Exhibit 10.2

TRIPLE NET SPACE LEASE

between

PACIFIC SHORES INVESTORS LLC,

as

LESSOR

and

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

BUILDING 9

1400 SEAPORT BOULEVARD

REDWOOD CITY, CALIFORNIA 94063

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TABLE OF CONTENTS

 

ARTICLE I PARTIES

   1            Section 1.01    Parties    1

ARTICLE II PREMISES

   1            Section 2.01    Demise of Premises    1            Section 2.02
   Common Area    1            Section 2.03    Parking    2            Section
2.04    Athletic Facility    2

ARTICLE III TERM

   3            Section 3.01    Lease Term    3            Section 3.02   
Acceleration of Commencement Date    3            Section 3.03    Option to
Extend    3

ARTICLE IV RENT: TRIPLE NET LEASE

   5            Section 4.01    Base Rent    5            Section 4.02    Rent
Adjustment    5            Section 4.03    [Intentionally Deleted]    6   
        Section 4.04    Absolute Triple Net Lease    6            Section 4.05
   Additional Rent    6            Section 4.06    Letter of Credit    6   
        Section 4.07    Operating Expenses    10            Section 4.08   
Lessee’s Right to Review Supporting Data    13

 

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ARTICLE V USE

   14            Section 5.01    Permitted Use and Limitations on Use    14   
        Section 5.02    Compliance with Laws    15            Section 5.03   
Condition of Premises at Commencement Date    16            Section 5.04   
[Intentionally Deleted]    16            Section 5.05    Building Security    16
           Section 5.06    Rules and Regulations    16

ARTICLE VI MAINTENANCE, REPAIRS AND ALTERATIONS

   17            Section 6.01    Maintenance of Premises and Building    17   
        Section 6.02    Maintenance of Project Common Areas    18   
        Section 6.03    Alterations, Additions and Improvements    19   
        Section 6.04    Covenant Against Liens    20

ARTICLE VII INSURANCE

   21            Section 7.01    Property/Rental Insurance for Premises    21   
        Section 7.02    Property Insurance for Fixtures and Inventory    21   
        Section 7.03    Lessor’s Liability Insurance    21            Section
7.04    Liability Insurance Carried by Lessee    22            Section 7.05   
Proof of Insurance    22            Section 7.06    Mutual Waiver of Claims and
Subrogation Rights    22            Section 7.07    Indemnification and
Exculpation    23            Section 7.08    Lessor as Party Defendant    23

 

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ARTICLE VIII DAMAGE OR DESTRUCTION

   24            Section 8.01    Destruction of the Premises    24   
        Section 8.02    Waiver of Civil Code Remedies    25   
        Section 8.03    Damages Incurred during Repair    25            Section
8.04    No Liability for Lessee’s Alterations or Personal Property    25

ARTICLE IX REAL PROPERTY TAXES

   25            Section 9.01    Payment of Taxes    25            Section 9.02
   Pro Ration for Partial Years    27            Section 9.03    Personal
Property Taxes    27            Section 9.04    Right to Contest Real Property
Taxes    27

ARTICLE X UTILITIES

   27                Section 10.01    Lessee to Pay    27

ARTICLE XI ASSIGNMENT AND SUBLETTING

   28            Section 11.01    Lessor’s Consent Required    28   
        Section 11.02    Lessee Affiliates    28            Section 11.03    No
Release of Lessee    29            Section 11.04    Excess Rent    29   
        Section 11.05    Information to be Provided    29   
        Section 11.06    Lessor’s Recapture Rights    29

ARTICLE XII DEFAULTS; REMEDIES

   31            Section 12.01    Defaults    31            Section 12.02   
Remedies    32

 

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           Section 12.03    Default by Lessor    33            Section 12.04   
Late Charges    33            Section 12.05    Lessor’s Right to Perform
Lessee’s Obligations    34

ARTICLE XIII CONDEMNATION OF PREMISES

   34            Section 13.01    Total Condemnation    34            Section
13.02    Partial Condemnation    34            Section 13.03    Award to Lessee
   35

ARTICLE XIV ENTRY BY LESSOR

   35            Section 14.01    Entry by Lessor Permitted    35

ARTICLE XV ESTOPPEL CERTIFICATE

   36            Section 15.01    Estoppel Certificate    36

ARTICLE XVI LESSOR’S LIABILITY

   36            Section 16.01    Limitations on Lessor’s Liability    36

ARTICLE XVII GENERAL PROVISIONS

   37            Section 17.01    Severability    37            Section 17.02   
Agreed Rate Interest on Past Due Obligations    37            Section 17.03   
Time of Essence    37            Section 17.04    Additional Rent    37   
        Section 17.05    Incorporation of Prior Agreements, Amendments and
Exhibits    37            Section 17.06    Notices    38            Section
17.07    Waivers    39            Section 17.08    Recording    39   
        Section 17.09    Surrender of Possession; Holding Over    39

 

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        Section 17.10

   Cumulative Remedies    41

        Section 17.11

   Covenants and Conditions    41

        Section 17.12

   Binding Effect; Choice of Law    41

        Section 17.13

   Lease to be Subordinate    41

        Section 17.14

   Attorneys’ Fees    42

        Section 17.15

   Signs    42

        Section 17.16

   Merger    43

        Section 17.17

   Quiet Possession    43

        Section 17.18

   Easements    43

        Section 17.19

   Authority    43

        Section 17.20

   Force Majeure Delays    43

        Section 17.21

   Hazardous Materials    44

        Section 17.22

   Modifications Required by Lessor’s Lender    47

        Section 17.23

   Brokers    47

        Section 17.24

   Acknowledgment of Notices    48

        Section 17.25

   Right of First Offer    48

        Section 17.26

   Right of First Refusal    50

        Section 17.27

   Lessee’s Expansion Right    51

        Section 17.28

   Notification of Intention to Market    52

        Section 17.29

   List of Lease Expiration Dates    52

        Section 17.30

   [Intentionally omitted.]    52

        Section 17.31

   Condition Subsequent    52

        Section 17.32

   List of Exhibits    53

 

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ARTICLE I

PARTIES

Section 1.01 Parties

This Lease, dated for reference purposes, and effective as of July 6, 2006, is
made by and between PACIFIC SHORES INVESTORS LLC (“Lessor”) and PDL BIOPHARMA,
INC., a Delaware corporation (“Lessee”).

ARTICLE II

PREMISES

Section 2.01 Demise of Premises

Lessor hereby leases to Lessee and Lessee leases from Lessor for the Lease Term,
at the rental, and upon all of the terms and conditions set forth herein,
certain space consisting of the entire two hundred eighty-three thousand and
fifteen (283,015) rentable square foot building sometimes known as “Building 9”
and commonly known as 1400 Seaport Boulevard, Redwood City, California 94063
(“Building 9”), which is one of ten free standing, office and research and
development Project Buildings (“Project Buildings”) on real property situated in
Redwood City, County of San Mateo, State of California and commonly known as
Pacific Shores Center. The Premises are more particularly described and depicted
herein in Exhibit “A.” The rentable square footage of the Premises, Building 9
and other Project Buildings (the “Rentable Area”) has been determined and
certified by Lessor’s architect by a method described as “dripline,” whereby the
measurement encompasses the outermost perimeter of the constructed building,
including every projection thereof and all area beneath each such projection,
whether or not enclosed, with no deduction for any inward deviation of structure
and with the measurement being made floor by floor, but beginning from the top
of Building 9. The Premises, the Project Buildings and appurtenances described
herein, including Common Area (defined below), and all other improvements at
Pacific Shores Center together with the land on which the same are located are
together designated as the project (“Project”). Lessor and Lessee acknowledge
that Lessor, as landlord, and Lessee, as tenant, are also parties to that
certain Triple Net Space Lease of even date herewith (the “Building 10 Lease”)
whereby Lessor leases to Lessee, and Lessee leased from Lessor, Building 10
(“Building 10”) in the Project.

Section 2.02 Common Area

As of the Commencement Date, and thereafter, during the Lease Term, Lessee shall
have the non-exclusive right to use the Common Area defined herein. Lessor
reserves the right to modify the Common Area, including increasing or reducing
the size, adding additional Project Buildings, structures or other improvements
or changing the use, configuration and elements thereof in its sole discretion
and to close or restrict access from time to time for repair, maintenance or
construction or to prevent a dedication thereof, provided that Lessee
nonetheless (i) shall have reasonable access to parking and the Premises during
such activities; and (ii) such modifications, when completed, shall not
unreasonably interfere with or restrict Lessee’s possession and use of the
Premises. Lessor further reserves the right to establish, repeal and amend from
time to time non-discriminatory rules and regulations for the use of the Common

 

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Area and to grant reciprocal easements or other rights to use the Common Area to
owners of other property provided that no amendment to the rules and regulations
shall unreasonably interfere with or restrict Lessee’s use of the Premises or
the Common Area. “Common Area” means all portions of the Project other than the
Project Buildings, including landscaping, sidewalks, walkways, driveways, curbs,
parking lots (including striping), roadways within the Project, sprinkler
systems, lighting, surface water drainage systems, an athletic facility to be
available for use by Lessee’s employees (the “Athletic Facility”), as well as
baseball and soccer fields, a water front park, and a perimeter walking/biking
trial, and additional or different facilities as Lessor may from time to time
designate or install or make available for the use by Lessee in common with
others. Lessee’s use of the Common Areas shall be subject to any easements
affecting the Project as of the date of this Lease. Subject to the rights of the
other tenants or users of the Project and the need for Lessee to execute a
license agreement therefor in the form attached hereto as Schedule 1, Lessee
shall have the right to use portions of the Common Areas for the hosting of
outdoor meetings, which meetings may include the use of tents and the catering
and/or barbeque of food for such meetings. The location, time and manner of such
meetings shall be subject to the prior written consent of Lessor, which consent
shall not be unreasonably withheld.

Section 2.03 Parking

Lessor shall provide Lessee with three (3) parking spaces per one thousand
(1,000) square feet of area within the Premises. In the event Lessor elects or
is required by any law to limit or control parking at the Premises, whether by
validation of parking tickets or any other method of assessment, Lessee agrees
to participate in such validation or assessment program under such reasonable
rules and regulations as are from time to time established by Lessor. Lessor
agrees that Lessee’s access to parking shall not be unreasonably limited beyond
any requirement of law by any such rules and regulations. Parking shall be free
of charge throughout the Lease Term (including any extensions thereof) except as
provided for in Article VI (i.e., Operating Expenses payable hereunder) for
reimbursement of repair, replacement and maintenance costs and expenses, and in
Article IX for payment or reimbursement of any real property taxes including
governmental or public authority charges, fees or impositions of any nature
hereafter imposed, except as otherwise provided herein. Nothing herein shall
prevent Lessee from allowing two (2) company vans, along with up to ten
(10) cars of employees of Lessee on an occasional basis, to remain in the
parking spaces for the Premises on an overnight basis.

Section 2.04 Athletic Facility

As of the Commencement Date, Lessee and its employees shall have access to the
thirty-eight thousand (38,000) square foot Athletic Facility and all of the
amenities thereof at no additional cost to Lessee or its employees, except that
Lessee acknowledges that the cost of operating and maintaining the Athletic
Facility will be an Operating Expense as described in Section 4.07 below.

 

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ARTICLE III

TERM

Section 3.01 Lease Term

Subject to the terms of Section 3.02 below, the term of this Lease (“Lease
Term”) shall be for one hundred and four (104) months, beginning on April 30,
2013 (the “Commencement Date”) and expiring, unless sooner terminated as
provided for herein, on December 31, 2021 (“Expiration Date”). The parties shall
execute a “Memorandum of Commencement of Lease Term” on the Commencement Date
which shall be substantially in the form attached hereto as Exhibit “B”.

Section 3.02 Acceleration of Commencement Date. If that certain Sublease
Agreement dated                     , 2006 (the “Openwave Sublease”) between
Openwave, Inc.(“Openwave”), as sublessor, and Lessee, as sublessee, terminates
for any reason other than a default by Lessee thereunder or a termination of
that certain Triple Net Space Lease dated February 4, 2000 between Lessor, as
lessor, and Openwave, as lessee by Lessor or Openwave pursuant to the terms of
Article VIII or Article XIII thereof, then the Commencement Date of this Lease
will be accelerated to be date on which the Openwave Sublease terminates, and
the Lease Term shall be extended to begin on such accelerated Commencement Date,
but still expire on the Expiration Date of December 31, 2021. During any portion
of such extended Lease Term that precedes the originally intended Commencement
Date (i.e., April 30, 2013), the monthly Base Rent due hereunder shall be as
follows:

 

Time Period

   Monthly Base Rent

1/1/07-12/31/07

   $ 466,974.75

1/1/08-12/31/08

   $ 483,318.86

1/1/09-12/31/09

   $ 500,235.02

1/1/10-12/31/10

   $ 517,743.24

1/1/11-12/31/11

   $ 535,864.25

1/1/12-12/31/12

   $ 554,619.49

1/1/13-4/29/13

   $ 574,031.17

Section 3.03. Option to Extend.

(a) Exercise. Subject to the “Conditions to Extend” described in Section 3.03(d)
below, Lessee is given two (2) options to extend the Lease Term (each, an
“Option to Extend”) with respect to Building 9 for periods of five (5) years
each (each, an “Extended Term”) following the date on which the initial Lease
Term (or, in the case of the second Extended Term, the first Extended Term)
would otherwise expire, which option may be exercised only by written notice
(“Option Notice”) from Lessee to Lessor given not less than twelve (12) months
nor more than fifteen (15) months prior to the end of the initial Lease Term or
the first Extended Term, as relevant (“Option Exercise Date”).

 

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(b) Extended Term Rent. In the event Lessee exercises any Option to Extend set
forth herein, all the terms and conditions of this Lease shall continue to apply
except that Lessee shall no longer have the future right to exercise the Option
to Extend in question and the Base Rent payable by Lessee during the Extended
Term shall be equal to the greater of (i) ninety-five percent (95%) of Fair
Market Rent (defined below), as determined under subparagraph (c) below, or
(ii) the monthly Base Rent paid by Lessee during the last year of the initial
Lease Term or the first Extended Term, as relevant. “Fair Market Rent” shall
mean the effective rate being charged (including periodic adjustments thereto as
applicable during the period of the Extended Term, to the extent such
adjustments are determined to be part of the Fair Market Rent), for comparable
space in similar buildings in the vicinity, i.e. of a similar age and quality
considering any recent renovations or modernization, and floor plate size or, if
such comparable space is not available, adjustments shall be made in the
determination of Fair Market Rent to reflect the age and quality of Building 9
and Premises as contrasted to other buildings used for comparison purposes, with
similar amenities, taking into consideration: size, location, floor level,
leasehold improvements or allowances provided or to be provided, term of the
lease, extent of services to be provided, the time that the particular rate
under consideration became or is to become effective, and any other relevant
terms or conditions applicable to tenants.

(c) Determination of Fair Market Rent.

(i) Negotiation. If Lessee so exercises the Option to Extend in a timely manner,
the parties shall then meet in good faith to negotiate the Base Rent for the
Premises for the Extended Term during the first thirty (30) days after the date
of the delivery by Lessee of the Option Notice (the “Negotiation Period”). If,
during the Negotiation Period, the parties agree on the Base Rent applicable to
the Premises for the Extended Term, then such agreed amount shall be the Base
Rent payable by Lessee during the Extended Term.

(ii) Arbitration. In the event that the parties are unable to agree on the Base
Rent for the Premises within the Negotiation Period, then within ten (10) days
after the expiration of the Negotiation Period, each party shall separately
designate to the other in writing an appraiser to make this determination. Each
appraiser designated shall be a member of MAI and shall have at least ten
(10) years experience in appraising commercial real property in Santa Clara
County. The failure of either party to appoint an appraiser within the time
allowed shall be deemed equivalent to appointing the appraiser appointed by the
other party, who shall then determine the Fair Market Rent for the Premises for
the Extended Term. Within five (5) business days of their appointment, the two
designated appraisers shall jointly designate a third similarly qualified
appraiser. Within thirty (30) days after their appointment, each of the two
appointed appraisers shall submit to the third appraiser a sealed envelope
containing such appointed appraiser’s good faith determination of the Fair
Market Rent for the Premises for the Extended Term; concurrently with such
delivery, each such appraiser shall deliver a copy of his or her determination
to the other appraiser. The third appraiser shall within ten (10) days following
receipt of such submissions, then determine which of the two appraisers’
determinations most closely reflects Fair Market Rent, as defined in
Section 3.03(b) of this Lease. The determination most closely reflecting the
third appraiser’s determination shall be

 

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deemed to be the Fair Market Rent for the Premises during the Extended Term; the
third appraiser shall have no rights to adjust, amend or otherwise alter the
determinations made by the appraisers selected by the parties, but must select
one or the other of such appraisers’ submissions. The determination by such
third appraiser shall be final and binding upon the parties. Said third
appraiser shall, upon selecting the determination which most closely resembles
Fair Market Rent, concurrently notify both parties hereto. The parties shall
share the appraisal expenses equally. If the Extended Term begins prior to the
determination of Fair Market Rent, Lessee shall pay monthly installments of Base
Rent equal to one hundred three and one half percent (103.5%) of the monthly
installment of Base Rent in effect for the last year of the initial Lease Term
or the first Extended Term, as relevant (in lieu of “holdover rent” payable
under Section 17.09(b)). Once a determination is made, any over payment or under
payment shall be reimbursed as a credit against, or paid by adding to, the
monthly installment of Base Rent next falling due.

(d) Conditions to Extend. Notwithstanding anything herein to the contrary,
Lessee shall have no right to exercise Lessee’s Option to Extend hereunder, and
any Option Notice delivered by Lessee shall be void and invalid if at the time
Lessee delivers such notice any of the following conditions (collectively, the
“Conditions to Extend”) are not satisfied both at the time such Option Notice is
delivered and at the time the Extended Term in question is to commence:
(i) Lessee has not assigned this Lease or the Building 10 Lease to any party
other than an Affiliate (as defined in Section 11.02), during any time in which
Lessor or any affiliate thereof owns Building 10 and the Building 10 Lease is in
effect (ii) Lessee has not sublet more than fifty percent (50%) of the Premises
to anyone other than an Affiliate, (iii) Lessee physically occupies at least
fifty percent (50%) of the Premises, (iv) Lessor has delivered a written notice
of default under this Lease or the Building 10 Lease and the default specified
therein has not yet been cured, and (v) Lessor has not delivered a written
notice to Lessee that Lessee has committed a monetary default under this Lease
more than three (3) times during the Lease Term and delivered a written notice
to Lessee that Lessee has committed a non-monetary default under this Lease more
than one (1) time during the Lease Term.

ARTICLE IV

RENT: TRIPLE NET LEASE

Section 4.01 Base Rent

Lessee shall pay to Lessor monthly Base Rent, in advance, on the first day of
each calendar month of the Lease Term, commencing on the Commencement Date
(subject to the adjustment of the Commencement Date pursuant to the terms of
Section 3.02 above), in the initial amount of Five Hundred Seventy-Four Thousand
Thirty-One and 11/100 Dollars ($574,031.11) per month; but subject to increase
pursuant to the terms of Section 4.02 below. Base Rent for any period during the
Lease Term which is for less than one month shall be a pro rata portion of the
monthly installment (based on the actual days in that month).

Section 4.02 Rent Adjustment

As of January 1, 2014, the Base Rent due hereunder shall adjust to Five Hundred
Ninety-Four Thousand One Hundred Twenty-Two and 19/100 Dollars ($594,122.19). As
of

 

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June 1, 2014, the Base Rent shall further adjust to the higher of: (i) Five
Hundred Ninety-Four Thousand One Hundred Twenty-Two and 19/100 Dollars
($594,122.19) or (ii) one hundred percent (100%) of the then existing Fair
Market Rent (as determined pursuant to Sections 3.03(b) and (c)), but in no
event higher than Seven Hundred Forty-Nine Thousand Nine Hundred Eighty-Nine and
75/100 Dollars ($749,989.75). Thereafter, the Base Rent due hereunder shall
increase by escalations as determined in the Fair Market Rent determination,
effective on January 1 of each remaining year of the Lease Term..

Section 4.03 Intentionally Deleted

Section 4.04 Absolute Triple Net Lease

This Lease is what is commonly called a “Absolute Triple Net Lease,” it being
understood that Lessor shall receive the Base Rent set forth in Section 4.01
free and clear of any and all expenses, costs, impositions, taxes, assessments,
liens or charges of any nature whatsoever. Lessee shall pay all rent in lawful
money of the United States of America to Lessor at the notice address stated
herein or to such other persons or at such other places as Lessor may designate
in writing not later than ten (10) days before the due date specified for same
without prior demand, set-off or deduction of any nature whatsoever. It is the
intention of the parties hereto that this Lease shall not be terminable for any
reason by Lessee and that Lessee shall in no event be entitled to any abatement
of or reduction in rent payable under this Lease, except as herein expressly
provided in Articles VIII and XIII. Any present or future law to the contrary
shall not alter this agreement of the parties.

Section 4.05 Additional Rent

In addition to the Base Rent reserved by Section 4.01, Lessee shall pay,
beginning on the Commencement Date and continuing throughout the Lease Term as
Additional Rent (i) 100% of amounts applicable solely to the Premises, and
Lessee’s Share (as defined in Section 4.07(c) below) of amounts applicable to
Building 9, the Project and the Common Area of all taxes, assessments, fees and
other impositions payable by Lessee in accordance with the provisions of Article
IX and insurance premiums in accordance with the provisions of Article VII,
(ii) Lessee’s Share of Operating Expenses ( as defined below), and (iii) any
other applicable charges, costs and expenses whether or not contemplated which
may arise under any provision of this Lease during the Lease Term, as the same
may be extended, plus a Management Fee to Lessor equal to two percent (2%) of
the Base Rent. The Management Fee is due and payable, in advance, with each
installment of Base Rent. All of such charges, costs, expenses, Management Fee
and all other amounts payable by Lessee hereunder, shall constitute Additional
Rent, and upon the failure of Lessee to pay any of such charges, costs or
expenses, Lessor shall have the same rights and remedies as otherwise provided
in this Lease for the failure of Lessee to pay Base Rent.

Section 4.06 Letter of Credit

(a) Deposit of Letter of Credit Security

Lessee shall deposit with Lessor, on or before the date that is three
(3) business days after the date Lessee executes this Lease, an unconditional,
irrevocable letter of

 

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credit (“Letter of Credit”) on a form acceptable to Lessor and, if required,
Lessor’s lender(s), and in favor of Beneficiary (as defined below) in the amount
of One Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) (the
“Letter of Credit Security”). “Beneficiary,” as used herein refers to either:
(x) Lessor as beneficiary, or (y) if required by Lessor’s lender(s), Lessor and
Lessor’s lender(s) as co-beneficiaries under the Letter of Credit Security. The
Letter of Credit Security shall: (i) be issued by a commercial money center bank
reasonably satisfactory to Lessor with retail branches in San Francisco,
California (the “Issuer”); (ii) be a standby, at-sight, irrevocable letter of
credit; (iii) be payable to Beneficiary; (iv) permit multiple, partial draws ,
(v) provide that any draw on the Letter of Credit Security shall be made upon
receipt by the Issuer of a sight draft accompanied by a letter from Lessor
stating that Lessor is entitled, pursuant to the provisions of this Lease, to
draw on the Letter of Credit Security in the amount of such draw; (vi) provide
for automatic annual extensions, without amendment (so-called “evergreen”
provision) with a final expiry date no sooner than ninety (90) days after the
end of the Lease Term; (vii) provide that it is governed by the Uniform Customs
and Practice for Documentary Credits (1993 revisions) International Chamber of
Commerce Publication 500; and (viii) be cancelable if, and only if, Issuer
delivers to Beneficiary no less than sixty (60) days advance written notice of
Issuer’s intent to cancel. Lessee shall pay all costs, expenses, points and/or
fees incurred by Lessee in obtaining the Letter of Credit Security.

