice is given. If at any time or
times it appears to Landlord that the actual Operating Expenses for an Expense
Year will vary from Landlord’s previous estimate by more than five percent (5%),
Landlord may, by notice to Tenant, revise its estimate for the applicable
Expense Year and subsequent payments by Tenant for such Expense Year shall be
based upon such revised estimate.
 
5.4           Final Accounting for Expense Year.
 
(a)           Within ninety (90) days after the close of each Expense Year, or
as soon after such 90-day period as practicable, Landlord shall deliver to
Tenant a statement of Tenant’s Operating Cost Share of the Operating Expenses
for such Expense Year prepared by Landlord from Landlord’s books and records. If
on the basis of such statement Tenant owes an amount that is more or less than
the estimated payments for such Expense Year previously made by Tenant, Tenant
or Landlord, as the case may be, shall pay the deficiency to the other party
within
 
 
- 16 -

--------------------------------------------------------------------------------

 
 
thirty (30) days after delivery of the statement. Failure or inability of
Landlord to deliver the annual statement within such ninety (90) day period
shall not impair or constitute a waiver of Tenant’s obligation to pay Operating
Expenses, or cause Landlord to incur any liability for damages.
 
(b)           At any time within three (3) months after receipt of Landlord’s
annual statement of Operating Expenses as contemplated in Section 5.4(a), Tenant
shall be entitled, upon reasonable written notice to Landlord and during normal
business hours at Landlord’s office or such other places as Landlord shall
designate, to inspect and examine those books and records of Landlord relating
to the determination of Operating Expenses for the immediately preceding Expense
Year covered by such annual statement or, if Tenant so elects by written notice
to Landlord, to request an independent audit of such books and records. Any such
independent audit of the books and records shall be conducted by a certified
public accountant reasonably acceptable to both Landlord and Tenant or, if the
parties are unable to agree, by a certified public accountant appointed by the
Presiding Judge of the San Mateo County Superior Court upon the application of
either Landlord or Tenant (with notice to the other party). In either event,
such certified public accountant shall be one who is not then employed in any
capacity by Landlord or Tenant or by any of their respective affiliates. The
audit shall be limited to the determination of the amount of Operating Expenses
for the subject Expense Year, and shall be based on generally accepted
accounting principles and tax accounting principles, consistently applied. If it
is determined, by mutual agreement of Landlord and Tenant or by independent
audit, that the amount of Operating Expenses billed to or paid by Tenant for the
applicable Expense Year was incorrect, then the appropriate party shall pay to
the other party the deficiency or overpayment, as applicable, within thirty (30)
days after the final determination of such deficiency or overpayment. All costs
and expenses of the audit shall be paid by Tenant unless the audit shows that
Landlord overstated Operating Expenses for the subject Expense Year by more than
five percent (5%), in which case Landlord shall pay all costs and expenses of
the audit. Tenant shall be deemed to have approved Landlord’s annual statement
of Operating Expenses, and shall be barred from raising any claims regarding
Operating Expenses for the period covered by such annual statement, except to
the extent Tenant specifically identifies any objections or claims based on such
annual statement, in reasonable detail, by written notice to Landlord within
four (4) months after Tenant’s receipt of the applicable annual statement. To
the extent Tenant provides Landlord with timely written notice of any such
objections or claims, Landlord and Tenant shall cooperate reasonably and in good
faith to try to resolve the objections or claims raised by Tenant, which
cooperation may include the use of an independent audit initiated by Tenant as
contemplated above. Each party agrees to maintain the confidentiality of the
findings of any audit in accordance with the provisions of this Section 5.4.
 
5.5           Proration. If the date on which Tenant’s obligation for payment of
Tenant’s Operating Cost Share commences falls on a day other than the first day
of an Expense Year or if this Lease terminates on a day other than the last day
of an Expense Year, then the amount of Operating Expenses payable by Tenant with
respect to such first or last partial Expense Year shall be prorated on the
basis which the number of days during such Expense Year in which this Lease is
in effect bears to 365. The termination of this Lease shall not affect the
obligations of Landlord and Tenant pursuant to Section 5.4 to be performed after
such termination.
 
 
- 17 -

--------------------------------------------------------------------------------

 
 
6. UTILITIES
 
6.1           Payment. Commencing with the Construction Access Date and
thereafter throughout the term of this Lease (including the early possession
period under Section 2.2 above), Tenant shall pay, before delinquency, all
charges for water, gas, heat, light, electricity, power, sewer, telephone, alarm
system, janitorial and other services or utilities supplied to or consumed in or
with respect to the Premises (other than any costs for water, electricity or
other services or utilities furnished with respect to the Common Areas, which
costs shall be paid by Landlord and shall constitute Operating Expenses under
Section 5.2 hereof), including any taxes on such services and utilities. It is
the intention of the parties that all such services shall be separately metered
to the Premises. In the event that any utilities or services supplied to the
Premises are not separately metered, then the amount thereof shall be allocated
in a reasonable, good faith and appropriate manner by Landlord between the
Premise and the other buildings, premises or areas sharing such utilities or
services, and the portion thereof allocable to the Building may, in Landlord’s
discretion, either be included in Operating Expenses allocable to the Building
under Section 5.1 hereof or be billed directly to Tenant and paid or reimbursed
by Tenant within ten (10) business days after receipt of Landlord’s statement
and request for payment, accompanied by reasonable supporting documentation
evidencing the calculation or determination of the amount for which payment or
reimbursement is requested. Notwithstanding the foregoing provisions, during any
portion of the period prior to the Rent Commencement Date in which Landlord is
performing repairs or construction of improvements in the Premises, (a) if
Tenant is neither operating its business in the Premises nor performing any
material construction of improvements in the Premises, Landlord shall bear all
utilities charges for the Premises; and (b) if Tenant is operating its business
in the Premises and/or performing any material construction of improvements in
the Premises, utilities charges for the Premises shall be allocated between
Landlord and Tenant on the basis of a reasonable, good faith estimate of their
respective usage of such utilities.
 
6.2           Interruption. There shall be no abatement of rent or other charges
required to be paid hereunder and Landlord shall not be liable in damages or
otherwise for interruption or failure of any service or utility furnished to or
used with respect to the Premises, the Building or the Center because of
accident, making of repairs, alterations or improvements, severe weather,
difficulty or inability in obtaining services or supplies, labor difficulties or
any other cause. Notwithstanding the foregoing provisions of this Section 6.2,
however in the event of any interruption or failure of any service or utility to
the Premises that (a) is caused in whole or in material part by the active
negligence or willful misconduct of Landlord or its agents, employees or
contractors and (b) continues for more than three (3) business days and (c)
materially impairs Tenant’s ability to use the Premises for the intended purpose
hereunder, then following such three (3) business day period, Tenant’s
obligations for payment of rent and other charges under this Lease shall be
abated in proportion to the degree of impairment of Tenant’s use of the
Premises, and such abatement shall continue until Tenant’s use of the Premises
is no longer materially impaired thereby. Tenant expressly waives any benefits
of any applicable existing or future law (including, but not limited to, the
provisions of California Civil Code Section 1932(1)) permitting the termination
of a lease due to any such interruption or failure of any service or
 
 
- 18 -

--------------------------------------------------------------------------------

 
 
utility, it being the intention of the parties that their respective rights in
such circumstances shall be governed solely by the provisions of this Section
6.2.
 
7. ALTERATIONS; SIGNS
 
7.1           Right to Make Alterations. Tenant shall make no alterations,
additions or improvements to the Premises, other than interior non-structural
alterations in the Premises costing less than (i) Twenty-Five Thousand Dollars
($25,000) for any single alteration or improvement or set of related and
substantially concurrent alterations or improvements, and (ii) Fifty Thousand
Dollars ($50,000) in the aggregate during any twelve (12) month period, without
the prior written consent of Landlord, which consent shall not be unreasonably
withheld, conditioned or delayed. All such alterations, additions and
improvements shall be completed with due diligence in a good and workmanlike
manner, in compliance with plans and specifications approved in writing by
Landlord and in compliance with all applicable laws, ordinances, rules and
regulations, and to the extent Landlord’s consent is not otherwise required
hereunder for such alterations, additions or improvements, Tenant shall give
prompt written notice thereof to Landlord. Tenant shall cause any contractors
engaged by Tenant for work in the Building or in the Center to maintain public
liability and property damage insurance, and other customary insurance, with
such terms and in such amounts as Landlord may reasonably require, naming as
additional insureds Landlord and any of its partners, shareholders, property
managers, project managers and lenders designated by Landlord for this purpose,
and shall furnish Landlord with certificates of insurance or other evidence that
such coverage is in effect. Notwithstanding any other provisions of this Section
7.1, under no circumstances shall Tenant make any structural alterations or
improvements, or any changes to the roof or equipment installations on the roof,
or any alterations materially affecting any building systems, without Landlord’s
prior written consent (which consent shall not be unreasonably withheld,
conditioned or delayed).
 
7.2           Title to Alterations. All alterations, additions and improvements
installed by Tenant in, on or about the Premises, the Building or the Center
(including, but not limited to, lab benches, fume hoods, clean rooms, cold rooms
and other similar improvement and equipment) shall become part of the Property
and shall become the property of Landlord, unless Landlord elects to require
Tenant to remove the same upon the termination of this Lease; provided, however,
that the foregoing (i) shall not apply to Tenant’s movable furniture, equipment
and trade fixtures, except to the extent any such items are specifically
described in the parenthetical in the initial portion of this sentence, and (ii)
shall not apply to any portable clean rooms (i.e., clean rooms that are designed
to be portable or removable in nature and can be installed and removed without
any material adverse impact on the existing improvements and Building systems in
the Building) which are installed by Tenant without any use of funds from the
Tenant Improvement Allowance and which are either leased from non-affiliated
third parties or owned by Tenant, but (iii) shall apply to all clean rooms and
other improvements described in the initial portion of this sentence, whether or
not designed to be portable or removable, to the extent such clean rooms or
other improvements are constructed, acquired or installed using any funds from
the Tenant Improvement Allowance. Tenant shall promptly repair any damage caused
by its removal of any such furniture, equipment or trade fixtures.
 
 
- 19 -

--------------------------------------------------------------------------------

 
 
(a)           Notwithstanding any other provisions of this Article 7, (i) under
no circumstances shall Tenant have any right to remove from the Premises or the
Building, at the expiration or termination of this Lease, any lab benches, fume
hoods, clean rooms, cold rooms or other similar improvements and equipment
installed in the Building, even if such equipment and improvements were
installed by Tenant (other than portable or removable clean rooms described in
clause (ii) of the initial portion of Section 7.2 above); (ii) under no
circumstances shall Tenant have any right to remove from the Premises or the
Building, at the expiration or termination of this Lease, any alterations,
additions, improvements or equipment acquired, constructed or installed with the
use, in whole or in part, of any funds from the Tenant Improvement Allowance;
(iii) if Tenant requests Landlord’s written consent to any alterations,
additions or improvements under Section 7.1 hereof and, in requesting such
consent, asks that Landlord specify whether Landlord will require removal of
such alterations, additions or improvements upon termination or expiration of
this Lease, then Landlord shall not be entitled to require such removal unless
Landlord specified its intention to do so at the time of granting of Landlord’s
consent to the requested alterations, additions or improvements; and (iv)
Landlord shall not be entitled to require removal of any element of the Tenant
Improvements initially constructed by Tenant pursuant to the Workletter upon
termination or expiration of this Lease, except to the extent (if any) that
Landlord’s approval of such element of the initial Tenant Improvements under the
Workletter was expressly conditioned upon Tenant’s agreement to remove the same
upon termination or expiration of this Lease. For purposes of clause (iv) of the
preceding sentence, (x) the parties acknowledge that Landlord’s approval of
Tenant Improvements under the Workletter generally may not be unreasonably
withheld, conditioned or delayed; (y) the parties further acknowledge and agree
that it may be reasonable for Landlord to condition its approval of specific
elements of the Tenant Improvements upon Tenant’s agreement to remove the same
upon termination or expiration of this Lease if Landlord believes reasonably and
in good faith that the functionality and marketability of the Premises for
purposes of re-leasing to a successor tenant would be materially and adversely
affected by the presence of such specific elements; and (z) the parties further
acknowledge and agree that unless Landlord reasonably believes in good faith
that the functionality and marketability of the Premises for purposes of
releasing to a successor tenant would be materially and adversely affected by
the presence of such specific element, Landlord shall not condition its approval
of such element upon Tenant’s agreement to remove the same upon termination or
expiration of this Lease.
 
(b)           Notwithstanding any other provisions of this Article 7, (i) it is
the intention of the parties that Landlord shall be entitled to claim all tax
attributes associated with alterations, additions, improvements and equipment
constructed or installed by Tenant or Landlord with funds provided by Landlord
pursuant to the Tenant Improvement Allowance; and (ii) it is the intention of
the parties that Tenant shall be entitled to claim, during the term of this
Lease, all tax attributes associated with alterations, additions, improvements
and equipment constructed or installed by Tenant with Tenant’s own funds (and
without any payment or reimbursement by Landlord pursuant to the Tenant
Improvement Allowance), despite the fact that the items described in this clause
(ii) are characterized in this Section 7.2 as becoming Landlord’s property upon
installation, in recognition of the fact that Tenant will have installed and
paid for such items, will have the right of possession of such items during the
term of this Lease and will have the obligation to pay (directly or indirectly)
property taxes on such items,
 
 
- 20 -

--------------------------------------------------------------------------------

 
 
carry insurance on such items to the extent provided in Article 10 hereof and
bear the risk of loss with respect to such items to the extent provided in
Article 13 hereof. If and to the extent it becomes necessary, in implementation
of the foregoing intentions, to identify (either specifically or on a percentage
basis, as may be required under applicable tax laws) which alterations,
additions, improvements and equipment constructed as part of the Tenant
Improvements have been funded through the Tenant Improvement Allowance and which
(if any) have been constructed or installed with Tenant’s own funds, Landlord
and Tenant agree to cooperate reasonably and in good faith to make such an
identification by mutual agreement.
 
(c)           Nothing in this Section 7.2 or in Section 7.1 above shall prohibit
Tenant from altering, relocating or removing during the term of this Lease the
Tenant Improvements or any other alterations, additions or improvements
installed by Tenant, whether or not the same were initially funded in whole or
in part through the Tenant Improvement Allowance, subject to the following:
 
(i)            The Landlord consent requirements set forth in Section 7.1 above
shall remain applicable to any such alteration, relocation or removal of
improvements by Tenant in accordance with their terms; and
 
(ii)           Landlord’s prior written consent shall in all events be required
for any alteration, relocation or removal of any improvements funded in whole or
in part through the Tenant Improvement Allowance. Such written consent under
this subparagraph (ii) shall not be unreasonably withheld, conditioned or
delayed, but the parties expressly acknowledge that Landlord may reasonably
condition its consent to any such alteration, relocation or removal of
improvements funded in whole or in part through the Tenant Improvement Allowance
(A) upon Tenant’s agreement to restore such improvements, upon termination or
expiration of this Lease, to the nature and condition that existed prior to such
alteration, relocation or removal and (B) if the reasonably estimated aggregate
cost of restoration of all improvements that Tenant is required to restore
pursuant to this Section 7.2(c)(ii) upon termination or expiration of this Lease
exceeds $250,000, upon Tenant’s provision to Landlord of a letter of credit,
bond or other security for the performance of such restoration obligation
pursuant to the preceding clause (A), the amount of which security shall be not
less than the estimated aggregate cost of restoration of the applicable
improvements as described above, and the nature (if other than a letter of
credit or bond) and terms of which security shall be reasonably satisfactory to
Landlord.
 
7.3          Tenant Trade Fixtures. Subject to the third sentence of Section 7.2
and to Section 7.5, Tenant may install, remove and reinstall trade fixtures
without Landlord’s prior written consent, except that installation and removal
of any trade fixtures which are affixed to the Building or which affect the
Building systems or the exterior or structural portions of the Building shall
require Landlord’s written approval, which approval shall not be unreasonably
withheld, conditioned or delayed. Subject to the provisions of Section 7.5, the
foregoing shall apply to Tenant’s signs, which Tenant shall have the right to
place and remove and replace (a) only with Landlord’s prior written consent as
to location, size and composition, which consent shall not be unreasonably
withheld, conditioned or delayed, and (b) only in compliance
 
 
- 21 -

--------------------------------------------------------------------------------

 
 
with all restrictions and requirements of applicable law and of any covenants,
conditions and restrictions or other written agreements now or hereafter
applicable to the Center. Tenant shall immediately repair any damage caused by
installation and removal of trade fixtures under this Section 7.3.
 
7.4          No Liens. Tenant shall at all times keep the Building and the
Center free from all liens and claims of any contractors, subcontractors,
materialmen, suppliers or any other parties employed either directly or
indirectly by Tenant in construction work on the Building or the Center. Tenant
may contest any claim of lien, but only if, prior to such contest, Tenant either
(i) posts security in the amount of the claim, plus estimated costs and
interest, or (ii) records a bond of a responsible corporate surety in such
amount as may be required to release the lien from the Building and the Center.
Tenant shall indemnify, defend and hold Landlord harmless against any and all
liability, loss, damage, cost and other expenses, including, without limitation,
reasonable attorneys’ fees, arising out of claims of any lien for work performed
or materials or supplies furnished at the request of Tenant or persons claiming
under Tenant.
 
7.5           Signs. Without limiting the generality of the provisions of
Section 7.3 hereof, Tenant shall have the right to install, at Tenant’s expense,
(a) signage substantially equivalent to that maintained by the preceding tenant
of the Premises and (b) to the extent not already covered by the foregoing
clause (a), a monument sign and other additional exterior signage (if any)
generally similar to signage presently existing for other tenants on other
buildings in the Center, subject in each instance to Landlord’s prior approval
as to location, size, design and composition (which approval shall not be
unreasonably withheld or delayed), to any reasonable sign criteria promulgated
by Landlord for the Center from time to time, and to all restrictions and
requirements of applicable law and of any covenants, conditions and restrictions
now or hereafter applicable to the Center. Landlord has advised Tenant that
exterior building wall signage is not presently used or permitted in the Center.
 
