Exhibit 10.31

OFFICE LEASE

by and between

CLARENDON HILLS INVESTORS, LLC,

a California limited liability company,

as Landlord

and

COTHERIX, INC.

a Delaware corporation

as Tenant

2000 Sierra Point Parkway

Brisbane, California 94005

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OFFICE LEASE

THIS LEASE is entered into as of May 5, 2006 (the “Effective Date”), by and
between CLARENDON HILLS INVESTORS, LLC, a California limited liability company
(“Landlord”), and COTHERIX, INC., a Delaware corporation (“Tenant”).

1. BASIC LEASE INFORMATION. The following is a summary of basic lease
information. Each item in this Article 1 incorporates all of the terms set forth
in this Lease pertaining to such item and to the extent there is any conflict
between the provisions of this Article 1 and any other provisions of this Lease,
the provisions of this Article 1 shall control. Any capitalized term not defined
in this Lease shall have the meaning set forth in the Glossary that appears at
the end of this Lease.

 

Building:

   The Building located at 2000 Sierra Point Parkway, Brisbane California 94005,
consisting of approximately 218,500 square feet of Rentable Area

Premises:

   The area shown on Exhibit A. The Premises are located on the fifth and sixth
floors and known as suite numbers 501 and 600.

Rentable Area of Premises:

   28,479 square feet of Rentable Area

Term:

   Sixty (60) Months

Scheduled Date for

  

Delivery of Premises:

   September 1, 2006

Commencement Date:

   The last to occur of (i) Substantial Completion of the Tenant Improvements
(as defined in the Work Letter) or (ii) fourteen (14) days after Tenant has been
allowed early occupancy of the Premises for purposes of preparing the Premises
for its occupancy

Rent Commencement Date:

   Commencement Date

Expiration Date:

   Sixty (60) Months following the Commencement Date

Base Rent Schedule:

  

 

Period

  

Monthly Rate

Per Square Foot

  

Monthly

Base Rent

Commencement Date – Month 5

   $2.30 (abated)    $65,501.70 (abated)

Month 6 – Month 12

   $2.30    $65,501.70

Month 13 – Month 24

   $2.40    $68,349.60

Month 25– Month 36

   $2.50    $71,197.50

Month 37 – Month 48

   $2.60    $74,045.40

Month 49 – Month 60

   $2.70    $76,893.30

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Tenant’s Pro Rata Share:

   13.03%

Base Year:

   Calendar Year 2006

Security Deposit:

   Two hundred thousand dollars ($200,000), reducing to one hundred thousand
dollars ($100,000) after Month 30 of the Lease Term, on condition that there be
no continuing Event of Default. The Security Deposit may be in cash or, at
Tenant’s option, in the form of a letter of credit.

Guarantor:

   none

Parking:

   94 unreserved spaces

Use:

   General office use and related lawful purposes

Addresses for Notice:

  

Landlord:

  

Clarendon Hills Investors, LLC

101 Redwood Shores Parkway, Suite 100

Redwood City, CA 94065

Attention: Stephen P. Diamond

with a copy to:

  

Kent Mitchell, Esq.

Mitchell, Herzog & Klingsporn, LLP

550 Hamilton Avenue

Palo Alto, CA 94301

Tenant (before Commencement Date):

     

CoTherix, Inc.

5000 Shoreline Court, Suite 101

South San Francisco, CA 94080

Attn: CFO

Tenant (after Commencement Date):

     

CoTherix, Inc.

2000 Sierra Point Parkway, Suite 600

Brisbane, CA 94005

Attn: CFO

with a copy to:

  

Greenberg Traurig, LLP

1900 University Avenue, 5th Floor

East Palo Alto, CA 94303

Attn: Toni Pryor Wise

Brokers:

   BT Commercial (Landlord’s Broker)    BT Commercial (Tenant’s Broker)

 

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Rent (defined in Section 5.2) is payable to the order of Clarendon Hills
Investors, LLC at the following address:   

Clarendon Hills Investors, LLC

2000 Sierra Point Pkwy., Management Office

Brisbane, CA 94005

Normal Business Hours:   

7:00 a.m. to 6:00 p.m. Monday through Friday

 

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2. PREMISES

2.1. Premises. Subject to the terms, covenants and conditions set forth in this
Lease, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
those premises (the “Premises”) shown on the building plan attached as
Exhibit A. The approximate total Rentable Area of the Premises is specified in
Article 1. The building in which the Premises shall be located is sometimes
referred to herein as the “Building”. Notwithstanding anything to the contrary
contained in this Lease, Landlord hereby reserves the exclusive right to the
exterior side walls, rear walls and roof of the Building.

2.2. Common Area. Landlord hereby grants to Tenant and its employees, agents,
contractors and invitees (collectively, “Tenant’s Agents”) a non-exclusive
license to use the public areas, sidewalks, driveways, parking areas and other
public amenities (the “Common Area”) associated with the Premises during the
Term. Together, the Premises, the Building and the Common Area are sometimes
referred to in this Lease as the “Property.” Tenant’s rights to the Common Area
shall be subject to the Rules and Regulations described in Section 23.1 and to
Landlord’s reserved rights described in Article 16.

2.3. Parking. Tenant shall have the right to use the number of parking spaces
specified in Article 1. Tenant’s license shall not be assigned, sublet or
otherwise transferred separately from the Premises. Tenant agrees that neither
Tenant nor Tenant’s Agents shall use parking spaces in excess of the number of
spaces allocated to Tenant or in areas designated for other uses. Landlord shall
have the right, at Landlord’s sole discretion, to specifically designate the
location of Tenant’s parking spaces within the parking areas of the Common Area,
but shall use reasonable efforts to locate such spaces as close as possible to
the Building. Tenant’s designated parking spaces (if any) may be relocated by
Landlord from time to time upon written notice. Tenant shall not at any time
park, or permit the parking of the trucks or vehicles of Tenant or Tenant’s
Agents in any portion of the Common Area not designated by Landlord for such
use. Tenant shall not park nor permit to be parked any inoperative vehicles or
store any materials or equipment on any portion of the parking area or other
areas of the Common Area. Tenant agrees to assume responsibility for compliance
by Tenant’s employees and agents acting within the scope of their agency with
the parking provisions contained in this Section. Tenant hereby authorizes
Landlord at Tenant’s expense to attach violation stickers or notices to such
vehicles not parked in compliance with this Section and to tow away any such
vehicles. In addition, a specific section of the parking area may be set aside
by Landlord for visitor parking for the Property.

2.4. Fitness Center. Tenant’s employees may use the existing fitness center
facilities located in the Building (“Fitness Center”) on a non-exclusive basis
at no charge during the Term, subject to the Rules and Regulations, so long as
Landlord operates the Fitness Center as part of the Common Area..

2.5. Conference Center. Subject to Landlord’s reserved rights described in
Article 16, Tenant may utilize the building conference center without charge on
two (2) days per quarter and at other times subject to the Rules and Regulations
for Landlord’s standard charge.

3. ACCEPTANCE

Except as provided in Section 9.1 and Exhibit E (the Work Letter), the Premises
as furnished by Landlord consist of the improvements as they exist as of the
Effective Date and Landlord shall have no obligation for construction work or
improvements on or to the Premises,

 

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the Building or the Common Area. Prior to entering into this Lease, Tenant has
made a thorough and independent examination of the Property and all matters
related to Tenant’s decision to enter into this Lease. Tenant is thoroughly
familiar with all aspects of the Property and is satisfied that it is in an
acceptable condition and meets Tenant’s needs. Tenant does not rely on, and
Landlord does not make, any express or implied representations or warranties as
to any matters including, without limitation, (a) the physical condition of the
Property, the Building Structure, or the Building Systems, (including, without
limitation, indoor air quality), (b) the existence, quality, adequacy or
availability of utilities serving the Property, (c) the use, habitability,
merchantability, fitness or suitability of the Premises for Tenant’s intended
use, (d) the likelihood of deriving business from Tenant’s location or the
economic feasibility of Tenant’s business, (e) Hazardous Materials in the
Premises, or on, in under or around the Property, (f) zoning, entitlements or
any laws, ordinances or regulations which may apply to Tenant’s use of the
Premises or business operations, or (g) any other matter. Tenant has satisfied
itself as to such suitability and other pertinent matters by Tenant’s own
inquiries and tests into all matters relevant in determining whether to enter
into this Lease. Subject to Section 9.1 and Exhibit E (the Work Letter), Tenant
accepts the Premises in their existing “as is” condition. Tenant shall, by
entering into and occupying the Premises, be deemed to have accepted the
Premises and to have acknowledged that the same are in good order, condition and
repair. Upon the Delivery of the Premises, Tenant shall execute and deliver to
Landlord the Acceptance Form attached here to Exhibit D.

4. TERM

4.1. Term. The Premises are leased for a term (the “Term”) commencing on the
Commencement Date and expiring on the Expiration Date. As of the Effective Date,
the parties anticipate that the Premises will be delivered to Tenant for the
construction of the Tenant Improvement Work described in Exhibit B on or before
the Scheduled Date for Delivery of the Premises. The Term shall end on the
Expiration Date, or such earlier date on which this Lease terminates pursuant to
its terms. The date upon which this Lease actually terminates, whether by
expiration of the Term or earlier termination pursuant to the terms of this
Lease, is sometimes referred to in this Lease as the “Termination Date.” Upon
delivery of possession, Landlord and Tenant shall execute an Agreement Regarding
Commencement Date, Rent Commencement Date, Expiration Date, Base Rent and
Rentable Area substantially in the form of Exhibit B. Such notice shall be
executed promptly after all of the information set forth in the notice has been
determined; provided that failure to do so shall not in any way affect either
party’s rights or obligations under this Lease.

4.2. Failure to Deliver Possession. If for any reason Landlord cannot deliver
possession of the Premises to Tenant on or prior to the Scheduled Date for
Delivery of the Premises, then the validity of this Lease and the obligations of
Tenant under this Lease shall not be affected and Tenant shall have no claim
against Landlord arising out of Landlord’s failure to deliver possession of the
Premises on the Scheduled Date for Delivery of the Premises. In the event
Landlord has not delivered the Premises to Tenant within sixty (60) days after
the Scheduled Date for Delivery of the Premises (plus the number of days of
Tenant Delay, as that term is defined in the Work Letter and any delays caused
by Force Majeure), Tenant shall have the right to terminate this Lease by
delivery to Landlord of a termination notice (the “Termination Notice”) which
shall be effective thirty (30) days after receipt by Landlord, unless within
such 30-day period the Premises are delivered to Tenant. In the event Landlord
has not delivered the Premises to Tenant within one hundred eighty (180) days
after the Scheduled Date for Delivery of the Premises (plus the number of days
of Tenant Delay, as that term is defined in the Work Letter, but without
including

 

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any delays caused by force majeure, including but not limited to delays caused
by weather, action of the elements, war, riot or civil insurrection, general
building moritoria, labor disputes, inability to procure or a general shortage
of labor or materials in the normal channels of trade, delay in transportation;
delay in inspections; or any other cause beyond the reasonable control of
Landlord), Tenant shall have the right to terminate this Lease by delivery to
Landlord of a Termination Notice. The event Tenant elects to terminate this
Lease, Tenant must deliver the Termination Notice to Landlord prior to the date
the Premises are delivered to Tenant. Upon such termination, Landlord shall
immediately return the Security Deposit, prepaid rent and any other amounts
delivered by Tenant to Landlord hereunder and thereupon, this Lease shall
terminate and neither party shall have any further obligation or liability to
the other under this Lease.

4.3. Early Possession. Tenant shall have the right to take possession of the
Premises up to 30 days before the Commencement Date for the sole purpose of
performing improvements or installing furniture, voice and data cabling,
equipment or other personal property, provided that such action does not
interfere with any work being performed by the Landlord or the Landlord’s timely
delivery of the Premises. In addition, Tenant shall have the right to take
possession of the Premises up to 14 days before the Commencement Date for the
sole purpose of performing improvements or installing furniture, voice and data
cabling, equipment or other personal property. Any such early possession shall
be subject to the terms and conditions of this Lease, provided that Tenant shall
not be obligated to pay Rent (defined in Section 5.2).

4.4. Renewal Option. Tenant shall have two (2) successive options (the “Renewal
Option”) to extend the Term of the Lease for the entire Premises then being
leased to Tenant for a period of three (3) years each (the “Renewal Term”). Each
Renewal Term shall commence on the day after the Expiration Date. Each Renewal
Option shall be void if an uncured default by Tenant exists, either at the time
of exercise of the Renewal Option or the time of commencement of the Renewal
Term, with respect to which Tenant has received notice and has had the
opportunity to cure pursuant to this Agreement. Each Renewal Option must be
exercised, if at all, by written notice from Tenant to Landlord given not more
than twelve (12) months and not less than nine (9) months prior to the
expiration of the current Term. Each Renewal Term shall be upon the same terms
and conditions as the original Term, except that (a) the Base Rent payable
pursuant to Section 4.1 with respect to the Renewal Term shall be equal to the
Prevailing Market Rent as of the commencement of the Renewal Term, as determined
pursuant to Exhibit C; (b) Tenant shall not be entitled to any tenant
improvement allowance during the Renewal Term; and (c) from and after the
exercise of the Renewal Option, (i) all references to “Expiration Date” shall be
deemed to refer to the last day of each Renewal Term, and (ii) all references to
“Term” shall be deemed to include the Renewal Term. The Renewal Option is
personal to Tenant and shall be inapplicable and null and void if Tenant sublets
or assigns its interest under this Lease, other than to a Permitted Transferee
(defined below)

5. RENT

5.1. Base Rent. Commencing upon the Rent Commencement Date, and thereafter
during the Term, Tenant shall pay to Landlord the monthly Base Rent specified in
Article 1 on or before the first day of each month, in advance, at the address
specified for Landlord in Article 1, or at such other place as Landlord
designates in writing, without any prior notice or demand and without any
deductions or setoff whatsoever (except as otherwise expressly provided in this
Lease). Tenant shall pay the first month’s Base Rent in advance, upon execution
of this Lease and such prepaid rent shall be applied to the first full month for

 

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which Base Rent is due hereunder. If the Rent Commencement Date occurs on a day
other than the first day of a calendar month, or the Termination Date occurs on
a day other than the last day of a calendar month, then the Base Rent for such
fractional month will be prorated on the basis of the actual number of days in
such month. The Rentable Area of the Premises shall be conclusively presumed to
be as stated in Article 1, and shall not be subject to adjustment by either
Landlord or Tenant during the Term.