(b) Lessor’s Right to Draw on Letter of Credit Security

The Letter of Credit Security shall be held by Lessor as security for the
faithful performance by Lessee of all of the terms, covenants, and conditions of
this Lease and, so long as Lessor or an affiliate thereof is the lessor under
the Building 10 Lease and the Building 10 Lease is in effect, all of the terms,
covenants and conditions of the Building 10 Lease, applicable to Lessee. Lessor
shall have the immediate right to draw upon the Letter of Credit Security, in
whole or in part and without prior notice to Lessee, other than as required
under this Lease, at any time and from time to time: (i) if an Event of Lessee’s
Default occurs under this Lease or, if Lessor or an affiliate thereof is the
lessor under the Building 10 Lease and the Building 10 Lease is in effect, the
Building 10 Lease (beyond any applicable notice and cure period), or (ii) Lessee
either files a voluntary bankruptcy petition or an involuntary bankruptcy
petition is filed against Lessee by an entity or entities other than Lessor,
under 11 U.S.C. §101 et seq., or Lessee executes an assignment for the benefit
of creditors. No condition or term of this Lease shall be deemed to render the
Letter of Credit Security conditional, thereby justifying the Issuer of the
Letter of Credit Security in failing to honor a drawing upon such Letter of
Credit Security in a timely manner. The Letter of Credit Security and its
proceeds shall constitute Lessor’s sole and separate property (and not Lessee’s
property or, in the event of a bankruptcy filing by or against Lessee, property
of Lessee’s bankruptcy estate) and Lessor may immediately upon any draw (and
without notice to Lessee) apply or offset the proceeds of the Letter of Credit
Security against: (A) any amounts payable by Lessee under the Lease that are not
paid when due, after the expiration of any applicable notice and cure period;
(B) all losses and damages that Lessor has suffered or may reasonably estimate
that it may suffer as a result of an Event of Lessee’s Default under this Lease
or the Building 10 Lease, including any damages arising under Section 1951.2 of
the California Civil Code for rent due following termination of this Lease;
(C) any costs incurred by Lessor in connection an Event of Lessee’s Default
under this Lease (including attorney’s fees); and (D) any other amount that
Lessor may spend or become obligated to spend by reason of an Event of Lessee’s
Default under this Lease or the Building 10

 

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Lease but in no event in excess of amounts to which the Lessor would be entitled
under the law. If any portion of the Letter of Credit Security is so drawn upon
or applied, Lessee shall, within five (5) business days after written demand
therefore, deposit cash with Issuer in an amount sufficient to restore the
Letter of Credit Security to its original amount. Tenant’s failure to do so
shall be a Default by Lessee. It is expressly understood that Lessor shall be
relying on Issuer rather than Lessee for the timely payment of proceeds under
the Letter of Credit Security and the rights of Lessor pursuant to this Section
are in addition to any rights which Lessor may have against Lessee pursuant to
Article XII below. Lessor shall not be required to keep the proceeds from the
Letter of Credit Security separate from Lessor’s general funds nor be deemed a
trustee of same.

(c) Replacement Letter of Credit Security

If, for any reason whatsoever, the Letter of Credit Security becomes subject to
cancellation or expiration during the Lease Term, within forty-five (45) days
prior to expiration of the Letter of Credit Security, Lessee shall cause the
Issuer or another bank satisfying the conditions of Section 4.06(a) above to
issue and deliver to Lessor a Letter of Credit Security to replace the expiring
Letter of Credit Security (the “Replacement Letter of Credit Security”). The
Replacement Letter of Credit Security shall be in the same amount as the
original Letter of Credit Security (or such reduced amount as provided by the
terms of Section 4.06(g) of this Lease) and shall be on the terms and conditions
set forth in items (A) through (D) above. Failure of Lessee to cause the
Replacement Letter of Credit Security to be issued forty-five (45) days prior to
the then pending expiration or cancellation shall entitle Lessor to fully draw
down on the existing Letter of Credit Security and, at Lessor’s election, shall
be an event of default under this Lease and/or the Building 10 Lease without any
relevant notice and cure period.

(d) Transfer of Beneficiary

During the Lease Term Lessor may transfer its interest in the Lease or Lessor’s
lender may change. Lessor may request a change to Beneficiary under the Letter
of Credit Security to the successor of Lessor and/or Lessor’s lender (the
“Transferee”). Lessee agrees to cooperate and to cause Issuer, at Lessor’s cost,
to timely issue a new Letter of Credit Security on the same terms and conditions
as the original Letter of Credit Security, except that the new Letter of Credit
Security shall be payable to the Transferee. Lessor shall surrender the existing
Letter of Credit Security to Lessee simultaneously with Lessee’s delivery of the
new Letter of Credit Security to Transferee.

(e) Return of the Letter of Credit Security

If Lessee fully and faithfully performs every provision of this Lease to be
performed by it, the Letter of Credit Security or any balance thereof shall be
returned (without interest) to Lessee (or, at Lessee’s option, to the last
assignee of Lessee’s interests hereunder) within thirty (30) days after the
expiration or earlier termination of the Lease and after Lessee has vacated the
Premises and surrendered possession; provided that if prior to the Lease
Expiration Date a voluntary bankruptcy provision is filed by Lessee, or an
involuntary bankruptcy is filed against Lessee by any of Lessee’s creditors
other than Lessor, under 11

 

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U.S.C. § 101 et seq., or Lessee executes an assignment for the benefit of
creditors, then to the fullest extent permitted by law Lessor shall not be
obligated to return the Letter of Credit Security or any proceeds of the Letter
of Credit Security until all statutes of limitations for any preference
avoidance statutes applicable to such bankruptcy or assignment for the benefit
of creditors have elapsed or the bankruptcy court or assignee, whichever is
applicable, has executed a binding release releasing Lessor of any and all
liability for the preferential transfers relating to payments made under this
Lease, and Lessor may retain and offset against any remaining Letter of Credit
Security proceeds the full amount Lessor is required to pay to any third party
on account of preferential transfers relating to this Lease. Lessor agrees it
will cooperate in providing Issuer with a letter of cancellation or such other
reasonable documentation as Issuer requests to effect the return and
extinguishment of the credit issued under the Letter of Credit Security.

(f) Acknowledgment of Parties

Lessor and Lessee (a) acknowledge and agree that in no event or circumstance
shall the Letter of Credit Security or any renewal thereof or substitute
therefor or any proceeds thereof be deemed to be or treated as a “security
deposit” under any law applicable to security deposits in the commercial
context, including, but not limited to Section 1950.7 of the California Civil
Code, as such Section now exists or as it may be hereafter amended or succeeded
(the “Security Deposit Laws”), (b) acknowledge and agree that the Letter of
Credit Security (including any renewal thereof or substitute therefor or any
proceeds thereof) is not intended to serve as a security deposit, and the
Security Deposit Laws shall have no applicability or relevancy thereto, and
(c) waive any and all rights, duties and obligations that any such party may
now, or in the future will, have relating to or arising from the Security
Deposit Laws. Lessee hereby waives the provisions of Section 1950.7 of the
California Civil Code and all other provisions of law, now or hereafter in
effect, which (i) establish the time frame by which a Lessor must refund a
security deposit under a lease, and/or (ii) provide that a Lessor may claim from
a security deposit only those sums reasonably necessary to remedy defaults in
the payment of rent, to repair damage caused by a Lessee or to clean the
premises, it being agreed that Lessor may, in addition, claim those sums
specified in this Section 4.06 and/or those sums reasonably necessary to
compensate Lessor for any loss or damage caused by Lessee’s breach of this
Lease, including any damages Lessor suffers.

(g) Scheduled Reduction in Letter of Credit Security.

Notwithstanding anything herein to the contrary, as of the eighth
(8th) anniversary of the “Commencement Date” of the Building 10 Lease, the
amount of the Letter of Credit Security shall be reduced to Seven Hundred Fifty
Thousand Dollars ($750,000), provided that (i) at such time Lessor has not
delivered a written notice of default by Lessee hereunder and such default has
not yet been cured, and (ii) Lessor has not delivered to Lessee written notice
that Lessee is in monetary default hereunder more than three (3) times and
written notice that Lessee is in non-monetary default more than one (1) time
during the Lease Term.

 

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Section 4.07 Operating Expenses

(a) Definition

“Operating Expenses” shall mean and include those actual costs or expenses of
the Premises, Building 9 or Project described in Articles VI, VII or IX, as well
as all actual costs and expenses of every kind and nature paid or incurred by
Lessor (whether obligated to do so or undertaken at Lessor’s discretion) in the
ownership, operation, maintenance, repair and replacement of the Common Areas,
including Common Area Project Buildings and improvements located within the
Project as well as the Common Areas of Building 9. Such cost and expenses shall
include, but not be limited to, costs of cleaning; lighting; maintaining,
repairing and replacing all Common Area improvements and elements (replacing
shall be deemed to include but not be limited to the replacement of light poles
and fixtures, storm and sanitary sewers, parking lots, driveways and roads as
well as the Building 9 elevators, stairways, floors and walls in the Common Area
and Building 9, but not the Building 9 elements which are the responsibility of
Lessor to maintain, repair and replace under this Lease), repairs to and
maintenance of the structural and non-structural portions of the Athletic
Facility; supplies, tools, equipment and materials used in the operation and
maintenance of the Project; parking lot striping; removal of trash, rubbish,
garbage and other refuse; painting; removal of graffiti; painting of exterior
walls; landscaping; providing security to the extent Lessor determines in its
sole discretion to do so(including security systems and/or systems designed to
safeguard life or property against acts of God and/or criminal and/or negligent
acts, and the costs of maintaining of same); personal property taxes; fire
protection and fire hydrant charges (including fire protection system signaling
devices, now or hereafter required, and the costs of maintaining of same); water
and sewer charges; utility charges; license and permit fees necessary to operate
and maintain the Project; the initial cost or the reasonable depreciation of
equipment used solely in operating and maintaining the Common Areas which is
expensed or amortized, respectively by Lessor in its good faith discretion using
accounting practices commonly utilized in the commercial real estate industry,
consistently applied and rent paid for leasing any such equipment; reasonable
cost of on or off site storage space of any and all items used in conjunction
with the operation, maintenance and management of the Project, including but not
limited to tools, machinery, records, decorations, tables, benches, supplies and
meters; the cost of and installation cost of any and all items which are
installed for the purpose of reducing Operating Expenses, increasing building or
public safety or which may be then required by governmental authority, laws,
statutes, ordinances and/or regulations, a use privilege for the Athletic
Facility equal to: (A) the product of 3,744 (Lessee’s Share of the Athletic
Facility Square Footage) times the monthly Base Rent per square foot then due
hereunder, plus (B) Lessee’s Share of the costs and expenses arising from the
operation of same; total compensation and benefits (including premiums for
workers’ compensation and other insurance) paid to or on behalf of Lessor’s
employees, agents, consultants and contractors, including but not limited to
full or part time on-site management or maintenance personnel, however,
excluding any person with a title greater than property manager, for work
performed at the Project.

Notwithstanding the above, if Lessee’s Share of the cost of any particular
capital expenditure to the Project or Premises exceeds Fifty Thousand Dollars
($50,000), then

 

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such cost, together with interest thereon at the rate actually charged Lessor by
any lender or, if no such interest is relevant, with interest thereon at an
interest rate equal to the Bank of America prime rate plus two percent (2%),
shall be amortized over its useful life, and the amount includible in Operating
Expenses shall be limited to the monthly amortized cost thereof. The
determination of what constitutes a capital expenditure and the useful life
applicable thereto shall be made by Lessor in its good faith discretion using
accounting practices commonly utilized in the commercial real estate industry,
consistently applied

(b) Payment

Lessee shall pay Lessee’s Share of Operating Expenses, as Additional Rent, in
monthly installments on the first day of each month in an amount set forth in a
written estimate by Lessor. Within ninety (90) days after the end of each
calendar year, Lessor shall furnish to Lessee a statement (hereinafter referred
to as “Lessor’s Statement”) of the actual amount of Lessee’s Share of such
Operating Expenses for such period. Within thirty (30) days after receipt
thereof, Lessee shall pay to Lessor, as Additional Rent, or Lessor shall apply
as a credit to Additional Rent next falling due (or if the Lease Term has
expired or terminated and there remains no money due to Lessor, remit to
Lessee), as the case may be, the difference between the estimated amounts paid
by Lessee and the actual amount of Lessee’s Share of Operating Expenses for such
period as shown by such Lessor’s Statement. Lessee’s Share of Operating Expenses
for the ensuing estimation period shall be adjusted upward or downward based
upon Lessor’s Statement.

(c) Lessee’s Share

For purposes hereof, “Lessee’s Share” shall mean (i) as to amounts allocable
solely to Building 9 (and with respect to real property tax, also to the legal
parcel in which Building 9 is located), one hundred percent (100%), and (ii) as
to amounts allocable to the Project or Project Common Area, the Rentable Area of
the Premises divided by the Rentable Area of all Project Buildings at the
Project (irrespective of whether they are rented). Subject to being increased or
decreased (in an amount Lessor shall, in good faith, determine), upon the
increase or reduction in the Rentable Area of the Premises and the Project,
respectively, Lessee’s Share for each of the Building 9 items shall be 100% and
Lessee’s Share of Project items shall be sixteen and ninety-three hundredths
percent (16.93%). The Rentable Area of all Project Buildings at the Project
shall not be reduced for vacancies in the ordinary course of business.

(d) Exclusions

For purposes of this Lease, the term Operating Expenses shall not include (and
Lessee shall have no liability for) any of the following:

(i) any expenses incurred by Lessor for the sole benefit of Lessee, which
expenses are reimbursed by Lessee pursuant to the other terms of this Lease,

(ii) any expenses incurred by Lessor for the benefit of the other tenants of the
Project, but not Lessee, which expenses are in fact reimbursed by such other
tenant(s),

 

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(iii) any payments of points, interest or principal relating to any debt secured
by Building 9 or the Project,

(iv) costs associated with the operation of the business of the ownership or
entity which constitutes “Lessor,” as distinguished from the costs of Project
operations, including, but not limited to, partnership accounting and legal
matters, costs of defending any lawsuits with any mortgagee (except as the
actions of Lessee may be in issue), costs of selling syndicating, financing,
mortgaging or hypothecating any of Lessor’s interest in the Project, costs of
any disputes between Lessor and its employee (if any) not engaged in Project
operation, or outside fees paid in connection with disputes with other tenants,

(v) Legal fees, space planners’ fees, real estate brokers’ leasing commissions,
and advertising expenses incurred in connection with leasing of the Project
Buildings,

(vi) Costs for which Lessor is reimbursed by its insurance carrier or any
tenant’s insurance carrier,

(vii) any bad debt loss, rent loss or reserves for bad debts or rent loss,

(viii) costs, including permit, license and inspection costs, incurred with
respect to the installation of tenant improvements made for new tenants in the
Project or incurred in renovating or otherwise improving, decorating, painting
or redecorating vacant space for tenants or other occupants of the Project,

(ix) costs of a capital nature, including, without limitation, capital
improvements and replacements, capital repairs, capital equipment and capital
tools, unless such costs are amortized pursuant to the terms of Subsection
4.07(a) above,

(x) any interest or late fee resulting from any failure of Lessor to pay any
item of Operating Expense when it would have been due without such interest or
late fee, provided, however, that nothing herein shall be deemed from precluding
Lessor from passing through to Lessee as an Operating Expense any cost
associated with paying Operating Expenses on any permitted installment or other
periodic basis, even if such payment basis results in an increase in the
Operating Expense in question,

(xi) overhead and profit increment paid to Lessor or to subsidiaries or
affiliates of Lessor for such services in the Building to the extent the same
exceeds the costs of such services rendered by unaffiliated third parties on a
competitive basis.

It is understood that Operating Expenses shall be reduced by all cash discounts,
trade discounts, or quantity discounts received by Lessor or Lessor’s managing
agent in the purchase of any goods, utilities, or services in connection with
the operation of the Project. In the calculation of any expenses hereunder, it
is understood that Lessor will not charge Lessee more than one hundred percent
(100%) of any Operating Expense due hereunder. Lessor shall use its best efforts
to effect an equitable proration of bills for services rendered to Building 9
and to any other property owned by Lessor.

 

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Section 4.08 Lessee’s Right to Review Supporting Data

(a) Exercise of Right by Lessee

Provided that Lessor has not delivered to Lessee written notice of any default
by Lessee hereunder, which default has not then been cured, and provided further
that Lessee strictly complies with the provisions of this Section 4.08, Lessee
shall have the right to reasonably review supporting data for any portion of a
Lessor’s Statement that Lessee believes may be incorrect. In order for Lessee to
exercise its right under this Section 4.08, Lessee shall, within: (i) forty-five
(45) days after any Lessor’s Statement is received, if Lessor includes a copy of
Lessor’s general ledger for Building 9 with such Lessor’s Statement, or
(ii) ninety (90) days after Lessor’s Statement is received, in all other events,
deliver a written notice to Lessor specifying the portions of the Lessor’s
Statement that it believes to be incorrect, and Lessee shall simultaneously pay
to Lessor all amounts due from Lessee to Lessor as specified in the Lessor’s
Statement, if applicable. Except as expressly set forth in subparagraph
(c) below, in no event shall Lessee be entitled to withhold, deduct, or offset
any monetary obligation of Lessee to Lessor under the Lease including, without
limitation, Lessee’s obligation to make all Base Rent payments and all payments
for Additional Rent, pending the completion of, and regardless of the results
of, any review under this Section 4.08. The right to review granted to Lessee
under this Section 4.08 may only be exercised once for any Lessor’s Statement,
and if Lessee fails to meet any of the above conditions as a prerequisite to the
exercise of such right, the right of Lessee under this Section 4.08 for a
particular Lessor’s Statement shall be deemed waived.

(b) Procedures for Review

Lessee acknowledges that Lessor maintains its records for Building 9 and the
Project at its offices in San Francisco, and Lessee therefore agrees that any
review of supporting data under this Section shall occur at such location. Any
review to be conducted under this Section shall be at the sole expense of
Lessee, except as otherwise provided herein, below, and shall be conducted by an
independent (i.e., not then engaged by Lessee for any other purposes) firm of
certified public accountants on a non-contingency fee basis. Lessee acknowledges
and agrees that any supporting data reviewed under this Section shall constitute
confidential information of Lessor, which shall not be disclosed to anyone other
than the accountants of national standing performing the review and the
principals or other employees or counsel of Lessee who receive the results of
the review. Except to the extent (i) required by law, (ii) in connection with
any legal proceeding concerning this Lease, or (iii) if such information or
results are otherwise publicly available, the disclosure of such information or
results of the review to any other person by Lessee or any person or entity who
received such information from or on behalf of Lessee shall constitute a
material breach of this Lease.

(c) Finding of Error

Any errors disclosed by the review of supporting data under this Section shall
be promptly corrected, provided that Lessor shall have the right to cause
another review of the supporting data to be made by an independent (i.e., not
then engaged by Lessor for any other purposes) firm of certified public
accountants of Lessor’s choice. If the results of the review of the supporting
data, taking into account (if applicable) the results of any additional review

 

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caused by Lessor, reveal that Lessee has overpaid obligations for a preceding
period, the amount of such overpayment shall be credited against Lessee’s
subsequent installment obligations to pay its share of Additional Rent or, if
the Lease has terminated or expired, in cash within thirty (30) days after the
determination of overpayment is received by Lessor. In the event that such
results show that Lessee has underpaid its obligations for a preceding period,
the amount of such underpayment shall be paid by Lessee to Lessor with the next
succeeding installment obligation of Additional Rent or, if this Lease has
terminated or expired, in cash within thirty (30) days after the determination
of underpayment is received by Lessee. Each party shall pay all the costs, and
expenses of its chosen accounting firm; provided, however, if Lessor and Lessee
determine that Operating Expenses for the Project for the year in question were
less than those stated in Lessor’s Statement by more than five percent (5%),
Lessor shall reimburse Lessee for the reasonable amounts paid by Lessee to third
parties in connection with such review. If Lessor and Lessee determine that
Operating Expenses for the Project in the year in question were not less than
those stated in Lessor’s Statement by more than five percent (5%), then Lessee
shall reimburse Lessor for the reasonable amounts paid by Lessor to third
parties in connection with such review.

(d) Effect of Lessee’s Default. In the event that Lessor has delivered a written
notice of default to Lessee hereunder and such default then remains uncured
during the pendency of a review of records under this Section, said right to
review shall immediately cease and the matters originally set forth in Lessor’s
Statement shall be deemed to be correct.

ARTICLE V

USE

Section 5.01 Permitted Use and Limitations on Use

(a) The Premises shall be used and occupied only for general office purposes,
research and development, laboratory, biopharmaceutical research (including
without limitation, vivarium and animal colony facilities for rodents only,
small scale pilot fermentation and other pilot plant facilities) and other
related legal uses and for no other use without Lessor’s prior written consent,
which shall not be unreasonably withheld, conditioned or delayed so long as such
use is lawful and does not conflict with any other provision of this Lease,
including, without limitation, the restrictions set forth in the following
provisions of this Section. Lessee shall not use, suffer or permit the use of
the Premises in any manner that will tend to constitute waste, nuisance or
unlawful acts or void any warranties that Lessor has received with respect to
Building 9, provided that biological and chemical and other waste generated and
disposed of in the ordinary course of business for the permitted uses in full
and timely compliance with all applicable laws shall not be deemed a violation
of this Section 5.01. In no event shall it be unreasonable for Lessor to
withhold its consent as to uses other than those expressly permitted above which
it determines would tend to materially increase the wear of the Premises or any
part thereof or increase the potential liability of Lessor or decrease the
marketability, financeability, leaseability or value of the Premises or Project.
Lessee shall not do anything in or about the Premises which will (i) cause
structural injury to Building 9 or Premises, or (ii) cause damage to any part of
Building 9 or Premises except to the extent reasonably necessary for the
installation of Lessee’s trade fixtures and Lessee’s Alterations, and then only
in a manner and to the extent consistent with this Lease. Lessee shall not
operate any equipment within Building 9 or

 

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Premises which will (A) materially damage Building 9 or the Common Area,
(B) overload existing electrical systems or other mechanical equipment servicing
Building 9, (C) impair the efficient operation of the sprinkler system or the
heating, ventilating or air conditioning (“HVAC”) equipment within or servicing
Building 9, (D) damage, overload or corrode the sanitary sewer system, or
(E) damage the Common Area or any other part of the Project. Lessee shall not do
any of the following in excess of the load limits for which such items are
designed (based on structural reinforcements to be constructed by Lessee as part
of Lessee’s alterations to the Premises): attach, hand or suspend anything from
the ceiling, roof, walls or columns of Building 9 or set any load on the floor.
Lessee shall not operate hard wheel forklifts within the Premises. Any dust,
fumes, or waste products generated by Lessee’s use of the Premises shall be
contained and disposed so that they do not (1) create an unreasonable fire or
health hazard, (2) damage the Premises, or (3) result in the violation of any
law. Except as approved by Lessor, Lessee shall not change the exterior of
Building 9, or the outside area of the Premises, or install any equipment or
antennas on or make any penetrations of the exterior or roof of Building 9.
Lessee shall not conduct, on any portion of the Premises, any sale of any kind
(but nothing herein is meant to prohibit sales and marketing activities of
Lessee’s products and services in the normal course of business consistent with
the permitted uses), including any public or private auction, fire sale,
going-out-of-business sale, distress sale or other liquidation sale, and any
such sale shall be an immediate event of default hereunder without the benefit
of a notice and cure period from Lessor, notwithstanding anything to the
contrary in this Lease. No materials, supplies, tanks or containers, equipment,
finished products or semi-finished products, raw materials, inoperable vehicles
or articles of any nature shall be stored upon or permitted to remain within the
outside areas of the Premises except in fully fenced and screened areas outside
Building 9 which have been designed for such purpose and have been approved in
writing by Lessor for such use by Lessee and for which Lessee has obtained all
appropriate permits from governmental agencies having jurisdiction over such
articles. Lessee shall also reimburse Lessor for any increased premiums or
additional insurance which Lessor reasonably deems necessary as a result of
Lessee’s use of the Premises.