8. MAINTENANCE AND REPAIRS
 
8.1           Landlord’s Obligation for Maintenance.
 
(a)           Repairs and Maintenance. Landlord shall repair and maintain or
cause to be repaired and maintained the Common Areas of the Center; the roof,
exterior walls and other structural portions of the Building and Service Annex;
and the shared-use areas of the Service Annex, except to the extent Landlord
enters into an alternative arrangement with Tenant and the tenant of the
Adjacent Building regarding janitorial and/or other repair and maintenance
services relating to such shared-use areas. The cost of all work performed by
Landlord under this Section 8.1 shall be an Operating Expense hereunder, except
to the extent such work (i) is required due to the negligence of Landlord; (ii)
involves the repair or correction of a condition or defect that Landlord is
required to correct pursuant to Section 2.3 hereof; (iii) is a capital expense
not includible (or in excess of the amounts includible on an amortized basis) as
an Operating Expense under Section 5.2 hereof, or is otherwise expressly
excluded from treatment as an Operating Expense under any other applicable
provision of Section 5,2 hereof; (iv) results from an event of casualty or
condemnation covered by Article 13 hereof (in which event the provisions of such
Article 13 shall govern the parties’ respective rights and obligations); or (v)
is
 
 
- 22 -

--------------------------------------------------------------------------------

 
 
required due to the negligence or willful misconduct of Tenant or its agents,
employees or invitees (in which event Tenant shall bear the full cost of such
work pursuant to the indemnification provided in Section 10.6 hereof, subject to
the release set forth in Section 10.4 hereof). Tenant knowingly and voluntarily
waives the right to make repairs at Landlord’s expense (except as specifically
provided in paragraph (b) below), or to offset the cost thereof against rent,
under any law, statute, regulation or ordinance now or hereafter in effect.
 
(b)           Tenant’s Remedy. If (i) Landlord fails to perform promptly any
repair, maintenance or replacement required to be performed by Landlord on the
Building or Premises (including the portions of the Service Annex designated for
exclusive use by the occupant of the Building, but excluding the shared-use
areas of the Service Annex) under Section 8.1(a) and (ii) such failure creates a
material risk to health and safety or a material risk of damage to property or a
material impairment of Tenant’s ability to conduct its business in the Premises
and (iii) such failure continues for more than thirty (30) days after Tenant
gives Landlord written notice of such failure (or, if such repairs or
maintenance cannot reasonably be performed within such 30-day period, then if
Landlord fails to commence performance within such 30-day period and thereafter
to pursue such performance diligently to completion), then Tenant shall have the
right to perform such repairs or maintenance and Landlord shall reimburse Tenant
for the reasonable cost thereof within fifteen (15) days after written notice
from Tenant of the completion and cost of such work, accompanied by copies of
invoices or other documentation reasonably supporting the costs for which Tenant
is requesting reimbursement. Under no circumstances, however, shall Tenant have
any right to offset or deduct the cost of any such work against rent or other
charges falling due from time to time under this Lease.
 
        8.2   Tenant’s Obligation for Maintenance.
 
(a)           Good Order, Condition and Repair. Except as provided in Section
8.1 hereof, and subject to the provisions of Article 13 hereof (which shall be
controlling in the event of any casualty or condemnation covered by such Article
13) and to Landlord’s obligations under Section 2.3 hereof, Tenant at its sole
cost and expense shall keep and maintain in good and sanitary order, condition
and repair the Premises and every part thereof, wherever located (excluding the
shared-use areas of the Service Annex, subject to Section 8.1 above, but
including any and all portions of the Service Annex designated for exclusive use
by the occupant of the Building), including but not limited to the signs,
interior, ceiling, electrical system, plumbing system, telephone and
communications systems serving the Premises, the HVAC equipment and related
mechanical systems serving the Premises (for which equipment and systems Tenant
shall enter into a service contract with a person or entity approved by
Landlord, such approval not to be unreasonably withheld or delayed), all doors,
door checks, windows, plate glass, door fronts, exposed plumbing and sewage and
other utility facilities, fixtures, lighting, wall surfaces, floor surfaces and
ceiling surfaces of the Premises and all other interior repairs, foreseen and
unforeseen, with respect to the Premises, as required. To the extent Landlord
has any third-party warranties or service contracts on any improvements or
systems in the Premises which are Tenant’s obligation to maintain during the
term of this Lease, Landlord agrees to assign such warranties or service
contracts to Tenant, to the extent practicable, and to use reasonable efforts to
enforce for Tenant’s benefit (and at Tenant’s expense) any such warranties or
service contracts which it is not practicable to assign to Tenant.

 
- 23 -

--------------------------------------------------------------------------------

 
 
(b)           Landlord’s Remedy. If Tenant fails to make or perform promptly any
repairs or maintenance which are the obligation of Tenant hereunder and such
failure continues for more than ten (10) days after written notice from Landlord
specifying the required repairs(except in case of emergency, in which event no
such prior notice shall be required, and except that in the case of repairs or
maintenance which cannot reasonably be performed within such 10-day period, the
provisions of this paragraph shall apply only if Tenant fails to commence
performance within such 10-day period and thereafter to pursue such performance
diligently to completion), Landlord shall have the right, but shall not be
required, to enter the Premises and make the repairs or perform the maintenance
necessary to restore the Premises to good and sanitary order, condition and
repair. Immediately on demand from Landlord, the cost of such repairs shall be
due and payable by Tenant to Landlord.
 
(c)           Condition upon Surrender. At the expiration or sooner termination
of this Lease, Tenant shall surrender the Premises and Building and the
improvements located therein, including any additions, alterations and
improvements thereto (except for items which Tenant is permitted and elects to
remove, or is required to remove, pursuant to the provisions of this Lease),
broom clean, in good and sanitary order, condition and repair, ordinary wear and
tear and casualty damage (the latter of which shall be governed by the
provisions of Article 13 here of) excepted, first, however, removing all goods
and effects of Tenant and all fixtures and items required to be removed or
specified to be removed at Landlord’s election pursuant to this Lease
(including, but not limited to, any such removal required as a result of an
election duly made by Landlord to require such removal as contemplated in
Section 7.2), and repairing any damage caused by such removal. Tenant expressly
waives any and all interest in any personal property and trade fixtures not
removed from the Center by Tenant at the expiration or termination of this
Lease, agrees that any such personal property and trade fixtures may, at
Landlord’s election, be deemed to have been abandoned by Tenant, and authorizes
Landlord (at its election and without prejudice to any other remedies under this
Lease or under applicable law) to remove and either retain, store or dispose of
such property at Tenant’s cost and expense, and Tenant waives all claims against
Landlord for any damages resulting from any such removal, storage, retention or
disposal.
 
9. USE OF PROPERTY
 
9.1           Permitted Use. Subject to Sections 9.3, 9.4 and 9.6 hereof, Tenant
shall use the Premises solely for an office, research and development,
engineering, laboratory, manufacturing including, but not limited to, the
manufacturing of medical devices), assembly and warehousing facility, including
(but not limited to) clean rooms, administrative offices, and other lawful
purposes reasonably related to or incidental to such specified uses (subject in
each case to receipt of all necessary approvals from the City of Redwood City
and all other governmental agencies having jurisdiction over the Premises), and
for no other purpose, unless Landlord in its reasonable discretion otherwise
consents in writing.
 
        9.2           [Intentionally Deleted.]
 
9.3           No Nuisance. Tenant shall not use the Premises for or carry on or
permit within the Center or any part thereof any offensive, noisy or dangerous
trade, business, manufacture,

 
- 24 -

--------------------------------------------------------------------------------

 
 
occupation, odor or fumes, or any nuisance or anything against public policy,
nor interfere with the rights or business of Landlord in the Building or the
Center, nor commit or allow to be committed any waste in, on or about the
Center. Tenant shall not do or permit anything to be done in or about the
Center, nor bring nor keep anything therein, which will in any way cause the
Center or any portion thereof to be uninsurable with respect to the insurance
required by this Lease or with respect to standard fire and extended coverage
insurance with vandalism, malicious mischief and riot endorsements.
 
9.4           Compliance with Laws. Tenant shall not use the Premises, the
Building or the Center or permit the Premises, the Building or the Center to be
used in whole or in part for any purpose or use that is in violation of any
applicable laws, ordinances, regulations or rules of any governmental agency or
public authority. Tenant shall keep the Premises equipped with all safety
appliances required by law, ordinance or insurance on the Center, or any order
or regulation of any public authority, because of Tenant’s particular use of the
Premises. Tenant shall procure all licenses and permits required for Tenant’s
particular use of the Premises. Tenant shall use the Premises in strict
accordance with all applicable ordinances, rules, laws and regulations and shall
comply with all requirements of all governmental authorities now in force or
which may hereafter be in force pertaining to the particular use of the Premises
and the Center by Tenant, including, without limitation, regulations applicable
to noise, water, soil and air pollution, and making such nonstructural
alterations and additions thereto as may be required from time to time by such
laws, ordinances, rules, regulations and requirements of governmental
authorities or insurers of the Center (collectively, “Requirements”) because of
Tenant’s construction of improvements in or other particular use of the Premises
or the Center. Any structural alterations or additions required from time to
time by applicable Requirements because of Tenant’s construction of improvements
in the Premises or other particular use of the Center shall, at Landlord’s
election, either (i) be made by Tenant, at Tenant’s sole cost and expense, in
accordance with the procedures and standards set forth in Section 7.1 for
alterations by Tenant, or (ii) be made by Landlord at Tenant’s sole cost and
expense, in which event Tenant shall pay to Landlord as additional rent, within
thirty (30) days after demand by Landlord, an amount equal to all reasonable
costs incurred by Landlord in connection with such alterations or additions. The
judgment of any court, or the admission by Tenant in any proceeding against
Tenant, that Tenant has violated any law, statute, ordinance or governmental
rule, regulation or requirement shall be conclusive of such violation as between
Landlord and Tenant.
 
9.5           Liquidation Sales. Tenant shall not conduct or permit to be
conducted any auction, bankruptcy sale, liquidation sale, or going out of
business sale, in, upon or about the Center, whether said auction or sale be
voluntary, involuntary or pursuant to any assignment for the benefit of
creditors, or pursuant to any bankruptcy or other insolvency proceeding.
 
        9.6           Environmental Matters.
 
(a)           For purposes of this Section, “hazardous substance” shall mean (i)
the substances included within the definitions of the term “hazardous substance”
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, 42 U.S.C. §§ 9601 et seq., and the regulations promulgated
thereunder, as amended, (ii) the substances included within the definition of
“hazardous substance” under the California

 
- 25 -

--------------------------------------------------------------------------------

 
 
Carpenter-Presley-Tanner Hazardous Substance Account Act, California Health &
Safety Code §§ 25300 et seq., and regulations promulgated thereunder, as
amended, (iii) the substances included within the definition of “hazardous
materials” under the Hazardous Materials Release Response Plans and Inventory
Act, California Heath & Safety Code §§ 25500 et seq., and regulations
promulgated thereunder, as amended, (iv) the substances included within the
definition of “hazardous substance” under the Underground Storage of Hazardous
Substances provisions set forth in California Health & Safety Code §§ 25280 et
seq., and (v) petroleum or any fraction thereof; “hazardous waste” shall mean
(i) any waste listed as or meeting the identified characteristics of a
“hazardous waste” under the Resource Conservation and Recovery Act of 1976, 42
U.S.C. §§ 6901 et seq., and regulations promulgated pursuant thereto, as amended
(collectively, “RCRA”), (ii) any waste meeting the identified characteristics of
“hazardous waste,” “extremely hazardous waste” or “restricted hazardous waste”
under the California Hazardous Waste Control Law, California Health & Safety
Code §§ 25100 et seq., and regulations promulgated pursuant thereto, as amended
(collectively, the “CHWCL”), and/or (iii) any waste meeting the identified
characteristics of “medical waste” under California Health & Safety Code §§
25015-25027.8, and regulations promulgated thereunder, as amended; “hazardous
waste facility” shall mean a hazardous waste facility as defined under the
CHWCL; and “pollutant” shall mean all substances defined as a “pollutant,”
“pollution,” “waste,” “contamination” or “hazardous substance” under the
Porter-Cologne Water Quality Control Act, California Water Code §§ 13000 et seq.
 
(b)           Without limiting the generality of the obligations set forth in
Section 9.4 of this Lease:
 
(i)            Tenant shall not cause or permit any hazardous substance or
hazardous waste to be brought upon, kept, stored or used in or about the Center
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld, except that Tenant, in connection with its permitted use
of the Premises and the Center as provided in Section 9.1, may, without the
prior written consent of Landlord, keep, store and use materials that constitute
hazardous substances which are customary for such permitted use, provided such
hazardous substances are kept, stored and used in quantities which are customary
for such permitted use and are kept, stored and used in full compliance with
clauses (ii) and (iii) immediately below.
 
(ii)           Tenant shall comply with all applicable laws, rules, regulations,
orders, permits, licenses and operating plans of any governmental authority with
respect to the receipt, use, handling, generation, transportation, storage,
treatment and/or disposal of hazardous substances or wastes by Tenant or its
agents or employees, and Tenant will provide Landlord with copies of all
permits, licenses, registrations and other similar documents that authorize
Tenant to conduct any such activities in connection with its authorized use of
the Premises and the Center from time to time.
 
(iii)          Tenant shall not (A) operate on or about the Center any facility
required to be permitted or licensed as a hazardous waste facility or for which
interim status as such is required, nor (B) store any hazardous wastes on or
about the Center for ninety (90) days or more, nor (C) conduct any other
activities on or about the Center that

 
- 26 -

--------------------------------------------------------------------------------

 
 
could result in the Center or any portion thereof being deemed to be a
“hazardous waste facility” (including, but not limited to, any storage or
treatment of hazardous substances or hazardous wastes which could have such a
result), nor (D) store any hazardous wastes on or about the Center in violation
of any federal or California laws or in violation of the terms of any federal or
state licenses or permits held by Tenant.
 
(iv)          Tenant shall not install any underground storage tanks on the
Property without the prior written consent of Landlord and prior approval by all
applicable governmental authorities. If and to the extent that Tenant obtains
all such required consents and approvals and installs any underground storage
tanks on the Property, Tenant shall comply with all applicable laws, rules,
regulations, orders and permits relating to such underground storage tanks
(including any installation, monitoring, maintenance, closure and/or removal of
such tanks) as such tanks are defined in California Health & Safety Code §
25281(x), including, without limitation, complying with California Health &
Safety Code §§ 25280-25299.7 and the regulations promulgated thereunder, as
amended. Tenant shall furnish to Landlord copies of all registrations and
permits issued to or held by Tenant from time to time for any and all
underground storage tanks located on or under the Property.
 
(v)           If applicable, Tenant shall provide Landlord in writing the
following information and/or documentation within fifteen (15) days after the
Rent Commencement Date, and shall update such information at least annually, on
or before each anniversary of the Rent Commencement Date, to reflect any change
in or addition to the required information and/or documentation (provided,
however, that in the case of the materials described in subparagraphs (B), (C)
and (E) below, Tenant shall not be required to deliver copies of such materials
to Landlord but shall maintain copies of such materials to such extent and for
such periods as may be required by applicable law and shall permit Landlord or
its representatives to inspect and copy such materials during normal business
hours at any time and from time to time upon reasonable notice to Tenant; and
provided further, however, that Landlord shall keep all such materials reviewed
by Landlord confidential, except to the extent disclosure of such materials or
of the contents thereof (x) to Landlord’s employees, counsel, managers and/or
consultants is necessary or appropriate in the course of their employment or
their representation of or advice to Landlord or in the enforcement of
Landlord’s rights and Tenant’s obligations under this Lease, or (y) to any
prospective lender or purchaser of the Center is necessary or appropriate in
connection with any proposed sale or financing of the Center, or (z) is
compelled by any governmental or quasi-governmental authority or by applicable
law):
 
(A)          A list of all hazardous substances, hazardous wastes and/or
pollutants that Tenant receives, uses, handles, generates, transports, stores,
treats or disposes of from time to time in connection with its operations in the
Center.
 
(B)          All Material Safety Data Sheets (“MSDS’s”), if any, required to be
completed with respect to operations of Tenant at the Center from time to time
in accordance with Title 26, California Code of Regulations § 8-5194

 
- 27 -

--------------------------------------------------------------------------------

 
 
or 42 U.S.C. § 11021, or any amendments thereto, and any Hazardous Materials
Inventory Sheets that detail the MSDS’s.
 
(C)           All Hazardous Waste Manifests, if any, that Tenant is required to
complete from time to time under California Health & Safety Code§ 25160, any
regulations promulgated thereunder, any similar success or provisions and/or any
amendments to any of the foregoing, in connection with its operations in the
Center.
 
(D)          Any Hazardous Materials Management Plan required from time to time
with respect to Tenant’s operations in the Center, pursuant to California Health
& Safety Code §§ 25500 et seq., any regulations promulgated thereunder, any
similar successor provisions and/or any amendments to any of the foregoing.
 
(E)           Any Air Toxics Emissions Inventory Plan required from time to time
with respect to Tenant’s operations in the Center, pursuant to California Health
& Safety Code §§ 44340 et seq., any regulations promulgated thereunder, any
similar successor provisions and/or any amendments to any of the foregoing.
 
(F)           Any biennial Hazardous Waste Generator reports or notifications
furnished by Tenant to the California Department of Toxic Substances Control or
other applicable governmental authorities from time to time pursuant to
California Code of Regulations Title 22, § 66262.41, any similar successor
provisions and/or any amendments to any of the foregoing, in connection with
Tenant’s operations in the Center.
 