5.2. Additional Rent. All sums due from Tenant to Landlord under the terms of
this Lease (other than Base Rent) shall be additional rent (“Additional Rent”),
including without limitation the charges for Tenant’s Pro Rata Share of
Operating Expenses (described in Article 7). All Additional Rent that is payable
to Landlord shall be paid at the time and place that Base Rent is paid, except
if otherwise provided in this Lease. Landlord will have the same remedies for a
default in the payment of any Additional Rent as for a default in the payment of
Base Rent. Together, Base Rent and Additional Rent are sometimes referred to in
this Lease as “Rent”.

5.3. Late Payment. Any unpaid Rent shall bear interest from the date due until
paid at the lower of the “Reference Rate” announced by Bank of America (San
Francisco) plus 5% or the maximum interest rate allowed by law (the “Interest
Rate”). In addition, Tenant recognizes that late payment of any Rent will result
in administrative expense to Landlord, the extent of which expense is difficult
and economically impracticable to determine. Therefore, Tenant agrees that if
Tenant fails to pay any Rent within five (5) days after its due date, provided
that Landlord notifies Tenant at the time such charge accrues that it elects to
charge a late charge, an additional late charge of five percent (5%) of the sums
so overdue shall become immediately due and payable. Tenant agrees that the late
payment charge is a reasonable estimate of the additional administrative costs
and detriment that will be incurred by Landlord as a result of such failure by
Tenant. In the event of nonpayment of interest or late charges on overdue Rent,
Landlord shall have, in addition to all other rights and remedies, the rights
and remedies provided in this Lease and by law for nonpayment of Rent. Late
charges and interest shall not accrue on Rent which is being disputed by Tenant;
additionally, late charges and interest shall not be charged on the first late
payment to occur in any lease year, provided that such payment is made within
the thirty (30) days of the date due.

5.4. Security Deposit. Concurrently with the execution of this Lease, Tenant
shall deliver to Landlord the Security Deposit described in Article 1. The
Security Deposit shall be held by Landlord as security for the faithful
performance of this Lease by Tenant of all of the terms, covenants and
conditions of this Lease. If there is an Event of Default by Tenant with respect
to any provisions of this Lease (including but not limited to the payment of
Rent, then Landlord may, without waiving any of Landlord’s other rights or
remedies under this Lease, apply the Security Deposit in whole or in part to
remedy any failure by Tenant to pay any sums due under this Lease, to perform
any other obligations of Tenant contained in this Lease, or to compensate
Landlord for any loss or damages which Landlord may suffer as a result thereof,
including without limitation any lost rent to which Landlord is entitled in the
event the Lease terminates or is rejected as a result of any of the foregoing.
Should Landlord so apply any portion of the Security Deposit, Tenant shall
replenish the Security Deposit to the original amount within ten (10) business
days after written demand by Landlord. Landlord shall not be required to keep
the Security Deposit separate from its general funds, and Tenant shall not be
entitled to interest on the Security Deposit.

 

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6. USE OF PREMISES AND CONDUCT OF BUSINESS

6.1. Permitted Use. Tenant may use and occupy the Premises during the Term
solely for the uses specified and permitted in Article 1 and for no other
purpose without the prior written consent of Landlord, such consent to be
granted or withheld in Landlord’s reasonable discretion. Tenant’s use of the
Property shall in all respects comply with all Applicable Laws (as defined in
Section 11.1).

6.2. Prohibited Uses. Tenant shall not use the Premises or allow the Premises to
be used for any illegal purpose, or so as to create waste, or constitute a
private or public nuisance. Tenant shall not place any loads upon the floors,
walls, or ceiling which endanger the structure, or place any Hazardous Material
in the drainage system of the Premises, or overload existing electrical or other
mechanical systems. Tenant shall not use any machinery or equipment which causes
any substantial noise or vibration. No waste materials or refuse shall be dumped
upon or permitted to remain upon any part of the Premises or outside of the
Premises except in trash containers placed inside exterior enclosures designated
by Landlord for that purpose or inside of the Premises. No materials, supplies,
equipment, finished products or semi-finished products, raw materials or
articles of any nature shall be stored upon or permitted to remain outside the
Premises or on any portion of the Common Area unless otherwise approved by
Landlord in its sole discretion. No loudspeaker or other device, system or
apparatus which can be heard outside the Premises shall be used in or at the
Premises without the prior written consent of Landlord. No explosives or
firearms shall be brought into the Premises.

7. BUILDING SERVICES; OPERATING EXPENSES

7.1. Building Services.

(a) Landlord agrees to furnish Tenant with the following services: (1) Water
service for use in the lavatories on each floor on which the Premises are
located and for use within the Premises in any plumbed areas; (2) Heat and air
conditioning in season during Normal Business Hours, at such temperatures and in
such amounts as are standard for comparable buildings or as required by
governmental authority. Tenant, upon such advance notice as is reasonably
required by Landlord, shall have the right to receive HVAC service during hours
other than Normal Business Hours. Tenant shall pay Landlord the standard charge
for the additional service as reasonably determined by Landlord from time to
time (which amount as of the Effective Date is $50.00 per hour per full or
partial floor); (3) Maintenance and repair of the Property as described in
Section 8.1; (4) Janitor service on Business Days. If Tenant’s use, floor
covering or other improvements require special services in excess of the
standard service for the Building, Tenant shall pay the additional cost
attributable to the special services, but such charge shall in no event include
any profit increment or markup for Landlord; (5) Elevator service;
(6) Electricity to the Premises for general office use; and (7) such other
services as Landlord reasonably determines are necessary or appropriate for the
Property.

(b) Tenant shall have access to the Premises via card key access 24 hours per
day, 7 days per week. Landlord shall work with Tenant to provide access to the
Building by Tenant’s invitees as early as 6:00 a.m. on reasonable advance
notice.

(c) Landlord’s failure to furnish, or any interruption or termination of,
services due to the application of Laws, the failure of any equipment, the
performance of repairs, improvements or alterations, or the occurrence of any
event or cause beyond the reasonable control of Landlord shall not render
Landlord liable to Tenant, constitute a constructive eviction of Tenant, give
rise to an abatement of Rent, nor relieve Tenant from the obligation to fulfill
any covenant or agreement, subject only to the provisions of Section 17.1.

 

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7.2. Operating Expenses. “Operating Expenses” means the total costs and expenses
paid or incurred by Landlord in connection with the ownership, management,
operation, maintenance, repair and replacement of the Property, including,
without limitation, all costs of:

(a) taxes, assessments and charges levied upon or with respect to the Property
or any personal property of Landlord used in the operation of the Property, or
on Landlord’s interest in the Property or its personal property therein (“Real
Estate Taxes”). Real Estate Taxes shall include, without limitation, all general
real property taxes and general and special assessments, charges, fees, or
assessments for transit, housing, police, fire, or other governmental services
or purported benefits to the Property or the occupants thereof, service payments
in lieu of taxes that are now or hereafter levied or assessed against Landlord
by the United States of America, the State of California or any political
subdivision thereof, or any other political or public entity, and shall also
include any other tax, assessment or fee, however described, that may be levied
or assessed as a substitute for, or as an addition to, in whole or in part, any
other Real Estate Taxes, whether or not now customary or in the contemplation of
the parties as of the Effective Date. Real Estate Taxes shall also include
reasonable legal fees, costs, and disbursements incurred in connection with
proceedings to contest, determine, or reduce Real Estate Taxes. Real Estate
Taxes shall not include franchise, transfer, succession, gift, inheritance,
gross receipts or capital stock taxes or income taxes measured by the net income
of Landlord unless, due to a change in the method of taxation, any of such taxes
is levied or assessed against Landlord as a substitute for, or as an addition
to, in whole or in part, any other tax that would otherwise constitute a Real
Estate Tax.

(b) repair, maintenance, replacement and supply of air conditioning,
electricity, steam, water, heating, ventilating, mechanical, escalator and
elevator systems, sanitary and storm drainage systems and all other utilities
and mechanical systems (the “Building Systems”); provided, however, the cost of
any capital repair or improvements shall only be included in Operating Expenses
to the extent provided in Section 7.2(n) below;

(c) landscaping and gardening of the Common Area;

(d) lighting, repaving, repairing, maintaining and restriping of parking areas
and sidewalks; provided, however, the cost of any capital improvements shall
only be included in Operating Expenses to the extent provided in Section 7.2(n)
below;

(e) lighting, repairs and maintenance to the Common Area;

(f) repair, maintenance and replacement of any security systems and fire
protection systems installed in the Premises; provided, however, the cost of any
capital improvements shall only be included in Operating Expenses to the extent
provided in Section 7.2(n) below;

(g) general maintenance, janitorial services, trash removal, cleaning and
service contracts and the cost of all supplies, tools and equipment required in
connection therewith;

 

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(h) all premiums and costs for insurance carried by Landlord on the Premises,
the Common Area and the Property, or in connection with the use or occupancy
thereof (including all amounts paid as a result of loss sustained that would be
covered by such policies but for deductibles, but excluding in any event any
deductibles on policies of earthquake insurance), including, but not limited to,
the premiums and costs of fire and extended coverage, vandalism and malicious
mischief, public liability and property damage, worker’s compensation insurance,
rental income insurance and any other insurance commonly carried by prudent
owners of comparable buildings; provided, however, that the Landlord may, but
shall not be obligated to carry earthquake insurance, if such insurance is
available at a commercially reasonable rates;

(i) wages, salaries, payroll taxes and other labor costs and employee benefits
for all persons engaged in the operation, management, maintenance and security
of the Property;

(j) management fees at commercially reasonable rates (whether or not Landlord
employs a third party managing agent);

(k) fees, charges and other costs of all independent contractors engaged by
Landlord to provide services benefiting the Property;

(l) license, permit and inspection fees;

(m) the cost of supplies, tools, machines, materials and equipment used in
operation and maintenance of the Common Area;

(n) any capital improvements to the Property; provided that the cost of any such
capital improvements shall be amortized over the useful life of the improvement
in question (determined in accordance with GAAP, consistently applied), together
with interest on the unamortized balance at the Interest Rate;

(o) [intentionally omitted];

(p) audit and bookkeeping fees, legal fees and expenses incurred in connection
with the operation or management of the Property;

(q) [intentionally omitted];

(r) legal and accounting services benefiting the Property.

Notwithstanding anything in the definition of Operating Expenses to the
contrary, Operating Expenses shall not include the following:

(i) cost of repairs or replacements occasioned by fire, windstorm or other
casualty, the costs of which are covered by insurance required to be maintained
by Landlord hereunder or reimbursed by governmental authorities in eminent
domain;

(ii) brokerage commissions, origination fees, points, mortgage recording taxes,
title charges and other costs or fees incurred in connection with any financing
or refinancing or transfer of the Building; interest, principal, points and fees
on debts or amortization on any mortgage or mortgages or any other debt
instrument encumbering the Property;

 

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(iii) legal fees, leasing commissions, finders’ fees, cash allowances, buy-out
amounts, advertising expenses, promotional expenses, and other costs of a
similar nature incurred in the leasing of space at the Property; legal fees for
the negotiation or enforcement of leases (including without limitation the
surrender, termination or modification of any lease of space in the Building) or
with financing transactions; legal fees and costs in connection with the
maintenance of Landlord’s entity or its internal organization;

(iv) ground rent or any other payments paid under any present or future ground
or overriding or underlying lease and/or grant affecting the Property and/or the
Premises (other than payments which, independent of such lease, would constitute
an Operating Expense hereunder); and

(v) costs incurred due to a violation of the provisions of this Lease by
Landlord;

(vi) costs arising from the presence of any Hazardous Materials, including
investigation, cleanup or monitoring costs, or the violation of Environmental
Laws not caused by Tenant or its agents;

(vii) the cost of redecorating or special cleaning or similar services to
individual tenant spaces, not provided on a regular basis to other tenants of
the Building;

(viii) wages or salaries paid to executive personnel of Landlord not providing
full-time service at the Building;

(ix) Any costs incurred in the ownership of the Building or the maintenance of
the Landlord’s entity status, as opposed to the operation and maintenance of the
Building, including Landlord’s income taxes, excess profit taxes, franchise
taxes or similar taxes on Landlord’s business; preparation of income tax
returns; corporation, partnership or other business form organizational
expenses; franchise taxes; filing fees;

(x) expenses in connection with services or other benefits of a type which are
not Building standard but which are provided to any other tenant or occupant;

(xi) any items to the extent such items are required to be reimbursed to
Landlord by Tenant (other than through Tenant’s additional rent), or by other
tenants or occupants of the Building or by third parties;

(xii) depreciation or amortization charges (except as specifically included in
Section 7.2(n) above);

(xiii) the cost of constructing tenant improvements or installations for any
tenant in the Building, including any relocation costs and any costs properly
allocable to employees or contractors engaged in the construction of such
improvements or installations;

 

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(xiv) advertising and promotional expenses or brochures with respect to the
Building or the Property;

(xv) overhead and profit increment paid to subsidiaries or affiliates of
Landlord for services on or to the Property, to the extent that the costs of
such services exceed market-based costs for such services rendered by
unaffiliated persons or entities of similar skill, competence and experience;

(xvi) penalties, fines, legal expenses, or late payment interest incurred by
Landlord due to violation by Landlord, or Landlord’s agents, contractors or
employees, of either the payment terms and conditions of any lease or service
contract covering space in the Building or Landlord’s obligations as owner of
the Building (such as late payment penalties and interest on real estate taxes,
late payment of utility bills);

(xvii) any compensation paid to clerks, attendants or other persons in any
commercial concession operated by Landlord in the Building from which Landlord
receives any form of income whatsoever, whether or not Landlord actually makes a
profit from such concession;

(xviii) costs incurred in connection with correcting latent defects or
remediating Hazardous Materials Contamination in the Building, or in repairing
or replacing Building equipment, where such repair or replacement results from
original defects in design, manufacture or installation rather than from
ordinary wear and tear or use; or

(xix) costs of making the improvements currently planned for the building lobby,
parking lot, second floor and common areas.