Section 5.02 Compliance with Laws

Lessor represents and warrants to Lessee that Building 9 was constructed in
accordance with all applicable laws, codes and regulations in effect as of the
date Building 9 was built. Except for any work necessary as a result of the
inaccuracy of the foregoing representation and warranty, Lessee shall, at
Lessee’s cost and expense, comply promptly with all statutes, ordinances, codes,
rules, regulations, orders, covenants and restrictions of record, and
requirements applicable to the Premises and Lessee’s use and occupancy of same
in effect during any part of the Lease Term, whether the same are presently
foreseeable or not, and without regard to the cost or expense of compliance
provided that any Alteration(s) required for compliance shall be subject to the
provisions of this Lease. By executing this Lease, Lessee acknowledges that it
has reviewed and satisfied itself as to its compliance, or intended compliance
with the applicable zoning and permit requirements, hazardous materials and
waste requirements, and all other statutes, laws, or ordinances relevant to the
uses stated in Section 5.01, above, or the occupancy of the Premises.

 

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Section 5.03 Condition of Premises at Commencement Date

Lessee hereby accepts the Premises in their condition existing as of the date
the Premises is delivered to Lessee, “AS-IS” and “WITH ALL FAULTS” subject to
all applicable zoning, municipal, county and state laws, ordinances and
regulations governing and regulating the use and condition of the Premises, and
any covenants or restrictions, liens, encumbrances and title exceptions of
record, and accepts this Lease subject thereto and to all matters disclosed
thereby and by any exhibits attached hereto. Lessee acknowledges that neither
Lessor nor any agent of Lessor has made any representation or warranty as to the
present or future suitability of the Premises for the conduct of Lessee’s
business, except as otherwise provided herein.

Section 5.04 Intentionally Deleted

Section 5.05 Building Security

Lessee acknowledges and agrees that it assumes sole responsibility for security
at the Premises for its agents, employees, invitees, licensees, contractors,
guests and visitors and will provide such systems and personnel for same
including, without limitation, while such person(s) are using the Common Area,
as it deems necessary or appropriate and at its sole cost and expense. Lessor
shall have absolutely no liability whatsoever with respect to the security of
Lessee’s agents, employees, invitees or contractors or their respective personal
property at the Project, except to the extent that liability to such parties
arises out of the intentional misconduct of Lessor or Lessor’s agents,
employees, invitees or contractors. Lessee acknowledges and agrees that Lessor
does not intend to provide any security system or security personnel at the
Premises or Project, including, without limitation, at the Common Area,
provided, however, that nothing herein shall be deemed to prevent Lessor from
providing such system or personnel in the future, the cost of which will be
included in those items for which Lessee pays additional rent.

Section 5.06 Rules and Regulations

Lessor may from time to time promulgate reasonable and nondiscriminatory rules
and regulations applicable for the care and orderly management of the Premises,
the Project and/or its Common Area. Such rules and regulations shall be binding
upon Lessee upon delivery of a copy thereof to Lessee, and Lessee agrees to
abide by such rules and regulations. A copy of the initial Rules and Regulations
is attached hereto as Exhibit “I.” If there is a conflict between the rules and
regulations and any of the provisions of this Lease, the provisions of this
Lease shall prevail. Lessor shall not be responsible for the violation of any
such rules and regulations by any person, including, without limitation, Lessee
or its employees, agents, invitees, licensees, guests, visitors or contractors.

 

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ARTICLE VI

MAINTENANCE, REPAIRS AND ALTERATIONS

Section 6.01 Maintenance of Premises and Building

(a) Throughout the Lease Term, Lessee, at its sole cost and expense, shall keep,
maintain, repair and replace the Premises and every part thereof (except as
provided in 6.01(b), Article VIII (Damage and Destruction), Article XIII
(Eminent Domain) and also, except for uninsured maintenance, repairs or
replacement costs caused solely by an act of gross negligence or intentional
misconduct by Lessor, or its employees, agents or contractors during the Lease
Term), maintain and repair all improvements and appurtenances in the Premises,
including, without limitation, all interior walls, all doors and windows, all
wall surfaces and floor coverings, all Alterations, additions and improvements
installed by or on behalf of Lessee during the Lease Term, all sewer, plumbing,
electrical, lighting, heating, ventilation and cooling systems and fixtures,
fire sprinklers, fire safety and security systems and fixtures and all wiring
and glazing, in the same good order, condition and repair as they are in on the
Commencement Date, or may be improved during the Lease Term, reasonable wear and
tear excepted, provided that such wear and tear could not have been reasonably
prevented by best maintenance practices customarily used in the Project.

(b) Lessor, at its sole cost and expense, shall (i) repair defects, latent and
patent, in Building 9 (including all exterior glass which is damaged by
structural defects in exterior walls), and keep, maintain, repair and, if deemed
necessary by Lessor, replace (ii) (a) supporting pillars, (b) structural walls,
(c) the structural portions of Building 9 (including, but not limited to, the
roof and window systems, provided that Lessee, and not Lessor, shall be
responsible for washing the windows, and Lessee shall be responsible for
Lessee’s Share of any costs incurred by Lessee in repairing, maintaining or
replacing the roof membrane of Building 9 as an Operating Expense) and
(d) foundations of Building 9. Notwithstanding the foregoing, subject to the
terms of Section 7.06 hereof, if the need for such repair is caused by Lessee,
Lessor shall, at Lessee’s sole cost and expense, repair same. Lessee shall give
Lessor written notice of any needed repairs which are the obligation of Lessor
hereunder. It shall then be the obligation of Lessor, after receipt of such
notice, to perform the same within fifteen (15) business days after such notice
(or, if the condition in need of repair constitutes an emergency which is
causing imminent and material risk of damage or injury to persons or property at
Building 9, Lessor must perform such repair within five (5) business days after
receipt of such notice); provided, however, that if the nature of the repairs is
such that more than fifteen (15) business days (or, in the case of the emergency
repairs described above, five (5) business days) are reasonably required for
performance, then Lessor shall not be deemed to be in default hereunder if
Lessor commences such repairs within said fifteen (15) business day period and
thereafter diligently completes them and provided further, that for purposes of
this sentence “commences” includes any steps taken by Lessor to investigate,
design, consult, bid or seek permit or other governmental approval in connection
with such repair. Should Lessor default as provided in Section 12.03 with
respect to its obligation to make any of the repairs assumed by it hereunder
with respect to the Premises or Building 9, Lessee shall have the right to
perform such repairs and Lessor agrees that within thirty (30) days after
written demand accompanied by detailed

 

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invoice(s), it shall pay to Lessee the cost of any such repairs together with
accrued interest from the date of Lessee’s payment at the Agreed Rate. Lessor
shall not be liable to Lessee for any damage to person or property as a result
of any failure to timely perform any of its obligations with respect to the
repair, maintenance or replacement of the Premises, Project Buildings or Project
or any part thereof, and Lessee’s sole right and remedy (together with its
rights under Section 12.03 below) shall be the performance of said repairs by
Lessee with right of reimbursement from Lessor of the reasonable fair market
cost of said repairs, not exceeding the out of pocket sums actually expended by
Lessee, together with accrued interest from the date of Lessee’s payment at the
Agreed Rate, provided that nothing herein shall be deemed to create a right of
setoff or withholding by Lessee of Base Rent or Additional Rent or any other
amounts due herein. Lessee hereby expressly waives all rights under and benefits
of Sections 1941 and 1942 of the California Civil Code or under any similar law,
statute or ordinance now or hereafter in effect to make repairs and offset the
cost of same against rent or to withhold or delay any payment of rent or any
other of its obligations hereunder as a result of any default by Lessor under
this Section 6.01(b).

(c) Lessee agrees to keep the Premises, both inside and out, clean and in
sanitary condition as required by the health, sanitary and police ordinances and
regulations of any political subdivision having jurisdiction and to remove all
trash and debris which may be found in or around the Premises. Lessee further
agrees to keep the interior surfaces of the Premises, including, without
limitation, windows, floors, walls, doors, showcases and fixtures clean and neat
in appearance.

(d) If Lessee refuses or neglects to commence such repairs and/or maintenance
for which Lessee is responsible under this Article VI within a ten (10) business
day period (or as soon as practical and in no event later than five (5) days, if
the failure to initiate the repair threatens to cause further damage to the
Premises) after written notice from Lessor and thereafter diligently prosecute
the same to completion, then Lessor may enter the Premises (except in an
emergency, upon at least 24 hours advance written notice) during Lessee’s
business hours and cause such repairs and/or maintenance to be made. Lessor
shall not be responsible to Lessee for any loss or damage occasioned thereby
other than physical damage to the Premises caused by the negligence of Lessor or
Lesson’s agents, employees or contractors which damage Lessor shall repair at
its sole cost as Lessor’s sole obligation and Lessee’s sole right and remedy
with respect to such damage. Lessee agrees that upon demand, it shall pay to
Lessor the reasonable cost of any such repairs subject to the terms of the
preceding sentence, not exceeding the amount of out-of-pocket expenses actually
expended by Lessor, together with accrued interest from the date of Lessor’s
payment at the Agreed Rate. Notwithstanding anything to the contrary contained
herein, above, if Lessor elects to enter the Premises as permitted herein,
above, it shall use commercially reasonable efforts to minimize any interference
with Lessee’s business at the Premises.

Section 6.02 Maintenance of Project Common Areas

Lessor shall maintain, repair and replace all landscape, hardscape and other
improvements within the Project Common Area and shall operate and manage the
Athletic Facility and other Project Common Area features and facilities
described in Section 2.02 including, without limitation, all landscape,
hardscape and other improvements within the

 

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outside areas of Building 9 and the other Project Buildings located within the
Project, including without limitation, landscaping, curbs, walkways, driveways,
roadways, parking areas and lighting, sprinkler, drainage, sewer, plumbing
systems. Notwithstanding the foregoing, subject to the terms of Section 7.06
below, any damage thereto, except for normal wear, caused by Lessee or its
employees, agents, contractors, invitees or visitors shall be repaired by Lessor
and the cost thereof shall be paid by Lessee within ten (10) days after
presentation of Lessor’s bill for same. The cost and expense of Lessor’s
obligations hereunder shall be Operating Expenses as to which Lessee shall pay
Lessee’s Share pursuant to Section 4.05 (except as otherwise provided herein);
provided, however, that Lessor’s obligation under this Section 6.02(b) in any
instance where the damage, other than normal wear and tear, was caused by Lessor
or its employees, agents or contractors shall not be recovered by Lessor from
Lessee as an Operating Expense or in any other manner. Notwithstanding anything
to the contrary contained herein, Lessee shall not be responsible for any cost
or expense pertaining solely to another Project Building, except for costs or
expenses pertaining to any Project Buildings which provide amenities for the
Project or any Project Building in which Lessee is a tenant.

Section 6.03 Alterations, Additions and Improvements

No alterations, additions, or improvements (“Alterations”) shall be made to the
Premises by Lessee without the prior written consent of Lessor, which Lessor
will not unreasonably withhold, condition or delay; provided, however, that
Lessee may make Alterations which do not affect the Building systems, exterior
appearance or structural integrity of Building 9, involve penetration of either
the ceiling or floor of Building 9 and which do not collectively exceed One
Hundred Thousand Dollars ($100,000) in cost within any twelve (12) month period,
without Lessor’s prior written consent; provided, further, that Lessee gives
Lessor prior notice of such alterations (which notice shall include the
estimated value of such alterations) and such alterations are otherwise
performed in accordance with the terms of this Lease. As a condition to Lessor’s
obligation to consider any request for consent hereunder, Lessee shall pay
Lessor upon demand for the reasonable out of pocket costs and expenses of
consultants, engineers, architects and others (exclusive of property management
personnel for reviewing plans and specifications. Lessor may require Lessee to
remove any such Alterations at the expiration or sooner termination of the Lease
Term and to restore the Premises to their prior condition pursuant to the terms
of Section 17.09 hereof; provided that: (i) Lessor shall make such election, if
at all, at the time consent to such Alteration is given, if such election is
requested in writing of Lessor at such time by Lessee, or if Lessor’s consent to
such Alteration is not required, then Lessor shall make such election within 30
days following a written request of Lessor by Lessee, and (ii) in any event, at
the end of the Lease Term or earlier termination of the Lease, Lessee shall
remove from the Premises the equipment listed as “Equipment To Be Removed” on
Schedule 3 attached hereto (the “Removal Obligations Schedule”), and shall
surrender to Lessor, and have no obligation to remove, the equipment listed as
“Equipment Left In Place” on the Removal Obligations Schedule. Lessee shall
furnish security or make other arrangement satisfactory to Lessor to assure
payment for the completion of all Alterations work free and clear of liens. All
Alterations to be made to the Premises shall be made under the supervision of a
competent, California licensed architect and/or competent California licensed
structural engineer (each of whom has been approved by Lessor) and shall be made
in accordance with plans and specifications which have been furnished to and
approved by Lessor in writing prior to commencement of work. All Alterations
shall be designed, constructed and installed at the sole

 

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cost and expense of Lessee by California licensed architects, engineers, and
contractors approved by Lessor in compliance with all applicable law, and in
good and workmanlike manner, and shall have been approved in writing by Redwood
City and any other applicable governmental agencies, if so required. Such
approvals shall not be unreasonably withheld, conditioned or delayed by Lessor.
Except as is provided for in the Removal Obligations Schedule, subject to
Lessor’s right to have Lessee retain ownership and remove same, any Alteration,
including, without limitation, all lighting, electrical, heating, ventilation,
air conditioning and full height partitioning, drapery and carpeting
installations made by Lessee, together with all property that has become an
integral part of the Premises such as fume hoods which penetrate the roof or
plenum area, built-in cold rooms, built-in warm rooms, deionized water systems,
glass washing equipment, autoclaves, chillers, built-in plumbing, electrical and
mechanical equipment and systems and any power generator and transfer switches,
shall not be deemed trade fixtures and shall become the property of Lessor at
the expiration or sooner termination of the Lease, unless Lessor directs
otherwise. Lessee shall retain title to all furniture and trade fixtures placed
on the Premises. Within thirty (30) days after completion of any Alteration,
Lessee shall provide Lessor with a complete set of both hard copies and CAD
drawings of “as built” plans for same.

Section 6.04 Covenant Against Liens

Lessee shall not allow any liens arising from any act or omission of Lessee to
exist, attach to, be placed on, or encumber Lessor’s or Lessee’s interest in the
Premises, Building 9 or Project, or any portion of either, by operation of law
or otherwise. Lessee shall not suffer or permit any lien of mechanics, material
suppliers, or others to be placed against the Premises, Building 9 or Project,
or any portion of either, with respect to work or services performed or claimed
to have been performed for Lessee or materials furnished or claimed to have been
furnished to Lessee or the Premises. Lessor has the right at all times to post
and keep posted on the Premises any notice that it considers necessary for
protection from such liens. At least ten (10) days before beginning construction
of any Alteration, Lessee shall give Lessor written notice of the expected
commencement date of that construction to permit Lessor to post and record a
notice of nonresponsibility. If any such lien attaches or Lessee receives notice
of any such lien, Lessee shall cause the lien to be immediately released and
removed of record by payment or bond. Despite any other provision of this Lease,
if the lien is not released and removed within twenty (20) days after Lessor
delivers notice of the lien to Lessee, Lessor may immediately take all action
necessary to release and remove the lien, without any duty to investigate the
validity of it. All expenses (including reasonable attorney fees and the cost of
any bond) incurred by Lessor in connection with a lien incurred by Lessee or its
removal shall be considered Additional Rent under this Lease and be immediately
due and payable by Lessee. Notwithstanding the foregoing, if Lessee shall, in
good faith, contest the validity of any such lien, claim or demand, then Lessee
shall, at its sole expense, defend and protect itself, Lessor and the Premises,
Building 9 and Project against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof. If
Lessor shall require, Lessee shall furnish a surety bond in an amount equal to
one hundred fifty percent (150%) of the amount of such contested lien, claim or
demand, indemnifying Lessor against liability for the same. If Lessor elects to
participate in or is made a party to any such action, Lessee shall reimburse
Lessor’s reasonable attorneys’ fees and costs within ten (10) days after demand.

 

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ARTICLE VII

INSURANCE

Section 7.01 Property/Rental Insurance for Premises

At all times during the Lease Term, Lessor shall keep Building 9, any tenant
improvements or Alterations made by Lessee therein and the Project insured
against loss or damage by fire and those risks normally included in the term
“all risk,” extended coverage, fire and casualty insurance, including, without
limitation, coverage for (i) earthquake and earthquake sprinkler leakage,
(ii) flood, (iii) loss of rents and extra expense for eighteen (18) months,
including scheduled rent increases, (iv) boiler and machinery, and (v) fire
damage legal liability, including waiver of subrogation. Lessee shall pay
Lessee’s Share of any deductibles. The amount of such insurance shall not be
less than 100% of replacement cost. Insurance shall include a Building Ordinance
and Increased Cost of Construction Endorsement insuring the increased cost of
reconstructing the Premises incurred due to the need to comply with applicable
statutes, ordinances and requirements of all municipal, state and federal
authorities now in force, which or may be in force hereafter. Any recovery
received from said insurance policy shall be paid to Lessor and thereafter
applied by Lessor to the reconstruction of the Premises in accordance with the
provisions of Article VIII below. Lessee, as part of the Operating Expenses,
shall reimburse Lessor for Lessee’s Share of the cost of the premiums for all
such insurance in accordance with Article IV. Such reimbursement shall be made
within fifteen (15) days of Lessee’s receipt of a copy of Lessor’s statement
therefore. To the extent commercially available in Lessor’s reasonable business
judgment, Lessor’s insurance shall have a deductible not greater than fifteen
percent (15%) for earthquake and ten percent (10%) for the basic “all risk”
coverage.

Notwithstanding the foregoing, Lessee may, at Lessee’s election, maintain at
Lessee’s sole cost and expense a separate, additional policy of insurance
insuring the Improvements or Alterations made by Lessee against loss or damage
by fire and those risks normally included in the term “all risk,” extended
coverage, fire and casualty insurance. Any recovery received from said insurance
policy shall be paid to Lessee in accordance with the provisions of Article VIII
below.

Section 7.02 Property Insurance for Fixtures and Inventory

At all times during the Lease Term, Lessee shall, at its sole expense, maintain
fire and casualty insurance with “all risk” coverage which includes the same
coverage as required of Lessor in Section 7.01, above, on any trade fixtures,
furnishings, merchandise, equipment, artwork or other personal property, whether
or not presented to Lessor for its consent in or on the Premises, whether in
place as of the date hereof or installed hereafter. The amount of such insurance
shall not be less than one hundred percent (100%) of the replacement cost
thereof with commercially reasonable deductibles, and Lessor shall not have any
responsibility nor pay any cost for maintaining any types of such insurance.
Lessee shall pay all deductibles.

Section 7.03 Lessor’s Liability Insurance

During the Lease Term, Lessor shall maintain a policy or policies of commercial
general liability insurance naming Lessor (and such others as designated by
Lessor) against

 

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claims and liability for bodily injury, personal injury and property damage on
or about the Premises and Project, with combined single limit coverage in an
amount determined by Lessor in its sole discretion (which amount is currently
Fifty Million Dollars ($50,000,000.00)); provided that if such policy is a
blanket policy that covers properties (other than the Project) owned by Lessor,
only that portion allocable to the Project shall be payable hereunder. Lessee,
in addition to the rent and other charges provided herein, agrees to pay
Lessee’s Share of the premiums for all such insurance in accordance with Article
IV.

Section 7.04 Liability Insurance Carried by Lessee

At all times during the Lease Term (and any holdover period) Lessee shall obtain
and keep in force a commercial general liability policy of insurance protecting
Lessee, Lessor and any lender(s) whose names are provided to Lessee as
additional insureds against claims and liability for bodily injury, personal
injury and property damage based upon involving or arising out of ownership,
use, occupancy or maintenance of the Premises and all areas appurtenant thereto.
Such insurance shall be on an occurrence basis providing a single limit coverage
in amount of not less than Ten Million Dollars ($10,000,000) per occurrence. The
limits of said insurance required by this Lease as carried by Lessee shall not,
however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by the Lessee shall be primary to and not
contributory with, any similar insurance carried by Lessor, whose insurance
shall be considered excess insurance only. Lessor may require Lessee’s liability
insurance policy limits to be raised to conform with requirements of Lessor’s
lender and/or to bring coverage limits to levels then being generally required
of new tenants within the Project.

Section 7.05 Proof of Insurance

Lessee shall furnish to Lessor prior to the Commencement Date, and during the
Lease Term, at least thirty (30) days prior to the expiration date of any
policy, certificates indicating that the property insurance and liability
insurance required to be maintained by Lessee is in full force and effect for
the twelve (12) month period following such expiration date; that Lessor has
been named as an additional insured to the extent of contractual liability
assumed in Section 7.07 and Section 7.08 and that all such policies will not be
canceled unless thirty (30) days’ prior written notice of the proposed
cancellation has been given to Lessor. The insurance shall be with insurers
approved by Lessor, provided, however, that such approval shall not be
unreasonably withheld so long as Lessee’s insurance carrier has a Best’s
Insurance Guide rating not less than A VIII and is licensed to do business in
California. Lessor shall furnish to Lessee reasonable evidence of its insurance
coverage required hereunder within fifteen (15) business days after demand made
therefor, however, not more than once in any calendar year.

Section 7.06 Mutual Waiver of Claims and Subrogation Rights

Lessor and Lessee hereby release and relieve the other, and waive their entire
claim of recovery for loss or damage to property arising out of or incident to
fire, lightning, and the other perils included in a standard “all risk”
insurance policy of a type described in Sections 7.01 and 7.02 above that is
carried by the waiving party (or that would have been if the waiving party had
carried the insurance required hereunder), when such property constitutes the
Premises or Building 9 or the Project, or is in, on or about the Premises or
Building 9, whether or not such

 

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loss or damage is due to the negligence of Lessor or Lessee, or their respective
agents, employees, guests, licensees, invitees, or contractors. Lessee and
Lessor waive all rights of subrogation against each other on behalf of, and
shall obtain a waiver of all subrogation rights from, all property and casualty
insurers referenced above.

Section 7.07 Indemnification and Exculpation

(a) Except as otherwise provided in Section 7.07(b), Lessee shall indemnify and
hold Lessor free and harmless from any and all liability, claims, loss, damages,
causes of action (whether in tort or contract, law or equity, or otherwise),
expenses, charges, assessments, fines, and penalties of any kind, including
without limitation, reasonable attorney fees, expert witness fees and costs,
arising by reason of the death or injury of any person, including any person who
is an employee, agent, invitee, licensee, permittee, visitor, guest or
contractor of Lessee, or by reason of damage to or destruction of any property,
including property owned by Lessee or by any person who is an employee, agent,
invitee, permittee, visitor, or contractor of Lessee, caused or allegedly caused
(1) while that person or property is in or about the Premises; (2) by some
condition of the Premises (exclusive of structural defects or disrepair that are
the sole responsibility of Lessor under the terms of Section 5.04 and 6.01(b) of
this Lease); (3) by some act or omission by Lessee or its agent, employee,
licensee, invitee, guest, visitor or contractor or any person in, adjacent, on,
or about the Premises with the permission, consent or sufferance of Lessee; or
(4) by any breach or default in timely observance or performance of any
obligation on Lessee’s part to be observed or performed under this Lease.

(b) Notwithstanding the provisions of Section 7.07(a) of this Lease, Lessee’s
duty to indemnify and hold Lessor harmless shall not apply to any liability,
claims, loss or damages, causes of action (whether in tort or contract, law or
equity, or otherwise), expenses, charges, assessments, fines and penalties of
any kind, including without limitation, reasonable attorney fees, expert witness
fees and costs arising by reason of Lessor’s, or its employees’, agents’ or
contractors’, negligence or willful act of misconduct.

(c) Lessee hereby waives all claims against Lessor for damages to goods, wares
and merchandise and all other personal property in, on or about the Premises and
for injury or death to persons in, on or about the Premises from any cause other
than the intentionally misconduct of Lessor or Lessor’s agents, employees or
contractors, Notwithstanding the provisions of Section 7.07(b) above, or any
other provision of this Lease, in no event shall Lessor be liable (i) for lost
profits or other consequential damages arising from any cause, or (ii) for any
damage which is or could be covered by the insurance Lessee is required to carry
under this Lease.

Section 7.08 Lessor as Party Defendant

If by reason of an act or omission of Lessee or any of its employees, agents,
invitees, licensee, visitors, guests or contractors, Lessor is made a party
defendant or a cross defendant to any action involving the Premises or this
Lease, Lessee shall hold harmless and indemnify Lessor from all liability or
claims of liability, including all damages, attorney fees and costs of suit.