(G)           Any Hazardous Waste Generator Reports regarding source reductions,
as required from time to time pursuant to California Health & Safety Code §§
25244.20 et seq., any regulations promulgated thereunder, any similar successor
provisions and/or any amendments to any of the foregoing, in connection with
Tenant’s operations in the Center.
 
(H)          Any Hazardous Waste Generator Reports or notifications not
otherwise described in the preceding subparagraphs and required from time to
time pursuant to California Health & Safety Code § 25153.6, California Code of
Regulations Title 22, Division 4.5, Chapter 12, §§66262.10 et seq. (“Standards
Applicable to Generators of Hazardous Waste”), any other regulations promulgated
thereunder, any similar successor provisions and/or any amendments to any of the
foregoing, in connection with Tenant’s operations in the Center.
 
(I)            All industrial wastewater discharge permits issued to or held by
Tenant from time to time in connection with its operations in the Center, and
all air quality management district permits issued to or held by Tenant from
time to time in connection with its operations in the Center.

 
- 28 -

--------------------------------------------------------------------------------

 
 
(J)           Copies of any other lists or inventories of hazardous substances,
hazardous wastes and/or pollutants on or about the Center that Tenant is
otherwise required to prepare and file from time to time with any governmental
or regulatory authority.
 
(vi)          Tenant shall secure Landlord’s prior written approval for any
proposed receipt, storage, possession, use, transfer or disposal of “radioactive
materials” or “radiation,” as such materials are defined in Title 26, California
Code of Regulations § 17-30100, and/or any other materials possessing the
characteristics of the materials so defined, which approval Landlord may
withhold in its sole and absolute discretion; provided, that such approval shall
not be required for any radioactive materials (x) for which Tenant has secured
prior written approval of the Nuclear Regulatory Commission and delivered to
Landlord a copy of such approval (if applicable), or (y) which Tenant is
authorized to use pursuant to the terms of any radioactive materials license
issued by the State of California. Tenant, in connection with any such
authorized receipt, storage, possession, use, transfer or disposal of
radioactive materials or radiation, shall:
 
(A)          Comply with all federal, state and local laws, rules, regulations,
orders, licenses and permits issued to or applicable to Tenant with respect to
its operations in the Center;
 
(B)           Maintain, to such extent and for such periods as may be required
by applicable law, and permit Landlord and its representatives to inspect during
normal business hours at any time and from time to time upon reasonable notice
to Tenant, a list of all radioactive materials or radiation received, stored,
possessed, used, transferred or disposed of by Tenant or in connection with
Tenant’s operations in the Center from time to time, to the extent not already
disclosed through delivery of a copy of a Nuclear Regulatory Commission approval
with respect thereto as contemplated above; and
 
(C)           Maintain, to such extent and for such periods as may be required
by applicable law, and permit Landlord or its representatives to inspect during
normal business hours at any time and from time to time upon reasonable notice
to Tenant, all licenses, registration materials, inspection reports,
governmental orders and permits in connection with the receipt, storage,
possession, use, transfer or disposal of radioactive materials or radiation by
Tenant or in connection with Tenant’s operations in the Center from time to
time.
 
(vii)         Tenant shall comply with any and all applicable laws, rules,
regulations and orders of any governmental authority with respect to the release
into the environment of any hazardous wastes, hazardous substances, pollutants,
radiation or radioactive materials by Tenant or its agents or employees. If and
to the extent Tenant becomes aware of any unauthorized release of any such
hazardous wastes, hazardous substances, pollutants, radiation or radioactive
materials into the environment and such release (x) creates a significant risk
to human health or safety, (y) creates a significant risk of contamination of
any of the improvements, soil or groundwater on or under the

 
- 29 -

--------------------------------------------------------------------------------

 
 
Property, or (z) is required to be reported to any governmental authority
(including, but not limited to, any release of a Reportable Quantity, under the
Emergency Planning and Community Right to Know Act, of any hazardous substance,
hazardous waste, pollutant, radiation or radioactive material), then in each
such event Tenant shall give Landlord verbal notice of such release as
immediately as practicable, shall follow such verbal notice with written notice
to Landlord of such release within one (1) business day after Tenant became
aware of such release, and shall provide Landlord with a copy of any written
report or disclosure filed by Tenant with any governmental authority with
respect to such release, substantially concurrently with Tenant’s filing of such
written report or disclosure with the applicable governmental authority.

(viii)        Tenant shall indemnify, defend and hold Landlord harmless from and
against any and all claims, losses (including, but not limited to, loss of
rental income), damages, liabilities, costs, legal fees and expenses of any sort
arising out of or relating to (A) any failure by Tenant to comply with any
provisions of this Section 9.6(b), or (B) any receipt, use handling, generation,
transportation, storage, treatment, release and/or disposal of any hazardous
substance, hazardous waste, pollutant, radioactive material or radiation on or
about the Center as a proximate result of Tenant’s use of the Center or as a
result of any intentional or negligent acts or omissions of Tenant or of any
agent, employee or invitee of Tenant. Notwithstanding the foregoing provisions,
Landlord acknowledges and agrees that losses of rental or other income
compensable under the preceding sentence do not include any actual or alleged
loss of rental or other income arising from another tenant’s or prospective
tenant’s or prospective purchaser’s objection to the mere fact of Tenant’s use
of hazardous substances or materials on or about the Premises, absent any
material violation by Tenant or its agents or employees of the provisions of
this Lease or of applicable law in the course of such use.

(ix)           Tenant shall cooperate with Landlord in furnishing Landlord with
complete information regarding Tenant’s receipt, handling, use, storage,
transportation, generation, treatment and/or disposal of any hazardous
substances, hazardous wastes, pollutants, radiation or radioactive materials in
or about the Center. Upon request, but subject to Tenant’s reasonable operating
and security procedures, Tenant shall grant Landlord reasonable access at
reasonable times to the Premises to inspect Tenant’s receipt, handling, use,
storage, transportation, generation, treatment and/or disposal of hazardous
substances, hazardous wastes, pollutants, radiation and radioactive materials,
without Landlord thereby being deemed guilty of any disturbance of Tenant’s use
or possession or being liable to Tenant in any manner.

(x)            Notwithstanding Landlord’s rights of inspection and review under
this Section 9.6(b), Landlord shall have no obligation or duty to so inspect or
review, and no third party shall be entitled to rely on Landlord to conduct any
sort of inspection or review by reason of the provisions of this Section 9.6(b).

(xi)           Landlord has made available for review by Tenant, prior to
execution of this Lease, copies of all third-party studies and reports in
Landlord’s possession regarding environmental conditions in the Building and/or
the Property.
 
 
- 30 -

--------------------------------------------------------------------------------

 

Landlord has engaged or shall engage an environmental consultant, at Landlord’s
sole expense, to conduct a further environmental study of the Building,
evaluating the presence or absence of hazardous substances, hazardous wastes,
pollutants, radiation and radioactive materials in and under the Building, and
Landlord shall provide a copy of such study to Tenant. The purpose of this study
is to provide evidence of the “baseline” condition of the Building prior to
Tenant’s occupancy and use thereof, although such evidence is not intended to be
conclusive or irrebuttable. Tenant shall also have the right (but not the
obligation), if it so elects and at its own expense, to conduct its own
environmental study of the Premises prior to or at the time of Tenant’s
occupancy, in which event Tenant shall provide a copy of such study to Landlord;
provided, that prior to any drilling, excavation or other physically invasive
testing on the Building or Property in connection with any such study, Tenant or
its consultant shall provide Landlord with a detailed scope of work and such
work shall be subject to Landlord’s prior written approval (which approval shall
not be unreasonably withheld or delayed, but may be conditioned upon compliance
by Tenant and its consultant with reasonable insurance requirements and upon
other reasonable and customary requirements).

(xii)          If Tenant or its employees, agents, contractors, vendors,
customers or guests receive, handle, use, store, transport, generate, treat
and/or dispose of any hazardous substances or wastes or radiation or radioactive
materials on or about the Center at any time during the term of this Lease, then
(A) Tenant shall be solely responsible for obtaining, at Tenant’s sole expense,
any environmental tests, studies or reports required by any governmental
authority for site or permit closure purposes or other similar purposes, and
shall provide a copy of all such tests, studies and reports to Landlord; and (B)
unless Landlord and Tenant mutually agree (in their respective sole discretion)
that the tests, studies and reports (if any) required under the foregoing clause
(A) are adequate to serve the purposes contemplated by this clause (B), then
within thirty (30) days after Tenant vacates the Premises upon termination or
expiration of this Lease, Landlord shall obtain a further environmental study,
performed by a reputable environmental consultant selected by Landlord,
evaluating the presence or absence of hazardous substances, hazardous wastes,
pollutants, radiation and radioactive materials on and about those portions of
the Center affected by Tenant’s operations in the Center and attributable or
potentially attributable to such operations (the “Exit Study”). Such Exit Study
shall be at least a Phase I study (and shall be a Phase II study to the extent
the results of the Phase I study reasonably suggest the necessity or
desirability of a Phase II level investigation in any areas), and shall be based
on a reasonable and prudent level of tests and investigations of the Center (if
appropriate), which tests shall be conducted no earlier than the date of
termination or expiration of this Lease. Liability for any remedial actions
required or recommended on the basis of the Exit Study shall be allocated in
accordance with Sections 9.4, 9.6, 10.6 and other applicable provisions of this
Lease. The cost of the Exit Study shall be borne by Landlord, except that if the
Exit Study identifies any required or recommended remedial work that is Tenant’s
responsibility under the applicable provisions of this Lease, then Tenant shall
reimburse Landlord for the cost of the Exit Study, which reimbursement shall be
paid within thirty
 
 
- 31 -

--------------------------------------------------------------------------------

 
 
(30) days after written demand by Landlord, accompanied by a copy of the
invoice(s) reflecting the cost of the Exit Study.

(xiii)         The parties acknowledge and agree that nothing in this Section
9.6 or in any other applicable provisions of this Lease (including, without
limitation, any provisions relating to compliance with applicable laws) is
intended to make Tenant responsible or liable to Landlord, as a matter of
contract, for any environmental conditions, or for any related claims, losses,
damages, liabilities, costs, legal fees or expenses, to the extent arising out
of or in connection with (A) any migration of hazardous substances, hazardous
wastes or pollutants onto or under the Property, except to the extent (if any)
that such migration is caused or materially exacerbated by any intentional or
actively negligent acts or omissions of Tenant or its employees, agents or
invitees, and/or (B) any release of hazardous substances, hazardous wastes or
pollutants into the environment (including, but not limited to, the Property) by
any person or from any cause other than as a proximate result of Tenant’s use of
the Property, or as a result of any intentional or negligent acts or omissions
of Tenant or its employees, agents or invitees, or as a result of any breach of
Tenant’s obligations under this Lease.
 
(c)           Landlord shall indemnify, defend and hold Tenant harmless from and
against any and all claims, losses, damages, liabilities, costs, legal fees and
expenses of any sort arising out of or relating to (i) the presence on the
Center of any hazardous substances, hazardous wastes, pollutants, radiation or
radioactive materials present on the Center as of the Rent Commencement Date
(other than as a result of any intentional or negligent acts or omissions of
Tenant or of any agent, employee or invitee of Tenant), and/or (ii) any
unauthorized release into the environment (including, but not limited to, the
Center) of any hazardous substances, hazardous wastes, pollutants, radiation or
radioactive materials to the extent such release results from the negligence of
or willful misconduct or omission by Landlord or its agents or employees.
 
(d)           The provisions of this Section 9.6 shall survive the termination
of this Lease.
 
10. INSURANCE AND INDEMNITY
 
10.1         Insurance.
 
(a)           Tenant shall procure and maintain in full force and effect at all
times during the term of this Lease, from and after the Construction Access
Date, at Tenant’s cost and expense, commercial general liability insurance to
protect against liability to the public, or to any invitee of Tenant or
Landlord, arising out of or related to the use of or resulting from any accident
occurring in, upon or about the Premises, with limits of liability of not less
than (i) Three Million Dollars ($3,000,000.00) per occurrence for bodily injury,
personal injury and death, and Five Hundred Thousand Dollars ($500,000.00) per
occurrence for property damage, or (ii) a combined single limit of liability of
not less than Five Million Dollars ($5,000,000.00) per occurrence for bodily
injury (including personal injury and death) and property damage. Such insurance
shall name Landlord, its general partners, its property manager and any lender
holding a deed of trust on the Center from time to time (as designated in
writing by Landlord to
 
 
- 32 -

--------------------------------------------------------------------------------

 
 
Tenant from time to time) as additional insureds thereunder. The amount of such
insurance shall not be construed to limit any liability or obligation of Tenant
under this Lease. Tenant shall also procure and maintain in full force and
effect at all times during the term of this Lease, at Tenant’s cost and expense,
products/completed operations coverage, on terms and in amounts (A) customary in
Tenant’s industry for companies engaged in the marketing of products on a scale
comparable to that in which Tenant is engaged from time to time and (B) mutually
satisfactory to Landlord and Tenant in their respective reasonable discretion,
provided that such coverage is reasonably available to Tenant on commercially
reasonable terms.
 
(b)           Landlord shall procure and maintain in full force and effect at
all times during the term of this Lease, at Landlord’s cost and expense (but
reimbursable as an Operating Expense under Section 5.2 hereof), commercial
general liability insurance to protect against liability arising out of or
related to the use of or resulting from any accident occurring in, upon or about
the Center, with a combined single limit of liability of not less than Five
Million Dollars ($5,000,000.00) per occurrence for bodily injury (including
personal injury and death) and property damage.
 
(c)           Landlord shall procure and maintain in full force and effect at
all times during the term of this Lease, at Landlord’s cost and expense (but
reimbursable as an Operating Expense under Section 5.2 hereof), policies of
property insurance providing protection against “all risk of direct physical
loss” (as defined by and detailed in the Insurance Service Office’s Commercial
Property Program “Cause of Loss--Special Form [CP1030]” or its equivalent) for
the shell of the Building and for the improvements in the Common Areas of the
Center, on a full replacement cost basis (with no co-insurance or, if coverage
without co-insurance is not reasonably available, then on an “agreed amount”
basis or with a commercially reasonable margin clause). Such insurance may
include earthquake and/or environmental coverage, as part of the same policy or
as a separate policy or policies, to the extent Landlord in its sole discretion
elects to carry such coverage, and shall have such commercially reasonable
deductibles and other terms as Landlord in its discretion determines to be
appropriate. Landlord shall have no obligation to carry property damage
insurance for any alterations, additions or improvements installed by Tenant in
the Building or on or about the Center.
 
(d)           Landlord shall procure and maintain in full force and effect at
all times during the term of this Lease, at Landlord’s cost and expense (but
reimbursable as an Operating Expense under Section 5.2 hereof), policies of
property insurance providing protection against “all risk of direct physical
loss” (as defined by and detailed in the Insurance Service Office’s Commercial
Property Program “Cause of Los--Special Form [CP1030]” or its equivalent) for
the tenant improvements existing in the Premises on the Construction Access Date
and for all Tenant Improvements constructed pursuant to the Workletter (but
excluding Tenant’s Property as defined in paragraph (e) below, which it shall be
Tenant’s responsibility to insure pursuant to such paragraph), on a full
replacement cost basis (with no co-insurance or, if coverage without
co-insurance is not reasonably available, then on an “agreed amount” basis or
with a commercially reasonable margin clause). Such insurance may have such
commercially reasonable deductibles and other terms as Landlord in its
reasonable discretion determines to be appropriate. The coverage required to be
maintained under this paragraph (d) may, in Landlord’s discretion, be added to
or combined with Landlord’s master policy carried under paragraph (c)
 
 
- 33 -

--------------------------------------------------------------------------------

 
 
above. Tenant shall cooperate with Landlord in the preparation of a mutually
approved initial list or schedule of such existing improvements and Tenant
Improvements, for purposes of identifying the items Landlord is responsible for
insuring under this paragraph (d), and Tenant shall thereafter provide to
Landlord from time to time, upon request by Landlord annually or at other
reasonable intervals, an updated version of such list or schedule (the intended
purpose of such updating being to reflect any modification or removal of any
such items that would have the effect of eliminating them from the scope of
Landlord’s insurance obligation under this paragraph (d)). In addition, Tenant
shall provide Landlord with final construction cost figures for the Tenant
Improvements (or for each phase thereof, if constructed in phases), for
Landlord’s use in determining appropriate insurance coverage for the Tenant
Improvements. Landlord, in its discretion, may elect from time to time to obtain
appraisals of any or all alterations, additions, improvements and tenant
improvements (if any) which Landlord is required to insure hereunder.
 
(e)           Tenant shall procure and maintain in full force and effect at all
times during the term of this Lease, from and after the Construction Access
Date, at Tenant’s cost and expense, policies of property insurance providing
protection against “all risk of direct physical loss” (as defined by and
detailed in the Insurance Service Office’s Commercial Property Program “Cause of
Loss-Special Form [CP1030]” or its equivalent) for Tenant’s movable personal
property, office furniture, movable equipment and trade fixtures, and for all
other alterations, additions and improvements placed or installed by Tenant from
time to time in or about the Premises other than Tenant Improvements constructed
pursuant to the Workletter (collectively, “Tenant’s Property,” which term is not
intended to imply any conclusion regarding ultimate ownership of alterations,
additions and improvements that are otherwise covered by Article 7 above, but is
used solely as a defined term for purposes of the specific contexts in which it
is used as such in this Lease), on a full replacement cost basis (with no
co-insurance or, if coverage without co-insurance is not reasonably available,
then on an “agreed amount” basis or with a commercially reasonable margin
clause). Such insurance may have such commercially reasonable deductibles and
other terms as Tenant in its discretion determines to be appropriate, and shall
name both Tenant and Landlord as insureds as their interests may appear.
 