7.3. Occupancy Assumption. If the Building is not at least 95% occupied during
any calendar year or if Landlord is not supplying services to at least 95% of
the total Rentable Area of the Building at any time during a calendar year,
Operating Expenses shall, at Landlord’s option, be determined as if the Building
had been 95% occupied and Landlord had been supplying services to 95% of the
Rentable Area of the Building during that calendar year. If Tenant pays for its
Pro Rata Share of Operating Expenses based on increases over a “Base Year” and
Operating Expenses for a calendar year are determined as provided in the prior
sentence, Operating Expenses for the Base Year shall also be determined as if
the Building had been 95% occupied and Landlord had been supplying services to
95% of the Rentable Area of the Building The extrapolation of Operating Expenses
under this Section shall be performed by appropriately adjusting the cost of
those components of Operating Expenses that are impacted by changes in the
occupancy of the Building.

7.4. Payment of Operating Expenses. Commencing on the first anniversary of the
Rent Commencement Date, Tenant shall pay to Landlord, as Additional Rent,
Tenant’s Pro Rata Share of the amount, if any, by which Operating Expenses for
each calendar year during the Term exceed Operating Expenses for the Base Year
(“Expense Excess”). In no event, however, shall Expense Excess include Operating
Expenses of a materially different nature or calculated in a materially
different fashion than Operating Expenses in the Base Year. Tenant shall pay one
twelfth of Tenant’s Pro Rata Share of the Expense Excess in advance, on or
before the first day of each month in an amount estimated by Landlord as stated
in a written notice to Tenant. Landlord may by written notice to Tenant revise
such estimates from time to time and Tenant shall thereafter make payments on
the basis of such revised estimates (but not more frequently than once in any
given lease year). With reasonable promptness after the

 

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expiration of each calendar year, but in any event within ninety (90) days after
the end of each calendar year, Landlord will furnish Tenant with a statement
(“Landlord’s Expense Statement”) setting forth in reasonable detail the actual
Operating Expenses for the prior calendar year and the amount of Tenant’s Pro
Rata Share of the Expense Excess. If Tenant’s Pro Rata Share of the actual
Expense Excess for such year exceeds the estimated amounts paid by Tenant for
such year, Tenant shall pay to Landlord (whether or not this Lease has
terminated) the difference between the amount of estimated Tenant’s Pro Rata
Share of Expense Excess paid by Tenant and the actual Tenant’s Pro Rata Share of
Expense Excess within thirty (30) days after the receipt of Landlord’s Expense
Statement. If the total amount paid by Tenant for any year exceeds the actual
amount due from Tenant for that year, the excess shall be credited against the
next installments of Rent due from Tenant to Landlord, or, if after the
Termination Date, the excess shall first be credited against any unpaid Rent and
any remaining excess shall be refunded to Tenant within thirty (30) days of
determination.

Within ninety (90) days after receipt of Landlord’s Expense Statement, Tenant
shall have the right to audit at Landlord’s local offices, at Tenant’s expense,
Landlord’s accounts and records relating to Operating Costs. Such audit shall be
conducted by a certified public accountant approved by Landlord, which approval
shall not be unreasonably withheld. If Landlord has overcharged Tenant, the
amount overcharged shall be paid to Tenant within thirty (30) days after the
audit is concluded, together with interest thereon at the Interest Rate, from
the date such amount was paid until payment of the overcharge is made to
Tenant. In addition, if Landlord’s Expense Statement exceeds the actual
Operating Costs which should have been charged to Tenant by more than five
percent (5%), the cost of the audit up to $10,000 shall be paid by Landlord.

7.5. Proration. If either the Rent Commencement Date or the Termination Date
occurs on a date other than the first or last day, respectively, of a calendar
year, Tenant’s Pro Rata Share of Expense Excess for the year in which the Rent
Commencement Date or Termination Date occurs shall be prorated based on a
365-day year.

7.6. Utility Costs. Landlord shall arrange for the following utilities furnished
to or used at the Premises: water, gas, electricity, sewer service and
non-hazardous waste pick-up. The costs of such utilities shall be included in
Operating Expenses. Tenant shall be responsible for arranging for telephone and
other electronic communications services, at the Premises and shall pay the
costs of such utilities directly. Landlord will work in good faith with Tenant
to provide access to a cable or satellite TV feed to the Premises, subject to
agreement of the parties with respect to allocation of costs of installation and
ongoing monthly service costs.

7.7. Taxes on Tenant’s Property and Business. Tenant shall pay prior to
delinquency all taxes levied or assessed by any local, state or federal
authority upon the conduct of Tenant’s business in the Premises or upon Tenant’s
Property (as defined in Section 9.6). If the assessed value of the Property is
increased by the inclusion of a value placed upon Tenant’s Property, Tenant
shall pay to Landlord, upon written demand, the taxes so levied against
Landlord, or the portion of Landlord’s taxes resulting from said increase in
assessment.

8. REPAIRS, MAINTENANCE AND SERVICES

8.1. Landlord’s Obligations. Except as specifically provided in this Lease,
Landlord shall not be required to furnish any services, facilities or utilities
to the Premises or to Tenant, and Tenant assumes full responsibility for
obtaining and paying for all services, facilities

 

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and utilities to the Premises. Landlord will repair, replace and maintain the
Building Systems, the Common Area, and the structural portions of the Premises
and the Building, including, without limitation, the foundation, floor/ceiling
slabs, roof, curtain wall, exterior glass and mullions, columns, beams, shafts
(including elevator shafts), Common Area stairs, Building standard stairwells
(but not stairs or stairwells installed by the Tenant) and elevators
(collectively, the “Building Structure”), and shall perform all such
maintenance, work and activities diligently and expeditiously to completion, and
in a manner consistent with Class A office buildings located in Brisbane,
California. Landlord shall also provide the Premises with interior and exterior
window washing services and janitorial service and shall provide the Common
Areas with janitorial and landscaping services; provided, however, that Tenant
shall have the right (but not the obligation) to assume responsibility for
providing janitorial services at the Premises. All window washing and janitorial
services, whether provided by Landlord or Tenant, must meet the standards
commensurate with Class A office buildings located in Brisbane, California.
Tenant shall notify Landlord in writing when it becomes aware of the need for
any repair, replacement or maintenance which is Landlord’s responsibility under
this Section of which it becomes aware. The costs of such repair, replacement
and maintenance shall be included in Operating Expenses to the extent provided
in Article 7; provided that, subject to Section 13.5, Tenant shall reimburse
Landlord in full and within thirty (30) business days after written demand for
the cost of any repair to the Property, Building Structure or Building Systems
which is attributable to misuse by Tenant or Tenant’s Agents and is not covered
by Landlord’s insurance. Any such reimbursement shall be Additional Rent. Tenant
hereby waives and releases any right it may have under any law, statute or
ordinance now or hereafter in effect to make any repairs which are Landlord’s
obligation under this Section.

8.2. Tenant’s Obligations. Except as provided in Section 8.1, Tenant assumes
full responsibility for the repair, replacement and maintenance of the Premises,
including, without limitation, all mechanical and other systems and equipment
installed in the Premises by Tenant in connection with its use and occupancy of
the Premises as permitted by this Lease (“Tenant Systems”). Tenant shall take
good care of the Premises and the Tenant Systems and keep the Premises (other
than any areas which are the responsibility of Landlord) and the Tenant Systems
in good working order and in a clean, safe and sanitary condition. All repairs
and replacements by Tenant for which Tenant is responsible are collectively
referred to as the “Tenant Obligations” and shall be made and performed: (a) at
Tenant’s cost and expense, (b) so that same shall be at least equal in quality
to the original work or installation, (c) in a manner and using equipment and
materials that will not impair the operation of or damage the Building Systems,
and (d) in accordance with Article 9 (if applicable), and all Applicable Laws.
Tenant shall cooperate fully and in good faith with Landlord and Landlord’s
property manager in the performance of all such repairs and replacements by
Tenant, and shall perform all such work and activities diligently and
expeditiously to completion, and in a manner consistent with Class A office
buildings located in Brisbane, California. Tenant shall reimburse Landlord
within ten (10) days after written demand as Additional Rent for any
out-of-pocket expenses incurred by Landlord in connection with any repairs or
replacements required to be made by Tenant which Landlord performs pursuant to
this Section 8.2.

8.3. Security. Tenant shall be solely responsible for the security of the
Premises while in or about the Premises. Any security services provided to the
Property by Landlord shall be at Landlord’s sole discretion and Landlord shall
not be liable to Tenant or Tenant’s Agents for any failure to provide security
services or any loss, injury or damage suffered as a result of a failure to
provide security services.

8.4. [intentionally omitted]

 

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8.5. Special Services. If Tenant requests any services from Landlord other than
those for which Landlord is obligated under this Lease, Tenant shall make its
request in writing and Landlord may elect in its sole discretion whether to
provide the requested services. If Landlord provides any special services to
Tenant, Landlord shall charge Tenant for such services at the prevailing rate
being charged for such services by other property owners and property managers
of comparable buildings in the area of the Property, and Tenant shall pay the
cost of such services as Additional Rent within thirty (30) business days after
receipt of Landlord’s invoice.

9. TENANT IMPROVEMENT WORK; ALTERATIONS

9.1. Tenant Improvement Work. Landlord shall deliver the Premises to Tenant with
the Tenant Improvement Work substantially completed consistent with the Work
Letter attached, marked Exhibit E.

9.2. Landlord Consent. Tenant shall not make or permit any alterations to the
Building Systems, and shall not make or permit any alterations, installations,
additions or improvements, structural or otherwise (collectively, “Alterations”)
in or to the Premises or the Building without Landlord’s prior written consent,
which Landlord shall not unreasonably withhold, condition or delay. Landlord
shall respond to any request by Tenant to make any Alteration within ten
(10) business days after receipt of such request for consent from Tenant.
Notwithstanding the foregoing, Landlord’s consent shall not be required in the
case Alterations that do not exceed a total price of Twenty-Five Thousand
Dollars ($25,000) per project and do not affect the Building Systems or the
structural integrity of the Building. All Alterations shall be done at Tenant’s
sole cost and expense, including without limitation the cost and expense of
obtaining all permits and approvals required for any Alterations. Tenant shall
reimburse Landlord within thirty (30) days after written demand as Additional
Rent for any out-of-pocket expenses incurred by Landlord in connection with
Alterations elected to be made and/or any repairs or replacements required to be
made by Tenant, including, without limitation, any reasonable fees charged by
Landlord’s contractors and/or consultants to review plans and specifications
prepared by Tenant.

9.3. Project Requirements. The provisions of this Section 9.3 shall apply to all
Alterations, whether or not requiring Landlord’s approval (unless otherwise
noted):

(a) Prior to entering into a contract for Alterations requiring Landlord’s
approval, Tenant shall obtain Landlord’s written approval, which approval shall
not be unreasonably withheld, conditioned or delayed, of the identity of each of
the design architect and the general contractor.

(b) Before commencing the construction of any Alterations requiring Landlord’s
approval, Tenant shall procure or cause to be procured the insurance coverage
described below and provide Landlord with certificates of such insurance in form
reasonably satisfactory to Landlord. All such insurance shall comply with the
following requirements of this Section and of Section 13.2.

(i) During the course of construction, to the extent not covered by property
insurance maintained by Tenant pursuant to Section 13.2, comprehensive “all
risk” builder’s risk insurance, including vandalism and malicious mischief,
excluding earthquake and flood, covering all improvements in place on the
Premises, all materials and equipment stored at the site and furnished under
contract, and all materials and equipment that

 

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are in the process of fabrication at the premises of any third party or that
have been placed in transit to the Premises when such fabrication or transit is
at the risk of, or when title to or an insurable interest in such materials or
equipment has passed to, Tenant or its construction manager, contractors or
subcontractors (excluding any contractors’, subcontractors’ and construction
managers’ tools and equipment, and property owned by the employees of the
construction manager, any contractor or any subcontractor), such insurance to be
written on a completed value basis in an amount not less than the full estimated
replacement value of Alterations.