 

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ARTICLE VIII

DAMAGE OR DESTRUCTION

Section 8.01 Destruction of the Premises

(a) In the event of a partial destruction of the Premises (i.e., less than fifty
percent (50%) of its Rentable Area) during the Lease Term from any cause,
Lessor, upon receipt of, and to the extent of, insurance proceeds paid in
connection with such casualty (or the proceeds that would have been received by
Lessor had Lessor maintained the insurance required of Lessor in Subsection 7.01
above, in the event Lessor fails to maintain such insurance) and the deductible
from Lessee which Lessee shall pay Lessee’s Share to Lessor within thirty
(30) business days after demand, shall forthwith repair the same, including
without limitation all Tenant Improvements and Alterations, whether or not
originally paid for or constructed by Lessor or Lessee, provided the repairs can
be made within a reasonable time under state, federal, county and municipal
applicable law, but such partial destruction shall in no way annul or void this
Lease, (except as provided in Section 8.01(b) or 8.01(c) below) provided that
Lessee shall be entitled to a proportionate credit for rent equal to rental
income insurance proceeds received by Lessor (or the proceeds that would have
been received by Lessor had Lessor maintained the insurance required of Lessor
in subsection 7.01 above, in the event Lessor fails to maintain such insurance)
and provided further that Lessee shall repair all damage and destruction to
those items as to which Lessee is required to maintain fire and casualty
insurance under Section 7.02 above. Lessor and Lessee each shall use diligence
in making such repairs within a reasonable time period, subject to the Force
Majeure provisions of Section 17.21, in which instance the time period shall be
extended accordingly, and this Lease shall remain in full force and effect, with
the rent to be proportionately reduced as provided above in this Section. If the
Premises are damaged by any peril within six (6) months prior to the last day of
the Lease Term (or, if Lessee has delivered its Option Notice pursuant to
Section 3.03(a) above, within six (6) months prior to the last day of the
Extended Term) and, in the reasonable opinion of the Lessor’s architect or
construction consultant, the restoration of the Premises cannot be substantially
completed within thirty (30) days after the date of such damage Lessor or Lessee
may terminate this Lease on thirty (30) days written notice to the other party.

(b) If the Premises are damaged or destroyed by any cause to the extent of more
than fifty percent (50%) of their total Rentable Area during the Lease Term,
Lessor shall notify Lessee within thirty (30) days after such damage or
destruction whether it will repair the same. If Lessor states that it will not,
or cannot, repair, this Lease shall terminate thirty (30) business days after
Lessor gives its notice.

(c) Lessee shall have the option to terminate this Lease if the Premises are
affected by a casualty not caused by Lessee and the time estimated to
substantially complete the restoration exceeds thirteen (13) months from the
date Lessor’s architect’s opinion of the repair time is delivered to Lessee.
Such termination right shall be (i) exercised by written notice to Lessor
delivered within thirty (30) days after delivery to Lessee of Lessor’s
architect’s opinion and (ii) irrevocable and automatically waived if not so
timely exercised.

(d) In the event of a termination of the Lease pursuant to this Section 8.01,
Lessor shall be entitled to any insurance proceeds received by Lessor under the
policy of

 

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insurance maintained by Lessor under Section 7.01 as a result of the damage or
destruction and Lessee shall be entitled to any insurance proceeds from any
separate, additional policy obtained by Lessee as described in Sections 7.01
and/or 7.02. The respective insurable interests of Lessor and Lessee in the
Lessee Improvements and Alterations shall not be affected by any termination of
the Lease following an event of damage or destruction as described herein.

(e) If Lessor states that it will repair the Premises, Lessor shall, upon
receipt of and to the extent of insurance proceeds paid in connection with such
casualty and the deductible amount from Lessee, forthwith conduct the repair and
diligently pursue the same to completion, but such destruction shall in no way
annul or void this Lease except upon a termination of the Lease pursuant to this
Article VIII, provided that Lessee shall be entitled to a proportionate credit
for rent equal to rental income insurance proceeds received by Lessor (or the
proceeds that would have been received by Lessor had Lessor maintained the
insurance required of Lessor in subsection 7.01(iii) above, in the event Lessor
fails to maintain such insurance).

Section 8.02 Waiver of Civil Code Remedies

Lessee hereby expressly waives any rights to terminate this Lease upon damage or
destruction to the Premises, including without limitation any rights pursuant to
the provisions of Section 1932, Subdivisions 1 and 2 and Section 1933,
Subdivision 4, of the California Civil Code, as amended from time-to-time, and
the provisions of any similar law hereinafter enacted.

Section 8.03 Damages Incurred during Repair

The Base Rent, Additional Rent and other charges due under this Lease shall not
be reduced or abated by reason of any damage or destruction to the Premises (but
will be subject to credit as provided in Section 8.01(a) and (b) above with
respect to rental loss insurance proceeds received), and Lessor shall be
entitled to all proceeds of the insurance maintained pursuant to Section 7.01
above during the period of rebuilding pursuant to Section 8.01 above, or if the
Lease is terminated pursuant to Section 8.01 above. Lessee shall have no claim
against Lessor, including, without limitation, for compensation for
inconvenience or loss of business, profits or goodwill during any period of
repair or reconstruction.

Section 8.04 No Liability for Lessee’s Alterations or Personal Property

In no event shall Lessor have any liability for, nor shall it be required to
repair or restore, any injury or damage to Lessee’s Alterations or personal
property or to any other personal property of Lessee in or upon the Premises,
Building 9 or Project.

ARTICLE IX

REAL PROPERTY TAXES

Section 9.01 Payment of Taxes

(a) Lessee shall pay to Lessor Lessee’s Share, as an Operating Expense pursuant
to Section 4.07 above, of all real property taxes, including any supplemental
tax and any form of real estate tax or assessment, general, special, ordinary or
extraordinary, and any license, fee, charge, excise or imposition (“real
property tax”), imposed, assessed or levied on or

 

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with respect to the Premises and the Project Common Areas by any Federal, State,
County, City or other political subdivision or public authority having the
direct or indirect power to tax, including, without limitation, any improvement
district or any community facilities district (including with respect to a
district established for purposes of constructing the Seaport Boulevard
improvements and other improvements as required in the Development Agreement or
by the City of Redwood City (“Community Facility District Bond”), as against any
legal or equitable interest of Lessor in the Project or against the Project or
any part thereof applicable to the Project for all periods of time included
within the Lease Term (as the same may be extended and during any holdover
period), as well as any government or private cost sharing agreement assessments
made for the purpose of augmenting or improving the quality of services and
amenities normally provided by government agencies and any tax, fee, charge,
imposition or excise described in subsection (b) below. Notwithstanding the
foregoing, Lessee shall not be required to pay any net income taxes, franchise
taxes, or any succession, estate or inheritance taxes of Lessor or any penalties
due to Lessor’s late or non-payment of any real property taxes, unless such
failure is caused by Lessee’s failure to pay Lessee’s Share of real property
taxes due hereunder.

(b) If at any time during the Lease Term, the State of California or any
political subdivision of the state, including any county, city, city and county,
public corporation, district, or any other political entity or public
corporation of this state, levies or assesses against Lessor a tax, fee, charge,
imposition or excise on rents under the Lease, the square footage of the
Premises or Project, the act of entering into this Lease, or the occupancy of
Lessee, or levies or assesses against Lessor any other tax, fee, or excise,
however described, including, without limitation, a so called value added,
business license, transit, commuter, environmental or energy tax fee, charge or
excise or imposition related to the Project as a direct substitution in whole or
in part for, or in addition to, any real property taxes on the Project the same
shall be included in real property taxes and paid in accordance with
Section 9.01(a).

(c) Lessor shall provide Lessee with copies of all tax and assessment bills on
the Premises promptly upon Lessor’s receipt of Lessee’s written request
therefor. Lessor shall also promptly provide to Lessee evidence of payment upon
Lessor’s receipt of Lessee’s written request therefor.

(d) With respect to taxes and assessments which may lawfully be paid in
installments, for the purpose of this Section, real property tax in any period
shall include only such portion of the same which is payable within such period
and any interest payable thereon computed (whether or not such is the case) as
if Lessor had elected to pay the same over the longest period permitted by law.

(e) If Lessor shall obtain any abatement or refund on account of any real
property tax as to which Lessee shall have paid payments hereunder, Lessor shall
promptly refund to Lessee Lessee’s portion of any such abatement or refund,
after deducting therefrom the reasonable costs and expenses incurred by Lessor
in obtaining such abatement or refund.

 

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Section 9.02 Pro Ration for Partial Years

If any such taxes paid by Lessee shall cover any period prior to the
Commencement Date or after the Expiration Date of the Lease Term, Lessee’s Share
of such taxes shall be equitably prorated to cover only the period of time
within the tax fiscal year during which this Lease shall be in effect, and
Lessor shall reimburse Lessee to any extent required.

Section 9.03 Personal Property Taxes

(a) Lessee shall pay prior to delinquency all taxes imposed, assessed against
and levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere. When possible, Lessee
shall cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.

(b) If any of Lessee’s personal property shall be assessed with Lessor’s real
property, Lessee shall pay Lessor the taxes attributable to Lessee within thirty
(30) days after receipt of a written statement setting forth the amount of such
tax bill reasonably allocated to Lessee’s property.

(c) If Lessee shall fail to pay any such taxes, Lessor shall have the right to
pay the same, in which case Lessee shall repay such amount to Lessor with
Lessee’s next rent installment together with interest at the Agreed Rate.

Section 9.04 Right to Contest Real Property Taxes

Lessee may, at any time (unless Lessor is already doing so), and at its sole
expense, contest the real property taxes due with respect to the Premises in its
own name and in a manner set forth by appropriate judicial or administrative
proceedings, provided that: (i) Lessee gives Lessor prior written notice of such
contest, (ii) Lessee pays the real property taxes required by the applicable
taxing authority while such contest is occurring, (iii) pays any and all
penalties, late interest or other fines associated with any such contest and
(iv) indemnifies, defends, protects and holds Lessor harmless from any and all
expenses (including reasonable attorneys’ fees), causes of action, damages or
liabilities associated with such contest.

ARTICLE X

UTILITIES

Section 10.01 Lessee to Pay

Lessee shall pay prior to delinquency and throughout the Lease Term, all charges
for water, gas, heating, cooling, sewer, telephone, electricity, garbage, air
conditioning and ventilation, janitorial service, landscaping and all other
services and utilities supplied to the Premises directly to the service provider
in question. The disruption, failure, lack or shortage of any service or utility
with respect to the Premises, Building 9 or Project due to any cause whatsoever
shall not affect any obligation of Lessee hereunder, and Lessee shall faithfully
keep

 

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and observe all the terms, conditions and covenants of this Lease and pay all
rent due hereunder, all without diminution, credit or deduction, provided that,
to the extent the cause is the failure of Lessor to observe or perform an
obligation of Lessor, hereunder Lessor shall initiate the cure of such failure
immediately after receipt from Lessee of notice of the failure and Lessor shall
thereafter diligently prosecute said cure to completion.

ARTICLE XI

ASSIGNMENT AND SUBLETTING

Section 11.01 Lessor’s Consent Required

Except as provided in Section 11.02, Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, license or otherwise
transfer or encumber all or any part of Lessee’s interest in this Lease or in
the Premises or any part thereof, without Lessor’s prior written consent, which
Lessor shall not unreasonably withhold, condition or delay. Lessor shall respond
in writing to Lessee’s request for consent hereunder within fifteen
(15) business days of Lessor’s receipt of Lessee’s request therefor, or within
any extended time period necessary in order for Lessor to receive a response
from Lessor’s lender, and any attempted assignment, transfer, mortgage,
encumbrance, subletting or licensing without such consent shall be void, and
shall constitute a breach of this Lease. If Lessor refuses to consent to
Lessee’s request, it shall specifically state in its response to Lessee the
reason(s) for denying such consent. By way of example, but not limitation,
reasonable grounds for denying consent include: (i) poor credit history or
insufficient financial strength of transferee, (ii) transferee’s intended use of
the Premises is inconsistent with the permitted use and will materially and
adversely affect Lessor’s interest. Lessee shall reimburse Lessor upon demand
for Lessor’s reasonable costs and expenses (including attorneys’ fees, architect
fees and engineering fees) involved in reviewing any request for consent whether
or not consent is granted. Notwithstanding any other provisions of this Lease,
if (i) the proposed assignee or sublessee has been required by any prior
landlord, lender or governmental authority to take remedial action in connection
with Hazardous Materials contaminating a property, where the contamination
resulted from such party’s action or use of the property in question, (ii) the
proposed assignee or sublessee is subject to any enforcement order issued by any
governmental authority in connection with the use, storage, handling, treatment,
generation, release or disposal of hazardous materials (including, without
limitation, any order related to the failure to make a required reporting to any
governmental authority), or (iii) because of the existence of a pre-existing
environmental condition in the vicinity of or underlying the Project, the risk
that Lessor would be targeted as a responsible party in connection with the
remediation of such pre-existing environmental condition would be materially
increased or exacerbated by the proposed use of Hazardous Materials by such
proposed assignee or sublessee, Lessor shall have the absolute right to refuse
to consent to any assignment or subletting to any such party.

Section 11.02 Lessee Affiliates

Lessee may assign this Lease, or sublet up to forty percent (40%) of the
Premises, without the need for Lessor’s consent (but with written notice to
Lessor prior to such transfer), to any corporation, limited liability company or
partnership which controls, is controlled by, or is under common control with
Lessee, or to any corporation, limited liability company or

 

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partnership resulting from the merger or consolidation with Lessee, or to any
person or entity which acquires all of Lessee’s stock or all, or substantially
all of the assets of Lessee as a going concern of the business that is being
conducted on the Premises (collectively, an “Affiliate”), provided that said
assignee or sublessee (i) in the event of an assignment of this Lease to an
Affiliate only, has a net worth at least equal to the net worth of Lessee as of
the date of this Lease, and (ii) assumes, in full, the obligations of Lessee
under this Lease (or, in the case of a sublease, the portion of the Premises
subject to the Lease) and provided further that the use to which the Premises
will be put does not materially change. Any such assignment shall not, in any
way, affect or limit the liability of Lessee under the terms of this Lease. Any
portion of the Premises which is assigned or sublet to an Affiliate of Lessee
shall not be included in the calculation of subleased, assigned or transferred
Rentable Area for the purposes of Section 11.06. In addition, the terms of
Section 11.04, below, shall not be applicable to any assignment or sublease
pursuant to this Section.

Section 11.03 No Release of Lessee

Regardless of Lessor’s consent, no subletting or assignment shall release Lessee
of Lessee’s obligation or alter the primary liability of Lessee to pay the rent
and to perform all other obligations to be performed by Lessee hereunder. The
acceptance of rent by Lessor from any other person shall not be deemed consent
to any subsequent assignment or subletting. In the event of default by any
assignee of Lessee or any successor of Lessee, in the performance of any of the
terms hereof, Lessor may proceed directly against Lessee without the necessity
of exhausting remedies against said assignee.

Section 11.04 Excess Rent

In the event Lessor shall consent to a sublease or an assignment, Lessee shall
pay to Lessor with its regularly scheduled Base Rent payments, fifty percent
(50%) of all sums and the fair market value of all consideration collected or
received by Lessee from a sublessee or assignee which are in excess of the Base
Rent and Additional Rent due and payable with respect to the subleased or
assigned space pursuant to Article IV for the time period encompassed by the
sublease or assignment term, after first deducting: leasing commissions,
incurred by Lessee in connection with such assignment or subletting.

Section 11.05 Information to be Provided

Lessee’s written request to Lessor for consent to an assignment or subletting or
other form of transfer shall be accompanied by (a) the name and legal
composition of the proposed transferee; (b) the nature of the proposed
transferee’s business to be carried on in the Premises; (c) the terms and
provisions of the proposed transfer agreement; and (d) such financial and other
information as Lessor may reasonably request concerning the proposed transferee.

Section 11.06 Lessor’s Recapture Rights

(a) Lessor’s Recapture Rights

Notwithstanding any other provision of this Article 11, in the event that Lessee
proposes to sublease or assign or otherwise transfer to any person or entity not
an

 

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Affiliate of Lessee any interest in this Lease or the Premises or any part
thereof affecting (collectively with all other such subleases, assignments, or
transfers then in effect to parties which are not Affiliates) more than fifty
percent (50%) of the square footage of the Rentable Area of the Premises for
more than fifty percent (50%) of the remaining Lease Term is hereafter
designated “Recapture Space”), then Lessor shall have the option to recapture
the Recapture Space by written notice to Lessee (“Recapture Notice”) given
within ten (10) business days after Lessor receives any notice of such proposed
assignment or sublease or other transfer (“Transfer Notice”). A timely Recapture
Notice terminates this Lease for the Recapture Space, effective as of the date
Lessee specified in the Transfer Notice, which date shall in no event be shorter
than thirty (30) days from the date of the Recapture Notice. If Lessor declines
or fails timely to deliver a Recapture Notice, Lessor shall have no further
right under this Section 11.06 to the Recapture Space unless it becomes
available again after transfer by Lessee. Lessor’s recapture rights shall be
subject to the rights of any sublessee, assignee or transferee of Lessee set
forth in any sublease, assignment or agreement of transfer to which Lessor has
consented, but subject to the terms and conditions set forth in Lessor’s
consent; any such sublease, assignment or agreement of transfer shall be
assigned to Lessor as of the effective date of the recapture. Notwithstanding
anything herein to the contrary, if Lessor elects to deliver a Recapture Notice
and terminate the Lease as set forth above, Lessee may negate Lessor’s Recapture
Notice by withdrawing its Transfer Notice by delivering written notice thereof
to Lessor within five (5) business days after Lessee’s receipt of the Recapture
Notice.

(b) Consequences of Recapture

To determine the new Base Rent under this Lease if Lessor recaptures the
Recapture Space and Lessee does not negate Lessor’s Recapture Notice within the
time periods provided therefore above, the then current Base Rent (immediately
before Lessor’s recapture) under the Lease shall be multiplied by a fraction,
the numerator of which is the square feet of the Rentable Area retained by
Lessee after Lessor’s recapture and the denominator of which is the total square
feet of the Rentable Area before Lessor’s recapture. The Additional Rent, to the
extent that it is calculated on the Rentable Area of the Premises, shall be
reduced to reflect Lessee’s Share based on the Rentable Areas of the Premises
retained by Lessee after Lessor’s recapture. This Lease as so amended shall
continue thereafter in full force and effect, except that Lessee shall be
released from liability under this Lease for future Base Rent and Additional
Rent with respect to the portion of the Premises subject to Lessor’s Recapture
Notice. Either party may require written confirmation of the amendments to this
Lease necessitated by Lessor’s recapture of the Recapture Space. If Lessor
recaptures the Recapture Space, Lessor shall, at Lessor’s sole expense,
construct, paint, and furnish any partitions required to segregate the Recapture
Space from the remaining Premises retained by Lessee as well as arrange separate
metering of utilities.

 

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ARTICLE XII

DEFAULTS; REMEDIES

Section 12.01 Defaults

The occurrence of any one or more of the following events shall constitute a
material default and breach of this Lease by Lessee (each shall be an “Event of
Lessee’s Default”):

(a) The abandonment of the Premises by Lessee or the commission of waste at the
Premises or the making of an assignment or subletting in violation of Article
XI, provided however, abandonment shall be considered to not occur if the
Premises are maintained and occupied to the extent necessary to maintain the
insurance on each and every portion of the Premises;

(b) The failure by Lessee to make any payment of rent or any other payment
required to be made by Lessee hereunder, as and when due, if such failure
continues for a period of five (5) business days after written notice thereof
from Lessor to Lessee. In the event that Lessor serves Lessee with a Notice to
Pay Rent or Quit in the form required by applicable Unlawful Detainer statutes
such Notice shall constitute the notice required by this paragraph, provided
that the cure period stated in the Notice shall be five (5) business days rather
than the statutory three (3) days;

(c) Lessee’s failure to provide (i) any required Replacement Letter of Credit
Security as required by Section 4.06, (ii) an estoppel certificate as required
by Section 15.01 or (iii) any document subordinating this Lease to a Lender’s
deed of trust as required by Section 17.13, if any such failure continues for
five (5) business days after written notice of the failure. In the event Lessor
serves Lessee with a Notice to Perform Covenant or Quit in the form required by
applicable Unlawful Detainer Statutes, such Notice shall constitute the notice
required by this paragraph, provided that the cure period stated in the Notice
shall be five (5) business days rather than the statutory three (3) days;

(d) The failure by Lessee to observe or perform any of the covenants, conditions
or provisions of this Lease to be observed or performed by Lessee, other than
described in paragraph (a) (b) or (c) above, if such failure continues for a
period of fifteen (15) days after written notice thereof from Lessor to Lessee;
provided, however, that if the nature of Lessee’s default is such that more than
fifteen (15) days are reasonably required for its cure, then Lessee shall not be
deemed to be in default if Lessee commences such cure within said fifteen
(15) day period and thereafter diligently prosecutes such cure to completion;

(e) (i) The making by Lessee of any general arrangement or assignment for the
benefit of creditors; (ii) the filing by Lessee of a voluntary petition in
bankruptcy under Title 11 U.S.C. or the filing of an involuntary petition
against Lessee which remains uncontested for a period of sixty (60) days;
(iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee’s assets located at the Premises or of Lessee’s
interest in this Lease; or (iv) the attachment, execution or other judicial
seizure of substantially all of Lessee’s assets located at the Premises or of
Lessee’s interest in this Lease, provided, however, in the event that any
provisions of this Section 12.01(e) is contrary to any applicable law, such
provision shall be of no force or effect;

 

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(f) The discovery by Lessor that Lessee delivered to Lessor a financial
statement that was materially false; and

(g) The occurrence of a material default and breach under any other lease
between Lessee (or an Affiliate thereof) and Lessor (or an affiliate of Lessor)
for premises in the Project, including but not limited to the Building 10 Lease.

Section 12.02 Remedies

If an Event of Lessee’s Default shall occur, Lessor may at any time thereafter,
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such Event of Lessee’s Default:

(a) Terminate Lessee’s right to possession of the Premises by any lawful means
including by way of unlawful detainer (and without any further notice if a
notice in compliance with the unlawful detainer statutes and in compliance with
paragraphs (b), (c) and (d) of Section 12.01 above has already been given), in
which case this Lease shall terminate and Lessee shall immediately surrender
possession of the Premises to Lessor. In such event Lessor shall be entitled to
recover from Lessee all damages incurred by Lessor by reason of an Event of
Lessee’s Default including, but not limited to, (i) the cost of recovering
possession of the Premises including reasonable attorney’s fees related thereto;
(ii) the worth at the time of the award of any unpaid rent that had been earned
at the time of the termination, to be computed by allowing interest at the
Agreed Rate but in no case greater than the maximum amount of interest permitted
by law, (iii) the worth at the time at the time of the award of the amount by
which the unpaid rent that would have been earned between the time of the
termination and the time of the award exceeds the amount of unpaid rent that
Lessee proves could reasonably have been avoided, to be computed by allowing
interest at the Agreed Rate but in no case greater than the maximum amount of
interest permitted by law, (iv) the worth at the time of the award of the amount
by which the unpaid rent for the balance of the Lease Term after the time of the
award exceeds the amount of unpaid rent that Lessee proves could reasonably have
been avoided, to be computed by discounting that amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award plus one per
cent (1%), (v) any other amount necessary to compensate Lessor for all the
detriment proximately caused by Lessee’s failure to perform obligations under
this Lease, including brokerage commissions and advertising expenses, and
(vi) any other amounts, in addition to or in lieu of those listed above, that
may be permitted by applicable law.

(b) Maintain Lessee’s right to possession as provided in Civil Code
Section 1951.4 in which case this Lease shall continue in effect whether or not
Lessee shall have abandoned the Premises. In such event Lessor shall be entitled
to enforce all of Lessor’s rights and remedies under this Lease, including the
right to recover the rent as it becomes due hereunder.

 

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(c) Pursue any other remedy now or hereafter available to Lessor under the laws
or judicial decisions of the state of California. Unpaid amounts of rent and
other unpaid monetary obligations of Lessee under the terms of this Lease shall
bear interest from the date due at the Agreed Rate.