(f)            During the construction of the Tenant Improvements, Tenant shall
also procure and maintain in full force and effect, at its sole cost and
expense, a policy of builder’s risk insurance on the Tenant Improvements, in
such amounts and with such commercially reasonable deductibles as Landlord and
Tenant may mutually and reasonably determine to be appropriate with respect to
such insurance. Without limiting the generality of the foregoing provisions,
Tenant’s builder’s risk insurance with respect to the Tenant Improvements shall
in all events include earthquake insurance in an amount at least equal to the
cumulative amount of the Tenant Improvement Allowance paid by Landlord from time
to time in connection with the construction of such Tenant Improvements.
 
10.2         Quality of Policies and Certificates. All policies of insurance
required hereunder shall be issued by responsible insurers and, in the case of
policies carried or required to be carried by Tenant, shall be written as
primary policies not contributing with and not in excess of any coverage that
Landlord may carry. Tenant shall deliver to Landlord copies of policies or
certificates of insurance showing that said policies are in effect. The coverage
provided by such policies shall include the clause or endorsement referred to in
Section 10.4. If Tenant fails to
 
 
- 34 -

--------------------------------------------------------------------------------

 
 
acquire, maintain or renew any insurance required to be maintained by it under
this Article 10 or to pay the premium therefor, then Landlord, at its option and
in addition to its other remedies, but without obligation so to do, may procure
such insurance, and any sums expended by it to procure any such insurance on
behalf of or in place of Tenant shall be repaid upon demand, with interest as
provided in Section 3.2 hereof. Tenant shall give Landlord at least thirty (30)
days prior written notice of any cancellation or nonrenewal of insurance
required to be maintained under this Article 10, and shall obtain written
undertakings from each insurer under policies required to be maintained by it to
endeavor to notify all insureds thereunder at least thirty (30) days prior to
cancellation of coverage (or ten (10) days prior to cancellation of coverage due
to failure to pay a premium).
 
10.3         Workers’ Compensation; Employees. Tenant shall maintain in full
force and effect during the term of this Lease workers’ compensation insurance
in at least the minimum amounts required by law, covering all of Tenant’s
employees working at or about the Premises. In addition, Tenant shall maintain
in full force and effect during the term of this Lease employer’s liability
coverage with limits of liability of not less than One Hundred Thousand Dollars
($100,000) per accident, One Hundred Thousand Dollars ($100,000) per employee
for disease, and Five Hundred Thousand Dollars ($500,000) policy limit for
disease.
 
10.4         Waiver of Subrogation. Notwithstanding anything to the contrary
contained in this Lease, to the extent permitted by law, Landlord and Tenant
each waive any right to recover against the other with respect to (i) damage to
property, (ii) damage to the Center or any part thereof, or (iii) claims arising
by reason of any of the foregoing, but only to the extent that any of the
foregoing damages and claims under clauses (i)-(iii) hereof are covered, and
only to the extent of such coverage, by property insurance actually carried or
required to be carried hereunder by either Landlord or Tenant. This provision is
intended to waive fully, and for the benefit of each party, any rights and
claims which might give rise to a right of subrogation in any insurance carrier.
Each party shall procure a clause or endorsement on any property insurance
policy denying to the insurer rights of subrogation against the other party to
the extent rights have been waived by the insured prior to the occurrence of
injury or loss. Coverage provided by insurance maintained by Landlord or Tenant
shall not be limited, reduced or diminished by virtue of the subrogation waiver
herein contained.
 
10.5         Increase in Premiums. Tenant shall do all acts and pay all expenses
necessary to ensure that the Premises are not used for purposes prohibited by
any applicable fire insurance, and that Tenant’s use of the Premises, Building
and Center complies with all requirements necessary to obtain any such
insurance. If Tenant uses or permits the Premises, Building or Center to be used
in a manner which increases the existing rate of any insurance carried by
Landlord on the Center and such use continues for longer than a reasonable
period specified in any written notice from Landlord to Tenant identifying the
rate increase and the factors causing the same, then Tenant shall pay the amount
of the increase in premium caused thereby, and Landlord’s costs of obtaining
other replacement insurance policies, including any increase in premium, within
ten (10) days after demand therefor by Landlord.

 
- 35 -

--------------------------------------------------------------------------------

 
 
10.6         Indemnification.
 
(a)           Except as otherwise expressly provided for in this Lease, Tenant
shall indemnify, defend and hold Landlord and its members, partners,
shareholders, officers, directors, agents, employees and contractors harmless
from any and all liability for injury to or death of any person, or loss of or
damage to the property of any person, and all actions, claims, demands, costs
(including, without limitation, reasonable attorneys’ fees), damages or expenses
of any kind arising therefrom which may be brought or made against Landlord or
which Landlord may pay or incur by reason of the use, occupancy and enjoyment of
the Center by Tenant or any invitees, sublessees, licensees, assignees,
employees, agents or contractors of Tenant or holding under Tenant (including,
but not limited to, any such matters arising out of or in connection with any
early entry upon the Center by Tenant pursuant to Section 2.2 hereof) from any
cause whatsoever other than (i) negligence or willful misconduct or omission by
Landlord or its agents, employees or contractors or (ii) Landlord’s material
breach of its obligations under this Lease. Except as otherwise expressly
provided for in this Lease, Landlord and its members, partners, shareholders,
officers, directors, agents, employees and contractors shall not be liable for,
and Tenant hereby waives all claims against such persons for, damages to goods,
wares and merchandise in or upon the Center, or for injuries to Tenant, its
agents or third persons in or upon the Center, from any cause whatsoever other
than (x) negligence or willful misconduct or omission by Landlord or its agents,
employees or contractors or (y) Landlord’s material breach of its obligations
under this Lease. Tenant shall give prompt notice to Landlord of any casualty or
accident in, on or about the Center.
 
(b)           Except as otherwise expressly provided for in this Lease, Landlord
shall indemnify, defend and hold Tenant and its partners, shareholders,
officers, directors, agents, employees and contractors harmless from any and all
liability for injury to or death of any person, or loss of or damage to the
property of any person, and all actions, claims, demands, costs (including,
without limitation, reasonable attorneys’ fees), damages or expenses of any kind
arising therefrom which may be brought or made against Tenant or which Tenant
may pay or incur, to the extent such liabilities or other matters arise by
reason of any negligence or willful misconduct or omission by Landlord or its
agents, employees or contractors.
 
10.7         Blanket Policy. Any policy required to be maintained hereunder may
be maintained under a so-called “blanket policy” insuring other parties and
other locations so long as the amount of insurance required to be provided
hereunder is not thereby diminished. Without limiting the generality of the
requirement set forth at the end of the preceding sentence, property insurance
provided under a blanket policy shall provide full replacement cost coverage and
liability insurance provided under a blanket policy shall include per location
aggregate limits meeting or exceeding the limits required under this Article 10.
 
11. SUBLEASE AND ASSIGNMENT
 
11.1         Assignment and Sublease of Building. Except in the case of a
Permitted Transfer, Tenant shall not have the right or power to assign its
interest in this Lease, or make any sublease of the Premises or any portion
thereof, nor shall any interest of Tenant under this Lease be assignable
involuntarily or by operation of law, without on each occasion obtaining the
prior
 
 
- 36 -

--------------------------------------------------------------------------------

 
 
written consent of Landlord, which consent shall not be unreasonably withheld,
conditioned or delayed. Any purported sublease or assignment of Tenant’s
interest in this Lease requiring but not having received Landlord’s consent
thereto (to the extent such consent is required hereunder) shall be void.
Without limiting the generality of the foregoing provisions, Landlord may
withhold consent to any proposed subletting or assignment solely on the ground,
if applicable, that the use by the proposed subtenant or assignee is not a
permitted use hereunder and is reasonably likely to be incompatible with
Landlord’s use of the balance of the Center. Except in the case of a Permitted
Transfer, any dissolution, consolidation, merger or other reorganization of
Tenant, or any sale or transfer of substantially all of the stock or assets of
Tenant in a single transaction or series of related transactions, shall be
deemed to be an assignment hereunder and shall be void without the prior written
consent of Landlord as required above. Notwithstanding the foregoing, (i)
neither an initial public offering of the common stock of Tenant, nor any other
sale of Tenant’s capital stock through any public securities exchange or market,
nor any other issuance of Tenant’s capital stock for bona fide financing
purposes, nor any consolidation, merger or reorganization in which Tenant is the
surviving entity, shall be deemed to be an assignment, subletting or transfer
hereunder; and (ii) Tenant shall have the right to assign this Lease or sublet
the Premises, or any portion thereof, without Landlord’s consent (but with prior
or concurrent written notice by Tenant to Landlord), to any Affiliate of Tenant,
or to any entity which results from a merger or consolidation involving Tenant,
or to any entity which acquires substantially all of the stock or assets of
Tenant as a going concern (each, a “Permitted Transfer”). For purposes of the
preceding sentence, an “Affiliate” of Tenant shall mean any entity in which
Tenant owns at least a fifty percent (50%) equity interest, any entity which
owns at least a fifty percent (50%) equity interest in Tenant, and/or any entity
which is related to Tenant by a chain of ownership interests involving at least
a fifty percent (50%) equity interest at each level in the chain. Landlord shall
have no right to terminate this Lease in connection with, and shall have no
right to any sums or other economic consideration resulting from, any Permitted
Transfer. Except as expressly set forth in this Section 11.1, however, the
provisions of Section 11.2 shall remain applicable to any Permitted Transfer and
the transferee under such Permitted Transfer shall be and remain subject to all
of the terms and provisions of this Lease.
 
11.2         Rights of Landlord.
 
(a)           Consent by Landlord to one or more assignments of this Lease, or
to one or more sublettings of the Premises or any portion thereof, or collection
of rent by Landlord from any assignee or sublessee, shall not operate to exhaust
Landlord’s rights under this Article 11, nor constitute consent to any
subsequent assignment or subletting. No assignment of Tenant’s interest in this
Lease and no sublease shall relieve Tenant of its obligations hereunder,
notwithstanding any waiver or extension of time granted by Landlord to any
assignee or sublessee, or the failure of Landlord to assert its rights against
any assignee or sublessee, and regardless of whether Landlord’s consent thereto
is given or required to be given hereunder. In the event of a default by any
assignee, sublessee or other successor of Tenant in the performance of any of
the terms or obligations of Tenant under this Lease, Landlord may proceed
directly against Tenant without the necessity of exhausting remedies against any
such assignee, sublessee or other successor. In addition, Tenant immediately and
irrevocably assigns to Landlord, as security for Tenant’s obligations under this
Lease, all rent from any subletting of all or a part of
 
 
- 37 -

--------------------------------------------------------------------------------

 

 
the Premises as permitted under this Lease, and Landlord, as Tenant’s assignee,
or any receiver for Tenant appointed on Landlord’s application, may collect such
rent and apply it toward Tenant’s obligations under this Lease; except that,
until the occurrence and during the continuance of an event of default by
Tenant, Tenant shall have the right to collect such rent and to retain all
sublease profits (subject to the provisions of Section 11.2(c), below).
 
(b)           Upon any assignment of Tenant’s interest in this Lease for which
Landlord’s consent is required under Section 11.1 hereof, Tenant shall pay to
Landlord, within ten (10) days after receipt thereof by Tenant from time to
time, one-half (½) of all cash sums and other economic considerations received
by Tenant in connection with or as a result of such assignment, after first
deducting therefrom (i) any costs incurred by Tenant for leasehold improvements
(including, but not limited to, third-party architectural and space planning
costs) in the Premises in connection with such assignment, amortized over the
remaining term of this Lease, (ii) any reasonable real estate commissions and/or
reasonable attorneys’ fees actually incurred by Tenant in connection with such
assignment, and (iii) the unamortized cost (assuming straight-line amortization
over the entire period from the date of substantial completion of construction
of the applicable alteration, addition or improvement through the remainder of
the initial term of this Lease) of any alterations, additions and improvements
made to the Premises at Tenant’s expense and remaining in the Premises at the
time of such assignment.
 
(c)           Upon any sublease of all or any portion of the Premises for which
Landlord’s consent is required under Section 11.1 hereof, Tenant shall pay to
Landlord, within ten (10) days after receipt thereof by Tenant from time to
time, one-half (1/2) of all cash sums and other economic considerations received
by Tenant in connection with or as a result of such sublease, after first
deducting therefrom (i) the minimum rental due hereunder for the corresponding
period, prorated (on the basis of the average per-square-foot cost paid by
Tenant for the Premises for the applicable period under this Lease) to reflect
the size of the subleased portion of the Premises, (ii) any costs incurred by
Tenant for leasehold improvements in the subleased portion of the Premises
(including, but not limited to, third-party architectural and space planning
costs) for the specific benefit of the sublessee in connection with such
sublease, amortized over the remaining term of this Lease, (iii) any reasonable
real estate commissions and/or reasonable attorneys’ fees actually incurred by
Tenant in connection with such sublease, amortized over the term of such
sublease, and (iv) amortized over the term of such sublease, the portion
allocable to the sublease term of the unamortized cost (assuming straight-line
amortization over the entire period from the date of substantial completion of
construction of the applicable alteration, addition or improvement through the
remainder of the initial term of this Lease) of any alterations, additions and
improvements made to the Premises at Tenant’s expense and reasonably allocable
to the subleased portion of the Premises at the time of such sublease.
Notwithstanding anything to the contrary contained in this paragraph (c), in no
event shall the economic considerations required to be shared by Tenant with
Landlord hereunder include the reasonable, good faith value of any goods or
services provided by Tenant to any sublessee in connection with any subletting,
including, but not limited to, any shipping, receiving, security, reception,
facilities management, laboratory, repair, maintenance, utilities and other
similar goods and services provided to the sublessee in excess of the goods and
services provided by Landlord to Tenant under this Lease.
 
 
- 38 -

--------------------------------------------------------------------------------

 
 
12. RIGHT OF ENTRY AND QUIET ENJOYMENT
 
12.1         Right of Entry. Landlord and its authorized representatives shall
have the right, subject to Tenant’s reasonable operating and security
procedures, to enter the Premises at any time during the term of this Lease
during normal business hours and upon not less than twenty-four (24) hours prior
notice, except in the case of emergency (in which event no notice shall be
required and entry may be made at any time), for the purpose of inspecting and
determining the condition of the Premises and Building or for any other proper
purpose including, without limitation, to make repairs, replacements or
improvements which Landlord may deem necessary, to show the Premises and
Building to prospective purchasers, to show the Premises and Building to
prospective tenants (but only during the final year of the term of this Lease),
and to post notices of nonresponsibility. Landlord shall not be liable for
inconvenience, annoyance, disturbance, loss of business, quiet enjoyment or
other damage or loss to Tenant by reason of making any repairs or performing any
work upon the Building or the Center or by reason of erecting or maintaining any
protective barricades in connection with any such work, and the obligations of
Tenant under this Lease shall not thereby be affected in any manner whatsoever,
provided, however, Landlord shall use reasonable efforts to minimize the
inconvenience to Tenant’s normal business operations caused thereby.
 
12.2         Quiet Enjoyment. Landlord covenants that Tenant, upon paying the
rent and performing its obligations hereunder and subject to all the terms and
conditions of this Lease, shall peacefully and quietly have, hold and enjoy the
Premises and the Center throughout the term of this Lease, or until this Lease
is terminated as provided by this Lease.
 
13. CASUALTY AND TAKING
 
13.1         Damage or Destruction.
 
(a)           If the Premises or any portion of the Common Areas of the Center
necessary for Tenant’s use and occupancy of the Premises is damaged or destroyed
in whole or in any substantial part during the term of this Lease, Landlord
shall obtain from Landlord’s architect, as soon as practicable (and in all
events within forty-five (45) days) following the damage or destruction, (i) the
architect’s reasonable, good faith estimate of the time within which repair and
restoration of the Premises and Common Areas (if applicable) can reasonably be
expected to be completed to the extent necessary to enable Tenant to resume its
full business operations in the Premises without material impairment and (ii)
the architect’s reasonable, good faith opinion as to whether repair and
restoration to that extent will be permitted under applicable governmental laws,
regulations and building codes then in effect (collectively, the
(“Architect’s Estimate”). If the damage or destruction materially impairs
Tenant’s ability to conduct its business operations in the Premises, and if
either (A) the estimated repair time specified in the Architect’s Estimate
exceeds nine (9) months (or, in the case of an occurrence during the final year
of the term of this Lease, sixty (60) days, provided that if Landlord elects to
terminate this Lease under this clause (A) on the basis of an Architect’s
Estimate showing an estimated repair time of more than sixty (60) days but not
more than nine (9) months with respect to a casualty occurring during the final
year of the initial term or first extended term [if applicable] of this Lease
but prior to a valid exercise by Tenant of its option to extend the then-current
term of this
 
 
- 39 -

--------------------------------------------------------------------------------

 
 
Lease, and if Tenant, within ten (10) days after receipt of written notice of
Landlord’s election to terminate, validly exercises in writing any
then-exercisable option of Tenant to extend the term of this Lease under Section
2.6 above, then Landlord’s election to terminate shall be void and of no force
or effect and the rights and obligations of the parties shall be determined
under this Article 13 without regard to such purported termination by Landlord)
or (B) the Architect’s Estimate states that repair and restoration of the
affected areas to the extent necessary to enable Tenant to resume its full
business operations in the Premises without material impairment will not be
permitted under applicable governmental laws, regulations and building codes
then in effect, then in either such event either Landlord or Tenant may
terminate this Lease as of the date of the occurrence by giving written notice
to the other party within thirty (30) days after the date of the occurrence or
fifteen (15) days after delivery of the Architect’s Estimate, whichever is
later. In addition, Landlord shall have a similar termination right if the
damage or destruction arises from a risk that is not required to be insured
against (and is not actually insured against) by Landlord under this Lease and
if Landlord’s architect reasonably estimates that the uninsured cost to restore
the portions of the Premises and Building for which Landlord is responsible to
the condition required above would exceed five percent (5%) of the then
applicable replacement cost of the entire Premises, unless Tenant agrees in
writing, within ten (10) days after being notified of Landlord’s exercise of its
termination right, to bear the restoration costs in excess of such five percent
(5%) limit and, if reasonably requested by Landlord, agrees to provide security
in an amount and on terms reasonably satisfactory to Landlord for Tenant’s
performance of such payment obligation. If the circumstances creating a
termination right under the preceding two sentences do not exist, or if such
circumstances exist but neither party timely exercises any applicable
termination right, then this Lease shall remain in full force and effect and (x)
Landlord, as to the Common Areas of the Center and as to the shell of the
Building and the alterations, additions and improvements that Landlord is
required to insure under Section 10.1(d) above, and (y) Tenant, as to the
alterations, additions and improvements that Tenant is required to insure under
Section 10.1(e) above, shall respectively commence and complete, with all due
diligence and as promptly as is reasonably practicable under the conditions then
existing, the repair and restoration of such respective portions of the Property
and Premises to a condition substantially comparable to that which existed
immediately prior to the damage or destruction; provided, however, that Tenant
in its discretion may elect not to repair, rebuild or replace any or all of the
items which would otherwise be Tenant’s responsibility under clause (y) of this
sentence to the extent such items were constructed or installed at Tenant’s sole
expense and without any use of funds from the Tenant Improvement Allowance.
 