(ii) Commercial general liability insurance covering Tenant, Landlord and each
construction manager, contractor and subcontractor engaged in any work on the
Premises, which insurance may be effected by endorsement, if obtainable, on the
policy required to be carried pursuant to Section 13.2, including insurance for
completed operations, elevators, owner’s, construction manager’s and
contractor’s protective liability, products completed operations for one
(1) year after the date of acceptance of the work by Tenant, broad form blanket
contractual liability, broad form property damage and full form personal injury
(including but not limited to bodily injury), covering the performance of all
work at or from the Premises by Tenant, its construction manager, contractors
and subcontractors, and in a liability amount not less than the amount at the
time carried by prudent owners of comparable construction projects, but in any
event not less than Two Million Dollars ($2,000,000) combined single limit,
which policy shall include for the mutual benefit of Landlord and Tenant, bodily
injury liability and property damage liability, and automobile insurance on any
non-owned, hired or leased automotive equipment used in the construction of any
work.

(iii) Workers’ Compensation Insurance approved by the State of California, in
the amounts and coverages required under workers’ compensation, disability and
similar employee benefit laws applicable to the Premises, and Employer’s
Liability Insurance with limits not less than One Million Dollars ($1,000,000)
or such higher amounts as may be required by law.

(c) All construction and other work in connection with any Alterations shall be
done at Tenant’s sole cost and expense and in a first class manner. Tenant shall
construct the Alterations in accordance with all Applicable Laws, and with plans
and specifications that are in accordance with the provisions of this Article 9
and all other provisions of this Lease.

(d) Prior to the commencement of the any Alteration in excess of Ten Thousand
Dollars ($10,000), Landlord shall have the right to post in a conspicuous
location on the Premises and to record in the public records a notice of
Landlord’s nonresponsibility. Tenant covenants and agrees to give Landlord at
least ten (10) days prior written notice of the commencement of any such
Alteration in order that Landlord shall have sufficient time to post such
notice.

(e) Tenant shall take all necessary safety precautions during any construction.

(f) Tenant shall prepare and maintain for any construction requiring Landlord’s
approval (i) on a current basis during construction, annotated plans and
specifications showing clearly all changes, revisions and substitutions during
construction, and (ii) upon completion of construction of any material
Alterations, as-built drawings showing clearly all changes, revisions and
substitutions during construction, including, without limitation, field

 

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changes and the final location of all mechanical equipment, utility lines,
ducts, outlets, structural members, walls, partitions and other significant
features. These as-built drawings and annotated plans and specifications shall
be kept at the Premises and Tenant shall update them as often as necessary to
keep them current. The as-built drawings and annotated plans and specifications
shall be made available for copying and inspection by Landlord at all reasonable
times. Within sixty (60) days after the Alterations have been substantially
completed, Tenant shall, at its cost, make a copy of the as-built drawings and
annotated plans and specifications and deliver the same to Landlord.

(g) Upon completion of the construction of any Alterations in excess of Ten
Thousand Dollars ($10,000) during the Term, Tenant shall file for recordation,
or cause to be filed for recordation, a notice of completion and shall deliver
to Landlord evidence satisfactory to Landlord of payment of all costs, expenses,
liabilities and liens arising out of or in any way connected with such
construction (except for liens that are contested in the manner provided
herein).

9.4. Ownership of Improvements. Except as provided in Section 9.5 or as
otherwise agreed to in writing by the parties at the time such item is
installed, all Alterations and any other appurtenances, fixtures, improvements,
equipment, additions and property permanently attached to or installed in the
Premises at the commencement of or during the Term, shall at the end of the Term
become Landlord’s property without compensation to Tenant, or be removed in
accordance with this Section. Upon written request by Tenant, Landlord shall
notify Tenant in writing at the time of Landlord’s approval of the Alterations
whether or not the proposed Alterations will be required to be removed by Tenant
at the end of the Term and Tenant shall have no obligation to remove any
Alterations that Landlord has not designated in writing for removal. Tenant
shall repair or pay the cost of repairing any damage to the Property caused by
the removal of Alterations. If Tenant fails to perform its repair obligations,
without limiting any other right or remedy, Landlord may on fifteen
(15) business days prior written notice to Tenant perform such obligations at
Tenant’s expense and Tenant shall reimburse Landlord within thirty (30) days
after demand for all out-of-pocket costs and expenses incurred by Landlord in
connection with such repair. Tenant’s obligations under this Section shall
survive the termination of this Lease.

9.5. Tenant’s Personal Property. All furniture, trade fixtures, furnishings,
equipment and articles of movable personal property installed in the Premises by
or for the account of Tenant (except for ceiling and related fixtures, HVAC
equipment and floor coverings, which shall become the property of Landlord at
the end of the Term, and which can be removed without structural or other
material damage to the Property (collectively, “Tenant’s Property”) shall be and
remain the property of Tenant and may be removed by it at any time during the
Term. Tenant shall remove from the Premises all Tenant’s Property on or before
the Termination Date, except such items as the parties have agreed pursuant to
the provisions of this Lease or by separate agreement are to remain and to
become the property of Landlord. Tenant shall repair or pay the cost of
repairing any damage to the Property resulting from such removal, and the
provisions of Section 9.4 above shall apply in the event Tenant fails to do so.
Any items of Tenant’s Property which remain in the Premises after the
Termination Date may, on five (5) business days prior written notice to Tenant,
at the option of Landlord, be deemed abandoned and in such case may either be
retained by Landlord as its property or be disposed of, without accountability,
at Tenant’s expense in such manner as Landlord may see fit.

 

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10. LIENS

Tenant shall keep the Premises free from any liens arising out of any work
performed, material furnished or obligations incurred by or for Tenant. If
Tenant shall not, within thirty (30) days following notice of the imposition of
any such lien, cause the lien to be released of record by payment or posting of
a proper bond, Landlord shall have, in addition to all other remedies provided
in this Lease and by law, the right but not the obligation to cause any such
lien to be released by such means as it shall deem proper, including payment of
the claim giving rise to such lien. All such sums paid by Landlord and all
expenses incurred by it in connection therewith (including, without limitation,
reasonable counsel fees) shall be payable to Landlord by Tenant upon demand with
interest from the date incurred at the Interest Rate. Landlord shall have the
right at all times to post and keep posted on the Premises any notices permitted
or required by law or that Landlord shall deem proper for the protection of
Landlord, the Premises and the Property from mechanics’ and materialmen’s liens,
as more specifically provided in Section 9.3(d).

11. COMPLIANCE WITH LAWS AND INSURANCE REQUIREMENTS

11.1. Applicable Laws. Tenant, at Tenant’s cost and expense, in regard to its
use of the Premises and any Alterations Tenant makes to the Premises, shall
comply with all applicable laws, statutes, codes, ordinances, orders, rules,
regulations, conditions of approval, and requirements, of all federal, state,
county, municipal and other governmental authorities and the departments,
commissions, boards, bureaus, instrumentalities, and officers thereof, and all
administrative or judicial orders or decrees and all permits, licenses,
approvals and other entitlements issued by governmental entities, and rules of
common law, relating to or affecting the Premises or the use, operation or
occupancy of the Premises, whether now existing or hereafter enacted
(collectively, “Applicable Laws”). Notwithstanding anything to the contrary
contained or implied in the foregoing, Landlord shall be solely responsible for
compliance with Applicable Laws and shall make or cause to be made all such
improvements and alterations to the Premises and the Common Areas (including,
without limitation, removing barriers and providing alternative services) as
shall be required to comply with all applicable building codes, laws and
ordinances relating to public accommodations, including the Americans with
Disabilities Act of 1990, 42 U.S.C. §§ 12111 et seq. (the “ADA”), and the ADA
Accessibility Guidelines promulgated by the Architectural and Transportation
Barriers Compliance Board, the public accommodations title of the Civil Rights
Act of 1964, 42 U.S.C. §§ 2000a et. seq., the Architectural Barriers Act of
1968, 42 U.S.C. §§ 4151 et. seq., as amended, Title V of the Rehabilitation Act
of 1973, 29 U.S.C. §§ 790 et. seq., the Minimum Guidelines and Requirements for
Accessible Design, 36 C.F.R. Part 1190, the Uniform Federal Accessibility
Standards, and Title 24 of the California Code of Regulations, as the same may
be amended from time to time, or any similar or successor laws, ordinances and
regulations, now or hereafter adopted. Any Alterations made or performed by
Tenant or any person or entity claiming through or under Tenant pursuant to the
provisions of this Section shall be made in conformity with and subject to the
provisions of Article 9. Tenant, with respect to its use of the Premises and
Alterations Tenant makes to the Premises shall be responsible for compliance
with Applicable Laws from and after the Commencement Date.

11.2. Insurance Requirements. Tenant shall not do anything, or permit anything
to be done, in or about the Premises that would: (a) invalidate any provisions
of or cause any increase in the applicable rates for any fire or other insurance
policies covering the Property or any property located therein (unless Tenant
pays for such increased costs), or (b) result in a refusal by fire insurance
companies of good standing to insure the Property or any

 

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such property in amounts reasonably satisfactory to Landlord (which amounts
shall be comparable to the amounts required by comparable landlords of
comparable buildings), or (c) subjects Landlord to any liability or
responsibility for injury to any person or property by reason of any business
operation being conducted in the Premises. Tenant, at Tenant’s expense, shall
comply with all rules, orders, regulations or requirements of the American
Insurance Association (formerly the National Board of Fire Underwriters) and
with any similar body that shall hereafter perform the function of such
Association.

12. HAZARDOUS MATERIALS

12.1. Definitions. As used in this Lease, the following terms shall have the
following meanings:

(a) “Environmental Activity” means any use, treatment, keeping, storage,
holding, release, emission, discharge, manufacturing, generation, processing,
abatement, removal, disposition, handling, transportation, deposit, leaking,
spilling, injecting, dumping or disposing of any Hazardous Materials from, into,
on or under the Premises, and shall include the exacerbation of any pre-existing
contamination by Tenant or any of Tenant’s Agents.

(b) “Environmental Laws” mean all Applicable Laws, now or hereafter in effect,
relating to environmental conditions, industrial hygiene or Hazardous Materials
on, under or about the Property, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
42 U.S.C. Section 9601, et seq., the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et seq., the Solid Waste Disposal Act, 42 U.S.C.
Section 6901, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., the
Clean Air Act, 42 U.S.C. Section 7401, et seq., the Toxic Substances Control
Act, 15 U.S.C. Section 2601 through 2629, the Safe Drinking Water Act, 42 U.S.C.
Sections 300f through 300j, and any similar state and local laws and ordinances
and the regulations now or hereafter adopted and published and/or promulgated
pursuant thereto.

(c) “Hazardous Material” means any chemical, substance, medical or other waste,
living organism or combination thereof which is or may be hazardous to the
environment or human or animal health or safety due to its radioactivity,
ignitability, corrosivity, reactivity, explosivity, toxicity, carcinogenicity,
mutagenicity, phytotoxicity, infectiousness or other harmful or potentially
harmful properties or effects. Hazardous Materials shall include, without
limitation, petroleum hydrocarbons, including MTBE, crude oil or any fraction
thereof, asbestos, radon, polychlorinated biphenyls (PCBs), methane, lead, urea,
formaldehyde foam insulation, microbial matter (including mold) and all
substances which now or in the future may be defined as “hazardous substances,”
“hazardous wastes,” “extremely hazardous wastes,” “hazardous materials,” “toxic
substances,” “infectious wastes,” “biohazardous wastes,” “medical wastes,”
“radioactive wastes” or which are otherwise listed, defined or regulated in any
manner pursuant to any Environmental Laws.

(d) “Tenant’s Hazardous Materials” means any Hazardous Materials resulting from
the Environmental Activity by Tenant or any of Tenant’s Agents on the Premises.

12.2. Environmental. Landlord hereby informs Tenant that detectable amounts of
Hazardous Materials may have come to be located on, beneath and/or in the
vicinity of the Premises. Landlord makes no representation or warranty with
regard to the environmental condition of the Property.

 

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12.3. Use of Hazardous Materials. Tenant shall not cause or permit any Hazardous
Materials to be used, stored, discharged, released or disposed of in the
Premises or cause any Hazardous Materials to be used, stored, discharged,
released or disposed of in, from, under or about, the Property, or any other
land or improvements in the vicinity of the Property, excepting only the types
and minor quantities of Hazardous Materials which are normally used in
connection with general office uses and then only in strict accordance with all
Applicable Laws, including all Environmental Laws. As of the Commencement Date,
Tenant shall provide Landlord a complete list of all Hazardous Materials
(including MSDS sheets for all such Hazardous Materials) used or stored by
Tenant or any of Tenant’s Agents or subtenants at the Premises, excluding
standard janitorial and office products. Throughout the Term, Tenant shall
continue to update this list so that it remains current. Without limiting the
foregoing, Tenant shall, at its own expense, procure, maintain in effect and
comply with all conditions of any and all permits, licenses, and other
governmental and regulatory approvals required for Tenant’s use of Hazardous
Materials at the Premises, including, without limitation, discharge of
appropriately treated materials or wastes into or through any sanitary sewer
serving the Premises. Tenant shall in all respects handle, treat, deal with and
manage any and all Tenant’s Hazardous Materials in total conformity with all
Environmental Laws and prudent industry practices regarding management of such
Hazardous Materials.