Section 12.03 Default by Lessor

Lessor shall not be in default under this Lease unless Lessor fails to perform
obligations required of Lessor within a reasonable time, but in no event later
than ten (10) business days after written notice by Lessee to Lessor and to the
holder of any first mortgage or deed of trust covering the Premises whose name
and address shall have theretofore been furnished to Lessee in writing,
specifying that Lessor has failed to perform such obligation; provided, however,
that if the nature of Lessor’s obligation is such that more than ten
(10) business days are reasonably required for performance then Lessor shall not
be in default if Lessor commences performance within such ten (10) business day
period and thereafter diligently prosecutes the same to completion. In the event
Lessor does not commence performance within the ten (10) business day period
provided herein, or fails to diligently prosecute such cure to completion,
Lessee may perform such obligation and will be reimbursed for its expenses by
Lessor together with interest thereon at the Agreed Rate within thirty (30) days
following demand for such payment. Lessee waives any right to terminate this
Lease or to vacate the Premises on Lessor’s default under this Lease. Lessee’s
sole remedy on Lessor’s default is an action for damages or injunctive or
declaratory relief. Notwithstanding the foregoing, (i) any default beyond any
applicable cure period by Lessor under the terms of the Building 10 Lease shall
also be a default under this Lease for any period of time during which Lessor or
any affiliate thereof is also the landlord under the Building 10 Lease, and
(ii) nothing herein shall be deemed applicable in the event of Lessor’s delay in
delivery of the Premises, in which case Lessee’s rights and remedies shall be
determined under Section 3.01 above.

Section 12.04 Late Charges

Lessee hereby acknowledges that late payment by Lessee to Lessor of rent and
other sums due hereunder will cause Lessor to incur costs not contemplated by
this Lease, the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and accounting charges,
and late charges which may be imposed on Lessor by the terms of any mortgage or
trust deed covering the Premises. Accordingly, if any installment of rent or any
other sum due from Lessee shall not be received by Lessor or Lessor’s designated
agent within five (5) business days after such amount is due and owing, Lessee
shall pay to Lessor a late charge equal to five percent (5%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of an Event of Lessee’s Default with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. Notwithstanding the foregoing, Lessor shall grant Lessee one (1) late
payment during the first twelve (12) months of the Lease Term without late
charge, provided that Lessee shall pay the applicable delinquent amount within
five (5) business days following written notice from Lessor of such delinquency.

 

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Section 12.05 Lessor’s Right to Perform Lessee’s Obligations

All obligations to be performed or observed by Lessee under this Lease shall be
performed or observed by Lessee at Lessee’s expense and without any reduction of
rent. Lessor may perform or observe any obligation of Lessee for which there
exists an Event of Lessee Default hereunder, without waiving Lessor’s other
rights and remedies for Lessee’s failure to perform or observe any obligations
under this Lease and without releasing Lessee from any such obligations. Within
ten (10) days after receiving a statement from Lessor, Lessee shall pay to
Lessor the amount of expense reasonably incurred by Lessor in performing or
observing Lessee’s obligation.

ARTICLE XIII

CONDEMNATION OF PREMISES.

Section 13.01 Total Condemnation

If the entire Premises, whether by exercise of governmental power or the sale or
transfer by Lessor to any condemnor under threat of condemnation or while
proceedings for condemnation are pending, at any time during the Lease Term,
shall be taken by condemnation such that there does not remain a portion
suitable for occupation, this Lease shall then terminate as of the date transfer
of possession is required. Upon such condemnation, all rent shall be paid up to
the date transfer of possession is required, and Lessee shall have no claim
against Lessor or the award for the value of the unexpired portion of this Lease
Term.

Section 13.02 Partial Condemnation

If any portion of the Premises is taken by condemnation during the Lease Term,
whether by exercise of governmental power or the sale or transfer by Lessor to
an condemnor under threat of condemnation or while proceedings for condemnation
are pending, this Lease shall remain in full force and effect except that in the
event a partial taking (i) is more than thirty-three percent (33%) of the
Rentable square footage of the Premises; or (ii) leaves the Premises unfit for
the conduct of the business of Lessee, then Lessee shall have the right to
terminate this Lease effective upon the date transfer of possession is required.
Moreover, Lessor shall have the right to terminate this Lease effective on the
date transfer of possession is required if more than thirty three percent
(33%) of the total square footage of the Premises is taken by condemnation.
Lessee and Lessor may elect to exercise their respective rights to terminate
this Lease pursuant to this Section by serving written notice to the other
within thirty (30) days after receipt of notice of condemnation (i.e., 30 days
from the date on which Lessor received such notice from the condemning authority
for purposes of calculating the 30 days with respect to Lessor, and 30 days from
the date on which Lessee received a copy of such notice from Lessor for purposes
of calculating the 30 days with respect to Lessee. All rent shall be paid up to
the date of termination, and Lessee shall have no claim against Lessor for the
value of any unexpired portion of the Lease Term. If this Lease shall not be
terminated, then Base Rent after such partial taking shall be that percentage of
the adjusted Base Rent specified herein, equal to the percentage which the
rentable square footage of the untaken part of the Premises, immediately after
the taking, bears to the rentable square footage of the entire Premises
immediately before the taking. If Lessee’s continued use of the Premises
requires alterations and repair by reason of a partial

 

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taking, all such alterations and repair shall be made by Lessor at Lessor’s
expense. Lessee waives all rights it may have under California Code of Civil
Procedure Section 1265.130 or otherwise, to terminate this Lease based on
partial condemnation.

Section 13.03 Award to Lessee

In the event of any condemnation, whether total or partial, Lessee shall have
the right to claim and recover from the condemning authority such compensation
as may be separately awarded or recoverable by Lessee for loss of its business
fixtures, or equipment belonging to Lessee immediately prior to the
condemnation, moving expenses and loss of good will, to the extent separately
awarded by the condemning authority. The balance of any condemnation award shall
belong to Lessor (including, without limitation, any amount attributable to any
excess of the market value of the Premises for the remainder of the Lease Term
over the then present value of the rent payable for the remainder of the Lease
Term) and Lessee shall have no further right to recover from Lessor or the
condemning authority for any claims arising out of such taking, provided that
Lessee shall have the right to make a separate claim in the condemnation
proceeding, as long as the award payable to Lessor is not reduced thereby, for
(i) the taking of the unamortized (using the Lease Term as the amortization
period) value of the Alterations paid for by Lessee which are not removed by
Lessee, (ii) reasonable removal and relocation costs for any Alterations that
Lessee has the right to remove and elects to remove (if condemnor approves the
removal), and (iii) relocation costs for Lessee’s business, provided that the
awarding to Lessee of the items described in (i), (ii) and (iii) above does not
reduce the condemnation award that would otherwise be awarded to Lessor.

ARTICLE XIV

ENTRY BY LESSOR

Section 14.01 Entry by Lessor Permitted

Lessee shall permit Lessor and its employees, agents and contractors, if
accompanied by Lessee (except in cases of emergency), to enter the Premises and
all parts thereof (i) upon twenty-four (24) hours notice (or without notice in
an emergency), including without limitation, Building 9 and all parts thereof at
all reasonable times for any of the following purposes: to inspect the Premises;
to maintain the Premises; to make such repairs to the Premises as Lessor is
obligated or may elect to make; and (ii) upon twenty-four (24) hours notice to
show the Premises and post “To Lease” signs for the purposes of re-letting
during the last twelve (12) months of the Lease Term (provided Lessee has failed
to exercise any remaining Option to Extend) to show the Premises as part of a
prospective sale by Lessor or to post notices of nonresponsibility. Lessor shall
have such right of entry without any rebate of rent to Lessee for any loss of
occupancy or quiet enjoyment of the Premises hereby occasioned, provided, Lessor
shall use commercially reasonable efforts not to interfere with Lessee’s
business operations at the Premises or unreasonably interfere with Lessee’s
access to, or parking at, the Project or materially increase Lessee’s
obligations or decrease Lessee’s rights under this Lease. Notwithstanding
anything in this Lease to the contrary, in exercising any right to undertake any
renovations, alterations, additions, restoration, inspections, repairs or
maintenance as set forth in this Lease, Lessor shall comply with Lessee’s
reasonable security measures and operating procedures and shall minimize any
disruption to Lessee..

 

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ARTICLE XV

ESTOPPEL CERTIFICATE

Section 15.01 Estoppel Certificate

(a) Either Lessor or Lessee shall at any time upon not less than fifteen
(15) days’ prior written notice from the other execute, acknowledge and deliver
to the requesting party a statement in writing (i) certifying, if true, that
this Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modification and certifying, if true, that this Lease, as so
modified, is in full force and effect) and the date to which the rent and other
charges are paid in advance, if any, and (ii) acknowledging, if true, that there
are not, to Lessee’s (or Lessor’s, as relevant) knowledge, any uncured defaults
on the part of the requesting party hereunder, or specifying such defaults if
any are claimed and (iii) certifying or acknowledging, if true, such other
matters as are reasonably requested by any prospective lender or buyer which are
reasonably related to the loan or sale transaction. Any such statement may be
conclusively relied upon by any prospective purchaser or encumbrancer of the
Premises.

(b) Lessee’s failure to deliver such statement within such time shall be
conclusive upon Lessee (i) that this Lease is in full force and effect, without
modification except as may be represented by Lessor, (ii) that there are no
uncured defaults in Lessor’s performance, and (iii) that not more than one
month’s rent has been paid in advance, if any, and stating whether or not to the
actual knowledge of the signer of such certificate Lessee is in default in the
performance of any covenant, agreement or condition contained in this Lease and,
if so, specifying each such default of which the signer may have knowledge, it
being intended that any such statement delivered pursuant to this
Section 15.01(b) may be relied upon by any prospective assignee of Lessee’s
interest in this Lease or any lender or prospective lender (or investor) or
purchaser of any interest in Lessee or its assets. Any failure of Lessee to
deliver an estoppel certificate as provided herein shall, at the option of
Lessor, be an event of default hereunder by Lessee without the requirement of
any notice or grace period, except as is provided for in Section 12.01(c) above.
In addition, Lessor may charge Lessee, and Lessee shall pay to Lessor, a fee
equal to Five Hundred Dollars ($500) per day for each day Lessee is late in
delivering such estoppel certificate.

ARTICLE XVI

LESSOR’S LIABILITY

Section 16.01 Limitations on Lessor’s Liability

The term “Lessor” as used herein shall mean only the owner or owners at the time
in question of the fee title of the Premises. In the event of any transfer of
such title or interest, Lessor herein named (and in case of any subsequent
transfers then the grantor) shall be relieved from and after the date of such
transfer of all liability as respects Lessor’s obligations thereafter to be
performed, provided that the Letter of Credit and any funds in the hands of
Lessor or the then grantor at the time of such transfer, in which Lessee has an
interest, shall be delivered to the grantee. The obligations contained in this
Lease to be performed by Lessor shall, subject as aforesaid, be binding on
Lessor’s successors and assigns, only during their respective periods of
ownership. For any breach of this Lease by Lessor, the liability of Lessor
(including all persons

 

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and entities that comprise Lessor, and any successor Lessor) and any recourse by
Lessee against Lessor shall be limited to the interest of Lessor, and Lessor’s
successors in interest, in and to Building 9 and, to the extent Building 10 is
owned by Lessor or any affiliate thereof, Building 10, and the proceeds
therefrom (including rents, insurance and condemnation proceeds). On behalf of
itself and all persons claiming by, through, or under Lessee, Lessee expressly
waives and releases Lessor and each member, agent and employee of Lessor from
any personal liability for breach of this Lease.

ARTICLE XVII

GENERAL PROVISIONS

Section 17.01 Severability

The invalidity of any provision of this Lease as determined by a court of
competent jurisdiction, shall in no way affect the validity of any other
provision hereof.

Section 17.02 Agreed Rate Interest on Past Due Obligations

Except as expressly herein provided, any amount due to either party not paid
when due shall bear interest at the lesser of the Bank of America prime rate
plus four percent (4%) or the maximum amount of interest allowed by law (“Agreed
Rate”). Payment of such interest shall not excuse or cure any default by either
party under this Lease. Despite any other provision of this Lease, the total
liability for interest payments shall not exceed the limits, if any, imposed by
the usury laws of the State of California. Any interest paid in excess of those
limits shall be refunded to the payor by application of the amount of excess
interest paid against any sums outstanding in any order that payee requires. If
the amount of excess interest paid exceeds the sums outstanding, the portion
exceeding those sums shall be refunded in cash to the payor by the payee. To
ascertain whether any interest payable exceeds the limits imposed, any
nonprincipal payment (including late charges) shall be considered to the extent
permitted by law to be an expense or a fee, premium, or penalty rather than
interest.

Section 17.03 Time of Essence

Time is of the essence in the performance of all obligations under this Lease.

Section 17.04 Additional Rent

Any monetary obligations of Lessee to Lessor under the terms of this Lease shall
be deemed to be Additional Rent and Lessor shall have all the rights and
remedies for the nonpayment of same as it would have for nonpayment of Base
Rent. All references to “rent” (except specific references to either Base Rent
or Additional Rent) shall mean Base Rent and Additional Rent.

Section 17.05 Incorporation of Prior Agreements, Amendments and Exhibits

This Lease (including Exhibits A, B, C, D, E, F, G, H and I and Schedules 1, 2,
3, 4, 5 and 6) contains all agreements of the parties with respect to any matter
mentioned herein. No prior agreement or understanding pertaining to any such
matter shall be effective. This Lease

 

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may be modified in writing only, signed by the parties in interest at the time
of the modification. Except as otherwise stated in this Lease, Lessee hereby
acknowledges that neither the Lessor nor any employees or agents of the Lessor
has made any oral or written warranties or representations to Lessee relative to
the condition or use by Lessee of said Premises and Lessee acknowledges that
Lessee assumes all responsibility regarding the Occupational Safety Health Act,
the legal use and adaptability of the Premises and the compliance thereof with
all applicable laws and regulations in effect during the Lease Term except as
otherwise specifically stated in this Lease. Neither party has been induced to
enter into this Lease by, and neither party is relying on, any representation or
warranty outside those expressly set forth in this Lease.

Section 17.06 Notices

(a) Written Notice

Any notice required or permitted to be given hereunder shall be in writing and
shall be given by a method described in paragraph (b) below and shall be
addressed to Lessee or to Lessor at the addresses noted below, next to the
signature of the respective parties, as the case may be. Either party may
specify a different address for notice purposes at any time by giving written
notice of such change to the other party in a manner provided herein at least
ten (10) days prior to the date such change is desired to be effective. A copy
of all notices required or permitted to be given to Lessor or Lessee (as
applicable) hereunder shall be concurrently transmitted to such party or parties
at such addresses as such party may from time to time hereafter designate by
notice to the other, but delay or failure of delivery to such person shall not
affect the validity of the delivery to Lessor or Lessee.

(b) Methods of Delivery

(i) When personally delivered to the recipient, notice is effective on delivery.
Delivery to the person apparently designated to receive deliveries at the
subject address is personally delivered if made during business hours (e.g.
receptionist).

(ii) When mailed by certified mail with return receipt requested, notice is
effective on receipt if delivery is confirmed by a return receipt.

(iii) When delivery by overnight delivery Federal Express/Airborne/United Parcel
Service/DHL WorldWide Express with charges prepaid or charged to the sender’s
account, notice is effective on delivery if delivery is confirmed by the
delivery service.

(c) Refused, Unclaimed or Undeliverable Notices

Any correctly addressed notice that is refused, unclaimed, or undeliverable
because of an act or omission of the party to be notified shall be considered to
be effective as of the first date that the notice was refused, unclaimed, or
considered undeliverable by the postal authorities, messenger, or overnight
delivery service.

 

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Section 17.07 Waivers

No waiver of any provision hereof shall be deemed a waiver of any other
provision hereof or of any subsequent breach of the same or any other
provisions. Any consent to, or approval of, any act shall not be deemed to
render unnecessary the obtaining of consent to or approval of any subsequent
act. The acceptance of rent hereunder by Lessor shall not be a waiver of any
preceding breach by Lessee of any provision hereof, other than the failure of
Lessee to pay the particular rent so accepted, regardless of Lessor’s knowledge
of such preceding breach at the time of acceptance of such rent.

Section 17.08 Recording

Either Lessor or Lessee shall, upon request of the other, execute, acknowledge
and deliver to the other a “short form” memorandum of this Lease for recording
purposes for each of the properties on which Building 6, Building 7, Building 8,
Building 10 and Building 9 are located, provided that Lessee simultaneously
executes in recordable form and delivers to Lessor a quit claim deed as to is
leasehold and any other interest in the Premises and hereby authorizes Lessor to
date and record the same only upon the expiration or sooner termination of this
Lease or, in the case of Buildings 6, 7 and 8, upon the termination of Lessee’s
expansion options with respect to each such property.

Section 17.09 Surrender of Possession; Holding Over

(a) At the expiration or earlier termination of the Lease, Lessee shall remove
all of Lessee’s signs (pursuant to Section 17.15) and, subject to the terms of
the Removal Obligations Schedule and Section 6.03 of the Lease, shall remove all
of Lessee’s equipment, trade fixtures, supplies, wall decoration and other
personal property from within the Premises, Building 9 and the Common Area and
shall vacate, deliver up and surrender to Lessor possession of the Premises and
all improvements thereon, subject to the terms of Section 17.21 of this Lease
concerning Hazardous Materials brought upon, kept, used, stored, handled,
treated, generated in, or released or disposed of from the Premises by Lessee or
any of Lessee’s agents, employees or contractors (collectively, “Lessee HazMat
Operations”) and released of all clearances required by any governmental
authorities with respect to Lessee HazMat Operations, broom clean and, in good
order and condition, excepting only ordinary wear and tear (wear and tear which
could have been avoided by best maintenance practices customarily used at the
Project) and damage due to casualty not caused by Lessee or Lessee’s agents,
employees or contractors. Except for such ordinary wear and tear and damage due
to casualty not caused by Lessee’s agents, employees or contractors
(collectively, the “Lessee’s Parties”), Lessee shall (i) repair all damage to
the Premises, the interior and exterior of Building 9 and the Common Area caused
by Lessee’s removal of its property, (ii) patch and refinish, to Lessor’s
reasonable satisfaction, all penetrations made by Lessee or its agents,
contactors, employees or invitees to the roof, floor, interior or exterior walls
or ceiling of the Premises and Building 9, whether such penetrations were made
with Lessor’s approval or not, to the extent that the equipment requiring such
penetration is removed at the expiration or earlier termination of the Lease,
(iii) repair or replace all stained or damaged ceiling tiles, wall coverings and
floor coverings (unless such staining or

 

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damage was caused by the actions of Lessor or the tenant of a leased space above
the Premises) to the reasonable satisfaction of Lessor, (iv) repair all damage
caused by Lessee to the exterior surface of Building 9 and, where necessary,
replace or resurface same. Upon expiration or sooner termination of this Lease,
Lessor may reenter the Premises and remove all persons and property therefrom.
If Lessee shall fail to surrender to Lessor the Premises, Building 9 and the
Common Area in the condition required by this paragraph at the expiration or, if
sooner terminated, within ten (10) days after sooner termination, of this Lease,
Lessor may, at Lessee’s expense, remove Lessee’s signs, property and/or
improvements not so removed and make such repairs and replacements not so made
or hire, at Lessee’s expense, independent contractors to perform such work.
Lessee shall be liable to Lessor for all reasonable costs incurred by Lessor in
returning the Premises, Building 9 and the Common Area to the required
condition, together with interest thereon at the Agreed Rate from the date
incurred by Lessor until paid. Lessee shall pay to Lessor the amount of all
costs so incurred (including, without limitation, costs of disposal, storage and
insurance) together with interest at the Agreed Rate within five (5) business
days from Lessor’s delivery of a statement therefor. If the Premises are not
surrendered at the end of the Lease Term, Lessee shall indemnify Lessor against
loss or liability resulting from delay by Lessee in so surrendering the
Premises, including, without limitation, actual damages for lost rent and with
respect to any claims of a successor occupant. Notwithstanding anything to the
contrary contained in this Section 17.09, and subject to the terms of the
Removal Obligations Schedule, Lessee shall only be required to remove those
Alterations as Lessor shall have designated at the time Lessor gave its consent
to such Alterations to the extent required pursuant to the terms of Section 6.03
hereof, or when consent was not required, in response to Lessee’s written
request for such determination.

(b) If Lessee, with Lessor’s prior written consent, remains in possession of the
Premises after expiration of the Lease Term and if Lessor and Lessee have not
executed an express written agreement as to such holding over, then such
occupancy shall be a tenancy from month to month at a monthly Base Rent
equivalent to one hundred fifty percent (150%) of the higher of: (i) the monthly
rental in effect immediately prior to such expiration, or (ii) the Fair Market
Rent for the Premises, such payments to be made as herein provided for Base
Rent. In the event of such holding over, all of the terms of this Lease,
including the payment of Additional Rent all charges owing hereunder other than
rent shall remain in force and effect on said month to month basis.

(c) At least three (3) months prior to the surrender of the Premises, Lessee
shall deliver to Lessor a narrative description of the actions proposed (or
required by any governmental authority) to be taken by Lessee in order to
surrender the Premises (including any Alterations permitted by Lessor to remain
in the Premises) at the expiration or earlier termination of the Lease Term, in
accordance with the requirements of any Environmental Laws or relevant
governmental authority or, in the absence thereof, the requirements of Lessor’s
lender or any commercially reasonable requirements of Lessor’s environmental
consultant (collectively “HazMat Requirements”) with respect to the Lessee
HazMat Operations and otherwise released for unrestricted use and occupancy (the
“Surrender Plan”). Such Surrender Plan shall be accompanied by a current listing
of (i) all Hazardous Materials licenses and permits held by or on behalf of any
Lessee’s Parties with respect to the Premises, and (ii) all Hazardous Materials
used, stored, handled, treated, generated, released or disposed of from the
Premises, and shall be subject to the review and approval of Lessor’s
environmental consultant. In connection with the

 

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review and approval of the Surrender Plan, upon the request of Lessor, Lessee
shall deliver to Lessor or its consultant such additional non-proprietary
information concerning Lessee HazMat Operations as Lessor shall request. On or
before such surrender, Lessee shall deliver to Lessor evidence that the approved
Surrender Plan shall have been satisfactorily completed and all HazMat
Requirements have been met and Lessor shall have the right, subject to
reimbursement at Lessee’s expenses as set forth below, to cause Lessor’s
environmental consultant to inspect the Premises and perform such additional
procedures as may be deemed reasonably necessary to confirm that the Premises
are, as of the effective date of such surrender or early termination of the
Lease, in accordance with applicable HazMat Requirements. Lessee shall reimburse
Lessor, as Additional Rent, for the actual, out-of-pocket expense incurred by
Lessor for Lessor’s environmental consultant to review and approve the Surrender
Plan and to visit the Premises and verify satisfactory completion of the same.
Lessor shall have the unrestricted right to deliver such Surrender Plan and any
report by Lessor’s environmental consultant with respect to the surrender of the
Premises to third parties. If Lessee shall fail to prepare or submit a Surrender
Plan approved by Lessor, or if Lessee shall fail to complete the approved
Surrender Plan, or if such Surrender Plan, whether or not approved by Lessor,
shall fail to adequately address any residual effect of Lessee HazMat Operations
in, on or about the Premises in violation of HazMat Requirements, Lessor shall
have the right to take such actions as Lessor may deem reasonable or appropriate
to assure that the Premises and the Project are surrendered free from any
residual impact from Lessee HazMat Operations, the cost of which actions shall
be reimbursed by Lessee as Additional Rent.

Section 17.10 Cumulative Remedies

No remedy or election hereunder by Lessor shall be deemed exclusive but shall,
wherever possible, be cumulative with all other remedies at law or in equity,
provided that notice and cure periods set forth in Article XII are intended to
extend and modify statutory notice provisions to the extent expressly stated in
Section 12.01.

Section 17.11 Covenants and Conditions

Each provision of this Lease to be observed or performed by Lessee and Lessor
shall be deemed both a covenant and a condition.