(b)           If this Lease is terminated pursuant to the foregoing provisions
of this Section 13.1 following an occurrence which is a peril actually insured
or required to be insured against pursuant to Section 10.1(c), (d) and/or (e),
Landlord and Tenant agree (and any Lender shall be asked to agree) that such
insurance proceeds shall be allocated between Landlord and Tenant in a manner
which fairly and reasonably reflects their respective ownership rights under
this Lease, as of the termination or expiration of the term of this Lease, with
respect to the improvements, fixtures, equipment and other items to which such
insurance proceeds are attributable.
 
 
- 40 -

--------------------------------------------------------------------------------

 
 
 (c)          From and after the date of an occurrence resulting in damage to or
destruction of the Premises or of Common Areas necessary for Tenant’s use and
occupancy of the Premises, and continuing until repair and restoration thereof
are completed to the extent necessary to enable Tenant to resume operation of
its business in the Premises without material impairment, there shall be an
equitable abatement of minimum rental and of Tenant’s Operating Cost Share of
Operating Expenses based upon the degree to which Tenant’s ability to conduct
its business in the Premises is impaired.
 
(d)           Each party expressly waives the provisions of California Civil
Code Sections 1932(2), 1933(4) and any other applicable existing or future law
permitting the termination of a lease agreement in the event of damage to or
destruction of the leased property, it being the intention of the parties that
their respective rights in such circumstances shall be governed solely by the
provisions of this Article 13.
 
13.2         Condemnation.
 
(a)            If during the term of this Lease the Premises or any Common Areas
of the Center that are necessary for Tenant’s use and occupancy of the Premises,
or any substantial part of either of them, is taken by eminent domain or by
reason of any public improvement or condemnation proceeding, or in any manner by
exercise of the right of eminent domain (including any transfer in lieu of or in
avoidance of an exercise of the power of eminent domain), or receives
irreparable damage by reason of anything lawfully done by or under color of any
public authority, then (i) this Lease shall terminate as to the entire Premises
at Landlord’s election by written notice given to Tenant within thirty (30) days
after the taking has occurred, and (ii) this Lease shall terminate as to the
entire Premises at Tenant’s election, by written notice given to Landlord within
thirty (30) days after the nature and extent of the taking have been finally
determined, if the portion of the Building or Center taken is of such extent and
nature as substantially to handicap, impede or permanently impair Tenant’s use
of the Premises. If Tenant elects to terminate this Lease, Tenant shall also
notify Landlord of the date of termination, which date shall not be earlier than
thirty (30) days nor later than ninety (90) days after Tenant has notified
Landlord of Tenant’s election to terminate, except that this Lease shall
terminate on the date of taking if such date falls on any date before the date
of termination designated by Tenant. If neither party elects to terminate this
Lease as hereinabove provided, this Lease shall continue in full force and
effect (except that there shall be an equitable abatement of minimum rental and
of Tenant’s Operating Cost Share of Operating Expenses based upon the degree to
which Tenant’s ability to conduct its business in the Premises is impaired),
Landlord shall restore the improvements for which Landlord is responsible under
clause (x) of Section 13.1 (a) above to a complete architectural whole and a
functional condition and as nearly as reasonably possible to the condition
existing before the taking, and Tenant shall restore the improvements for which
Tenant is responsible under clause (y) of Section 13.1 (a) above to a complete
architectural whole and a functional condition and as nearly as reasonably
possible to the condition existing before the taking; provided, however, that
Tenant in its discretion may elect not to repair, restore or replace any or all
of the items which would otherwise be Tenant’s responsibility to the extent such
items were constructed or installed at Tenant’s sole expense and without any use
of funds from the Tenant Improvement Allowance. In connection with any such
restoration, each party shall use reasonable efforts (including, without
limitation, any necessary negotiation or
 
 
- 41 -

--------------------------------------------------------------------------------

 
 
intercession with its respective lender, if any) to ensure that any severance
damages or other condemnation awards intended to provide compensation for
rebuilding or restoration costs are promptly collected and made available to
Landlord and Tenant in portions reasonably corresponding to the cost and scope
of their respective restoration obligations, subject only to such payment
controls as either party or its lender may reasonably require in order to ensure
the proper application of such proceeds toward the restoration of the Building
and the Center. Each party expressly waives the provisions of California Code of
Civil Procedure Section 1265.130 and of any other existing or future law
allowing either party to terminate (or to petition the Superior Court to
terminate) a lease in the event of a partial condemnation or taking of the
leased property, it being the intention of the parties that their respective
rights in such circumstances shall be governed solely by the provisions of this
Article 13.
 
(b)           If this Lease is terminated pursuant to the foregoing provisions
of this Section 13.2, or if this Lease remains in effect but any condemnation
awards or other proceeds become available as compensation for the loss or
destruction of the Building and/or the Center, then Landlord and Tenant agree
(and any Lender shall be asked to agree) that such proceeds shall be allocated
between Landlord and Tenant, respectively, in the respective proportions in
which Landlord and Tenant would have shared, under Section 13.1(b), the proceeds
of any applicable insurance following damage to or destruction of the applicable
improvements due to an insured casualty.
 
13.3         Reservation of Compensation. Landlord reserves, and Tenant waives
and assigns to Landlord, all rights to any award or compensation for damage to
the Center, the improvements located therein and the leasehold estate created
hereby, accruing by reason of any taking in any public improvement, condemnation
or eminent domain proceeding or in any other manner by exercise of the right of
eminent domain or of anything lawfully done by public authority, except that (a)
Tenant shall be entitled to pursue recovery from the applicable public authority
for Tenant’s moving expenses, trade fixtures and equipment and any leasehold
improvements installed by Tenant in the Premises or Building at its own sole
expense, but only to the extent Tenant would have been entitled to remove such
items at the expiration of the term of this Lease and then only to the extent of
the then remaining unamortized value of such improvements computed on a
straight-line basis over the period from the Rent Commencement Date through the
remainder of the then current term of this Lease, and (b) any condemnation
awards or proceeds described in Section 13.2(b) shall be allocated and disbursed
in accordance with the provisions of Section 13.2(b), notwithstanding any
contrary provisions of this Section 13.3.
 
13.4         Restoration of Improvements. In connection with any repair or
restoration of improvements by either party following a casualty or taking as
hereinabove set forth, the party responsible for such repair or restoration
shall, to the extent possible, return such improvements to a condition
substantially equal to that which existed immediately prior to the casualty or
taking. To the extent such party wishes to make material modifications to such
improvements, such modifications shall be subject to the prior written approval
of the other party (not to be unreasonably withheld or delayed), except that no
such approval shall be required for modifications that are required by
applicable governmental authorities as a condition of the repair or restoration,
unless such required modifications would impair or impede Tenant’s conduct of
its business in the Premises (in which case any such modifications in Landlord’s
work
 
 
- 42 -

--------------------------------------------------------------------------------

 
 
shall require Tenant’s consent, not unreasonably withheld or delayed) or would
materially and adversely affect the exterior appearance, the structural
integrity or the mechanical or other operating systems of the Premises or
Building (in which case any such modifications in Tenant’s work shall require
Landlord’s consent, not unreasonably withheld or delayed).
 
14. DEFAULT
 
14.1         Events of Default. The occurrence of any of the following shall
constitute an event of default on the part of Tenant:
 
                                (a)           Abandonment. Abandonment of the
Premises. “Abandonment” is hereby defined to include, but is not limited to, any
absence by Tenant from the Premises for fifteen (15) consecutive days or more
while Tenant is in default, beyond any applicable notice and cure periods, under
any other provision of this Lease;
 
(b)   Nonpayment. Failure to pay, when due, any amount payable to Landlord
hereunder, such failure continuing for a period of five (5) business days after
written notice of such failure; provided, however, that any such notice shall be
in lieu of, and not in addition to, any notice required under California Code of
Civil Procedure Section 1161 et seq., as amended from time to time, so long as
such notice is served in the manner required by California Code of Civil
Procedure Section 1162;
 
(c)   Other Obligations. Failure to perform any obligation, agreement or
covenant under this Lease other than those matters specified in subsection (b)
hereof (including, but not limited to, any breach by Tenant of the Master
Declaration or Association Documents (if any) as provided in Section 15.4
below), such failure continuing for thirty (30) days after written notice of
such failure; provided, however, that if such failure is curable in nature but
cannot reasonably be cured within such 30-day period, then Tenant shall not be
in default if, and so long as, Tenant promptly (and in all events within such
30-day period) commences such cure and thereafter diligently pursues such cure
to completion; and provided further, however, that any such notice shall be in
lieu of, and not in addition to, any notice required under California Code of
Civil Procedure Section 1161 et seq., as amended from time to time, so long as
such notice is served in the manner required by California Code of Civil
Procedure Section 1162;
 
(d)   General Assignment. A general assignment by Tenant for the benefit of
creditors;
 
(e)   Bankruptcy. The filing of any voluntary petition in bankruptcy by Tenant,
or the filing of an involuntary petition by Tenant’s creditors, which
involuntary petition remains undischarged for a period of sixty (60) days. In
the event that under applicable law the trustee in bankruptcy or Tenant has the
right to affirm this Lease and continue to perform the obligations of Tenant
hereunder, such trustee or Tenant shall, in such time period as may be permitted
by the bankruptcy court having jurisdiction, cure all defaults of Tenant
hereunder outstanding as of the date of the affirmance of this Lease and provide
to Landlord such adequate assurances as may be necessary to ensure Landlord of
the continued performance of Tenant’s obligations under this Lease.
Specifically, but without limiting the generality of the foregoing, such
adequate
 
 
- 43 -

--------------------------------------------------------------------------------

 
 
assurances must include assurances that the Premises continue to be operated
only for the use permitted hereunder. The provisions hereof are to assure that
the basic understandings between Landlord and Tenant with respect to Tenant’s
use of the Center and the benefits to Landlord therefrom are preserved,
consistent with the purpose and intent of applicable bankruptcy laws;
 
                            (f)            Receivership. The employment of a
receiver appointed by court order to take possession of substantially all of
Tenant’s assets or the Premises, if such receivership remains undissolved for a
period of sixty (60) days;
 
(g)   Attachment. The attachment, execution or other judicial seizure of all or
substantially all of Tenant’s assets or the Premises, if such attachment or
other seizure remains undismissed or undischarged for a period of thirty (30)
days after the levy thereof; or
 
(h)           Insolvency. The admission by Tenant in writing of its inability to
pay its debts as they become due, the filing by Tenant of a petition seeking any
reorganization or arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, the filing by Tenant of an answer admitting or failing timely to
contest a material allegation of a petition filed against Tenant in any such
proceeding or, if within sixty (60) days after the commencement of any
proceeding against Tenant seeking any reorganization or arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such proceeding shall not have
been dismissed.
 
14.2         Remedies upon Tenant’s Default.
 
(a)   Upon the occurrence of any event of default described in Section 14.1
hereof, Landlord, in addition to and without prejudice to any other rights or
remedies it may have, shall have the right either (i) to terminate this Lease
and recover from Tenant all damages incurred by Landlord as a result of Tenant’s
default, as hereinafter provided, or (ii) to continue this Lease in effect and
recover rent and other charges and amounts as they become due.
 
(b)   Even if Tenant has breached this Lease and abandoned the Premises, this
Lease shall continue in effect for so long as Landlord does not terminate
Tenant’s right to possession under subsection (a) hereof and Landlord may
enforce all of its rights and remedies under this Lease, including the right to
recover rent as it becomes due, and Landlord, without terminating this Lease,
may exercise all of the rights and remedies of a lessor under California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee’s breach
and abandonment and recover rent as it becomes due, if lessee has right to
sublet or assign, subject only to reasonable limitations), or any successor Code
section. Acts of maintenance, preservation or efforts to relet the Premises or
the appointment of a receiver upon application of Landlord to protect Landlord’s
interests under this Lease shall not constitute a termination of Tenant’s right
to possession.
 
(c)   If Landlord terminates this Lease pursuant to this Section 14.2, Landlord
shall have all of the rights and remedies of a landlord provided by Section
1951.2 of the Civil Code of the State of California, or any successor Code
section, which remedies include
 
 
- 44 -

--------------------------------------------------------------------------------

 
 
Landlord’s right to recover from Tenant (i) the worth at the time of award of
the unpaid rent and additional rent which had been earned at the time of
termination, (ii) the worth at the time of award of the amount by which the
unpaid rent and additional rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss that Tenant
proves could have been reasonably avoided, (iii) the worth at the time of award
of the amount by which the unpaid rent and additional rent for the balance of
the term after the time of award exceeds the amount of such rental loss that
Tenant proves could be reasonably avoided, and (iv) any other amount necessary
to compensate Landlord for all the detriment proximately caused by Tenant’s
failure to perform its obligations under this Lease or which in the ordinary
course of things would be likely to result therefrom, including, but not limited
to, the cost of recovering possession of the Premises, expenses of reletting,
including necessary repair, renovation and alteration of the Premises,
reasonable attorneys’ fees, and other reasonable costs. The “worth at the time
of award” of the amounts referred to in clauses (i) and (ii) above shall be
computed by allowing interest at ten percent (10%) per annum from the date such
amounts accrued to Landlord. The “worth at the time of award” of the amounts
referred to in clause (iii) above shall be computed by discounting such amount
at one percentage point above the discount rate of the Federal Reserve Bank of
San Francisco at the time of award.
 
14.3         Remedies Cumulative. All rights, privileges and elections or
remedies of Landlord contained in this Article 14 are cumulative and not
alternative to the extent permitted by law and except as otherwise provided
herein.
 
15. SUBORDINATION, ATTORNMENT AND SALE
 
15.1         Subordination to Mortgage. This Lease, and any sublease entered
into by Tenant under the provisions of this Lease, shall be subject and
subordinate to any ground lease, mortgage, deed of trust, sale/leaseback
transaction or any other hypothecation for security now or hereafter placed upon
the Premises, the Building, the Center, or any of them, and the rights of any
assignee of Landlord or of any ground lessor, mortgagee, trustee, beneficiary or
leaseback lessor under any of the foregoing, and to any and all advances made on
the security thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof; provided, however, that such subordination
in the case of any future ground lease, mortgage, deed of trust, sale/leaseback
transaction or any other hypothecation for security placed upon the Premises,
the Building, the Center, or any of them shall be conditioned on Tenant’s
receipt from the ground lessor, mortgagee, trustee, beneficiary or leaseback
lessor of a Non-Disturbance Agreement in a form reasonably acceptable to Tenant
(i) confirming that so long as Tenant is not in material default hereunder
beyond any applicable cure period (for which purpose the occurrence and
continuance of any event of default under Section 14.1 hereof shall be deemed to
be “material”), Tenant’s rights hereunder shall not be disturbed by such person
or entity and (ii) agreeing that the benefit of such Non-Disturbance Agreement
shall be transferable to any transferee under a Permitted Transfer and to any
other assignee or subtenant that is acceptable to the ground lessor, mortgagee,
trustee, beneficiary or leaseback lessor at the time of transfer. If any
mortgagee, trustee, beneficiary, ground lessor, sale/leaseback lessor or
assignee elects to have this Lease be an encumbrance upon the Center prior to
the lien of its mortgage, deed of trust, ground lease or leaseback lease or
other security arrangement and gives notice thereof to Tenant, this Lease shall
be deemed prior thereto, whether this Lease is dated prior or subsequent to the
date thereof or the
 
 
- 45 -

--------------------------------------------------------------------------------

 
 
date of recording thereof. Tenant, and any sublessee, shall execute such
documents as may reasonably be requested by any mortgagee, trustee, beneficiary,
ground lessor, sale/leaseback lessor or assignee to evidence the subordination
herein set forth, subject to the conditions set forth above, or to make this
Lease prior to the lien of any mortgage, deed of trust, ground lease, leaseback
lease or other security arrangement, as the case may be. Upon any default by
Landlord in the performance of its obligations under any mortgage, deed of
trust, ground lease, leaseback lease or assignment, Tenant (and any sublessee)
shall, notwithstanding any subordination hereunder, attorn to the mortgagee,
trustee, beneficiary, ground lessor, leaseback lessor or assignee thereunder
upon demand and become the tenant of the successor in interest to Landlord, at
the option of such successor in interest, and shall execute and deliver any
instrument or instruments confirming the attornment herein provided for.
Landlord represents and warrants to Tenant that as of the date of this Lease,
neither the Premises nor the Building nor the Center is subject to any existing
ground lease, mortgage, deed of trust, sale/leaseback transaction or any other
hypothecation for security.
 