12.4. Remediation of Hazardous Materials. Tenant shall, upon demand of Landlord,
and at Tenant’s sole cost and expense, promptly take all actions to remediate
the Property from the effects of any Tenant’s Hazardous Materials. Such actions
shall include, but not be limited to, the investigation of the environmental
condition of the Property, the preparation of any feasibility studies, reports
or remedial plans, and the performance of any cleanup, remediation, containment,
operation, maintenance, monitoring or restoration work, whether on or off of the
Property. Tenant shall take all actions necessary to remediate the Property from
the effects of such Tenant’s Hazardous Materials to a condition required by any
applicable governmental authority. All work shall be performed by one or more
contractors selected by Tenant and reasonably approved in advance and in writing
by Landlord. Tenant shall proceed continuously and diligently with such
investigatory and remedial actions, provided that in all cases such actions
shall be in accordance with all Applicable Laws. Any such actions shall be
performed in a good, safe and workmanlike manner. Tenant shall pay all costs in
connection with such investigatory and remedial activities, including but not
limited to all power and utility costs, and any and all taxes or fees that may
be applicable to such activities. Tenant shall promptly provide to Landlord
copies of testing results and reports that are generated in connection with the
above activities and any that are submitted to any governmental entity. Promptly
upon completion of such investigation and remediation, Tenant shall permanently
seal or cap all monitoring wells and test holes in accordance with sound
engineering practice and in compliance with Applicable Laws, remove all
associated equipment, and restore the Property to the maximum extent possible,
which shall include, without limitation, the repair of any surface damage,
including paving, caused by such investigation or remediation.

12.5. Environmental Indemnity. Tenant shall indemnify, defend (by counsel
reasonably acceptable to Landlord), protect and hold Landlord and Landlord’s
trustees, directors, officers, agents and employees and their respective
successors and assigns (collectively, “Landlord’s Agents”), free and harmless
from and against any and all claims, liabilities, penalties, forfeitures, losses
or expenses (including reasonable attorneys’ and consultants’ fees and oversight
and response costs) to the extent arising from (a) Environmental

 

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Activity by Tenant or Tenant’s Agents; or (b) failure of Tenant or Tenant’s
Agents to comply with any Environmental Law with respect to Tenant’s
Environmental Activity; or (c) Tenant’s failure to remove Tenant’s Hazardous
Materials as required in Section 12.4. Matters referred to in subparts (a),
(b) and (c) in the previous sentence are referred to herein collectively as
“Environmental Indemnity Matters.” Tenant’s obligations hereunder shall include,
but not be limited to, the burden and expense of defending all claims, suits and
administrative proceedings (with counsel reasonably approved by Landlord), even
if such claims, suits or proceedings are groundless, false or fraudulent;
conducting all negotiations of any description; and promptly paying and
discharging when due any and all judgments, penalties, fines or other sums due
against or from Landlord or the Premises. As a condition to Tenant’s obligations
under this Section, Tenant shall receive timely notice of any Environmental
Indemnity Matter. Prior to retaining counsel to defend such claims, suits or
proceedings, Tenant shall obtain Landlord’s written approval of the identity of
such counsel, which approval shall not be unreasonably withheld, conditioned or
delayed. Tenant acknowledges that Landlord, as the owner of the Property, shall
have the right at its election and at Tenant’s expense, to negotiate, defend,
approve and appeal any action taken or order issued with regard to Tenant’s
Hazardous Materials by any applicable governmental authority; provided, however,
that Tenant shall have the right to participate in any such negotiations and to
approve any settlements, in the exercise of its reasonable discretion. In the
event Tenant’s failure to surrender the Premises at the expiration or earlier
termination of this Lease free of Tenant’s Hazardous Materials prevents Landlord
from reletting the Premises, or reduces the fair market and/or rental value of
the Premises or any portion thereof, Tenant’s indemnity obligations shall
include all losses to Landlord arising therefrom. Notwithstanding the foregoing,
Tenant shall in no event be responsible for consequential damages.

12.6. No Lien. Tenant shall not suffer any lien to be recorded against the
Property as a consequence of any Tenant’s Hazardous Materials, including any
so-called state, federal or local “super fund” lien related to the remediation
of any Tenant’s Hazardous Materials in or about the Property.

12.7. Investigation. Subject to Tenant’s reasonable security requirements,
Landlord shall have the right to enter and conduct an inspection of the
Premises, at any reasonable time and upon reasonable advance notice, to
determine whether Tenant is complying with the terms of this Lease, including
but not limited to the compliance of the Property and the Premises and the
activities thereon with Environmental Laws (the “Environmental Investigation”).
Landlord shall have the right, but not the obligation, to retain at its expense
an independent professional consultant to enter the Premises to conduct such an
inspection, and to review any report prepared by or for Tenant concerning such
compliance. In the event the Environmental Investigation identifies any
deficiencies in the compliance of the Premises with Environmental Laws due to
any Environmental Activity by Tenant or Tenant’s Agents, Tenant shall promptly
correct any such deficiencies identified in the Environmental Investigation, and
document to Landlord that corrective action has been taken. In such event,
Tenant shall also reimburse Landlord for the reasonable cost of the
Environmental Investigation. If the Environmental Investigation identifies any
such deficiency in compliance of the Premises with Environmental Laws due to any
Environmental Activity by Tenant or Tenant’s Agents, then, within nine
(9) months of the date of the Environmental Investigation, Landlord may request
a detailed review of the status of such violation by a consultant selected by
Landlord (the “Supplemental Investigation”). Tenant shall pay for the reasonable
cost of any Supplemental Investigation. A copy of the Supplemental Investigation
shall be promptly supplied to Landlord and Tenant when it becomes available.

 

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12.8. Right to Remediate. Should Tenant fail to perform or observe any of its
obligations or agreements in this Lease pertaining to Hazardous Materials or
Environmental Laws, then Landlord shall have the right, but not the obligation,
without limitation of any other rights of Landlord hereunder, to enter the
Premises personally or through Landlord’s agents, employees and contractors and
perform the same, upon reasonable prior notice to Tenant and opportunity to
cure. Tenant agrees to indemnify Landlord for the costs thereof and liabilities
therefrom as set forth above in this Article 12.

12.9. Notices. Tenant shall promptly notify Landlord of any inquiry, test,
claim, investigation or enforcement proceeding by or against Tenant or the
Premises or the Property known to Tenant concerning any Hazardous Materials.
Tenant shall immediately notify Landlord of any release or discharge of
Hazardous Materials on, in, under or about the Property by Tenant.

12.10. Surrender. Tenant shall surrender the Property and the Premises to
Landlord, upon the expiration or earlier termination of the Lease, free of
Tenant’s Hazardous Materials in accordance with the provisions of this Article
12.

12.11. Survival; Insurance. The provisions of this Article 12 shall survive the
expiration or earlier termination of this Lease. The provisions of Article 13
(Insurance) shall not limit in any way Tenant’s obligations under this Article
12.

13. INDEMNITY; INSURANCE

13.1. Indemnity. Except as to Environmental Indemnity Matters, as to which
Section 12.5 shall apply, Tenant shall indemnify, protect, defend and save and
hold Landlord and Landlord’s Agents harmless from and against any and all
losses, costs, liabilities, claims, judgments, liens, damages (excluding
consequential damages) and expenses, including, without limitation, reasonable
attorneys’ fees and costs and reasonable investigation costs, incurred in
connection with or arising from: (a) any default by Tenant in the observance or
performance of any of the terms, covenants or conditions of this Lease on
Tenant’s part to be observed or performed, or (b) the use or occupancy or manner
of use or occupancy of the Property by Tenant and Tenant’s Agents, (c) the
condition of the Premises, and any occurrence on the Premises (including injury
to or death of any person, or damage to property) from any cause whatsoever,
except to the extent caused by the negligence or willful misconduct of Landlord
or the breach by Landlord or its obligations under this Lease, and (d) any acts
or omissions or negligence of Tenant or of Tenant’s Agents, in, on or about the
Property. In case any action or proceeding be brought, made or initiated against
Landlord relating to any matter covered by Tenant’s indemnification obligations
under this Section or under Section 12.5, Tenant, upon notice from Landlord,
shall at its sole cost and expense, resist or defend such claim, action or
proceeding by counsel reasonably approved by Landlord, which consent shall not
be unreasonably withheld, delayed or conditioned. Tenant’s obligations under
this Section shall survive the expiration or earlier termination of this Lease.
Notwithstanding the foregoing, Tenant shall in no event be responsible for
consequential damages.

13.2. Insurance. Tenant shall procure at its sole cost and expense and keep in
effect during the Term:

(a) commercial general liability insurance covering Tenant’s operations in the
Premises and the use and occupancy of the Premises and the Property and any part
thereof by Tenant. Such insurance shall include broad form contractual liability

 

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insurance coverage insuring Tenant’s obligations under this Lease. Such coverage
shall be written on an “occurrence” form and shall have a minimum combined
single limit of liability of not less than two million dollars ($2,000,000.00).
Tenant’s policy shall be written to apply to all bodily injury, property damage,
personal injury and other covered loss (however occasioned) occurring during the
policy term, with at least the following endorsements to the extent such
endorsements are generally available: (i) deleting any employee exclusion on
personal injury coverage, and (ii) providing broad form property damage coverage
and products completed operations coverage (where applicable). Such insurance
shall name Landlord and any other party designated by Landlord as an additional
insured, shall specifically include the liability assumed hereunder by Tenant,
shall provide that it is primary insurance, shall provide for severability of
interests, shall further provide that an act or omission of one of the named
insureds which would void or otherwise reduce coverage shall not reduce or void
the coverage as to any insured, shall afford coverage for claims based on acts,
omissions, injury or damage which occurred or arose (or the onset of which
occurred or arose in whole or in part during the policy period), and shall
provide that the insurer will endeavor to provide Landlord with thirty
(30) days’ written notice prior to any cancellation of coverage;

(b) commercial property insurance, including sprinkler leakages, vandalism and
malicious mischief and plate glass damage covering all the items specified as
Tenant’s Property and all other property of every description including
stock-in-trade, furniture, fittings, installations, alterations, additions,
partitions and fixtures or anything in the nature of a leasehold improvement
made or installed by the Tenant in the Premises in an amount of not less than
one hundred percent (100%) of the full replacement cost thereof as shall from
time to time be determined by Tenant in form reasonably satisfactory to
Landlord;

(c) Worker’s Compensation Insurance in the amounts and coverages required under
worker’s compensation, disability and similar employee benefit laws applicable
to Tenant and/or the Premises from time to time, and Employer’s Liability
Insurance, with limits of not less than one million dollars ($1,000,000) or such
higher amounts as may be required by law;

(d) business income insurance with extra expense insurance in an amount
sufficient to insure payment of Rent for a period of not less than twelve
(12) months during any interruption of Tenant’s business by reason of the
Premises or Tenant’s Property being damaged by casualty.

13.3. Policies. All policies of insurance required of Tenant shall be issued by
insurance companies with general policyholders’ rating of not less than A, as
rated in the most current available “Best’s Insurance Reports,” and not
prohibited from doing business in the State of California, and shall, with
respect to the commercial general liability insurance, include as additional
insureds Landlord, and such other persons or entities as Landlord specifies from
time to time. Executed copies of Tenant’s policies of insurance or certificates
thereof shall be delivered to Landlord prior to the delivery of possession of
the Premises to Tenant and thereafter within ten (10) days prior to the
expiration of the term of each such policy. All commercial general liability and
property damage policies shall contain a provision that Landlord and any other
additional insured, although named as additional insureds, shall nevertheless be
entitled to recover under said policies for a covered loss occasioned by it, its
servants, agents and employees, by reason of Tenant’s negligence. As often as
any policy shall expire or terminate, renewal or additional policies shall be
procured and maintained by Tenant in like manner and to like extent. All such
policies of insurance shall provide that the company writing said policy will
endeavor to give to Landlord thirty (30) days notice in writing in advance of
any

 

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cancellation. All commercial general liability, property damage and other
casualty policies shall be written on an occurrence basis. Landlord’s coverage
shall not be contributory. No policy shall have a deductible in excess of
$25,000 for any one occurrence.

13.4. Landlord’s Rights. Should Tenant fail to take out and keep in force each
insurance policy required under this Article 13, and should the Tenant not
rectify the situation within five (5) business days after written notice from
Landlord to Tenant, Landlord shall have the right, without assuming any
obligation in connection therewith, to purchase such insurance at the sole cost
of Tenant, and all costs incurred by Landlord shall be payable to Landlord by
Tenant within thirty (30) days after demand as Additional Rent and without
prejudice to any other rights and remedies of Landlord under this Lease.

13.5. Waiver of Subrogation. Notwithstanding anything to the contrary contained
herein, to the extent permitted by their respective policies of insurance and to
the extent of insurance proceeds received (or which would have been received had
the party carried the insurance required by this Lease) with respect to the
loss, Landlord and Tenant each hereby waive any right of recovery against the
other party and against any other party maintaining a policy of insurance with
respect to the Property or any portion thereof or the contents of the Premises
or the Building for any loss or damage sustained by such other party with
respect to the Premises, the Building or the Property, or any portion thereof,
or the contents of the same or any operation therein, whether or not such loss
is caused by the fault or negligence of such other party. Either party shall
notify the other party if the policy of insurance carried by it does not permit
the foregoing waiver.

13.6. No Liability. No approval by Landlord of any insurer, or the terms or
conditions of any policy, or any coverage or amount of insurance, or any
deductible amount shall be construed as a representation by Landlord of the
solvency of the insurer or the sufficiency of any policy or any coverage or
amount of insurance or deductible and Tenant assumes full risk and
responsibility for any inadequacy of insurance coverage or any failure of
insurers.

13.7. Landlord’s Insurance. During the Term of his Lease, Landlord shall obtain
and keep in full force and effect, the following insurance from an insurance
company licensed to do business in the state of California. The insurance
required to be carried by Landlord under this Section shall be referred to
herein as “Landlord’s Insurance.”

(a) Bodily injury, personal injury and property damage insurance insuring
against claims of bodily injury or death, personal injury or property damage
arising out of or in connection with (a) Landlord’s activities upon, in or about
the Premises; or (b) the use or occupancy of the Building or the Property in a
limit of not less than One Million Dollars ($1,000,000.00) for injury to or
death of one person in any one accident or occurrence and in an amount of not
less than Two Million Dollars ($2,000,000.00) for injury to or death of more
than one person in any one accident or occurrence. Such insurance may be written
in any combination of primary and excess coverage as Landlord may determine.