Section 17.12 Binding Effect; Choice of Law

Subject to any provisions hereof restricting assignment or subletting by Lessee
and subject to the provisions of Article XVI, this Lease shall bind the parties,
their personal representatives, successors and assigns. This Lease shall be
governed by the laws of the State of California and any legal or equitable
action or proceeding brought with respect to the Lease or the Premises shall be
brought in San Mateo County, California except for such actions or proceedings
as are required by California law to be brought in the County were the subject
real property is located.

Section 17.13 Lease to be Subordinate

Lessee agrees that this Lease is and shall be, at all times, subject and
subordinate to the lien of any mortgage, deed of trust or other encumbrances
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the Premises, including all renewals, replacements and extensions thereof
provided, however, that regardless of any default under any such mortgage, deed
of trust or other encumbrance or any sale of the Premises under such mortgage,
deed of trust or other encumbrance so long as, subject to all applicable notice
and cure periods, Lessee timely performs all covenants and conditions of this
Lease and continues to make all timely payments hereunder, this Lease and
Lessee’s possession and rights hereunder shall not be disturbed by the mortgagee
or beneficiary or anyone claiming under or through such mortgagee or
beneficiary. Lessee shall execute any documents which are commercially
reasonable (i.e., of a type customarily executed between lenders and lessees for
similar loans and leases) subordinating this Lease within ten (10) business days
after delivery of same by Lessor so long as the mortgagee or beneficiary agrees
therein that this Lease will not be terminated if Lessee is not in default
following a foreclosure, including, without limitation, any Subordination
Non-Disturbance and Attornment Agreement (“SNDA”) which is substantially in the
form attached hereto as Exhibit “C”. In any event, Lessor and Lessee agree that
Lessee may terminate this Lease upon written notice thereof to Lessor at any
time after the date that is twenty (20) business days after the date of this
Lease if Lessor and Lessor’s lender have not executed and delivered an executed
version of a SNDA in the substantially the form attached hereto as Exhibit “C”
to Lessee. In the event that any mortgage or deed of trust is foreclosed or a
conveyance in lieu of foreclosure is made for any reason, and this Lease shall
terminate, Lessee shall, notwithstanding any subordination, attorn to and become
the tenant of such mortgagee or beneficiary or any successor to Lessor by
foreclosure or deed-in-lieu of foreclosure, at the option of such successor in
interest, provided however, that any such successor shall not (i) be liable for
any previous act or omission of Lessor under the Lease, (ii) be subject to any
offset, defense or counterclaim which shall theretofore have accrued to the
Lessee under the Lease against Lessor, or (iii) have any obligation with respect
to any security deposit unless it shall have been paid over or physically
delivered to such successor, or (iv) be bound by any rents paid more than one
month in advance to Lessor or any prior landlord or owner. Lessee shall execute
and deliver, upon reasonable prior notice from Lessor any additional documents
in such form as is designated by Lessor evidencing the priority or subordination
of the Lease with respect to any such lien of any such mortgage or deed of
trust.

Section 17.14 Attorneys’ Fees

If either party herein brings an action to enforce the terms hereof or to
declare rights hereunder, the prevailing party in any such action, on trial or
appeal, shall be entitled to recover its reasonable attorney’s fees, expert
witness fees and costs as fixed by the Court.

Section 17.15 Signs

Lessee may, at Lessee’s sole expense, place Lessee’s company name on the
monument sign for Building 9 at a location reasonably agreed by Lessee and
Lessor and otherwise subject to the terms of this Section 17.15. Lessee shall
also be entitled, at Lessee’s expense, to a pro rata share of directional
signage at the Project for Building 9. Lessee shall not place any sign outside
the Premises (or visible from outside the Premises) without Lessor’s prior
written consent, which consent shall not be unreasonably withheld and subject to
Lessee’s obtaining approval by the City of Redwood City. Lessee, at its sole
cost and expense, after obtaining Lessor’s prior written consent, shall install,
maintain and remove prior to expiration of this Lease (or within ten (10) days
after any earlier termination of this Lease) all signage in full

 

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compliance with (i) all applicable law, statutes, ordinances and regulations and
(ii) all provisions of this Lease concerning Alterations, and (iii) Lessor’s
signage policy set forth on Exhibit “D” hereto.

Section 17.16 Merger

The voluntary or other surrender of this Lease by Lessee, or a mutual
cancellation thereof, or a termination by Lessor, shall not work a merger, and
shall, at the option of Lessor, terminate all or any existing subtenancies or
may, at the option of Lessor, operate as an assignment to Lessor of any or all
of such subtenancies.

Section 17.17 Quiet Possession

Upon Lessee timely paying the rent for the Premises and timely observing and
performing all of the covenants, conditions and provisions on Lessee’s part to
be observed and performed hereunder, Lessee shall have quiet possession of the
Premises for the entire Lease Term, subject to all of the provisions of this
Lease.

Section 17.18 Easements

Lessor reserves to itself the right, from time to time, to grant such easements,
rights and dedications that Lessor deems necessary or desirable, and to cause
the recordation of Parcel Maps and conditions, covenants and restrictions, so
long as such easements, rights, dedications, Maps and conditions, covenants and
restrictions do not unreasonably interfere with or diminish the use of the
Premises or parking rights granted hereunder, including access thereto, by
Lessee. Lessee shall sign any of the aforementioned or other documents, and take
such other actions, which are reasonably necessary or appropriate to accomplish
such granting, recordation and subordination of the Lease to same, upon request
of Lessor, and failure to do so within ten (10) business days after a written
request to do so shall constitute a material breach of this Lease, provided that
Lessor shall reimburse Lessee for Lessee’s reasonable out-of-pocket expenses
(including reasonable attorneys’ fees) necessarily incurred in the performance
of Lessee’s obligations under this Section 17.18.

Section 17.19 Authority

Each individual executing this Lease on behalf of a corporation, limited
liability company or partnership represents and warrants that he or she is duly
authorized to execute and deliver this Lease on behalf of such entity, and that
this Lease, once fully executed, shall be binding upon said entity in accordance
with its terms.

Section 17.20 Force Majeure Delays

In any case where either party hereto is required to do any act (other than the
payment of money), delays caused by or resulting from Acts of God or Nature,
war, civil commotion, fire, flood or other casualty, labor difficulties,
shortages of labor or materials or equipment, government regulations, delay by
government or regulatory agencies with respect to approval or permit process,
unusually severe weather, or other causes beyond such party’s reasonable
control, the time during which such act shall be completed, shall be deemed to
be extended by the period of such delay, whether such time be designated by a
fixed date, a fixed time or a “reasonable time.”

 

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Section 17.21 Hazardous Materials

(a) Definition of Hazardous Materials and Environmental Laws

“Hazardous Materials” means any (a) substance, product, waste or other material
of any nature whatsoever which is or becomes listed regulated or addressed
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. sections 9601, et seq. (“CERCLA”); the Hazardous Materials
Transportation Act (“HMTA”) 49 U.S.C. section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. section 6901, et seq. (“RCRA”); the
Toxic Substances Control Act, 15 U.S.C. sections 2601, et seq. (“TSCA”); the
Clean Water Act, 33 U.S.C. sections 1251, et seq.; the California Hazardous
Waste Control Act, Health and Safety Code sections 25100, et seq.; the
California Hazardous Substances Account Act, Health and Safety Code sections
26300, et seq.; the California Safe Drinking Water and Toxic Enforcement Act,
Health and Safety Code sections 25249.5, et seq.; California Health and Safety
Code sections 25280, et seq.; (Underground Storage of Hazardous Substances); the
California Hazardous Waste Management Act, Health and Safety Code sections
25170.1, et seq.; California Health and Safety Code sections 25501. et seq.
(Hazardous Materials Response Plans and Inventory); or the Porter Cologne Water
Quality Control Act, California Water Code sections 13000, et seq., all as
amended, or any other federal, state or local statute, law, ordinance,
resolution, code, rule, regulation, order or decree regulating, relating to or
imposing liability (including, but not limited to, response, removal and
remediation costs) or standards of conduct or performance concerning any
hazardous, toxic or dangerous waste, substance or material, as now or at any
time hereafter may be in effect (collectively, “Environmental Laws”); (b) any
substance, product, waste or other material of any nature whatsoever whose
presence in and of itself may give rise to liability under any of the above
statutes or under any statutory or common law theory based on negligence,
trespass, intentional tort, nuisance, strict or absolute liability or under any
reported decisions of a state or federal court, (c) petroleum or crude oil,
including but not limited to petroleum and petroleum products contained within
regularly operated motor vehicles and (d) asbestos.

(b) Lessor’s Representations and Disclosures

Lessor represents that it has provided Lessee with a description of the
Hazardous Materials on or beneath the Project as of the date hereof attached
hereto as Exhibit “I” and incorporated herein by reference and that except as
described in the documents identified in Exhibit “F,” Lessor has no actual
knowledge of any Hazardous Materials at the Project. Lessee acknowledges receipt
of the attached Exhibit “F”, which Lessor has provided pursuant to California
Health & Safety Code Section 25359.7 which requires:

“Any owner of nonresidential real property who knows, or has reasonable cause to
believe, that any release of hazardous substances has come to be located on or
beneath that real property shall, prior to the sale, lease or rental of the real
property by that owner, give written notice of that condition to the buyer,
lessee or renter of the real property.”

 

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(c) Use of Hazardous Materials

Lessee shall not cause or permit any Hazardous Materials to be brought upon,
kept or used in, on or about the Project by Lessee or Lessee’s Parties without
Lessor’s prior written consent, except that Lessee may, without the need for
Lessor’s prior written consent, bring on, keep at and use in, on or about the
Premises those Hazardous Materials described in Schedule 4 attached hereto or
any similar Hazardous Materials used for substantially the same purposes in
substitution thereof in compliance with applicable Environmental Laws, even if
they are Hazardous Materials. All such Hazardous Materials will be used, kept
and stored by Lessee in a manner that complies with all applicable Environmental
Laws. Lessee shall, at all times, use, keep, test, store, handle, transport,
treat or dispose all such Hazardous Materials in or about the Project in
compliance with all applicable HazMat Requirements. Lessee shall remove
Hazardous Materials used or brought onto the Project during the Lease Term from
the Project prior to the expiration or earlier termination of the Lease in
accordance with any applicable HazMat Requirements and the Surrender Plan
approved by Lessor.

(d) Lessee’s Environmental Indemnity

Lessee agrees to indemnify, defend, protect and hold Lessor harmless from any
liabilities, losses, claims, damages, penalties, fines, attorney fees, expert
fees, court costs, remediation costs, investigation costs, or other expenses
resulting from or arising out of the use, storage, treatment, transportation,
release, presence, generation, or disposal of Hazardous Materials on, from or
about the Project, and/or subsurface or ground water from an act or omission of
Lessee (or Lessee’s successor-in-interest), its agents, employees, invitees,
vendors or contractors.

(e) Lessee’s Obligation to Promptly Remediate

If the presence of Hazardous Materials on the Premises after the Commencement
Date results from an act or omission of Lessee (or Lessee’s
successor-in-interest), its agents, employees, invitees, vendors, contractors,
guests, or visitors results in contamination of the Project or any water or soil
beneath the Project in violation of applicable HazMat Requirements, Lessee shall
promptly take all action necessary or appropriate to test, investigate and
remedy that contamination, at its sole cost and expense, provided that Lessor’s
consent to such action shall first be obtained, which consent shall not be
unreasonably withheld, conditioned or delayed.

(f) Notification

Lessor and Lessee each agree to promptly notify the other of any communication
received from any governmental entity concerning Hazardous Materials or the
violation or alleged violation of Environmental Laws that relate to the Project.
In addition, Lessee shall promptly provide to Lessor copies of any approvals or
disapprovals received from any relevant governmental agency in connection with
permits, licenses or periodic or episodic testing or remediation of the Premises
by Lessee required by HazMat Requirements, including but not limited to the
plans, permits and licenses described in Schedule 5 attached hereto or any

 

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other such plans, permits and licenses instead performed by Lessee pursuant to
HazMat Requirements. Without limiting the foregoing, Lessee shall deliver to
Lessor any applications for decommissioning the Premises pursuant to HazMat
Requirements at the same time such application is delivered to the relevant
governmental agency. Lessor shall have the opportunity to participate in, and
comment on, any such decommission or surrender plan application and the final
version of such plan shall be subject to Lessor’s written approval.

(g) Testing.

Lessor shall have the right to conduct tests of the Premises at any time that
Lessor seeks to sell or refinance the Premises, or if Lessor has reasonable
grounds to believe that Hazardous Materials may exist at the Premises in
violation of the terms of this Lease. Such test shall be performed in order to
determine whether any contamination of the Premises or the Project has occurred
as a result of Lessee’s use. Lessee shall be required to pay the reasonable cost
of such tests of the Premises if they are performed due to Lessor’s reasonable
grounds to believe that Hazardous Materials may exist at the Premises in
violation of the terms of this Lease (Lessor shall pay the costs of such tests
in the event of a sale or refinancing); provided, however, that if Lessee
conducts its own tests of the Premises using third party contractors and test
procedures acceptable to Lessor which tests are certified to Lessor, Lessor
shall accept such tests in lieu of such tests to be paid for by Lessee. In
connection with such testing, upon the request of Lessor, Lessee shall deliver
to Lessor or its consultant such non-proprietary information concerning the use
of Hazardous Materials in or about the Premises by Lessee or any Lessee Parties.
If contamination has occurred in violation or excess of the HazMat Requirements
for which Lessee is liable under this Section 17.21, Lessee shall pay all costs
to conduct such tests. If no such contamination is found, Lessor shall pay the
costs of such tests. Lessee shall, at its sole cost and expense, promptly and
satisfactorily remediate any environmental conditions identified by such testing
in accordance with HazMat Requirements. Lessor’s receipt of or satisfaction with
any environmental assessment in no way waives any rights which Lessor may have
against Lessee. Notwithstanding anything herein to the contrary, within thirty
(30) days prior to the Expiration Date or any earlier date on which the Lease
terminates, Lessee shall, at Lessee’s sole expense, deliver to Lessor a phase II
environmental audit of the Premises showing the environmental condition of the
Premises and the completion of Lessee’s Surrender Plan for the Premises.

(h) Dispute Resolution. Notwithstanding anything herein to the contrary, if
Lessor requires Lessee to perform any testing, clean-up or remediation of
Hazardous Materials, or if Lessor requires Lessee to modify Lessee’s use of
Hazardous Materials at the Premises in a manner or in amounts other than as is
required by Environmental Laws pursuant to either this Section 17.21 or
Section 17.09(c) above, and Lessee believes that Lessor’s requirements are not
commercially reasonable, then if Lessee provides Lessor with written notice
thereof (the “Dispute Notice”) within fifteen (15) business days of the date on
which Lessor first informs Lessee in writing of such requirement, then such
dispute shall be remedied pursuant to the terms of this Subparagraph 17.22(h).
If such a dispute exists, Lessor and Lessee shall meet within ten (10) business
days after the date of the Dispute Notice and attempt in good faith to resolve
the dispute. If, despite such meeting, the parties cannot resolve the dispute,
each of Lessor and Lessee shall separately designate to the other in writing an
environmental expert to determine if the requirement in question is commercially
reasonable. The two (2) environmental experts shall

 

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then each prepare a written proposal of a commercially reasonable environmental
requirement for the activity in question. Each environmental expert designated
shall have at least ten (10) years experience in performing environmental audits
of real property in San Mateo County and shall be paid by the party choosing
such expert. The failure of either party to appoint an environmental expert
within the time allowed shall be deemed equivalent to appointing the
environmental expert appointed by the other party, who shall then determine
whether the requirement in question is commercially reasonable. If the two
(2) environmental experts are unable to agree on whether the requirement in
question is commercially reasonable, or, in lieu thereof, to come to agreement
on a commercially reasonable environmental requirement for the issue in
question, within fifteen (15) business days of their appointment, the two
designated environmental experts shall jointly designate a third similarly
qualified environmental expert. The third environmental expert shall within ten
(10) business days following its appointment, then determine which of the two
environmental experts’ determinations most closely reflects an appropriate,
commercially reasonable requirement with respect to the Hazardous Materials
issue in question. The third environmental expert shall have no rights to
adjust, amend or otherwise alter the determinations made by the environmental
experts selected by the parties, but must select one or the other of such
experts’ submissions. The determination by such third environmental expert shall
be final and binding upon the parties. Said third environmental expert shall,
upon selecting the determination, concurrently notify both parties hereto. The
parties shall share the expenses of the third environmental expert equally.

(i) Survival.

Lessee’s obligations pursuant to this Section 17.21 shall survive the expiration
or earlier termination of this Lease.

Section 17.22 Modifications Required by Lessor’s Lender

If any lender of Lessor requests a modification of this Lease that will not
increase Lessee’s cost or expense or materially and adversely change Lessee’s
rights and obligations hereunder, this Lease shall be so modified and Lessee
shall execute whatever documents are required by such lender and deliver them to
Lessor within ten (10) days after the request.

Section 17.23 Brokers

Lessor and Lessee each represents to the other that it has had no dealings with
any real estate broker or agent in connection with the negotiation of this
Lease, except for Cornish & Carey Commercial, in the case of Lessor, and
Cornish & Carey Commercial in the case of Lessee (collectively, the “Brokers”)
and that they know of no other real estate broker or agent who is entitled to a
commission or finder’s fee in connection with this Lease. Each party shall
indemnify, protect, defend, and hold harmless the other party against all
claims, demands, losses, liabilities, lawsuits, judgments, and costs and
expenses (including reasonable attorney fees) for any leasing commission,
finder’s fee, or equivalent compensation alleged to be owning on account of the
indemnifying party’s dealings with any real estate broker or agent other than
the Brokers. The terms of this Section 17.23 shall survive the expiration or
earlier termination of the Lease.

 

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Section 17.24 Acknowledgment of Notices

Lessor has provided and Lessee hereby acknowledges receipt of the Notices
attached as Exhibits “G” and “H” hereto, concerning the presence of certain uses
and operations of neighboring parcels of land.

Section 17.25 Right of First Offer.

(a) Grant.

Subject to the terms of this Section 17.25, Lessor grants to Lessee during the
Right of First Offer Term a continuing right of first offer (“Right of First
Offer”) to lease any space which is available for lease located in Building 6 in
the Project (“Available Space”). For the purposes of this Section 17.25, such
space shall not be deemed available for lease, and this Right of First Offer
shall not apply, if the space in question is already leased to a tenant thereof
who leases or re-leases such space pursuant to any then-existing or future
agreement to extend the term of its lease or expand the size of its premises
between Lessor and such tenant.

(b) Term.

The term of the Right of First Offer (“Right of First Offer Term”) shall
commence on the Commencement Date of this Lease and shall terminate on the
expiration or earlier termination of this Lease.

(c) Covenants of Lessor.

Subject to the conditions precedent established by subsection (e) below, if at
any time during the Right of First Offer Term Lessor decides to offer any
Available Space for lease to the general public, Lessor shall first provide
Lessee with a written notice (“Offer Notice”) detailing (i) the rent at which
said Available Space is being offered, (ii) the rentable square footage and
location thereof, (iii) the date the Available Space will become available and
(iv) all other material economic terms upon which Lessor proposes to lease the
Available Space to Lessee. If Lessee does not deliver an Acceptance Notice (as
defined below) in response to such Offer Notice and Lessor subsequently decides
to offer the Available Space for lease to the general public at a lesser rental
rate than was described in the initial Offer Notice, then Lessor shall send
Lessee a subsequent Offer Notice and the terms of this Section 17.25 shall apply
again to such subsequent Offer Notice.

(d) Exercise of Lessee’s Right of First Offer.

Subject to the conditions precedent established by subsection (e) below, Lessee
may exercise Lessee’s Right of First Offer to lease all (but not less than all)
of the Available Space described in the Offer Notice by providing Lessor with
written notice (“Acceptance Notice”) thereof within ten (10) business days of
Lessor’s delivery to Lessee of the Offer Notice. If Lessee does not exercise its
Right of First Offer within said ten (10) business day period, Lessor shall be
relieved of Lessor’s obligation to lease the Available Space mentioned in the
Offer Notice to Lessee and the provisions of this Section 17.25 shall not apply
to Lessor.

 

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(e) Conditions to Right of First Offer.

Notwithstanding anything to the contrary in this Section 17.25, Lessor shall
have no obligation to provide Lessee with an Offer Notice, and Lessee shall have
no right to exercise Lessee’s Right of First Offer, if: (i) Lessor has delivered
a written notice to Lessee that Lessee is in default hereunder or under the
Building 10 Lease and such default has not yet been cured either: (a) at the
time Lessor seeks to lease the Available Space in question, or at the time
Lessee seeks to give Lessor an Acceptance Notice, whichever, is relevant, or
(b) upon the date Lessee seeks to take possession of the Available Space
referenced in the Offer Notice, (ii) Lessee has assigned this Lease or sublet
more than fifty percent (50%) of the rentable space located in the Premises to a
party other than an Affiliate, (iii) Lessee then occupies less than fifty
percent (50%) of the Premises, (iv) Lessee has received more than three
(3) written notices of monetary default and more than one (1) written notice of
a non-monetary default from Lessor hereunder during the Lease Term or under the
Building 10 Lease during the “Lease Term” of that lease, (v) as of the date of
such Offer Notice, Lessee does not meet the financial tests set forth in
Schedule 6 attached hereto, or (vi) Lessor’s lender does not consent to Lessee’s
expansion into the Available Space.. Lessee’s Right of First Offer shall be
personal to Lessee and Lessee’s Affiliate and shall not be transferable with any
assignment of this Lease or subletting of the Premises.

(f) Terms for Right of First Offer.

In the event that Lessee exercises Lessee’s Right of First Offer, Lessee’s
occupancy of the Available Space taken shall be on all of the same terms and
conditions described in the Offer Notice. In such event, Lessee’s Share due
hereunder shall also be adjusted accordingly.

(g) New Lease.

Lessor and Lessee hereby agree to execute a new lease for such Available Space
in the same form and, except for the business terms of the Offer Notice and
terms made necessary as a result of the different space, having the same content
as this Lease (“New Lease”) prior to Lessee’s occupancy of the Available Space
in question. The New Lease shall specify, among other things, the Rent, date of
occupancy, increase in Lessee’s Share and square footage of the Available Space
taken in connection with Lessee’s exercise of Lessee’s Right of First Offer, and
shall otherwise be on the terms of this Lease, except for whatever changes are
required in connection with any differing uses of the Available Space by Lessee.
If Lessee does not execute such a New Lease within ten (10) business days after
the date on which Lessor provides Lessee with a form of New Lease as described
in this Subsection (g), then, at Lessor’s option, Lessee’s right to lease the
Available Space on the terms referenced in the Offer Notice shall be void and
terminated, provided that such termination shall not affect Lessee’s ongoing
rights pursuant to the terms of this Section 17.25.

 

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Section 17.26 Right of First Refusal.

(a) Grant.

Subject to the terms of this Section 17.26, Lessor grants to Lessee during the
Right of First Refusal Term a continuing right of first refusal (“Right of First
Refusal”) to lease any space which is available for lease in either Building 7
or Building 8 in the Project (“Available ROFR Space”). For the purposes of this
Section 17.26, such space shall not be deemed available for lease, and this
Right of First Refusal shall not apply, if the space in question is already
leased to a tenant thereof who leases such space pursuant to any then-existing
or future agreement to extend the term of its lease or expand the size of its
premises between Lessor and such tenant.

(b) Covenants of Lessor.

Subject to the conditions precedent established by subsection (d) below, if at
any time during the Lease Term Lessor receives an offer which Lessor is willing
to accept from a bona fide third party to lease any space in the Available ROFR
Space, Lessor shall first provide Lessee with a written notice (“Refusal Offer
Notice”) detailing (i) the rent at which said Available ROFR Space is to be
leased to the third party, (ii) the rentable square footage and location
thereof, (iii) the date the Available ROFR Space will become available and the
term of the proposed lease and (iv) all other material economic terms upon which
Lessor is willing to lease the Available ROFR Space in question to such third
party.

(c) Exercise of Lessee’s Right of First Refusal.