15.2         Sale of Landlord’s Interest. Upon sale, transfer or assignment of
Landlord’s entire interest in the Building and the Center, Landlord shall be
relieved of its obligations hereunder with respect to liabilities accruing from
and after the date of such sale, transfer or assignment.
 
15.3         Estoppel Certificates. Tenant or Landlord (the “responding party”),
as applicable, shall at any time and from time to time, within ten (10) business
days after written request by the other party (the “requesting party”), execute,
acknowledge and deliver to the requesting party a certificate in writing
stating: (i) that this Lease is unmodified and in full force and effect, or if
there have been any modifications, that this Lease is in full force and effect
as modified and stating the date and the nature of each modification; (ii) the
date to which rental and all other sums payable hereunder have been paid; (iii)
that the requesting party is not in default in the performance of any of its
obligations under this Lease, that the certifying party has given no notice of
default to the requesting party and that no event has occurred which, but for
the expiration of the applicable time period, would constitute an event of
default hereunder, or if the responding party alleges that any such default,
notice or event has occurred, specifying the same in reasonable detail; and (iv)
such other matters as may reasonably be requested by the requesting party or by
any institutional lender, mortgagee, trustee, beneficiary, ground lessor,
sale/leaseback lessor or prospective purchaser of the Center, or prospective
sublessee or assignee of this Lease. Any such certificate provided under this
Section 15.3 may be relied upon by any lender, mortgagee, trustee, beneficiary,
assignee or successor in interest to the requesting party, by any prospective
purchaser, by any purchaser on foreclosure or sale, by any grantee under a deed
in lieu of foreclosure of any mortgage or deed of trust on the Property, by any
subtenant or assignee, or by any other third party. Failure to execute and
return within the required time any estoppel certificate requested hereunder, if
such failure continues for five (5) days after a second written request by the
requesting party for such estoppel certificate, shall be deemed to be an
admission of the truth of the matters set forth in the form of certificate
submitted to the responding party for execution.
 
15.4         Subordination to CC&R’s. This Lease, and any permitted sublease
entered into by Tenant under the provisions of this Lease, and the interests in
real property conveyed hereby
 
 
- 46 -

--------------------------------------------------------------------------------

 
 
and thereby shall be subject and subordinate (a) to any declarations of
covenants, conditions and restrictions or other recorded restrictions affecting
the Center or any portion thereof from time to time, provided that the terms of
such declarations or restrictions are reasonable (or, to the extent they are not
reasonable, are mandated by applicable law), do not materially impair Tenant’s
ability to conduct the uses permitted hereunder on the Premises and in the
Center, and do not discriminate against Tenant relative to other similarly
situated tenants occupying the portion(s) of the Center covered by such
declarations or restrictions, (b) to the Master Declaration of Covenants,
Conditions and Restrictions for Seaport Centre, San Mateo County, California,
dated October 5, 1987 and recorded on October 6, 1987 as Instrument No.
87153374, Official Records of San Mateo County, as amended from time to time
(the “Master Declaration”), the provisions of which Master Declaration are an
integral part of this Lease, and (c) to the Articles, By laws and Association
Rules (if any), as amended from time to time, of the Seaport Centre Owners’
Association created under the Master Declaration (the “Association
Documents”). Any failure by Tenant to comply with the applicable terms of the
Master Declaration and the Association Documents (if any) shall be a default
under this Lease, subject, however, to any applicable notice and cure periods
under this Lease. Tenant agrees to execute, upon request by Landlord, any
documents reasonably required from time to time to evidence the foregoing
subordination.
 
15.5         Mortgagee Protection. If, following a default by Landlord under any
mortgage, deed of trust, ground lease, leaseback lease or other security
arrangement covering the Building, the Center, or any portion of them, the
Building and/or the Center, as applicable, is acquired by the mortgagee,
beneficiary, master lessor or other secured party, or by any other successor
owner, pursuant to a foreclosure, trustee’s sale, sheriffs sale, lease
termination or other similar procedure (or deed in lieu thereof), then any such
person or entity so acquiring the Building and/or the Center shall not be:
 
(a)           liable for any act or omission of a prior landlord or owner of the
Center (including, but not limited to, Landlord), except that such person or
entity shall be liable for the cure or correction of any continuing defaults,
such as a continuing failure to repair or maintain;
 
(b)   subject to any offsets or defenses that Tenant may have against any prior
landlord or owner of the Center (including, but not limited to, Landlord),
except for offsets expressly set forth in this Lease;
 
(c)           bound by any rent or additional rent that Tenant may have paid in
advance to any prior landlord or owner of the Center (including, but not limited
to, Landlord) for a period in excess of one month, or by any security deposit,
cleaning deposit or other prepaid charge that, Tenant may have paid in advance
to any prior landlord or owner (including, but not limited to, Landlord), except
to the extent such deposit or prepaid amount has been expressly turned over to
or credited to the successor owner thus acquiring the Center;
 
(d)   liable for any warranties or representations of any nature whatsoever,
whether pursuant to this Lease or otherwise, by any prior landlord or owner of
the Center (including, but not limited to, Landlord) with respect to the use,
construction, zoning, compliance with laws, title, habitability, fitness for
purpose or possession, or physical condition (including,
 
 
- 47 -

--------------------------------------------------------------------------------

 
 
without limitation, environmental matters) of the Building or the Center, except
for any then remaining obligations of Landlord arising under Section 2.3(a) or
(c) of this Lease; or
 
(e)           liable to Tenant in any amount beyond the interest of such
mortgagee, beneficiary, master lessor or other secured party or successor owner
in the Center as it exists from time to time and in the proceeds from any
disposition of such interest, it being the intent of this provision that Tenant
shall look solely to the interest of any such mortgagee, beneficiary, master
lessor or other secured party or successor owner in the Center, and in the
proceeds from any disposition of such interest, for the payment and discharge of
the landlord’s obligations under this Lease and that such mortgagee,
beneficiary, master lessor or other secured party or successor owner shall have
no separate personal liability for any such obligations.
 
16. SECURITY
 
16.1     Deposit.
 
(a)   Cash Security Deposit. Within ten (10) days after mutual execution of this
Lease, Tenant shall deposit with Landlord the sum of Two Hundred Seventy-Three
Thousand and No/100 Dollars ($273,000.00), which sum (the “Security Deposit”)
shall be held by Landlord as security for the faithful performance of all of the
terms, covenants and conditions of this Lease to be kept and performed by Tenant
during the term hereof. If Tenant defaults (beyond any applicable cure period)
with respect to any provision of this Lease, including, without limitation, the
provisions relating to the payment of rental and other sums due hereunder,
Landlord shall have the right, but shall not be required, to use, apply or
retain all or any part of the Security Deposit for the payment of rental or 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. If any portion of the
Security Deposit is so used or applied, Tenant shall, within ten (10) days after
written demand therefor, deposit cash with Landlord in an amount sufficient to
restore the Security Deposit to its original amount and Tenant’s failure to do
so shall be a material breach of this Lease. Landlord shall not be required to
keep any deposit under this Section separate from Landlord’s general funds, and
Tenant shall not be entitled to interest thereon. Provided that no uncured event
of default by Tenant then exists under this Lease, the Security Deposit and the
Letter of Credit as defined below (if applicable), or any balance thereof, shall
be returned to Tenant or, at Landlord’s option, to the last assignee of Tenant’s
interest hereunder, at the expiration of the term of this Lease and after Tenant
has vacated the Property. In the event of termination of Landlord’s interest in
this Lease, Landlord shall transfer all deposits then held by Landlord under
this Section to Landlord’s successor in interest, whereupon Tenant agrees to
release Landlord from all liability for the return of such deposit or the
accounting thereof.
 
(b)   Letter of Credit. As an alternative to the cash Security Deposit described
in Section 16.1 (a), Tenant may instead deliver to Landlord, within ten (10)
days after mutual execution of this Lease, an irrevocable standby letter of
credit (the “Letter of Credit”) issued in favor of Landlord by a federally
insured commercial bank or trust company approved in writing by Landlord (which
approval shall not be unreasonably withheld), in form and substance reasonably
satisfactory to Landlord, to be held by Landlord as security for the faithful
 
 
- 48 -

--------------------------------------------------------------------------------

 
 
performance of all the obligations of Tenant under this Lease, subject to the
following terms and conditions:
 
(i)            The amount of the Letter of Credit shall be at least Two Hundred
Seventy-Three Thousand and No/100 Dollars ($273,000.00) (the “Required Amount”).
and Tenant shall maintain the Letter of Credit in the Required Amount in full
force and effect throughout the term of this Lease (including any extensions
thereof) and until thirty (30) days after the expiration of the term of this
Lease, unless Tenant elects at any time to replace the Letter of Credit with a
full cash Security Deposit in compliance with Section 16.1 (a). The Letter of
Credit may be for an initial one-year term, with automatic renewal provisions,
provided that Landlord shall be given at least thirty (30) days prior written
notice if the Letter of Credit will not be renewed as of any otherwise
applicable renewal date and shall be entitled to draw against the expiring
Letter of Credit if a replacement Letter of Credit is not furnished to Landlord
at least twenty (20) days prior to the scheduled expiration date, as provided in
Section 16.1(b)(iii)(A) below. The Letter of Credit must provide that it is
transferable to any successor in interest to Landlord under this Lease. In the
event Landlord requests the transfer of the Letter of Credit to another party,
Tenant shall pay any transfer fees and other related costs and expenses payable
in connection with the first two (2) such transfers during the term of this
Lease, and Landlord shall pay any such transfer fees and other related costs and
expenses associated with any further transfers after the first two (2) such
transfers during the term of this Lease.

(ii)           Landlord shall be entitled (but shall not be required) to draw
against the Letter of Credit and receive and retain the proceeds thereof upon
any default (beyond any applicable cure period) by Tenant in the payment of any
rent or other amounts required to be paid by Tenant under this Lease, or upon
the occurrence of any other event of default (beyond any applicable cure period)
under this Lease, by presenting to the issuer a written statement by Landlord
that Landlord is entitled to draw the requested amount under the Letter of
Credit pursuant to the terms of this Lease. The amount of the draw shall not
exceed the amount of the payments (if any) as to which Tenant is then in default
and/or the amount reasonably necessary to cure any non-monetary events of
default by Tenant, and shall be applied by Landlord to the cure of the
applicable default(s). Following any partial draw under this paragraph (ii), if
Tenant fully cures all outstanding defaults and provides Landlord with a new
Letter of Credit in the full Required Amount under this Section 16.1, Landlord
shall surrender and return to Tenant, within ten (10) days after Tenant’s
satisfaction of the foregoing conditions, the Letter of Credit under which the
partial draw was made.

(iii)          Landlord shall also be entitled (but shall not be required) to
draw against the Letter of Credit in full and to receive the entire proceeds
thereof under either of the following circumstances:

(A)          If the Letter of Credit will expire as of a date prior to the date
thirty (30) days after the expiration of the term of this Lease and Tenant fails
to provide to Landlord an extension or replacement of such Letter of Credit, in
at
 
 
- 49 -

--------------------------------------------------------------------------------

 
 
least the minimum Required Amount, at least twenty (20) days prior to the
scheduled expiration date of the Letter of Credit; or

(B)           If, as a result of a draw against the Letter of Credit by Landlord
or for any other reason, the amount of the Letter of Credit falls below the
minimum Required Amount and Tenant has failed to cause the Letter of Credit to
be restored to at least the minimum Required Amount within ten (10) days after
written demand by Landlord or, in lieu thereof, has failed to put up cash in an
amount equal to the amount required to be restored (which cash, if put up by
Tenant, shall be retained by Landlord as a cash security deposit in accordance
with Section 16.1(a) hereof).

(iv)          If Landlord draws against the Letter of Credit in any of the
circumstances described in subparagraph (iii) above, Landlord may use, apply
and/or retain the amount drawn for the cure of any then existing defaults under
this Lease. Any amount drawn that is not immediately so used or applied by
Landlord shall be retained by Landlord as a cash Security Deposit, subject to
and in accordance with the provisions of Section 16.1(a).

(v)           Any actual or purported withdrawal, rescission, termination or
revocation of the Letter of Credit by the issuer thereof prior to the expiration
of the term of this Lease (except when replaced prior to the effectiveness of
such withdrawal, rescission, termination or revocation by a replacement Letter
of Credit as contemplated in Section 16.1(b)(iii)(A) hereof or by a cash
Security Deposit in the Required Amount) shall be a material breach of this
Lease.

(vi)          The Letter of Credit shall provide that it is governed by the
International Standby Practices (ISP98), ICC Publication No. 590.
 
17. MISCELLANEOUS
 
17.1     Notices. All notices, consents, waivers and other communications which
this Lease requires or permits either party to give to the other shall be in
writing and shall be deemed given when delivered personally (including delivery
by private same-day or overnight courier or express delivery service), effective
upon personal delivery to or refusal of delivery by the recipient, to the
parties at their respective addresses as follows:

 
To Tenant:
FoxHollow Technologies, Inc.

740 Bay Road
Redwood City, CA 94063
Attn: Vice President and CFO

 
with a copy to: 
Holme Roberts & Owen LLP

560 Mission Street, 25th Floor
San Francisco, CA 94105
Attn: Norman Cruz
 
 
- 50 -

--------------------------------------------------------------------------------

 
 
 
To Landlord:
Slough Redwood City, LLC

c/o Slough Estates USA Inc.
444 North Michigan Avenue, Suite 3230
Chicago, IL 60611
Attn: Randy Rohner

 
with a copy to:
Britannia Management Services, Inc.

555 Twelfth Street, Suite 1650
Oakland, CA 94607
Attn: Magdalena Shushan

 
and a copy to:
Folger Levin & Kahn llp

Embarcadero Center West
275 Battery Street, 23rd Floor
San Francisco, CA 94111
Attn: Donald E. Kelley, Jr.
 
or to such other address(es) as may be contained in a notice of address change
given by either party to the other pursuant to this Section, effective no
earlier than fifteen (15) days after delivery of such notice to the receiving
party. Rental payments and other sums required by this Lease to be paid by
Tenant shall be delivered to Landlord in care of Britannia Management Services,
Inc., 555 Twelfth Street, Suite 1650, Oakland, CA 94607, or at such other
address as Landlord may from time to time specify in writing to Tenant, and
shall be deemed to be paid only upon actual receipt.
 
17.2         Successors and Assigns. The obligations of this Lease shall run
with the land, and this Lease shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that the
original Landlord named herein and each successive Landlord under this Lease
shall be liable only for obligations accruing during the period of its ownership
of the Center, and any liability for obligations accruing after termination of
such ownership shall terminate as of the date of such termination of ownership
and shall pass to the successor lessor.
 
17.3         No Waiver. The failure of either party to seek redress for
violation, or to insist upon the strict performance, of any covenant or
condition of this Lease shall not be deemed a waiver of such violation, or
prevent a subsequent act which would originally have constituted a violation
from having all the force and effect of an original violation.
 
17.4         Severability. If any provision of this Lease or the application
thereof is held to be invalid or unenforceable, the remainder of this Lease or
the application of such provision to persons or circumstances other than those
as to which it is invalid or unenforceable shall not be affected thereby, and
each of the provisions of this Lease shall be valid and enforceable, unless
enforcement of this Lease as so invalidated would be unreasonable or grossly
inequitable under all the circumstances or would materially frustrate the
purposes of this Lease.

 
- 51 -

--------------------------------------------------------------------------------

 
 
17.5         Litigation Between Parties. In the event of any litigation or other
dispute resolution proceedings between the parties hereto arising out of or in
connection with this Lease, the prevailing party shall be reimbursed for all
reasonable costs, including, but not limited to, reasonable accountants’ fees
and attorneys’ fees, incurred in connection with such proceedings (including,
but not limited to, any appellate proceedings relating thereto) or in connection
with the enforcement of any judgment or award rendered in such proceedings.
“Prevailing party” within the meaning of this Section shall include, without
limitation, a party who dismisses an action for recovery hereunder in exchange
for payment of the sums allegedly due, performance of covenants allegedly
breached or consideration substantially equal to the relief sought in the
action.
 
17.6         Surrender. A voluntary or other surrender of this Lease by Tenant,
or a mutual termination thereof between Landlord and Tenant, shall not result in
a merger but shall, at the option of Landlord, operate either as an assignment
to Landlord of any and all existing subleases and subtenancies, or a termination
of all or any existing subleases and subtenancies. This provision shall be
contained in any and all assignments or subleases made pursuant to this Lease.
 
17.7         Interpretation. The provisions of this Lease shall be construed as
a whole, according to their common meaning, and not strictly for or against
Landlord or Tenant. The captions preceding the text of each Section and
subsection hereof are included only for convenience of reference and shall be
disregarded in the construction or interpretation of this Lease.
 
17.8         Entire Agreement. This written Lease, together with the exhibits
hereto, contains all the representations and the entire understanding between
the parties hereto with respect to the subject matter hereof. Any prior
correspondence, memoranda or agreements are replaced in total by this Lease and
the exhibits hereto. This Lease may be modified only by an agreement in writing
signed by each of the parties.
 
17.9         Governing Law. This Lease and all exhibits hereto shall be
construed and interpreted in accordance with and be governed by all the
provisions of the laws of the State of California.
 
17.10       No Partnership. The relationship between Landlord and Tenant is
solely that of a lessor and lessee. Nothing contained in this Lease shall be
construed as creating any type or manner of partnership, joint venture or joint
enterprise with or between Landlord and Tenant.
 