(b) Commercial property form insurance insuring the Building (excluding any
property which Tenant or any other tenant in the Building is obligated to
insure) for its full replacement value. The terms and conditions of said policy
and the perils and risks covered thereby shall be determined by Landlord, from
time to time, in Landlord’s reasonable discretion; provided that such policy
shall, at a minimum, provide protection against any peril included within the
classification “fire and extended coverage.” In addition, Landlord shall obtain
and keep in force, during the term of this Lease, a policy of business
interruption insurance, with loss payable to Landlord.

 

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14. ASSIGNMENT AND SUBLETTING

14.1. Consent Required. Except as set forth in Section 14.7, Tenant shall not
directly or indirectly, voluntarily or by operation of law, sell, assign,
encumber, pledge or otherwise transfer or hypothecate all or any part of its
interest in or rights with respect to the Premises or its leasehold estate
(collectively, “Assignment”), or permit all or any portion of the Premises to be
occupied by anyone other than itself or sublet all or any portion of the
Premises (collectively, “Sublease”) without Landlord’s prior written consent,
such consent not to be unreasonably withheld, delayed or conditioned.

14.2. Notice. If Tenant desires to enter into a Sublease of all or any portion
of the Premises or Assignment of this Lease (except as provided in
Section 14.7), it shall give written notice (the “Transfer Notice”) to Landlord
of its intention to do so, which notice shall contain (a) the name and address
of the proposed assignee, subtenant or occupant (the “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 Assignment or Sublease, and
(d) such financial information as Landlord may reasonably request concerning the
proposed Transferee. Without limitation of any other provision hereof, it shall
not be unreasonable for Landlord to withhold its consent if (i) an Event of
Default is then in existence, (ii) the use of the Premises would not comply with
the provisions of this Lease, or (iii) in Landlord’s reasonable judgment, the
proposed Transferee does not have the financial capability to perform its
obligations under this Lease with respect to the Premises which are the subject
of the Assignment or Sublease.

14.3. Terms of Approval. Landlord shall respond to Tenant’s request for approval
within ten (10) days after receipt of the Transfer Notice. If Landlord approves
the proposed Assignment or Sublease, Tenant may, not later than thirty (30) days
thereafter, enter into the Assignment or Sublease with the proposed Transferee
upon the terms and conditions set forth in the Transfer Notice.

14.4. Excess Rent. For any Assignment or Sublease (other than a Permitted
Transfer under Section 14.7), fifty percent (50%) of the Excess Rent received by
Tenant shall be paid to Landlord as and when received by Tenant. “Excess Rent”
means the gross revenue received from the Transferee during the Sublease term or
with respect to the Assignment (but not including any payments for furniture or
equipment rental), less (a) the gross revenue received by Landlord from Tenant
during the period of the Sublease term or concurrently with or after the
Assignment; (b) any reasonably documented tenant improvement allowance or other
economic concession (planning allowance, moving expenses, etc.), paid by Tenant
to or on behalf of the Transferee; (d) customary and reasonable external
brokers’ commissions to the extent paid and documented; (e) reasonable
attorneys’ fees; (f) reasonable costs of advertising the space for Sublease or
Assignment; (g) the unamortized cost of any Alterations made to the Premises by
Tenant; and (h) any other reasonable direct costs actually incurred by Tenant in
connection with the Assignment or Sublease (collectively, “Transfer Costs”).
Tenant shall not be required to pay to Landlord any Excess Rent until Tenant has
recovered its Transfer Costs.

14.5. [intentionally omitted]

 

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14.6. No Release. No Sublease or Assignment by Tenant nor any consent by
Landlord thereto shall relieve Tenant of any obligation to be performed by
Tenant under this Lease. Any Sublease or Assignment that is not in compliance
with this Article shall be null and void and, at the option of Landlord, shall
constitute an Event of Default by Tenant under this Lease, and Landlord shall be
entitled to pursue any right or remedy available to Landlord under the terms of
this Lease or under the laws of the State of California. The acceptance of any
Rent or other payments by Landlord from a proposed Transferee shall not
constitute consent to such Sublease or Assignment by Landlord or a recognition
of any Transferee, or a waiver by Landlord of any failure of Tenant or other
Transferor to comply with this Article.

14.7. Permitted Transfers. Notwithstanding anything in this Article 14 to the
contrary, Landlord’s prior written consent shall not be required for any
assignment of this Lease or sublease to any of the following (each a “Permitted
Transferee”): (a) a successor entity related to Tenant by merger, consolidation,
or non-bankruptcy reorganization, (b) a transfer to any parent, affiliate or
wholly owned subsidiary of Tenant, or (c) a transferee of substantially all of
Tenant’s assets (collectively, “Permitted Transfers”); provided that after such
assignment or transfer the operation of the business conducted in the Premises
shall be in the manner required by this Lease.

14.8. Assumption of Obligations. Any Transferee shall, from and after the
effective date of the Assignment, assume all obligations of Tenant under this
Lease with respect to the Transferred Space and shall be and remain liable
jointly and severally with Tenant for the payment of Base Rent and Additional
Rent, and for the performance of all of the terms, covenants, conditions and
agreements herein contained on Tenant’s part to be performed for the Term. No
Assignment shall be binding on Landlord unless Tenant delivers to Landlord a
counterpart of the Assignment and an instrument that contains a covenant of
assumption reasonably satisfactory in substance and form to Landlord, and
consistent with the requirements of this Section.

15. DEFAULT

15.1. Event of Default. The occurrence of any of the following shall be an
“Event of Default” on the part of Tenant:

(a) Failure to pay any part of the Base Rent or Additional Rent, or any other
sums of money that Tenant is required to pay under this Lease where such failure
continues for a period of five (5) business days after written notice of default
from Landlord to Tenant. Landlord’s notice to Tenant pursuant to this subsection
shall be deemed to be the notice required under California Code of Civil
Procedure Section 1161.

(b) Failure to perform any other covenant, condition or requirement of this
Lease when such failure shall continue for a period of thirty (30) days after
written notice thereof from Landlord to Tenant; provided that if the nature of
the default is such that more than thirty (30) days are reasonably required for
its cure, then an Event of Default shall not be deemed to have occurred if
Tenant shall commence such cure within said thirty (30) day period and
thereafter diligently and continuously prosecute such cure to completion.
Landlord’s notice to Tenant pursuant to this subsection shall be deemed to be
the notice required under California Code of Civil Procedure Section 1161.

(c) The abandonment of the Premises by Tenant.

 

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(d) Tenant shall admit in writing its inability to pay its debts generally as
they become due, file a petition in bankruptcy, insolvency, reorganization,
dissolution or liquidation under any law or statute of any government or any
subdivision thereof either now or hereafter in effect, or Tenant shall make an
assignment for the benefit of its creditors, consent to or acquiesce in the
appointment of a receiver of itself or of the whole or any substantial part of
the Premises.

(e) A court of competent jurisdiction shall enter an order, judgment or decree
appointing a receiver of Tenant or of the whole or any substantial part of the
Premises and such order, judgment or decree shall not be vacated, set aside or
stayed within sixty (60) days after the date of entry of such order, judgment,
or decree, or a stay thereof shall be thereafter set aside.

(f) A court of competent jurisdiction shall enter an order, judgment or decree
approving a petition filed against Tenant under any bankruptcy, insolvency,
reorganization, dissolution or liquidation law or statute of the federal or
state government or any subdivision of either now or hereafter in effect, and
such order, judgment or decree shall not be vacated, set aside or stayed within
ninety (90) days from the date of entry of such order, judgment or decree, or a
stay thereof shall be thereafter set aside.

15.2. Remedies. Upon the occurrence of an Event of Default, Landlord shall have
the following rights and remedies:

(a) The right to terminate this Lease upon written notice to Tenant, in which
event Tenant shall immediately surrender possession of the Premises in
accordance with Article 20.

(b) The right to bring a summary action for possession of the Premises.

(c) The rights and remedies described in California Civil Code Section 1951.2,
pursuant to which Landlord may recover from Tenant upon a termination of the
Lease, (i) the worth at the time of award of the unpaid rent which has been
earned at the time of termination; (ii) the worth at the time of award of the
amount by which the unpaid rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss that Tenant
proves could have been reasonably avoided; (iii) the worth at the time of the
award of the amount by which the unpaid rent for the balance of the term after
the time of award exceeds the amount of such rental loss that Tenant proves
could be reasonably avoided; and (iv) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant’s failure to perform
its obligations under this Lease or which in the ordinary course of events would
be likely to result therefrom. The “worth at the time of award” of the amounts
referred to in (i) and (ii) above is computed by allowing interest at the rate
of ten percent (10%) per annum. The “worth at the time of award” of the amount
referred to in (iii) above shall be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent (1%). The detriment proximately caused by Tenant’s failure to
perform its obligations under this Lease or which in the ordinary course of
events would be likely to result therefrom includes, without limitation, (1) the
unamortized portion of any brokerage or real estate agent’s commissions paid in
connection with the execution of this Lease, (2) any direct costs or expenses
incurred by Landlord in recovering possession of the Premises, maintaining or
preserving the Premises after such default, (3) preparing the Premises for
reletting to a new tenant, (4) any repairs or alterations to

 

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the Premises for such reletting, (5) leasing commissions, architect’s fees and
any other costs necessary or appropriate either to relet the Premises or, if
reasonably necessary in order to relet the Premises, to adapt them to another
beneficial use by Landlord and (6) such amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by Applicable Law to the extent
that such payment would not result in a duplicative recovery.

(d) The rights and remedies described in California Civil Code Section 1951.4
which allow Landlord to continue this Lease in effect and to enforce all of
Landlord’s rights and remedies under this Lease, including the right to recover
Base Rent, Additional Rent and other charges payable hereunder as they become
due. Acts of maintenance or preservation, efforts to relet the Premises or the
appointment of a receiver upon Landlord’s initiative to protect its interest
under this Lease shall not constitute a termination of Tenant’s right to
possession.

(e) The right to enjoin, and any other remedy or right now or hereafter
available to a Landlord against a defaulting tenant under the laws of the State
of California or the equitable powers of its courts, and not otherwise
specifically reserved herein.

(f) If this Lease provides for a postponement of deferral of any Rent, or for
commencement of payment of Rent to a date later than the Commencement Date, or
for a period of “free” Rent or any other Rent concession (collectively, “Abated
Rent”), the right upon an Event of Default resulting on a termination of this
Lease to demand immediate payment of a pro rated portion of the Abated Rent,
based on the ratio of (i) the time remaining between the date of lease
termination and the Expiration Date to (ii) the amount of time in the original
Lease Term.

15.3. Cumulative Remedies. The various rights and remedies reserved to Landlord,
including those not specifically described herein, shall, to the extent that the
exercise of such right and/or remedy does not result in a duplicative recovery,
be cumulative and shall be in addition to every other right or remedy provided
for in this Lease or now or hereafter existing at law or in equity and the
exercise of the rights or remedies provided for in this Lease or now or
hereafter existing at law or in equity shall not preclude the simultaneous or
later exercise by Landlord of any or all other rights and remedies.

15.4. Landlord’s Right to Cure. If Tenant shall fail or neglect to do or perform
any covenant or condition required under this Lease and such failure shall not
be cured within any applicable grace period, Landlord may, on fifteen (15) days
written notice to Tenant, but shall not be required to, make any payment payable
by Tenant hereunder, discharge any lien, take out, pay for and maintain any
insurance required hereunder, or do or perform or cause to be done or performed
any such other act or thing (entering upon the Premises for such purposes, if
Landlord shall so elect), and Landlord shall not be or be held liable or in any
way responsible for any loss, disturbance, inconvenience, annoyance or damage
resulting to Tenant on account thereof. Tenant shall repay to Landlord within
thirty (30) days after demand the entire out-of-pocket cost and expense incurred
by Landlord in connection with the cure, including, without limitation,
compensation to the agents, consultants and contractors of Landlord and
reasonable attorneys’ fees and expenses. Landlord may act upon shorter notice or
no notice at all if necessary in Landlord’s reasonable judgment to meet an
emergency situation or governmental or municipal time limitation or to protect
Landlord’s interest in the Premises. Landlord shall not be required to inquire
into the correctness of the amount of validity or any tax or lien that may be
paid by Landlord and Landlord shall be duly protected in paying the amount of
any such tax or lien claimed and in such event Landlord also shall have the full

 

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authority, in Landlord’s sole judgment and discretion and without prior notice
to or approval by Tenant, to settle or compromise any such lien or tax. Any act
or thing done by Landlord pursuant to the provisions of this Section shall not
be or be construed as a waiver of any such failure by Tenant, or as a waiver of
any term, covenant, agreement or condition herein contained or of the
performance thereof.

15.5. Landlord’s Default. Landlord shall be in default under this Lease if
Landlord fails to perform obligations required of Landlord within thirty
(30) days after written notice by Tenant to Landlord and to the holder of any
first mortgage or deed of trust covering the Premises whose name and address
shall have heretofore been furnished to Tenant in writing, specifying wherein
Landlord has failed to perform such obligations; provided, however, that if the
nature of Landlord’s obligations is such that more than thirty (30) days are
required for performance, then Landlord shall not be in default if Landlord
commences performance within such thirty (30) day period and thereafter
diligently prosecutes the same to completion. Tenant shall be entitled to actual
(but not consequential) damages in the event of any uncured default by Landlord,
but the provision of Article 17 shall apply to any Landlord default and Tenant
shall not have the right to terminate this Lease as a result of a Landlord
default.