Subject to the conditions precedent established by subsection (d) below, Lessee
may exercise Lessee’s Right of First Refusal to lease all (but not less than
all) of the Available ROFR Space described in the Refusal Offer Notice by
providing Lessor with written notice (“ROFR Acceptance Notice”) thereof within
five (5) business days of Lessor’s delivery to Lessee of the Refusal Offer
Notice. If Lessee does not exercise its Right of First Refusal within said five
(5) business day period, Lessor shall be relieved of Lessor’s obligation to
lease the Available ROFR Space mentioned in the Refusal Offer Notice, to Lessee
and the provisions of this Section 17.26 shall not apply to Lessor. If the
transaction described in the ROFR Offer Notice is not consummated, then, prior
to entering into a new lease for the Available ROFR Space, Lessor shall repeat
the process described in this Section 17.26.

(d) Conditions to Right of First Refusal.

Notwithstanding anything to the contrary in this Section 17.26, Lessor shall
have no obligation to provide Lessee with a Refusal Offer Notice, and Lessee
shall have no right to exercise Lessee’s Right of First Refusal, if: (i) Lessor
has delivered to Lessee a written notice that Lessee is in default hereunder or
under the Building 10 Lease and such default has not yet been cured either:
(a) at the time Lessor seeks to lease the Available ROFR Space in question, or
at the time Lessee seeks to give Lessor an ROFR Acceptance Notice, whichever, is
relevant, or (b) upon the date Lessee seeks to take possession of the Available
ROFR Space referenced in the Refusal Offer Notice, (ii) Lessee has assigned this
Lease or sublet more than fifty percent (50%)

 

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of the rentable space located in the Premises to a party other than an
Affiliate, (iii) Lessee then occupies less than fifty percent (50%) of the
Premises, (iv) Lessee has received more than three (3) written notices of
monetary default and one (1) written notice of non-monetary default from Lessor
hereunder during the Lease Term or under the Building 10 Lease during the “Lease
Term” of that lease, (v) at the time of the Refusal Offer Notice Lessee fails to
meet the financial tests set forth in Schedule 6 attached hereto, or
(vi) Lessor’s lender does not consent to Lessee’s expansion into the Available
Space.. Lessee’s Right of First Refusal shall be personal to Lessee and Lessee’s
Affiliate and shall not be transferable with any assignment of this Lease or
subletting of the Premises.

(e) Terms for Right of First Refusal.

In the event that Lessee exercises Lessee’s Right of First Refusal, Lessee’s
occupancy of the Available ROFR Space taken shall be on all of the same terms
and conditions described in the Refusal Offer Notice. In such event, Lessee’s
Share due hereunder shall also be adjusted accordingly.

(f) New Lease.

Lessor and Lessee hereby agree to execute a new lease for such Available ROFR
Space in the same form and, except for the business terms of the ROFR Offer
Notice and terms made necessary as a result of the different space, having the
same content as this Lease (“ROFR Lease”) prior to Lessee’s occupancy of the
Available ROFR Space in question. The ROFR Lease shall specify, among other
things, the Rent, date of occupancy, increase in Lessee’s Share and square
footage of the Available ROFR Space taken in connection with Lessee’s exercise
of Lessee’s Right of First Refusal, and shall otherwise be on the terms of this
Lease, except for whatever changes are required in connection with any differing
uses of the Available ROFR Space by Lessee. If Lessee does not execute such a
ROFR Lease within ten (10) business days after the date on which Lessor provides
Lessee with a form of ROFR Lease as described in this Subsection (f), then, at
Lessor’s option, Lessee’s right to lease the Available ROFR Space on the terms
referenced in the ROFR Offer Notice shall be void and terminated, provided that
such termination shall not affect Lessee’s ongoing rights pursuant to the terms
of this Section 17.26.

Section 17.27 Lessee’s Expansion Right. If, during the Lease Term, Lessee
desires to lease additional space in the Project but there is no such space then
available for lease in the Project, and if Lessor (and Lessor’s lender)
determines, in its sole and absolute discretion, that it would not adversely
affect the Project and Lessor determines, in Lessor’s sole and absolute
discretion, that Lessor can construct an additional building in the Project,
then, at Lessee’s written request, Lessor shall use Lessor’s good faith efforts
to gain the necessary governmental approvals for, and shall construct, such an
additional building for Lessee’s use. The size, location and date of
availability of such building, and the economic terms on which Lessor shall
lease such building to Lessee, shall be subject to the mutual agreement of the
Lessor and Lessee. Further, Lessor shall have no obligations whatsoever to
Lessee under this Section 17.27 if at the time of Lessee’s request for such
building Lessee does not meet the relevant financial tests set forth in Schedule
6 attached hereto or has received a written notice of default hereunder or under
the Building 10 Lease and such default has not yet been cured. The terms of this
Section 17.27 shall only be operative at any time that Pacific Shores Investors,
LLC or any affiliate thereof

 

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owns the entire Project, and upon the sale or other transfer of this Project or
any portion thereof the terms of this Section 17.27 shall be rendered null and
void and of no further effect, and the Lessor shall then have no further
obligations to the Lessee hereunder whatsoever.

Section 17.28 Notification of Intention to Market. If Lessor shall decide to
market the Project for sale, Lessor shall provide Lessee with marketing
materials therefore at the same time and in a similar manner as Lessor provides
such materials to the general public. Nothing herein shall be deemed to create
an obligation of Lessor to sell the Project or enter into negotiations for the
sale of the Project with Lessee or keep Lessee informed of the status of any
such negotiations with a third party for the sale of the Project. The parties
acknowledge and agree that nothing herein shall be deemed to create any sort of
an option, right of first refusal, right of first offer, right of first
negotiation or any other type of option or right of Lessee to purchase the
Project or any portion thereof. The obligation of Lessor hereunder is limited
solely to notifying Lessee of Lessor’s marketing of the Project for a potential
sale, and Lessor reserves the right to sell the Project, or not sell it at all,
on any terms and conditions that Lessor shall deem appropriate, in Lessor’s sole
and absolute discretion. Lessee agrees to keep the notification delivered to it
by Lessor hereunder strictly and completely confidential, and shall not disclose
such notification to anyone whatsoever. The terms of this Section 17.28 shall
only be operative at any time that Pacific Shores Investors, LLC or any
affiliate thereof owns the entire Project, and upon the sale or other transfer
of this Project or any portion thereof the terms of this Section 17.28 shall be
rendered null and void and of no further effect, and the Lessor shall then have
no further obligations to the Lessee hereunder whatsoever.

Section 17.29 List of Lease Expiration Dates. Upon written request therefor by
Lessee, Lessor shall deliver to Lessee a list of then current expiration dates
(not taking into account any extension or expansion rights that may or may not
be exercised by the tenants of the Project) of the current leases of space in
the portion of the Project then owned by Lessor, which list shall also describe
the size and location of the space in question. Nothing herein shall be deemed
to create an obligation of Lessor to lease such space to Lessee or enter into
negotiations for the lease of such space to Lessee or keep Lessee informed of
the status of any space for lease in the Project. The parties acknowledge and
agree that nothing in this Section 17.29 shall be deemed to create any sort of
an option, right of first refusal, right of first offer, right of first
negotiation or any other type of option or right of Lessee to lease space the
Project or any portion thereof. The obligation of Lessor hereunder is limited
solely to delivering to Lessee a list of the expiration dates of existing leases
of space in the Project.

Section 17.30 [Intentionally omitted.]

Section 17.31 Condition Subsequent. Notwithstanding anything to the contrary
herein, Lessor and Lessee acknowledge and agree that the effectiveness of this
Lease is conditioned upon Lessee’s exercise of Lessee’s option to lease the
Premises and the Building 10 Premises (as defined therein) pursuant to the terms
of that certain Amended and Restated Option to Lease dated June 15, 2006 (the
“Option Agreement”) between Lessor, as optionor, and Lessee, as optionee.
Notwithstanding Lessor and Lessee’s execution of this Lease, if Lessee fails to
exercise such option by July 5, 2006, or if the Option Agreement is terminated
pursuant to its terms, then this Lease and all of the obligations of the parties
hereunder shall terminate and be null and void, and any amount prepaid by Lessee
to Lessor hereunder shall be promptly repaid to Lessee.

 

   -52-   

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  Section 17.32 List of Exhibits

 

EXHIBIT A:    Premises EXHIBIT B:    Memorandum of Commencement of Lease Term
and Schedule of Base Rent EXHIBIT C    SNDA EXHIBIT D    Signage Exhibit
EXHIBIT E    Intentionally Deleted EXHIBIT F    Hazardous Materials Disclosure
EXHIBIT G:    Notice to Tenants EXHIBIT H:    Notice to Tenants EXHIBIT I:   
Rules and Regulations SCHEDULE 1    License Agreement SCHEDULE 2   
Intentionally Deleted SCHEDULE 3    Removal Obligations Standard SCHEDULE 4   
Permitted Hazardous Materials SCHEDULE 5    Plans, Licenses and Permits
SCHEDULE 6    Financial Tests

 

   -53-   

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LESSOR AND LESSEE EACH HAS CAREFULLY READ AND HAS REVIEWED THIS LEASE AND BEEN
ADVISED BY LEGAL COUNSEL OF ITS OWN CHOOSING AS TO EACH TERM AND PROVISION
CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOWS ITS INFORMED AND
VOLUNTARY CONSENT THERETO. EACH PARTY HEREBY AGREE THAT, AT THE TIME THIS LEASE
IS EXECUTED, THE TERMS AND CONDITIONS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

Executed at Redwood City, California, as of the reference date.

(Signatures continued on next page)

 

   -54-   

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LESSOR:

 

PACIFIC SHORES INVESTORS, LLC,

a Delaware limited liability company

 

ADDRESS:

 

c/o Jay Paul Company

350 California Street, Suite 1905

San Francisco, CA 94104-1432

 

By:    Pacific Shores Mezzanine, LLC,       a Delaware limited liability
company,
its sole member       By:    Pacific Shores Junior Mezz, LLC,          a
Delaware limited liability company
its sole member          By:    Pacific Shores Junior Mezz Managers, LLC,      
      a Delaware limited liability company,
its sole member             By:    Pacific Shores Development, LLC,            
   a Delaware limited liability company,
its sole member                By:    TECHNOLOGY LAND LLC,                   a
California limited liability company,                   Operating Member      
            By:  

/s/ Jay Paul

                    Jay Paul, Sole Managing Member   

 

LESSEE:     ADDRESS:

PDL BIOPHARMA, INC.,

a Delaware corporation

 

   

(Before Commencement Date)

 

34801 Campus Drive

Freemont, California 94555

Attention: Ms. Laurie Torres, VP Human Resources

By:  

/s/ Mark McDade

Mark McDade

(Type or Print Name)

    Its:   Chief Executive Officer     (After Commencement Date)      

Pacific Shores Center

Building 9

1400 Seaport Boulevard

Redwood City, CA 94063

 

   -55-   

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With a copy to:

Silicon Valley Law Group

25 Metro Drive, Suite 600

San Jose, California 95110

Attn: Lucy A. Lofrumento, Esq.

 

   -56-   

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EXHIBIT A

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

REAL PROPERTY LEGAL DESCRIPTION,

SITE PLAN AND PREMISES FLOOR PLAN

(See Building Description and Depiction of Property attached)

 

   A-1   

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

EXHIBIT A

LEGAL DESCRIPTION

Real property in the City of Redwood City, County of San Mateo, State of
California described as follows:

Lot 9 as shown on the certain Map of Pacific Shores Center filed July 21, 2000
in Book 130 of Maps, pages 66-74, San Mateo County Records.

 

   A-2   

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

Site Plan

LOGO [g10961582.jpg]

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

EXHIBIT B

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

MEMORANDUM OF

COMMENCEMENT OF LEASE TERM

Pursuant to Article III, Section 3.01, paragraph (a) of the above-referenced
Lease, the parties to said Lease agree to the following:

The Commencement Date of the Lease                      and the Lease Term
commenced on said date. The Expiration Date for the initial Lease Term is
                    .

The date for commencement of Base Rent for the Premises is                     .

The date for commencement of Additional Rent, including, without limitation,
Operating Expenses is                     .

Attached hereto as a part hereof is a true and correct schedule of Base Rent.
The total Rentable Area of the Premises is an agreed
                                     rentable square feet.

Each person executing this Memorandum certifies that he or she is authorized to
do so on behalf of and as the act of the entity indicated. Executed as of
                             , 2006, at Redwood City (San Mateo County),
California.

 

   B-1   

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

“Lessor”

PACIFIC SHORES INVESTORS, LLC

a Delaware limited liability company

 

By:    Pacific Shores Mezzanine, LLC,       a Delaware limited liability
company,
its sole member       By:    Pacific Shores Junior Mezz, LLC,          a
Delaware limited liability company
its sole member          By:    Pacific Shores Junior Mezz Managers, LLC,      
      a Delaware limited liability company,
its sole member             By:    Pacific Shores Development, LLC,            
   a Delaware limited liability company,
its sole member                By:    TECHNOLOGY LAND LLC,                   a
California limited liability company,                   Operating Member      
            By:  

 

                    Jay Paul, Sole Managing Member   

“Lessee”

PDL BIOPHARMA, INC.,

a Delaware corporation

 

By:  

 

  (Type or Print Name) Its:  

 

 

   B-2   

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

EXHIBIT C

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

SUBORDINATION, NONDISTURBANCE

AND ATTORNMENT AGREEMENT

 

NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR OPTION AGREEMENT, BUILDING
9 LEASE AND BUILDING 10 LEASE BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE
LIEN OF THE DEED OF TRUST (DEFINED BELOW).

THIS AGREEMENT is dated for reference as of the      day of
                    , 2006, and is made between WELLS FARGO BANK, N.A., as
Trustee for the Registered Holders of Credit Suisse First Boston Mortgage
Securities Corp., Commercial Mortgage Pass-Through Certificates Series 2004-TFL2
(“Mortgagee”), PACIFIC SHORES INVESTORS, LLC, a Delaware limited liability
company (“Lessor”), and PROTEIN DESIGN LABS, INC., a Delaware corporation
(“Lessee”).

RECITALS

 

A. Lessor currently owns the Pacific Shores Center in Redwood City, California,
which project includes that certain approximately 283,015 square foot building
located at 1400 Seaport Boulevard and related real property referred to herein
as the “Building 9 Premises”, and that certain approximately 164,732 square foot
building located at 1500 Seaport Boulevard and related real property referred to
herein as “Building 10 Premises.”

 

B. Lessor and Lessee have entered into (a) that certain Triple Net Space Lease
for the Building 9 Premises (“Building 9 Lease”), and (b) that certain Triple
Net Space Lease for the Building 10 Premises (“Building 10 Lease”).

 

C. Mortgagee is the current holder of a loan made by Column Financial, Inc. to
Lessor and secured by a deed of trust (the “Deed of Trust”) encumbering the real
property of which the Building 9 Premises and the Building 10 Premises form a
part (the “Property”), and the parties desire to set forth their agreement as
hereinafter set forth.

 

   C-1   

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NOW, THEREFORE, in consideration of the premises and of the sum of ONE DOLLAR
($1.00) by each party in hand paid to the other, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:

1. The Building 9 Lease and the Building 10 Lease are and shall be subject and
subordinate to the Deed of Trust insofar as it affects the Property, and to all
of Mortgagee’s rights thereunder, including all renewals, modifications,
consolidations, replacement and extensions of the Deed of Trust, to the full
extent of amounts secured thereby and interest thereon.

2. Subject to the terms and conditions of Paragraph 3 of this agreement, Lessee
agrees that it will attorn to and recognize any purchaser at a foreclosure sale
under the Deed of Trust, any transferee who acquires the Property by deed in
lieu of foreclosure, and the successors and assigns of such purchasers (the
applicable party taking title is referred to as the “New Owner”), as its
landlord for the unexpired balance (and any extensions, if exercised) of the
term of said leases upon the same terms and conditions set forth in the Building
9 Lease and the Building 10 Lease.

3. Regardless of any default under any such mortgage, deed of trust or other
encumbrance or any sale of the Property under such mortgage, deed of trust or
other encumbrance, the Building 9 Lease and the Building 10 Lease and Lessee’s
rights thereunder, shall not be disturbed by the mortgagee or beneficiary or
anyone claiming under or through such mortgagee or beneficiary; provided,
however that nothing contained herein shall prevent Mortgagee from naming Lessee
in any foreclosure or other action or proceeding initiated in order for
Mortgagee to avail itself of and complete any such foreclosure or other remedy,
so long as such joinder does not result in a termination of the Building 9 Lease
and/or the Building 10 Lease, or diminish Lessee’s rights and privileges under
the Building 9 Lease or the Building 10 Lease. After acquisition of title by a
New Owner, Building 9 Lease and the Building 10 Lease shall be a direct
agreement(s) between Lessee and the New Owner. Lessee shall be obligated to
perform for the New Owner under the Building 9 Lease and the Building 10 Lease
and the New Owner shall assume the obligations of the Lessor under the Building
9 Lease and the Building 10 Lease, including without limitation any extension
thereof pursuant to the terms of the Building 9 Lease and the Building 10 Lease,
in accordance with the terms of the applicable document(s), subject to Section 4
below.

4. If any New Owner succeeds to the interest of Lessor under the Building 9
Lease or the Building 10 Lease, the New Owner shall not be:

(a) liable for any act or omission of any prior lessor (including Lessor);
provided, that nothing herein shall release the lessor under the Building 9
Lease or the Building 10 Lease from the obligation to perform maintenance or
repair obligations or limit New Owner’s obligations under said leases to correct
any conditions in violation of the New Owner’s obligations as lessor under the
Building 9 Lease or the Building 10 Lease provided that Lessee provides such New
Owner with written notice of such default and opportunity to cure pursuant to
Section 6 below; or

 

   C-2   

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(b) liable for the return of any security deposit under either the Building 9
Lease or the Building 10 Lease not actually received by Mortgagee or the New
Owner; or

(c) subject to any offsets or claims which Lessee might have against any prior
lessor (including Lessor); or

(d) bound by any rent or additional rent which Lessee might have paid under the
Building 9 Lease or the Building 10 Lease for more than the current month to any
prior lessor (including Lessor) unless such monies have been actually received
by New Owner; or

(e) bound by any amendment or modification of the Building 9 Lease or the
Building 10 Lease (including an agreement to terminate the Building 9 Lease or
the Building 10 Lease, other than as expressly contained in the Building 9 Lease
or the Building 10 Lease) made without its consent.

5. This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their successors and assigns.

6. Lessee agrees to give Mortgagee notice of any default by Lessor under the
Building 9 Lease and the Building 10 Lease (if and when executed by the
parties). Lessee further agrees that if Lessor shall have failed to cure such
default within the time provided for in the Building 9 Lease or the Building 10
Lease, then Mortgagee shall have an additional thirty (30) days within which to
cure such default or if such default cannot be cured within that time, then such
additional time as may be necessary if within such thirty (30) days Mortgagee
has commenced and is diligently pursuing the remedies necessary to cure such
default (including, but not limited to, commencement of legal proceedings, if
necessary to effect such cure) in which event neither the Building 9 Lease nor
the Building 10 Lease shall be terminated while such remedies are being so
diligently pursued. Lessee shall accept performance by Mortgagee of any term,
covenant, condition or agreement to be performed by Lessor under the Building 9
Lease or the Building 10 Lease with the same force and effect as though
performed by Lessor.

7. In the event Mortgagee succeeds to the interest of Lessor in the Property,
Lessee’s rights against Mortgagee, as lessor, shall be limited to Mortgagee’s
interest in the Property, and Lessee shall have no recourse with regard to any
other assets of Mortgagee.

8. Any notices which a party may be obligated or elect to give hereunder shall
be sufficient if sent by certified mail, return receipt requested, postage
prepaid or by Federal Express or other established overnight courier addressed
as follows:

 

If to Mortgagee:   

Wells Fargo Bank, N.A., as Trustee for the Registered Holders of Credit Suisse
First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through
Certificates Series 2004-TFL2

c/o Wachovia Securities, Commercial Real Estate Services

8739 Research Drive-URP4

Charlotte, NC 28288-1075 (28262-1075 for overnight deliveries)

Attn: Alex Aguilar Fax: 704-715-0036

 

   C-3   

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with a copy to:   

Alston & Bird LLP

101 South Tryon Street, Suite 4000

Charlotte, NC 28280-4000

Attn: James A.L. Daniel, Jr., Esq.

Fax: 704-444-1776

If to Lessee:   

PDL BioPharma, Inc.

34801 Campus Drive

Fremont, California 94555

Attention: Laurie Torres, VP Human Resources

Facsimile: (510) 574-1661

With a copy to:   

Silicon Valley Law Group

25 Metro Drive, Suite 600

San Jose, California 95110

Attention: Lucy Lofrumento, Esq.

Facsimile: (408) 573-5701

Any such notice shall be deemed delivered on the earlier to occur of (a) receipt
or (b) the date of delivery, refusal or non-delivery indicated on the return
receipt if sent by certified mail. The above addresses may be changed by the
persons identified above from time to time designated by written notice given as
herein required; provided that no notice of a change of address shall be
effective until actual receipt of such notice.

9. In the event of the bringing of any action or suit by any party or parties
hereto against another party or parties hereunder alleging a breach of any of
the covenants, conditions, agreements or provisions of this Agreement, the
prevailing party or parties shall recover all reasonable costs and expenses of
suit, including without limitation, reasonable attorneys’ fees, consultants fees
and fees of expert witnesses.

10. This Agreement shall be governed by and construed in accordance with the
laws of the State of California.

11. This Agreement may be executed in one or more counterparts, each of which
shall be deemed original, and all of which together shall constitute one and the
same instrument.

12. Neither Mortgagee nor its designee or nominee shall become liable under the
Building 9 Lease and Building 10 Lease, unless and until Mortgagee or its
designee or nominee becomes, and then only with respect to periods in which
Mortgagee or its designee or nominee remains, the owner of the Property.

13. Lessee acknowledges that Lessor has assigned (or will assign) to Mortgagee
its right, title and interest in the Building 9 Lease and the Building 10 Lease
and to the rents, issues and profits of the Property pursuant to the Deed of
Trust, and that Lessor has been granted the

 

   C-4   

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license to collect such rents provided no Event of Default has occurred under,
and as defined in, the Deed of Trust. Lessee agrees to pay all rents and other
amounts due under the Building 9 Lease and the Building 10 Lease directly to
Mortgagee upon receipt of written demand by Mortgagee following an Event of
Default, and Lessor hereby consents thereto and agrees that Lessee shall be
released and discharged of all liability to Lessor for any such payments made to
Mortgagee. The assignment of the Building 9 Lease and the Building 10 Lease to
Mortgagee, or the collection of rents by Mortgagee pursuant to such assignment,
shall not obligate Mortgagee to perform Lessor’s obligations under the Building
9 Lease and/or the Building 10 Lease.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.

 

PDL BIOPHARMA, INC., a Delaware corporation By:  

 

Name:   Title:   WELLS FARGO BANK, N.A., as Trustee for the Registered Holders
of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage
Pass-Through Certificates Series 2004-TFL2 By:  

WACHOVIA BANK NATIONAL

ASSOCIATION, solely in its capacity as

Master Servicer

By:  

 

Name:   Title:  

 

   C-5   

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The undersigned Lessor hereby consents to the foregoing Subordination,
Non-Disturbance and Attornment Agreement and confirms the facts stated in the
foregoing Subordination, Non-Disturbance and Attornment Agreement.

LESSOR:

PACIFIC SHORES INVESTORS, LLC,

a Delaware limited liability company

 

By:    Pacific Shores Mezzanine, LLC,       a Delaware limited liability
company,
its sole member       By:    Pacific Shores Junior Mezz, LLC,          a
Delaware limited liability company
its sole member          By:    Pacific Shores Junior Mezz Managers, LLC,      
      a Delaware limited liability company,
its sole member             By:    Pacific Shores Development, LLC,            
   a Delaware limited liability company,
its sole member                By:    TECHNOLOGY LAND LLC,                   a
California limited liability company,                   Operating Member      
            By:  

 

                    Jay Paul, Sole Managing Member   

 

   C-6   

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ACKNOWLEDGMENTS

 

STATE OF CALIFORNIA    )       )    ss.: COUNTY OF                         )   

On                          , 2006, before me,
                                     the undersigned, a notary public in and for
said state, personally appeared                                         
            , personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal.

Notary Public

 

STATE OF CALIFORNIA    )       )    ss.: COUNTY OF                         )   

On                          , 2006, before me,
                                         the undersigned, a notary public in and
for said state, personally appeared                                         
    , personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument the person, or the entity upon
behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal.