17.11       Financial Information. From time to time Tenant shall promptly
provide directly to prospective lenders and purchasers of the Center designated
by Landlord such financial information pertaining to the financial status of
Tenant as Landlord may reasonably request; provided. Tenant shall be permitted
to provide such financial information in a manner which Tenant deems reasonably
necessary to protect the confidentiality of such information. In addition, from
time to time, Tenant shall provide Landlord with such financial information
pertaining to the financial status of Tenant as Landlord may reasonably request.
Landlord agrees that all financial information supplied to Landlord by Tenant
shall be treated as confidential material, and shall not be disseminated to any
party or entity (including any entity affiliated with

 
- 52 -

--------------------------------------------------------------------------------

 
 
Landlord) without Tenant’s prior written consent, except that Landlord shall be
entitled to provide such information, subject to reasonable precautions to
protect the confidential nature thereof, (i) to Landlord’s partners and
professional advisors, solely to use in connection with Landlord’s execution and
enforcement of this Lease, and (ii) to prospective lenders and/or purchasers of
the Center, solely for use in connection with their bona fide consideration of a
proposed financing or purchase of the Center, provided that such prospective
lenders and/or purchasers are not then engaged in businesses directly
competitive with the business then being conducted by Tenant. For purposes of
this Section, without limiting the generality of the obligations provided
herein, it shall be deemed reasonable for Landlord to request copies of Tenant’s
most recent audited annual financial statements, or, if audited statements have
not been prepared, unaudited financial statements for Tenant’s most recent
fiscal year, accompanied by a certificate of Tenant’s chief financial officer
that such financial statements fairly present Tenant’s financial condition as of
the date(s) indicated. Notwithstanding any other provisions of this Section
17.11, during any period in which Tenant has outstanding a class of publicly
traded securities and is filing with the Securities and Exchange Commission, on
a regular basis, Forms 10Q and 10K and any other periodic filings required under
the Securities Exchange Act of 1934, as amended, it shall constitute sufficient
compliance under this Section 17.11 for Tenant to furnish Landlord with copies
of such periodic filings substantially concurrently with the filing thereof with
the Securities and Exchange Commission.
 
Landlord and Tenant recognize the need of Tenant to maintain the confidentiality
of information regarding its financial status and the need of Landlord to be
informed of, and to provide to prospective lenders and purchasers of the Center
financial information pertaining to, Tenant’s financial status. Landlord and
Tenant agree to cooperate with each other in achieving these needs within the
context of the obligations set forth in this Section.
 
17.12       Costs. If Tenant requests the consent of Landlord under any
provision of this Lease for any act that Tenant proposes to do hereunder,
including, without limitation, assignment or subletting of the Premises, Tenant
shall, as a condition to doing any such act and the receipt of such consent,
reimburse Landlord promptly for any and all reasonable costs and expenses
incurred by Landlord in connection therewith, including, without limitation,
reasonable attorneys’ fees.
 
17.13       Time. Time is of the essence of this Lease, and of every term and
condition hereof.
 
17.14       Rules and Regulations. Tenant shall observe, comply with and obey,
and shall cause its employees, agents and, to the best of Tenant’s ability,
invitees to observe, comply with and obey such reasonable rules and regulations
for the safety, care, cleanliness, order and use of the Building and the Center
as Landlord may promulgate and deliver to Tenant from time to time.
 
17.15       Brokers. Landlord agrees to pay a brokerage commission in connection
with the consummation of this Lease (a) to Landlord’s broker, CB Richard Ellis,
Inc., and (b) to Tenant’s broker, Cornish & Carey Commercial, each in accordance
with a separate written agreement. Each party represents and warrants that no
other broker participated in the consummation of this

 
- 53 -

--------------------------------------------------------------------------------

 
 
Lease and agrees to indemnify, defend and hold the other party harmless against
any liability, cost or expense, including, without limitation, reasonable
attorneys’ fees, arising out of any claims for brokerage commissions or other
similar compensation in connection with any conversations, prior negotiations or
other dealings by the indemnifying party with any other broker.
 
17.16       Memorandum of Lease. At any time during the term of this Lease,
either party, at its sole expense, shall be entitled to record a memorandum of
this Lease and, if either party so requests, both parties agree to cooperate in
the preparation, execution, acknowledgment and recordation of such document in
reasonable form. If such a memorandum of lease is recorded, then upon expiration
or termination of this Lease, Tenant agrees promptly to execute, acknowledge and
deliver to Landlord, upon written request by Landlord, a Termination of
Memorandum of Lease in such form as Landlord may reasonably request, for the
purpose of terminating any continuing effect of the previously recorded
memorandum of lease as a cloud upon title to the Property.
 
17.17       Organizational Authority. Each party to this Lease represents and
warrants that the person signing this Lease on behalf of such respective party
is fully authorized to do so and, by so doing, to bind such party.
 
17.18       Execution and Delivery. Submission of this Lease for examination or
signature by Tenant does not constitute an agreement or reservation of or option
for lease of the Premises. This instrument shall not be effective or binding
upon either party, as a lease or otherwise, until executed and delivered by both
Landlord and Tenant. This Lease may be executed in one or more counterparts and
by separate parties on separate counterparts, but each such counterpart shall
constitute an original and all such counterparts together shall constitute one
and the same instrument.
 
17.19       Survival. Without limiting survival provisions which would otherwise
be implied or construed under applicable law, the provisions of Sections 2.5,
5.4, 7.2, 7.3, 7.4, 8.2, 9.6, 10.6, 16.1(a), 17.5, 17.11 and 17.16 hereof shall
survive the termination of this Lease with respect to matters occurring prior to
the expiration of this Lease.
 
17.20       Parking. Landlord agrees that the Common Areas, taken as a whole,
shall include parking in amounts sufficient to satisfy the minimum parking
requirements of the City of Redwood City applicable to the Center from time to
time; that Tenant shall have the non-exclusive and non-reserved use of
approximately three (3) automobile parking stalls per 1,000 rentable square feet
of space in the Premises; that Tenant shall have the right to stripe and
designate five (5) parking spaces in the vicinity of the principal entrance to
the Building as visitor parking spaces, at Tenant’s sole expense, subject to
Landlord’s prior written approval (which shall not be unreasonably withheld,
delayed or conditioned) as to the location of the specific spaces and the design
of the striping or other designation to be used and subject to compliance by
Tenant with all applicable laws, ordinances, codes, regulations and requirements
(if any) applicable to such designated parking spaces, provided that Landlord
shall have no responsibility to monitor or enforce compliance with such “visitor
parking” designation by Tenant’s employees or by any other tenants, occupants or
users of the Center; and that except as

 
- 54 -

--------------------------------------------------------------------------------

 
 
specifically set forth in the preceding clause with respect to costs relating to
the designation of visitor parking spaces, there shall be no additional cost or
charge to Tenant for the nonexclusive, non-reserved use of such parking by
Tenant and its employees and invitees or for the designation of five (5) visitor
parking spaces as permitted under such preceding clause. Landlord shall not
agree with any other tenant of the Center that such tenant may have the use of
parking spaces in excess of such tenant’s proportional share of the available
parking spaces in the Center as it exists from time to time.
 
17.21       Approvals. Whenever this Lease requires an approval, consent,
designation, determination, selection or judgment by either Landlord or Tenant,
then except to the extent a different standard is expressly provided in the
applicable provision where such requirement is set forth, such approval,
consent, designation, determination, selection or judgment shall not be
unreasonably withheld, conditioned or delayed.
 
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and year first set forth above.

       
“Landlord”
 
“Tenant”
         
SLOUGH REDWOOD CITY, LLC, a
 
FOXHOLLOW TECHNOLOGIES, INC.,
 
Delaware limited liability company
 
a Delaware corporation
 

By:
Slough Estates USA Inc., a
Delaware corporation, Its Manager
 
By:
signature [img005_v3.jpg]
             
 
  (signature) [img005a_v3.jpg]
 
Name:
Matthew Ferguson
                Title: CFO   
By:
          Jonathan M. Bergschneider            Senior Vice President  
By:
                     
Name:
                     
Title:
 

 
- 55 -

--------------------------------------------------------------------------------

 
EXHIBITS

   
EXHIBIT A-l
Site Plan (The Center)
   
EXHIBIT A-2
Building Plan/Service Annex
   
EXHIBIT B
Workletter
   
EXHIBIT C
Form of Acknowledgment of Rent Commencement Date
   
EXHIBIT D
Service Annex Space Allocation; Landlord Priority Area

 
 
- 56 -

--------------------------------------------------------------------------------

 
 
EXHIBIT A-l
 
SITE PLAN (THE CENTER)
 
[See attached two (2) pages.]
 
 
EXHIBIT A-l TO LEASE

--------------------------------------------------------------------------------

 

(MAP) [img001_v3.jpg]

   
Seaport Center and Seaport Plaza
 
REDWOOD CITY, CALIFORNIA
 

 
EXHIBIT A-1 (page 1 of 2)

--------------------------------------------------------------------------------

 

(MAP) [img002_v3.jpg]

 
 
EXHIBIT A-1 (page 2 of 2)

--------------------------------------------------------------------------------

 
 
EXHIBIT A-2
 
BUILDING PLAN/SERVICE ANNEX
 
[See attached two (2) pages.]
 
 
EXHIBIT A-2 TO LEASE

--------------------------------------------------------------------------------

 
 
(MAP) [img003_v3.jpg]
 
First Floor Plan on Site
 
 
EXHIBIT A-2 (page 1 of 2)

--------------------------------------------------------------------------------

 

(MAP) [img004_v3.jpg]
 
Second Floor Plan
 
 
EXHIBIT A-2 (page 2 of 2)

--------------------------------------------------------------------------------

 
 
EXHIBIT B
 
WORKLETTER
 
          This Workletter (“Workletter”) constitutes part of the Lease dated as
of November 3, 2006 (the “Lease”) between SLOUGH REDWOOD CITY, LLC, a Delaware
limited liability company (“Landlord”), and FOXHOLLOW TECHNOLOGIES, INC., a
Delaware corporation (“Tenant”). The terms of this Workletter are incorporated
in the Lease for all purposes.
 
NOTE: The provisions of this Workletter are intended to apply only to Tenant
Improvements constructed by Tenant in the Premises. The work that Landlord is
required to perform under Section 2.3 of the Lease (such work being defined in
the Lease as “Landlord’s Work”) shall be governed solely by such Section 2.3 and
any other applicable provisions of the main Lease, and not by this Workletter.
 
1.             Defined Terms. As used in this Workletter, the following
capitalized terms have the following meanings:
 
(a)            Approved Plans: Plans and specifications prepared by the
Architect for the Tenant Improvements and approved by Landlord in accordance
with Paragraph 2 of this Workletter, subject to further modification from time
to time to the extent provided in and in accordance with such Paragraph 2.
 
(b)           Architect: The Architect for the Tenant Improvements shall be
selected by Tenant with the written approval of Landlord, which approval shall
not be unreasonably withheld, conditioned or delayed.
 
(c)           Cost of Improvement: See definition in Paragraph 2(b) hereof.
 
(d)           Final Working Drawings: See definition in Paragraph 2(a) hereof.
 
(e)           General Contractor: The General Contractor for the Tenant
Improvements shall be selected by Tenant with the written approval of Landlord,
which approval shall not be unreasonably withheld, conditioned or delayed, as
contemplated in Paragraph 4(a) hereof.
 
(f)            Project Manager. Project Management Advisors, Inc., or any other
project manager designated by Landlord in its sole discretion from time to time
by written notice to Tenant to act in an oversight and coordinating capacity on
behalf of Landlord, as contemplated in Paragraph 2(d) below, in connection with
the design and/or construction of Landlord’s Work and the Tenant Improvements.
 
(g)           Tenant Improvements: The improvements to or within the Premises as
shown on the Approved Plans from time to time and to be constructed by Tenant
pursuant to the Lease and this Workletter.
 
(h)           Capitalized terms not otherwise defined in this Workletter shall
have the definitions set forth in the Lease.

 
B – 1

--------------------------------------------------------------------------------

 
 
2.             Plans, Cost of Improvements and Construction. Landlord and Tenant
shall comply with the procedures set forth in this Paragraph 2 in preparing,
delivering and approving matters relating to the Tenant Improvements.
 
(a)           Approved Plans and Working Drawings for Tenant’s Work. Tenant
shall promptly and diligently cause to be prepared and delivered to Landlord for
approval (which approval shall not be unreasonably withheld, conditioned or
delayed by Landlord) a space plan and outline specifications for the Tenant
Improvements that Tenant wishes to construct in the Premises (the “Schematic
Plans”). Following mutual approval of the Schematic Plans, Tenant shall then
promptly and diligently cause to be prepared and delivered to Landlord for
approval (which approval shall not be unreasonably withheld, conditioned or
delayed by Landlord) final working drawings and specifications for the Tenant
Improvements, including any applicable life safety, mechanical and electrical
working drawings and final architectural drawings (collectively, the “Final
Working Drawings”). The Final Working Drawings shall substantially conform to
the approved Schematic Plans. Landlord shall either approve the Final Working
Drawings or set forth in writing with particularity any changes necessary to
bring the Final Working Drawings into substantial conformity with the approved
Schematic Plans or into a form which will be acceptable to Landlord. Upon
approval of the Final Working Drawings by Landlord and Tenant, the Final Working
Drawings shall constitute the “Approved Plans,” superseding (to the extent of
any inconsistencies) any inconsistent features of the previously approved
Schematic Plans. Landlord’s failure to respond with its written approval or
disapproval of any plans and specifications within ten (10) business days after
they are submitted to Landlord for approval shall be deemed to be Landlord’s
approval thereof.
 
(b)           Cost of Improvements. “Cost of Improvement” shall mean, with
respect to any item or component for which a cost must be determined in order to
allocate such cost, or an increase in such cost, to Landlord and/or Tenant
pursuant to this Workletter, the sum of the following (unless otherwise agreed
in writing by Landlord and Tenant with respect to any specific item or component
or any category of items or components): (i) all sums paid to contractors or
subcontractors for labor and materials furnished in connection with construction
of such item or component; (ii) all costs, expenses, payments, fees and charges
(other than penalties) paid or incurred to or at the direction of any city,
county or other governmental or quasi-governmental authority or agency which are
required to be paid in order to obtain all necessary governmental permits,
licenses, inspections and approvals relating to construction of such item or
component; (iii) engineering and architectural fees for services rendered in
connection with the design and construction of such item or component
(including, but not limited to, the Architect for such item or component and an
electrical engineer, mechanical engineer and civil engineer, if applicable);
(iv) sales and use taxes; (v) testing and inspection costs; (vi) the cost of
power, water and other utility facilities and the cost of collection and removal
of debris required in connection with construction of such item or component;
(vii) costs for builder’s risk insurance; and (viii) all other “hard” and “soft”
costs incurred in the construction of such item or component in accordance with
the Approved Plans and this Workletter.
 
(i)            Notwithstanding the foregoing, Cost of Improvement shall not
include, Landlord shall be solely responsible for, and the Tenant Improvement
Allowance shall not be used for any of the following: (A) costs incurred to
remove from the Premises, the Building and

 
B – 2

--------------------------------------------------------------------------------

 
 
the Center hazardous substances, hazardous wastes and pollutants existing
therein prior to the Rent Commencement Date, except to the extent (if any) that
such hazardous substances, hazardous wastes or pollutants were brought onto or
released onto the Premises, the Building or the Center through the acts or
omissions of Tenant or its employees, agents or contractors; and(B) costs
incurred to perform Landlord’s Work and related obligations of Landlord under
Section 2.3 of the Lease.
 
(ii)           For purposes of this paragraph 2(b) and of Section 2.3 of the
Lease, the parties wish to clarify their intention with respect to certain
situations as follows:
 
(A)          If there are code requirements or other legal compliance
requirements which are in existence at or prior to the Rent Commencement Date
and are not met by the Building and existing improvements but have not
previously been applicable to or enforced against the Building (such as, but not
limited to, what are commonly referred to as “grandfathered” compliance
situations), and such requirements become applicable to or enforceable against
the Building and existing improvements in the course of Tenant’s construction of
the Tenant Improvements solely because of the extent, cost or value of such
Tenant Improvements and/or because of the fact that Tenant is obtaining permits
for such Tenant Improvements, without regard to the particular nature or design
of such Tenant Improvements, then Landlord shall be responsible for complying
with such requirements and bearing the cost of such compliance, without any
charge against the Tenant Improvement Allowance and without any inclusion of
such cost in the Cost of Improvements for the Tenant Improvements; and
conversely,

(B)          If there are code requirements or other legal compliance
requirements which become applicable to or enforceable against the Building or
existing improvements therein as a result of the particular nature or design of
the Tenant Improvements (such as, but not limited to, installation of equipment
which triggers seismic, vibration, firewall, sprinkler, life safety, ventilation
or other requirements that would not apply in the absence of the installation
and use of such equipment), or which become applicable to or enforceable against
the Building or existing improvements only as a result of or in connection with
later phases of the Tenant Improvements constructed after substantial completion
of the initial phase of the Tenant Improvements, then Tenant shall be
responsible for complying with such requirements and the cost of such compliance
shall be part of the Cost of Improvements for the Tenant Improvements.
 
(c)          Changes. If Tenant at any time desires to make any changes,
alterations or additions to the Approved Plans, such changes, alterations or
additions shall be subject to approval by Landlord in the same manner as the
original Approved Plans as provided above, except that Landlord shall be deemed
to have approved such changes, alterations or additions if Landlord fails to
respond with its written approval or disapproval thereof within five (5)
business days after they are submitted to Landlord for approval.
 