16. LANDLORD’S RESERVED RIGHTS

16.1. Control of Common Area. Landlord reserves the right, at any time and from
time to time, to make alterations, additions, repairs, replacements or
improvements to all or any part of the Building (including the Building
Structure and Building Systems), the Common Area and the Property. Landlord may
make changes at any time and from time to time in the size, shape, location, use
and extent of the Common Area, and no such change shall entitle Tenant to any
abatement of rent or damages. Landlord shall at all times during the Term have
the sole and exclusive control of the Building Structure and the Common Area,
and may at any time and from time to time during the Term restrain any use or
occupancy of the Common Area except as authorized by this Lease. Landlord
specifically reserves the right to alter, reconfigure, replace, diminish,
expand, or remove all or any part of the executive conference center that
currently exists on the second floor of the Building. Landlord may temporarily
or permanently close any portion of the Common Area for repairs, maintenance,
replacements or alterations, to prevent a dedication or the accrual of
prescriptive rights, or for any other reasonable purpose; provided, however,
that Landlord shall use reasonable efforts not to materially adversely affect
Tenant’s use of the Premises. Tenant’s rights in and to the Common Area shall at
all times be subject to the rights of Landlord and Tenant shall keep the Common
Area free and clear of any obstructions created or permitted by Tenant or
resulting from Tenant’s operations. Notwithstanding the foregoing, Landlord
shall not have the right to unreasonably interfere with Tenant’s use and
enjoyment of the Premises, and shall use its best efforts not to do so, in the
exercise of its rights under this Section.

16.2. Access. Subject to Tenant’s reasonable security requirements, including
the right to require a confidentiality agreement if appropriate, Landlord
reserves (for itself and its agents, consultants, contractors and employees) the
right to enter the Premises at all reasonable times and, except in cases of
emergency, after giving Tenant reasonable notice, to inspect the Premises
(including, without limitation, environmental testing); to supply any service to
be provided by Landlord hereunder; to show the Premises to prospective
purchasers or mortgagees; to show the Premises to prospective tenants during the
last nine months of the Term (or the last nine [9] months of any extension term,
if Tenant has exercised its rights to renew this Lease); to post notices of
nonresponsibility; and to repair or maintain the Premises and the Building as
required or permitted by the terms of this Lease, without abatement of Rent,

 

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and may for that purpose erect, use and maintain necessary structures in and
through the Premises and the Building where reasonably required by the character
of the work to be performed. Tenant hereby waives any claim for damages for any
injury or inconvenience to or interference with Tenant’s business, any loss of
occupancy or quiet enjoyment of the Premises or any other loss occasioned
thereby, except to the extent caused by the gross negligence or willful
misconduct of Landlord in the exercise of its rights and provided that Landlord
shall use its best efforts not to adversely affect Tenant’s use of the Premises.
All locks for all of the doors in, upon and about the Premises, excluding
Tenant’s vaults and safes or special security areas (designated in advance in
writing by Tenant) shall at all times be keyed to a master system and Landlord
shall at all times have and retain a key with which to unlock all of said doors.
Landlord shall have the right to use any and all reasonable means that Landlord
may deem necessary or proper to open said doors in an emergency in order to
obtain entry to any portion of the Premises, and any such entry to the Premises
or portions thereof obtained by Landlord by any of said means, or otherwise,
shall not under any circumstances be construed or deemed to be a forcible or
unlawful entry into, or a detainer of, the Premises, or an eviction, actual or
constructive, of Tenant from the Premises or any portion thereof.

16.3. Easements. Landlord reserves the right to grant or relocate all easements
and rights of way which Landlord in its sole discretion may deem necessary or
appropriate; provided that Tenant’s rights to use the Property is not materially
impeded.

16.4. Use of Additional Areas. Landlord reserves the exclusive right to use any
air space above the Property, and the land beneath the Premises; provided that
such use shall not materially impede Tenant’s use of and access to the Premises.

16.5. Subordination. This Lease shall be subject and subordinate at all times
to: (a) all reciprocal easement agreements, and any ground leases or underlying
leases which may now exist or hereafter be executed affecting the Property, and
(b) the lien of any mortgage or deed of trust which may now exist or hereafter
be executed in any amount for which the Property, or any ground leases or
underlying leases, or Landlord’s interest or estate in any of said items, is
specified as security; provided that, in the case of any future leases,
mortgages or deeds of trust, Tenant’s obligation to subordinate shall be
conditioned upon receipt of a commercially reasonable recognition and
nondisturbance agreement. Notwithstanding the foregoing, Landlord shall have the
right to subordinate or cause to be subordinated to this Lease any of the items
referred to in clause (a) or (b) above, subject to compliance with the condition
precedent set forth below. In the event that any ground lease or underlying
lease terminates for any reason or any mortgage or deed of trust is foreclosed
or a conveyance in lieu of foreclosure is made for any reason, (i) no person or
entity which as a result of the foregoing succeeds to the interest of Landlord
under this Lease (a ”Successor”) shall be liable for any default by Landlord or
any other matter that occurred prior to the date the Successor succeeded to
Landlord’s interest in this Lease, and (ii) Tenant shall, notwithstanding any
subordination, attorn to and become the tenant of the Successor, at the option
of the Successor. Tenant covenants and agrees to execute and deliver, upon
demand by Landlord and a commercially reasonable form, any additional documents
evidencing the priority or subordination of this Lease with respect to any such
ground leases, underlying leases, reciprocal easement agreements or similar
documents or instruments, or with respect to the lien of any such mortgage or
deed of trust and Tenant’s failure to execute and deliver any such document
within ten (10) business days after such demand by Landlord shall constitute an
Event of Default. Landlord shall use commercially reasonable efforts to obtain
the written agreement of the mortgagee or trustee named in any mortgage, deed of
trust or other encumbrance, and any landlord under any ground lease or
underlying lease, that so long as an Event of Default by Tenant is not in
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Lease nor any of Tenant’s rights hereunder shall be terminated or modified, nor
shall Tenant’s possession of the Premises be disturbed or interfered with, by
any trustee’s sale or by an action or proceeding to foreclose said mortgage,
deed of trust or other encumbrance.

17. LIMITATION OF LANDLORD’S LIABILITY

17.1. Limitation. Landlord shall not be responsible for or liable to Tenant and
Tenant hereby releases Landlord, waives all claims against Landlord and assumes
the risk for any injury, loss or damage to any person or property in or about
the Property by or from any cause whatsoever (other than Landlord’s negligence
or willful misconduct or breach by Landlord of its obligations or
representations or warranties under this Lease) including, without limitation,
(a) acts or omissions of persons occupying adjoining premises, (b) theft or
vandalism, (c) burst, stopped or leaking water, gas, sewer or steam pipes,
(d) loss of utility service, (e) accident, fire or casualty, (f) nuisance, and
(g) work done by Landlord in the Property. There shall be no abatement of Rent
and no liability of Landlord by reason of any injury to or interference with
Tenant’s business arising from the making of any repairs, alterations or
improvements to any portion of the Property or to fixtures, appurtenances and
equipment in the Property (except if caused by Landlord’s negligence or willful
misconduct) or resulting from any interruption or termination of utilities or
services which is under the reasonable control of Landlord; provided, however,
that in the event Landlord fails to perform its obligations to make repairs,
alterations or improvements or performs such obligations in a negligent manner
or fails to restore utilities or services, in each case which results in Tenant
use of the Premises being substantially for a period of more than five
(5) consecutive Business Days, then Tenant shall be entitled to an abatement of
Rent commencing on the sixth Business Day Tenant’s use is so impaired and
continuing until Tenant’s use is restored. Such Rent abatement shall be Tenant’s
only remedy in the event of a negligent interference with Tenant’s business and
Tenant shall not be entitled to damages or to termination of this Lease arising
from Landlord’s repairs, alterations or improvements. No interference with
Tenant’s operations in the Premises shall constitute a constructive or other
eviction of Tenant. Notwithstanding the foregoing, in the event that Landlord
fails to make repairs or restore services for an unreasonable period of time,
where the repair or restoration of services is within Landlord’s reasonable
control, Tenant shall have the right to make the repairs or restore the services
in question and Landlord shall be responsible for Tenant’s reasonable costs of
so doing. Notwithstanding anything to the contrary contained or implied in the
foregoing, Landlord shall in no event be responsible for consequential damages.

17.2. Sale of Property. It is agreed that Landlord may at any time sell, assign
or transfer its interest as landlord in and to this Lease, and may at any time
sell, assign or transfer its interest in and to the Property. In the event of
any transfer of Landlord’s interest in this Lease or in the Property, the
transferor shall be automatically relieved of any and all of Landlord’s
obligations and liabilities accruing from and after the date of such transfer;
provided that the transferee assumes all of Landlord’s obligations under this
Lease. Tenant hereby agrees to attorn to Landlord’s assignee, transferee, or
purchaser from and after the date of notice to Tenant of such assignment,
transfer or sale, in the same manner and with the same force and effect as
though this Lease were made in the first instance by and between Tenant and the
assignee, transferee or purchaser.

17.3. No Personal Liability. In the event of any default by Landlord hereunder,
Tenant shall look only to Landlord’s interest in the Property and rents and
proceeds therefrom and any available insurance proceeds for the satisfaction of
Tenant’s remedies, and no other property or assets of Landlord or any trustee,
partner, member, officer or director thereof, disclosed or undisclosed, shall be
subject to levy, execution or other enforcement procedure for the satisfaction
of Tenant’s remedies under or with respect to this Lease.

 

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18. DESTRUCTION

18.1. Landlord’s Repair Obligation. If the Property or any portion thereof is
damaged by fire or other casualty, Landlord shall repair the same (including the
base building and the Tenant Improvement Work but not any of Tenant’s
Alterations); provided that (a) such repairs can be made under the laws and
regulations of the federal, state and local governmental authorities having
jurisdiction within twelve (12) months after the date of such damage (or in the
case of damage occurring during the last twelve (12) months of the Term [taking
into account any extension terms, it Tenant has exercised its right to renew],
provided that such repairs can be made within ninety (90) days after the date of
such damage), (b) such repairs are fully covered (except for any deductible) by
the proceeds of insurance maintained by Landlord and (provided, however that the
condition set out in subsection (b) shall only apply if Landlord has satisfied
its obligation to maintain Landlord’s Insurance), and (c) the damage does not
affect more than fifty percent (50%) of the assessed value of the Building.

18.2. Notice. Landlord shall notify Tenant within thirty (30) days after the
date of damage whether or not the requirements for reconstruction and repair
described in Section 18.1 are met. If such requirements are not met, Landlord
shall have the option, exercisable within thirty (30) days after the date of
such damage either to: (a) notify Tenant of Landlord’s intention to repair such
damage, in which event this Lease shall continue in full force and effect
(unless terminated by Tenant pursuant to Section 18.3 below), or (b) notify
Tenant of Landlord’s election to terminate this Lease as of the date of the
damage. If such notice to terminate is given by Landlord, this Lease shall
terminate as of the date of such damage. If within ten (10) days after receipt
of a notice from Landlord electing to terminate this Lease because of the
unavailability of insurance proceeds, Tenant sends Landlord a notice electing to
reimburse Landlord for the cost of such repairs that are in excess of five
percent (5%) of the replacement cost of the Building (as determined as of the
day prior to any such damage), this Lease shall not terminate, and Landlord
shall complete such repairs.

18.3. Termination by Tenant. If Landlord elects to repair or is required to
repair the damage and any such repair (a) is not commenced by Landlord within
ninety (90) days after the occurrence of such damage or destruction, or (b) is
not or cannot practicably be substantially completed by Landlord within twelve
(12) months after the occurrence of such damage or destruction (or in the case
of damage occurring in the last twelve (12) months of the Term, within ninety
(90) days), then in either such event Tenant may, at its option, upon written
notice to Landlord to be delivered within fifteen (15) days after receipt of
Landlord’s notice or the expiration of the 90-day commencement period, elect to
terminate this Lease as of the date of the occurrence of such damage or
destruction.

18.4. Rent Adjustment. In case of termination pursuant to Sections 18.2 or 18.3
above, the Base Rent and Operating Expenses shall be reduced by a proportionate
amount based upon the extent to which such damage interfered with the business
carried on by Tenant in the Premises, commencing on the date of damage. If
Landlord is required or elects to make repairs, and Tenant does not terminate
this Lease pursuant to Section 18.3, this Lease shall remain in full force and
effect except that Tenant shall be entitled to a proportionate reduction of Base
Rent and Operating Expenses from the date of such casualty and during the period
such repairs are being made by a proportionate amount based upon the extent of
interference with Tenant’s operations in the Premises. The full amount of Base
Rent and

 

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Operating Expenses shall again become payable immediately upon the completion of
such work of repair, reconstruction or restoration. The repairs to be made by
Landlord under this Article shall not include, and Landlord shall not be
required to repair, any casualty damage to Tenant’s Property or any Alterations.

18.5. Tenant Obligations. If Landlord elects or is required to repair,
reconstruct or restore the Premises after any damage or destruction, Tenant
shall be responsible at its own expense for the repair and replacement of any of
Tenant’s Property and any Alterations which Tenant elects to replace.

18.6. No Claim. Tenant shall have no interest in or claim to any portion of the
proceeds of any property insurance maintained by Landlord in connection with the
damage. If Landlord is entitled and elects not to rebuild the Premises, Landlord
shall relinquish to Tenant such claim as Landlord may have for any part of the
proceeds of any insurance maintained by Tenant under Section 13.2 of this Lease.