Notary Public

 

   C-7   

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STATE OF CALIFORNIA    )       )    ss.: COUNTY OF                         )   

On                          , 2006, before me,
                                     the undersigned, a notary public in and for
said state, personally appeared                                         
            , personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal.

Notary Public

 

STATE OF CALIFORNIA    )       )    ss.: COUNTY OF                         )   

On                          , 2006, before me,
                                     the undersigned, a notary public in and for
said state, personally appeared                                         
        , personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument the person, or the entity upon
behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal.

Notary Public

 

   C-8   

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

EXHIBIT D

TO

PACIFIC SHORES INVESTORS, LLC

LEASE

TO

PDL BIOPHARMA, INC.

as

LESSEE

For

Pacific Shores Center

Building 9

1400 Seaport Boulevard

Redwood City, California 94063

SIGNAGE EXHIBIT

SINGLE TENANT BUILDINGS

Each tenant of a single tenant Building will be permitted (subject to compliance
with Section 17.15 of the Lease) to place one sign to be located near the
entrance to the parking lot associated with Building 9 (“Monument”). The exact
size, design, color, location and materials of the Monument, and of the Lessee’s
sign on the Monument, will be determined by Lessor in its sole and absolute
discretion, provided that Lessor will not unreasonably withhold its consent to a
tenant sign which employs a design and color commonly used by such tenant for
marketing purposes so long as it fits within the space allocated by Lessor, and
so long as it is in keeping with the overall design scheme of the Project. Each
such tenant will also be permitted (subject to compliance with Section 17.15 of
the Lease) to place one sign on the exterior surface of Building 9. Lessor
reserves the right to allow different or additional signage anywhere in the
Project, provided that, so long as Lessor may lawfully do so, Lessor will not
reduce the size of space allocated on the Monument to a size smaller than that
permitted as of the commencement date of the Lease, unless the size of the
premises subject to the lease decreases from its size as of the lease
commencement date or unless Lessor provides alternate signage of reasonably
equivalent visibility. All signs shall comply with all applicable government
laws and regulations and with the Pacific Shores Signage Master Plan (City of
Redwood City Design Review Submittal dated November 11, 2000).

 

  D-1  

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EXHIBIT E

To

PACIFIC SHORES INVESTORS, LLC.

LEASE

to

PDL BIOPHARMA, INC.,

For

PREMISES

at

1400 Seaport Drive

Building 9

Redwood City, California

INTENTIONALLY DELETED

 

  E-1  

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

EXHIBIT F

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

HAZARDOUS MATERIALS DISCLOSURE

Lessor has provided Lessee, and Lessee acknowledges that it has received and
pursuant to Section 17.22(b) of the Lease, reviewed same, a copy of each of
those certain documents entitled: (i) PHASE I, ENVIRONMENTAL SITE ASSESSMENT,
PACIFIC SHORES CENTER, REDWOOD CITY, CALIFORNIA, Prepared for: The Jay Paul
Company, San Francisco, California, Prepared by: IRIS ENVIRONMENTAL, Oakland,
California, December 20, 1999, Job No. 99-122A; and (ii) PHASE II, ENVIRONMENTAL
SITE ASSESSMENT, PACIFIC SHORES CENTER, 1000 SEAPORT BOULEVARD, REDWOOD CITY,
CALIFORNIA, Prepared for: The Jay Paul Company, San Francisco, California,
Prepared by: IRIS ENVIRONMENTAL, Oakland, California, January 14, 1999, Job
No. 99-122-B

 

LESSEE

PDL BIOPHARMA, INC.,

a Delaware corporation

By:  

 

 

 

  (Type or print name) Its:  

 

By:  

 

  (Type or print name) Its:  

 

 

  F-1  

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

EXHIBIT G

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

NOTICE TO TENANTS AND TRANSFEREES OF

CURRENT OR FUTURE USES OF ADJACENT PORT PROPERTY

Notice is hereby given to all lessees, tenants and transferees of land or
interests in land located within Pacific Shores Center of the presence or
potential future presence of Port related industrial activities on Port property
adjacent to and west of Pacific Shores Center. All recipients of this notice
should be aware of the following facts:

1. The parcel of Port property adjacent to Pacific Shores Center to the
northwest shown on the Exhibit J-Figure One attached hereto (the “Port Parcel”)
is now or may be developed for Port related maritime and industrial uses similar
to those occupying other properties along the west side of Seaport Boulevard and
to the west of Pacific Shores Center.

2. Such Port related maritime and industrial activities are those which are
permitted by the general industrial zoning of the City of Redwood City and may
include heavy industrial land uses, including uses which involve the receipt,
transport, storage or management of hazardous wastes, aggregates, cement, gravel
and similar materials, including the outdoor storage and handling of such
materials.

3. Pacific Shores Center Limited Partnership, on behalf of itself, its
successors and assigns, has recognized, accepted and approved such uses of the
Port Parcel subject to the utilization of Best Available Management Practices in
the development and use of the Port Parcel. Best Available Management Practices
are defined on Schedule One to Exhibit G attached hereto.

4. Despite the use of Best Available Management Practices on the Port Parcel by
the Port and its lessees and licensees and despite Pacific Shores Center Limited
Partnership’s efforts to ensure compatibility between such uses and those in
Pacific Shores Center, it is possible that such uses will cause emissions into
the air of dust or other particulate matter, or noise or odorous substances
which may be offensive to or be perceived as a nuisance by occupants of Pacific
Shores Center.

 

  G-1  

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

5. Pursuant to covenants made by Pacific Shores Center Limited Partnership on
behalf of its successors and assigns, tenants and lessees, the tenants, lessees
and transferees of Pacific Shores Center Limited Partnership have approved and
accepted such neighboring uses subject to their utilization of Best Available
Management Practices.

6. Any actions to enjoin the continuation of such uses or to recover any damages
to persons or property related to their operations are subject to a requirement
for prior notice found in recorded covenants by Pacific Shores Center Limited
Partnership. The following language is excerpted from such covenants:

“In the event that either party hereto believes that the other has failed to
perform any covenant made herein in favor of the other, at least ten (10) days
prior to the commencement of any action to enforce the covenants hereunder or to
recover damages for the breach thereof, that party who believes that a failure
to perform has occurred (the “Complaining Party”) shall give written notice (the
“Notice”) to the party alleged not to have performed the covenant (the
“Non-Complaining Party”) of the specific nature of the alleged failure and of
the intent of the Complaining Party to take action to remedy the breach by the
Non-Complaining Party. In the event that the nature of the alleged failure to
perform is such that the same cannot reasonably be cured within ten (10) days
after receipt of the Notice (the “Notice Period”), the Non-Complaining Party
shall not be deemed to be in violation of its covenants and no action shall be
commenced by the Complaining Party if, within the Notice Period, the
Non-Complaining Party commences such cure and thereafter diligently and
continuously prosecutes the same to completion within a reasonable time.
Provided, however, that the Complaining Party shall not be precluded from
recovering any actual damages suffered by reason of the alleged failure to
perform prior to or after delivery of the Notice, whether or not such failure is
thereafter cured.”

 

  G-2  

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FIGURE ONE TO EXHIBIT G

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

 

  G-3  

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

LOGO [g10961img1.jpg]

 

  G-4  

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

SCHEDULE ONE TO EXHIBIT G

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

 

   G-5   

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DEFINITION OF “BEST AVAILABLE MANAGEMENT PRACTICES”

(Exchange Parcel and New Road Access)

“Best Available Management Practices (“BAMP”) means the following:

1. Compliance with all laws, rules and regulations, and operating permits,
whether Federal, state or local, applicable to the uses of the Exchange Parcel
and industrial operations thereon, including without limitation all laws, rules
and regulations and operating permits applicable to emissions into the air of
gases, substances and particulate matter, the generation or release of odors or
odorous substances into the air, and the generation of noise.

2. Initiation and maintenance of reasonable precautions to minimize emission and
transport of dust from the Exchange Parcel and the New Road Access onto the
Project Site. As used herein the term “reasonable precautions” shall mean the
use of materials, techniques and equipment reasonably available at the time of
commencement of a use or operation and designed to minimize emissions during
predictably adverse climatic conditions common in the area (collectively,
‘‘initial measures”) plus the addition of one or more of the following
additional measures if not already in use and if initial measures prove
inadequate to achieve minimization of emission and transport of dust onto the
Project Site:

(a) Paving of surfaces used for active operations where the absence of such
paving causes emission and transport of dust onto the Project Site;

(b) Installation of wind fences to a height of not less than 20 feet with 50%
porosity around areas of open storage and areas of active dust-generating uses
causing emission and transport of dust onto the Project Site;

(c) Use of storage silos, open-ended enclosures or water spray equipment for the
outdoor storage and handling of materials, such as rock, concrete, soil, mineral
substances, and similar materials, causing emission and transport of dust onto
the Project Site;

(d) Installation of enclosures or use of water or foam spray bars both above and
below the belt surface of all conveyors used for loading and unloading
materials, causing emission and transport of dust onto the Project Site; and

3. Initiation of a reasonable, regularly scheduled sweeping program for the New
Road Access to minimize accumulation of dust and dirt and/or installation of
dust traps, wheel washers or other methods of minimizing the tracking of dust
onto the Road Access Area and resulting emission and transport of dust onto the
Project Site.

 

   G-6   

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EXHIBIT H

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

NOTICE TO PACIFIC SHORES TENANTS, LESSEES, SUCCESSORS, ASSIGNS AND

TRANSFEREES REGARDING CURRENT OR FUTURE USES OF ADJACENT RMC

LONESTAR AND PORT PROPERTY

Notice is hereby given to all tenants, lessees, successors, assigns and
transferees of land or interest in land located within the Pacific Shores Center
of the presence or potential future presence of maritime and industrial
activities on RMC Lonestar and Port of Redwood City property west and adjacent
to Pacific Shores Center. Recipients of this notice should be aware of the
following:

1. The RMC Lonestar property and parcels of port property adjacent to and west
of Pacific Shores Center are shown on the map attached to this notice. The RMC
Lonestar and Port properties are now devoted to, or will be developed for,
maritime and industrial uses.

2. These maritime and industrial uses are those which are permitted by the
“Heavy Industry” General Plan designation and general industrial zoning of the
City of Redwood City. These uses include, by way of example and not limitation,
uses involving the receipt, transport, storage, handling, processing or
management of aggregates, cement, concrete, asphalt, soil or other landscaping
materials, recyclable metals and plastics, recyclable concrete and asphalt,
chemicals, petroleum products, hazardous wastes, and similar materials,
including indoor storage, mixing and handling of these materials.

3. These uses may cause, on either a regular or intermittent basis, air
emissions, including without limitation, dust and other particulates, odors,
vibrations, loud noises, and heavy truck, rail or marine vessel traffic. These
uses may have visual, aesthetic or other aspects that may be offensive or
perceived as a nuisance by occupants of Pacific Shores Center.

 

   H-1   

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EXHIBIT I

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

RULES AND REGULATIONS

1. Lessee and Lessee’s employees shall not in any way obstruct the sidewalks,
entry passages, pedestrian passageways, driveways, entrances and exits to the
Project or the Building, and they shall use the same only as passageways to and
from their respective work areas.

2. Any sash doors, sashes, windows, glass doors, lights and skylights that
reflect or admit light into the Common Area of the Project shall not be covered
or obstructed by the Lessee. Water closets, urinals and wash basins shall not be
used for any purpose other than those for which they were constructed, and no
rubbish, newspapers, food or other substance of any kind shall be thrown into
them. Except in connection with ordinary and customary interior decorating,
Lessee shall not mark, drive nails, screw or drill into, paint or in any way
deface the exterior walls, roof, foundations, bearing walls or pillars without
the prior written consent of Lessor, which consent may be withheld in Lessor’s
sole discretion. The reasonable and actual, out-of-pocket expense of repairing
any breakage, stoppage or damage resulting from a violation of the foregoing
rule shall be borne by Lessee.

3. No awning or shade shall be affixed or installed over or in the windows or
the exterior of the Premises except with the consent of Lessor, which consent
may not be unreasonably withheld, conditioned or delayed.

4. Lessee shall not do anything in the Premises, or bring or keep anything
therein, which will in any way increase the risk of fire or the rate of fire
insurance or which shall conflict with the regulations of the fire department or
the law or with any insurance policy on the Premises or any part thereof, or
with any rules or regulations established by any administrative body or official
having jurisdiction, and it shall not use any machinery therein, even though its
installation may have been permitted, which may cause any unreasonable noise,
jar, or tremor to the floors or walls, or which by its weight might injure the
floors of the Premises.

 

   I-1   

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

5. Lessor may reasonably limit weight, size and position of all safes, fixtures
and other equipment used in the Premises. If Lessee shall require extra heavy
equipment, Lessee shall notify Lessor of such fact and shall pay the cost of
structural bracing to accommodate it. All damage done to the Premises or Project
by installing, removing or maintaining extra heavy equipment shall be repaired
at the expense of Lessee.

6. Lessee and Lessee’s officers, agents and employees shall not make nor permit
any loud, unusual or improper noises that unreasonably interfere with other
lessees or those having business with them, nor bring into or keep within the
Project any animal or bird or any bicycle or other vehicle, except such vehicle
as Lessor may from time to time permit and guide dogs.

7. No machinery of any kind will be allowed in the Premises without the written
consent of Lessor, which consent may not be unreasonably withheld, conditioned
or delayed. This shall not apply, however, to customary office equipment or
trade fixtures or package handling equipment.

8. All freight must be moved into, within and out of the Project only during
such reasonable hours and according to such reasonable regulations as may be
posted from time to time by Lessor.

9. Except as provided in the Lease, no aerial or satellite dish or similar
device shall be erected on the roof or exterior walls of the Premises, or on the
grounds, without in each instance, the written consent of Lessor, which consent
may not be unreasonably withheld, conditioned or delayed. Any aerial so
installed without such written consent shall be subject to removal without
notice at any time.

10. All garbage, including wet garbage, refuse or trash shall be placed by the
Lessee in the receptacles appropriate for that purpose and only at locations
prescribed by the Lessor.

11. Lessee shall not burn any trash or garbage at any time in or about the
Premises or any area of the Project.

12. Lessee shall observe all security regulations issued by the Lessor and
comply with instructions and/or directions of the duly authorized security
personnel for the protection of the Project and all tenants therein, except to
the extent such regulations unreasonably and materially limit Lessee’s right of
access to the Premises and Project’s parking facilities or prohibit Lessor from
entering “Secured Areas,” all as provided in the Lease.

13. Any requirements of the Lessee will be considered only upon written
application to Lessor at Lessor’s address set forth in the Lease.

14. No waiver of any rule or regulation by Lessor shall be effective unless
expressed in writing and signed by Lessor or its authorized agent.

 

   I-2   

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

15. Lessor reserves the right to exclude or expel from the Project any person
who, in the reasonable judgment of Lessor, is intoxicated or under the influence
of liquor or drugs, or who shall in any manner do any act in violation of the
law or the rules and regulations of the Project.

17. Lessor reserves the right at any time to change or rescind any one or more
of these rules and regulations or make such other and further reasonable,
non-discriminatory rules and regulations as in Lessor’s judgment may from time
to time be necessary for the operation, management, safety, care and cleanliness
of the Project and the Premises, and for the preservation of good order therein,
as well as for the convenience of other occupants and tenants of the Project.
Lessor shall not be responsible to Lessee or the any other person for the
non-observance or violation of the rules and regulations by any other tenant or
other person. Lessee shall be deemed to have read these rules and have agreed to
abide by them as a condition to its occupancy of the Premises. Notwithstanding
anything to the contrary contained herein, Lessor agrees that the rules and
regulations for the Project shall not be (i) modified or enforced in any way by
Lessor so as to unreasonably and materially interfere with Lessee’s permitted
use set forth in this Lease or Lessee’s access to the Premises or Project
parking facility, or (ii) discriminatorily enforced against Lessee and not
against other tenants of the Project.

18. Lessee shall abide by any additional rules or regulations which are ordered
or requested by any governmental or military authority.

19. In the event of any conflict between these rules and regulations, or any
further or modified rules and regulations from time to time issued by Lessor,
and the Lease provisions, the Lease provisions shall govern and control.

 

   I-3   

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SCHEDULE 1

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

PACIFIC SHORES CENTER

COMMON AREA LICENSE AGREEMENT

This License Agreement (“Agreement”) is dated for reference purposes and entered
into by and between Pacific Shores Investors LLC (“PSI”) and PDL BioPharma, Inc.
(“Licensee”) as of                     , 200    .

R E C I T A L S

A. Licensee leases Building          at Pacific Shores Center pursuant to a
written Lease (“Lease”) and Licensee desires to utilize a portion of the Pacific
Shores Center Common Area for                                              
(“Event”) on                     , 200     during the hours of              p.m.
to              p.m. (“Event Period”); and

B. PSI is willing to grant a temporary license to Licensee for the Event during
the Event Period and on that portion of the Pacific Shores Center Common Area
depicted on Exhibit A hereto (“Event Location”) on the terms and conditions set
forth below.

 

   1   

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

AGREEMENT

1. Recitals. The recitals set forth above are true and correct and incorporated
into this Agreement.

2. License Granted. PSI hereby grants to Licensee a revocable, temporary license
to use the Event Area for the Event during the Event Period on all of the terms
and conditions hereof (“License”).

3. Contractors. All contractors hired by Licensee to assist with the event shall
be subject to the prior written approval of PSI, which approval shall not be
unreasonably withheld.

4. Security. Licensee shall provide security for the Event and for at least one
hour prior to and one hour after the Event Period and assumes all risk for the
safety of Event participants.

5. Signage. Subject to the prior written approval of PSI as to location, size
and materials, Licensee may place signage on the Common Area to direct attendees
to the Event. Licensee shall remove and dispose of all such signage within
             (    ) hours after the expiration of the Event Period.

6. Clean Up. Licensee shall initiate clean up of the Event Location and all
other affected areas of Pacific Shores Center immediately upon expiration of the
Event Period and complete such cleanup, such that no evidence of the Event
remains, no later than              (    ) hours after the expiration of the
Event Period.

7. Damage. Licensee agrees to pay to PSI the cost of repair of any damage
arising from or in connection with the Event within five (5) business days after
written demand for same.

8. Insurance. Licensee shall maintain in place at all times during the Event
Period the insurance required to be maintained by Licensee (as Lessee) under
Article VII of the Lease.

9. Indemnity. Licensee shall indemnify and hold PSI free and harmless from any
and all liability, claims, loss, damages, causes of action (whether in tort or
contract, law or equity, or otherwise), expenses, charges, assessments, fines,
and penalties of any kind, including, without limitation, reasonable attorneys’
fees, expert witness fees and costs, arising by reason of the death or injury of
any person, including any person who is an employee, agent, invitee, licensee,
permittee, visitor, guest or contractor of Licensee, or by reason of damage to
or

 

   2   

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

destruction of any property, including property owned by Licensee or any person
who is an employee, agent, invitee, permittee, visitor, or contractor of
Licensee, caused or allegedly caused (1) while that person or property is in or
about the Common Area in connection with the Event; (2) by some condition of the
Common Area caused by the Event; (3) by some act or omission by Licensee or its
agent, employee, licensee, invitee, guest, visitor or contractor or any person
in, adjacent, on, or about the Common Area with the permission, consent or
sufferance of Licensee in connection with the Event; (4) by any matter connected
to or arising out of Licensee’s occupation and use of the Common Area in
connection with the Event, or any breach or default in timely observance or
performance of any obligation on Licensee’s part to be observed or performed
under this License Agreement.

10. Acceptance of Event Location “As-Is”. Licensee accepts the Event Location
and all other areas of Pacific Shores Center utilized for the Event (including,
without limitation, roadways, driveways and parking areas) “as-is” and “with all
faults” and acknowledges that PSI makes no representation or warranty as to the
condition of the Event Location or any other part of Pacific Shores Center or as
to its suitability for the Event. Licensee assumes all risk as to same,
including, without limitation, the risk of injury and property damage for
itself, its officers, employees, agents, contractors, invitees, guests and
visitors and Licensee waives all claims against PSI and its Affiliates with
respect to same except to the extent caused by the gross negligence or
intentional misconduct of PSI or its Affiliates.

11. Attorneys’ Fees. If either party herein brings an action to enforce the
terms hereof or to declare rights hereunder, the prevailing party in any such
action, on trial or appeal, shall be entitled to recover its reasonable
attorneys’ fees, expert witness fees and costs as fixed by Court.

12. Relation to Lease. Money due from Licensee hereunder for any failure to
perform its obligations hereto shall be deemed due under the Lease.

13. List of Exhibits.

Exhibit A – Event Location

 

   3   

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

By:    Pacific Shores Mezzanine, LLC,       a Delaware limited liability
company,
its sole member       By:    Pacific Shores Junior Mezz, LLC,          a
Delaware limited liability company
its sole member          By:    Pacific Shores Junior Mezz Managers, LLC,      
      a Delaware limited liability company,
its sole member             By:    Pacific Shores Development, LLC,            
   a Delaware limited liability company,
its sole member                By:    TECHNOLOGY LAND LLC,                   a
California limited liability company,                   Operating Member      
            By:  

 

                    Jay Paul, Sole Managing Member   

 

PDL BIOPHARMA, INC. a Delaware corporation By:  

 

Name:  

 

Its:  

 

 

   4   

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

SCHEDULE 2

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

[Intentionally Deleted]

 

     

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

SCHEDULE 3

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

REMOVAL OBLIGATIONS SCHEDULE

 

     

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

SCHEDULE 4

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

PERMITTED HAZARDOUS MATERIALS

 

     

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

SCHEDULE 5

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

PDL BioPharma, Inc. List of Plans, Licenses and Permits

 

Plans

   Inspecting Authority    Frequency

Injury Illness Prevention Plan

   Cal OSHA    Anytime

Biosafety Plan

   “    “

Radiation Safety Plan

   “    “

Chemical Hygiene Plan

   “    “

Hazard Communication Plan

   “    “

Emergency Action Plan

     

Hazardous Materials Business Plan

   Fremont Fire    Annual

AAALAC Accreditation program

   AAALAC    Complaint

Licenses

     

CA – Business License

     

DHS - Radiation Use License

   DHS    Anytime

Permits

     

Fremont City - Hazardous Materials Permits A/B/D

   Fremont Fire    Annual

Alameda County - Medical waste Permits A/B/D

   Ala. County    Annual

BAAQMD – Emergency Generator Permits A/B/D

   AQMD    Complaint

DEA – Controlled Substances

   DEA    Violation

 

     

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

SCHEDULE 6

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

FINANCIAL TESTS

In general, financial terms have their GAAP defined meaning. Revenue, EBITDA
(Earnings before Interest, Taxes, Depreciation, and Amortization), and Cash and
Cash equivalents are to be derived from the financial statements in the Lessee’s
most recent 10Q or 10K filings, as appropriate.

Level 1 performance numbers are sufficient to trigger rights of first refusal on
buildings 7 and 8, and the right of first offer on building 6 until an
additional 285,000 square feet has been leased beyond the space in buildings 9
and 10.

Level 2 performance numbers are sufficient to trigger rights of first refusal on
buildings 7 and 8, and the right of first offer on building 6, if more than
285,000 square feet has already been leased beyond the space in buildings 9 and
10, but less than all of the square footage in buildings 6, 7, and 8.

Level 3 performance numbers are required to trigger Lessor’s obligations
pursuant to Section 17.27 of the Lease.

Cash and cash equivalents may include marketable securities which can be
converted to cash in less than 3 months.

All rights are subject to lender approval independent of the Lessee’s
performance level.

 

     

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

    

Level 1

  

Level 2

  

Level 3

Revenue    At least $100 million in each of the last four quarters    At least
$150 million in each of the last four quarters    At least $150 million in each
of the last four quarters EBITDA ratio to Revenue    Ratio of EBITDA to Revenue
greater than 0% in each of the last 3 quarters    Ratio of EBITDA to Revenue of
at least 3% in each of the last 3 quarters    Ratio of EBITDA to Revenue of at
least 5% in each of the last 3 quarters Cash and Cash Equivalents    At least
$250 million for each of the last four quarters.    At least $300 million for
each of the last 4 quarters.    At least $500 million for each of last 4
quarters.