(d)          Project Management. Unless and until revoked by Landlord by written
notice delivered to Tenant, Landlord hereby (i) delegates to Project Manager the
authority to exercise

 
B – 3

--------------------------------------------------------------------------------

 
 
all approval rights, supervisory rights and other rights and powers of Landlord
under this Workletter with respect to the design and construction of the Tenant
Improvements, and (ii) requests that Tenant work with Project Manager with
respect to any and all logistical or other coordination matters arising in the
course of construction of the Tenant Improvements, in which regard Project
Manager’s role on behalf of Landlord may include (but need not be limited to)
reviewing and processing Tenant’s requests for disbursement of the Tenant
Improvement Allowance, monitoring Tenant’s and Landlord’s compliance with their
respective obligations under this Workletter and under the Lease in connection
with the design and construction of the Tenant Improvements, and facilitating
and assisting in coordination between teams performing Landlord’s Work and teams
constructing the Tenant Improvements to the extent such construction activity is
occurring concurrently. Tenant acknowledges the foregoing delegation and
request, and agrees to cooperate reasonably with Project Manager as Landlord’s
representative pursuant to such delegation and request. As between Landlord and
Tenant, however, Landlord shall be bound by and be fully responsible for all
acts and omissions of Project Manager and for the performance of all of
Landlord’s obligations under the Lease and this Workletter, notwithstanding such
delegation of authority to Project Manager. Notwithstanding the preceding
sentence, neither Landlord’s delegation of authority to Project Manager nor
Project Manager’s performance of the functions and responsibilities contemplated
in this paragraph shall cause Landlord or Project Manager to incur any
obligations or responsibilities for the design, construction or delivery of the
Tenant Improvements, except to the extent of the specific obligations and
responsibilities expressly set forth in the Lease and in this Workletter.
Project Manager’s fees for its services on behalf of Landlord in connection with
the Tenant Improvements and Landlord’s Work shall be borne solely by Landlord,
at its sole expense, and shall not be chargeable to Tenant or to the Tenant
Improvement Allowance.
 
3.             Payment of Costs.
 
(a)           Except as otherwise expressly provided in this Workletter, in the
Lease or by mutual written agreement of Landlord and Tenant, the cost of
construction of the Tenant Improvements shall be paid or reimbursed by Landlord
up to a maximum contribution by Landlord equal to Ten Dollars ($10.00) per
square foot, equivalent to an aggregate allowance of up to Four Hundred
Fifty-Seven Thousand Nine Hundred Forty and No/100 Dollars ($457,940.00) toward
the Cost of Improvements for such Tenant Improvements (the “Tenant Improvement
Allowance”), less any reduction in or charge against such sums pursuant to any
applicable provisions of the Lease or of this Workletter. Except as otherwise
expressly provided in this Workletter or in the Lease, Tenant shall be
responsible, at its sole cost and expense, for payment of the entire Cost of
Improvements of the Tenant Improvements in the Premises in excess of the Tenant
Improvement Allowance or such portion thereof as Tenant elects to use (if any
such excess occurs), including (but not limited to) any costs or cost increases
incurred as a result of unavoidable delays, governmental requirements or
unanticipated conditions, but Tenant shall be entitled to utilize the entire
Tenant Improvement Allowance (or so much thereof as Tenant elects to use) for
the Tenant Improvements prior to being required to expend any of Tenant’s own
funds on an unreimbursed basis for the Tenant Improvements (except to the extent
any costs are incurred which are not eligible for payment or reimbursement out
of the Tenant Improvement Allowance under the express provisions governing the
Tenant Improvement Allowance, including, without limitation, the express
restrictions set forth below in this paragraph). The funding of the Tenant
Improvement Allowance (or so much thereof as Tenant

 
B – 4

--------------------------------------------------------------------------------

 
 
elects to use) shall be made on a monthly basis or at other convenient intervals
mutually approved by Landlord and Tenant, and in all other respects shall be
based on such commercially reasonable disbursement conditions and procedures as
Landlord, Project Manager and Landlord’s lender (if any) may reasonably
prescribe (which conditions may include, without limitation, delivery of
invoices, architect’s certifications and/or other evidence reasonably
satisfactory to Landlord or Project Manager that expenses have been incurred for
the design and construction of alterations and improvements for which the Tenant
Improvement Allowance is eligible to be expended or applied, and delivery of
conditional or unconditional lien releases from all parties performing the
applicable work). Notwithstanding the foregoing provisions, (i) under no
circumstances shall the Tenant Improvement Allowance or any portion thereof be
used or useable for any moving or relocation expenses of Tenant, or for any Cost
of Improvement (or any other cost or expense) associated with any moveable
furniture, trade fixtures, personal property or any other item or element which,
under the applicable provisions of the Lease, will not become Landlord’s
property and remain with the Building upon expiration or termination of the
Lease, and (ii) any portion of the Tenant Improvement Allowance which has not
been claimed or drawn by Tenant within two (2) years after the Rent Commencement
Date under the Lease shall expire and shall no longer be available to Tenant
thereafter. The Tenant Improvement Allowance is provided as part of the basic
consideration to Tenant under the Lease and will not result in any rental
adjustment or additional rent beyond the rental amounts expressly provided in
Section 3.1 of the Lease.
 
(b)           Landlord acknowledges that Landlord’s prompt disbursement of the
Tenant Improvement Allowance will be critical to achieve the timely completion
of the Tenant Improvements and that Tenant would not execute the Lease but for
Landlord’s commitment to fund the Tenant Improvement Allowance in accordance
with the provisions of the Lease and of this Workletter. If, therefore, Landlord
fails to make any timely disbursement of the Tenant Improvement Allowance when
required to do so, and such failure continues for more than five (5) business
days after Tenant gives written notice to Landlord specifying such failure and
demanding funding of the applicable payment(s) by Landlord, then Tenant shall
have the right (in addition to any and all other rights or remedies available to
Tenant under the Lease, this Workletter and applicable law) to pay out of
Tenant’s own funds any undisbursed amounts for which payment should have been
made from the Tenant Improvement Allowance, in which event (i) Tenant shall
thereafter be entitled to reimbursement from Landlord, within thirty (30) days
after written notice from Tenant to Landlord that such payment has been made by
Tenant, for the amount of all such payments by Tenant that should have been
funded from the Tenant Improvement Allowance, together with interest on such
disbursements by Tenant at the rate of ten percent (10%) per annum from the date
of disbursement to the date of reimbursement by Landlord, and (ii) to the extent
any such reimbursement owed by Landlord to Tenant pursuant to the foregoing
provisions remains unpaid more than thirty (30) days after Tenant’s written
notice to Landlord pursuant to clause (i) above, Tenant shall be entitled to
deduct the aggregate unpaid reimbursement amount, together with interest thereon
as provided in clause (i) above, from payments of minimum rental, Operating
Expenses and other amounts thereafter becoming due from Tenant under the Lease
and this Workletter.
 
4.             Tenant’s Work. Tenant shall construct and install the Tenant
Improvements in the Premises substantially in accordance with the Approved
Plans. Tenant’s construction of the Tenant Improvements shall be performed in
accordance with, and shall in all respects be subject

 
B – 5

--------------------------------------------------------------------------------

 
 
to, the terms and conditions of the Lease (to the extent not inconsistent with
this Workletter), and shall also be subject to the following conditions:
 
(a)          Contractor Requirements. The general contractor engaged by Tenant
for construction of the Tenant Improvements, and any subcontractors, shall be
duly licensed in California and shall be subject to Landlord’s prior written
approval, which approval shall not be unreasonably withheld, conditioned or
delayed. Tenant shall engage only union contractors for the construction of the
Tenant Improvements and for the installation of Tenant’s fixtures and equipment
in the Building, and shall require all such contractors engaged by Tenant, and
all of their subcontractors, to use only union labor on or in connection with
such work, except to the extent Landlord determines, in its reasonable
discretion, that the use of non-union labor would not create a material risk of
labor disputes, picketing or work interruptions at the Center, in which event
Landlord shall, to that extent, waive such union labor requirement at Tenant’s
request.
 
(b)          Costs and Expenses of Tenant Improvements. Subject to Landlord’s
payment or reimbursement obligations under Paragraph 3 hereof with respect to
Landlord’s share of the Cost of Improvements for the Tenant Improvements, Tenant
shall promptly pay all costs and expenses arising out of the design and
construction of the Tenant Improvements (including the costs of permits) and
shall furnish Landlord with evidence of payment on request. Tenant shall provide
Landlord with ten (10) days prior written notice before commencing any
construction activities on the Property. Upon completion of construction of the
Tenant Improvements, Tenant shall deliver to Landlord a release and
unconditional lien waiver executed by each contractor, subcontractor and
materialman involved in the design or construction of the Tenant Improvements.
 
(c)          Tenant’s Indemnification. Tenant shall indemnify, defend (with
counsel reasonably satisfactory to Landlord) and hold Landlord harmless from all
suits, claims, actions, losses, costs and expenses (including, but not limited
to, claims for workers’ compensation, attorneys’ fees and costs) based on
personal injury or property damage or contract claims (including, but not
limited to, claims for breach of warranty) arising from the design and
construction of the Tenant Improvements from any cause whatsoever, except to the
extent any such claims or other matters arise from negligence or willful
misconduct or omission by Landlord or its agents, employees or contractors.
Tenant shall repair or replace (or, at Landlord’s election, reimburse Landlord
for the cost of repairing or replacing) any portion of the buildings or other
existing improvements on the Property and/or any of Landlord’s real or personal
property or equipment that is damaged, lost or destroyed in the course of or in
connection with the construction of the Tenant Improvements, except to the
extent (i) any such damage, loss or destruction is caused by negligence or
willful misconduct or omission by Landlord or its agents, employees or
contractors, or (ii) any demolition or removal of existing improvements is
explicitly contemplated in the Approved Plans as approved by Landlord.
 
(d)          Insurance. With respect to the construction of the Tenant
Improvements, Tenant’s contractors shall obtain and provide to Landlord
certificates evidencing workers’ compensation, employer’s liability, public
liability and property damage insurance in amounts and forms and with companies
reasonably satisfactory to Landlord, and Tenant shall provide to Landlord
certificates evidencing Tenant’s compliance with the insurance requirements of

 
B – 6

--------------------------------------------------------------------------------

 
 
Article 10 of the Lease (except to the extent any such requirements by their
nature or terms are clearly relevant only after Tenant’s commencement of
business operations on the Premises). In addition, to the extent Landlord or
Project Manager advises Tenant of any specific insurance requirements that are
commercially reasonable and customary during a “course of construction” period
(such as, but not limited to, designation of specified “additional insureds” who
would not ordinarily be required to be named in that capacity during the Lease
term under Article 10 of the Lease), Tenant shall comply with and/or cause its
contractors (as applicable) to comply with such additional requirements.
 
(e)          Rules and Regulations; Construction Signage. Tenant and Tenant’s
contractors shall comply with any rules, regulations and requirements that
Landlord, Project Manager or Landlord’s property manager or general contractor
(if any) may reasonably impose with respect to the construction of the Tenant
Improvements. Tenant’s agreement with Tenant’s contractors shall require each
contractor to provide reasonable and customary daily cleanup of the construction
area to the extent that such cleanup is necessitated by the performance of such
contractor’s activities in connection with the construction of the Tenant
Improvements. Any temporary construction signage (including, but not limited to,
directional signage and/or identifying signage) which Tenant or any of its
contractors or subcontractors may wish to place anywhere in or about the Center
shall be subject to all of the provisions of Section 7.5 of the Lease, including
(but not limited to) prior written approval of the location, size, design and
composition of such signage by Landlord, or by either Project Manager or
Landlord’s property manager on behalf of Landlord, which approval shall not be
unreasonably withheld, delayed or conditioned.
 
(f)          Risk of Loss. All materials, work, installations and decorations of
any nature brought onto or installed in the Building, by or at the direction of
Tenant or in connection with the construction of the Tenant Improvements, prior
to the Rent Commencement Date shall be at Tenant’s risk, and neither Landlord
nor any party acting on Landlord’s behalf shall be responsible for any damage,
loss or destruction thereof.
 
(g)          Condition of Tenant’s Work. All work performed by Tenant shall be
performed in a good and workmanlike manner, shall be free from defects in
design, materials and workmanship, and shall be completed in compliance with the
Approved Plans in all material respects and in compliance with all applicable
governmental laws, ordinances, codes and regulations in force at the time such
work is completed. Without limiting the generality of the foregoing, Tenant
shall be responsible (i) for obtaining all permits and approvals necessary for
the construction of the Tenant Improvements, and (ii) for compliance of all
Tenant Improvements with the requirements of the ADA and all similar or related
requirements under federal, state or local laws pertaining to access by persons
with disabilities.
 
(h)          Phases. Tenant may construct the Tenant Improvements in phases, at
Tenant’s discretion, subject to the limitations set forth above with respect to
the period of time within which the Tenant Improvement Allowance is available
for use.
 
(i)          As-Built Drawings; Permits. At the conclusion of construction,
Tenant shall cause the Architect and General Contractor (i) to update the
Approved Plans as necessary to reflect all changes made to the Approved Plans
during the course of construction, (ii) to certify to

 
B – 7

--------------------------------------------------------------------------------

 
 
the best of their knowledge that the “record set” of as-built drawings are true
and correct, which certification shall survive the expiration or termination of
this Lease, and (iii) to deliver to Landlord, within sixty (60) days after
issuance of a certificate of occupancy for the Premises or for the applicable
Tenant Improvements, (A) two (2) sets of copies of such record set of drawings
and (B) a copy of the final, signed version of each building permit for the
applicable Tenant Improvements.
 
5.             No Agency. Nothing contained in this Workletter shall make or
constitute Tenant as the agent of Landlord.
 
6.             Survival. Without limiting any survival provisions which would
otherwise be implied or construed under applicable law, the provisions of
Paragraph 4(c) of this Workletter shall survive the termination of the Lease
with respect to matters occurring prior to expiration of the Lease.
 
7.             Miscellaneous. All references in this Workletter to a number of
days shall be construed to refer to calendar days, unless otherwise specified
herein. If any item requiring approval by Landlord is disapproved by Landlord in
a timely manner, the procedure for preparation and approval of that item shall
be repeated.
 
            IN WITNESS WHEREOF, the parties have executed this Workletter
concurrently with and as of the date of the Lease.

                 
“Landlord”
 
 
                           “Tenant”
     
SLOUGH REDWOOD CITY, LLC, a
 
FOXHOLLOW TECHNOLOGIES, INC., a
Delaware limited liability company
 
Delaware corporation
     

By:
 

Slough Estates USA Inc., a Delaware
corporation, Its Manager
 
By:
signiture [img005_v3.jpg]
       
Its:
 CFO
               
By:
               
Jonathan M. Bergschneider
 
By:
       
Senior Vice President
 
Its:
   

 
 
B – 8

--------------------------------------------------------------------------------

 

EXHIBIT C
 
ACKNOWLEDGMENT OF RENT COMMENCEMENT DATE
 
This Acknowledgment is executed as of _____________________, 200 ____, by SLOUGH
REDWOOD CITY, LLC, a Delaware limited liability company (“Landlord”), and
FOXHOLLOW TECHNOLOGIES, INC., a Delaware corporation (“Tenant”), pursuant to
Section 2.4 of the Lease dated November 3, 2006 between Landlord and Tenant (the
“Lease”) covering premises located at 900 Chesapeake Drive, Redwood City, CA
94063 (the “Premises”).
 
Landlord and Tenant hereby acknowledge and agree as follows:
 
1.          The Rent Commencement Date under the Lease is _________________,
200___.
 
2.          The termination date under the Lease shall be ________________, 201
___, subject to any applicable provisions of the Lease for extension or
early termination thereof.
 
3.          The square footage of the Premises (including allocable portions of
the Service Annex, as defined in the Lease) is ________________ square feet.
 
4.          Tenant accepts the Premises, subject only to Landlord’s warranties,
representations and obligations expressly set forth in Section 2.3 of the Lease.
 
This Acknowledgment is executed as of the date first set forth above.

     
                       “Landlord”
 
                            “Tenant”
     
SLOUGH REDWOOD CITY, LLC, a
 
FOXHOLLOW TECHNOLOGIES, INC.,
Delaware limited liability company
 
a Delaware corporation

 
By:
Slough Estates USA Inc., a
Delaware corporation, Its Manager
 
By:
                     
Its:
               
By:
           
Jonathan M. Bergschneider
Senior Vice President
 
By:
       
 
         
Its:
 

 
 
EXHIBIT C TO LEASE

--------------------------------------------------------------------------------

 
 
EXHIBIT D
 
SERVICE ANNEX SPACE ALLOCATION; LANDLORD PRIORITY AREA

 
[See attached two (2) pages.]
 
 
 
 
EXHIBIT D TO LEASE

--------------------------------------------------------------------------------

 
(MAP) [img006_v3.jpg]
 
 

--------------------------------------------------------------------------------

 
(MAP) [img007_v3.jpg]

 
20 of 21

--------------------------------------------------------------------------------

 

EXHIBIT C
 
Furniture
 

 
·
Desks:   118

 
 
·
Chairs:   150

 
 
·
2 drawer file cabinets:  114

 
 
·
3 drawer file cabinets:  108

 
 
·
Upright cabinet:  101

 
 
·
36” x 32” 2 door cabinet:  17

 
 
·
Small rectangle red table:  82

 
 
·
36” x 48” 3 shelf bookcase:  26

 
 
·
Small round table:  7

 
 
·
White 4 drawer lateral file:  3

 
 
·
HON 4 drawer lateral file:  2

 
 
·
36” x 48” 2 door Fire King cabinet: 1

 
 
·
Black 4 drawer lateral file:  1

 
 
·
Schwab 5000 4 drawer lateral file:  1

 
 
·
Gray 5 drawer lateral file:  1

 
 
·
HON drawer lateral file: 1

 
 
·
Green 2 door 36” x 48” cabinet:  1

 
 
·
5’ x 8’ oval conference table:  1

 
 
·
2’ x 6’ rectangle table:  3

 
 
·
32” x 6’ rolling white/ bulletin board:  1

 
Page 21 of 21

--------------------------------------------------------------------------------