18.7. No Damages. If Landlord is required or elects to make any repairs,
reconstruction or restoration of any damage or destruction to the Premises under
any of the provisions of this Article 18, Tenant shall not be entitled to any
damages by reason of any inconvenience or loss sustained by Tenant as a result
thereof. Except as expressly provided in Section 18.4, there shall be no
reduction, change or abatement of any rental or other charge payable by Tenant
to Landlord hereunder, or in the method of computing, accounting for or paying
the same. Tenant hereby waives the provisions of Section 1932(2) and
Section 1933(4) of the California Civil Code, or any other statute or law that
may be in effect at the time of a casualty under which a lease is automatically
terminated or a tenant is given the right to terminate a lease due to a
casualty.

19. EMINENT DOMAIN

19.1. Taking. If all or any part of the Premises shall be taken as a result of
the exercise of the power of eminent domain or any transfer in lieu thereof,
this Lease shall terminate as to the part so taken as of the date of taking or
as of the date of final judgment, whichever is earlier; and, (i) in the case of
a partial taking of at least twenty-five percent (25%) of the Rentable Area of
the Premises, either Landlord or Tenant shall have the right to terminate this
Lease as to the balance of the Premises and (ii) in the case of a partial taking
of any size which substantially impairs Tenants use of the Premises, Tenant
shall have the right to terminate this Lease as to the balance of the Premises;
in either case, by written notice to the other party given within thirty
(30) days after such date. If any material part of the Common Area shall be
taken as a result of the exercise of the power of eminent domain or any transfer
in lieu thereof, whether or not the Premises are affected, Landlord shall have
the right to terminate this Lease by written notice to Tenant within thirty
(30) days of the date of taking. If any material part of the Common Area shall
be taken as a result of the exercise of the power of eminent domain or any
transfer in lieu thereof, such that Tenant’s access to or use of the Premises is
materially adversely affected, Tenant shall have the right to terminate this
Lease by written notice to Landlord within thirty (30) days of the date of
taking.

19.2. Award. In the event of any taking, Landlord shall be entitled to any and
all compensation, damages, income, rent, awards, or any interest therein
whatsoever which may be paid or made in connection therewith, and Tenant shall
assign to Landlord any right to compensation or damages for the condemnation of
its leasehold interest; provided that Tenant may file a claim for (a) Tenant’s
relocation expenses, and (b) the taking of Tenant’s Property.

 

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19.3. Partial Taking. In the event of a partial taking of the Premises which
does not result in a termination of this Lease, the Base Rent and Operating
Expenses shall be adjusted as follows:

(a) In the event of a partial taking, if this Lease is not terminated pursuant
to this Article 19, Landlord shall repair, restore or reconstruct the Premises
to a useable state; provided that Landlord shall not be required to expend any
sums other than those received pursuant to Section 19.2.

(b) During the period between the date of the partial taking and the completion
of any necessary repairs, reconstruction or restoration, Tenant shall be
entitled to a reduction of Base Rent and Operating Expenses by a proportionate
amount based upon the extent of interference with Tenant’s operations in the
Premises; and

(c) Upon completion of said repairs, reconstruction or restoration, and
thereafter throughout the remainder of the Term, the Base Rent and Operating
Expenses shall be recalculated based on the remaining total number of square
feet of Rentable Area of the Premises.

19.4. Temporary Taking. Notwithstanding any other provision of this Article, if
a taking occurs with respect to all or any portion of the Premises for a period
of twelve (12) months or less, this Lease shall remain unaffected thereby and
Tenant shall continue to pay Base Rent and Additional Rent and to perform all of
the terms, conditions and covenants of this Lease, provided that Tenant shall
have the right to terminate this Lease if the taking continues beyond twelve
(12) months. In the event of any such temporary taking, and if this Lease is not
terminated, Tenant shall be entitled to receive that portion of any award which
represents compensation for the use or occupancy of the Premises during the Term
up to the total Base Rent and Additional Rent owing by Tenant for the period of
the taking, and Landlord shall be entitled to receive the balance of any award.

19.5. Sale in Lieu of Condemnation. A voluntary sale by Landlord of all or any
part of the Property to any public or quasi-public body, agency or person,
corporate or otherwise, having the power of eminent domain, either under threat
of condemnation or while condemnation proceedings are pending, shall be deemed
to be a taking under the power of eminent domain for the purposes of this
Article.

19.6. Waiver. Except as provided in this Article, Tenant hereby waives and
releases any right it may have under any Applicable Law to terminate this Lease
as a result of a taking, including without limitation Sections 1265.120 and
1265.130 of the California Code of Civil Procedure, or any similar law, statute
or ordinance now or hereafter in effect.

20. SURRENDER

20.1. Surrender. Upon the Termination Date, Tenant shall surrender the Premises
to Landlord in as good order and repair as on the Commencement Date, reasonable
wear and tear and damage by casualty excepted, free and clear of all letting and
occupancies and free of Tenant’s Hazardous Materials as required pursuant to
Article 12. Subject to Article 9, upon any termination of this Lease all
improvements, except for Tenant’s Property, shall automatically and without
further act by Landlord or Tenant, become the property of Landlord, free and
clear of any claim or interest therein by Tenant, and without payment therefore
by Landlord.

 

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20.2. Holding Over. Any holding over after the expiration of the Term without
the consent of Landlord shall be construed to automatically extend the Term on a
month-to-month basis at a Base Rent equal to the greater of (a) one and one-half
(1.5) times the then-current Base Rent, and (b) the prevailing rate at which
Landlord is then offering space in building reasonably determined by Landlord to
be comparable to the Premises, and shall otherwise be on the terms and
conditions of this Lease to the extent applicable.

21. FINANCIAL STATEMENTS

Tenant provide Landlord within fifteen (15) business days after receipt of a
written request its then most current publicly available financial statements.
Landlord shall be entitled to rely upon the information provided therein for the
purpose of any financing or other transaction subsequently undertaken by
Landlord. Tenant hereby represents and warrants to Landlord the following:
(a) that all documents provided by Tenant to Landlord in connection with the
negotiation of this Lease are true and correct copies of the originals, (b) all
information supplied by Tenant to Landlord is true, correct and accurate, and
(c) no part of the information supplied by Tenant to Landlord contains any
misleading or fraudulent statements. Landlord shall maintain any nonpublic
financial information delivered to it by Tenant in strict confidence and shall
only use such information in connection with this Lease. Landlord shall be
entitled to disclose Tenant’s financial information on a need-to-know basis to
(1) potential purchasers of an interest in the Property, and (2) lenders
contemplating making a loan to the Landlord to be secured by the Property,
provided that such recipients are advised of the confidential nature of such
information and agree to maintain such confidentiality.

22. TENANT CERTIFICATES

Tenant, at any time and from time to time within ten (10) business days after
receipt of written notice from Landlord, shall execute, acknowledge and deliver
to Landlord or to any party designated by Landlord (including prospective
lenders, purchasers, ground lessees and others similarly situated), a
certificate of Tenant stating, to the best of Tenant’s knowledge, if true:
(a) that Tenant has accepted the Premises, (b) the Commencement Date, the Rent
Commencement Date and Expiration Date of this Lease, (c) that this Lease is
unmodified and in full force and effect (or, if there have been modifications,
that same is in full force and effect as modified and stating the
modifications), (d) whether or not there are then existing any defenses against
the enforcement of any of the obligations of Tenant under this Lease (and, if
so, specifying same), (e) whether or not there are then existing any defaults by
Landlord in the performance of its obligations under this Lease (and, if so,
specifying same), (f) the dates, if any, to which the Base Rent and Operating
Expenses have been paid, and (g) any other factual information relating to the
rights and obligations under this Lease that may reasonably be required by any
of such persons. Failure to deliver such certificate when due shall constitute
an Event of Default. At the request of Tenant, Landlord shall execute,
acknowledge and deliver to Tenant a certificate with similar types of
information and in the time period set forth above. Failure by either Landlord
or Tenant to execute, acknowledge and deliver such certificate shall be
conclusive evidence that this Lease is in full force and effect and has not been
modified except as may be represented by the requesting party.

23. RULES AND REGULATIONS; SIGNS

23.1. Rules and Regulations. Tenant shall faithfully observe and comply with all
rules and regulations and all reasonable, nondiscriminatory modifications
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additions thereto from time to time put into effect by Landlord (the “Rules and
Regulations”). Landlord shall not enforce such Rules and Regulations in an
unreasonable or discriminatory manner. In the event of any conflict between the
terms of this Lease and the terms, covenants, agreements and conditions of the
Rules and Regulations, this Lease shall control.

23.2. Signs. Landlord shall enter Tenant’s name in the Building directory
located in the main lobby of the Building and install building standard signage
at Landlord’s sole cost and expense in the elevator lobbies of the floors on
which the Premises are located. Landlord, at its sole cost and expense, will
install the Lessee’s name on the “to be installed” street-level, monument, sign.
Any signage to be installed by Tenant shall meet the requirements of Landlord’s
signage program for the Property (e.g. aesthetic appearance, size, etc.) and
shall be subject to the prior written consent of Landlord, not to be
unreasonably withheld, and, if required, the approval of the City of Brisbane.

24. INABILITY TO PERFORM

If Landlord is unable to fulfill or is delayed in fulfilling any of Landlord’s
obligations under this Lease, by reason of acts of God, accidents, breakage,
repairs, strikes, lockouts, other labor disputes, inability to obtain utilities
or materials or by any other reason beyond Landlord’s reasonable control, then
no such inability or delay by Landlord shall constitute an actual or
constructive eviction, in whole or in part, or entitle Tenant to any abatement
or diminution of Base Rent or Additional Rent, or relieve Tenant from any of its
obligations under this Lease. Or impose any liability upon Landlord or
Landlord’s Agents by reason of inconvenience, annoyance, interruption, injury or
loss to or interference with Tenant’s business or use and occupancy or quiet
enjoyment of the Premises or any loss or damage occasioned thereby. If Tenant is
unable to fulfill or is delayed in fulfilling any of Tenant’s obligations under
this Lease (other than the payment of Rent), by reason of acts of God,
accidents, breakage, repairs, strikes, lockouts, other labor disputes, inability
to obtain utilities or materials or by any other reason beyond Tenant’s
reasonable control, then such inability or delay by Tenant shall excuse the
performance of Tenant for a period equal to the duration of such prevention,
delay or stoppage. Tenant hereby waives and releases any right to terminate this
Lease under Section 1932(1) of the California Civil Code, or any similar law,
statute or ordinance now or hereafter in effect.

25. NOTICES

Notices or other communications given or required to be given under this Lease
shall be effective only if rendered or given in writing, sent by certified mail
with a return receipt requested, or delivered in person or by reputable
overnight courier (e.g., Federal Express, DHL, etc.): (a) to Tenant per Tenant’s
address set forth in Article 1, or at the place where Tenant otherwise
designates subsequent to Tenant’s vacating, deserting, abandoning or
surrendering the Premises; or (b) to Landlord at Landlord’s address set forth in
Article 1; or (c) to such other address as either Landlord or Tenant may
designate as its new address for such purpose by notice given to the other in
accordance with the provisions of this Article. Any such notice or other
communication shall be deemed to have been rendered or given five (5) days after
the date mailed, if sent by certified mail, or upon the date of delivery in
person or by courier. In the case of any provision hereunder requiring five
(5) or less days’ notice, notice shall only be considered rendered or given if
delivered in person or by courier.

 

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26. QUIET ENJOYMENT

Landlord covenants that so long as an Event of Default by Tenant is not in
existence, upon paying the Base Rent and Additional Rent and performing all of
its obligations under this Lease, Tenant shall peaceably and quietly enjoy the
Premises, subject to the terms and provisions of this Lease.

27. AUTHORITY

If Tenant is a corporation, limited liability company or a partnership, Tenant
represents and warrants as follows: Tenant is an entity as identified in
Article 1, duly formed and validly existing and in good standing under the laws
of the state of organization specified in Article 1 and qualified to do business
in the State of California. Tenant has the power, legal capacity and authority
to enter into and perform its obligations under this Lease and no approval or
consent of any person is required in connection with the execution and
performance hereof except that which has heretofore been obtained or given. The
execution and performance of Tenant’s obligations under this Lease will not
result in or constitute any default or event that would be, or with notice or
the lapse of time would be, a default, breach or violation of the organizational
instruments governing Tenant or any agreement or any order or decree of any
court or other governmental authority to which Tenant is a party or to which it
is subject. Tenant has taken all necessary action to authorize the execution,
delivery and performance of this Lease and this Lease constitutes the legal,
valid and binding obligation of Tenant.

Landlord represents and warrants as follows: Landlord has the power, legal
capacity and authority to enter into and perform its obligations under this
Lease and no approval or consent of any person is required in connection with
the execution and performance hereof. The execution and performance of
Landlord’s obligations under this Lease will not result in or constitute any
default or event that would be, or with notice or the lapse of time would be, a
default, breach or violation of the organizational instruments governing
Landlord or any agreement or any order or decree of any court or other
governmental authority to which Landlord is a party or to which it is subject.
Landlord has taken all necessary action to authorize the execution, delivery and
performance of this Lease and this Lease constitutes the legal, valid and
binding obligation of Landlord.

28. BROKERS

Tenant and Landlord warrant that they have had dealings with only the real
estate brokers or agents listed in Article 1 in connection with the negotiation
of this Lease and that they know of no other real estate broker or agent who is
entitled to a commission in connection with this Lease. The brokerage commission
earned in connection with this transaction shall be paid by Landlord pursuant to
separate agreement. Tenant and Landlord shall indemnify, defend and hold the
other harmless from and against all liabilities arising from any other claims of
brokerage commissions or finder’s fees based on Tenant’s or Landlord’s, as
applicable, dealings or contacts with brokers or agents other than those listed
in Article 1.

29. RIGHT OF FIRST OFFER

29.1. Tenant shall have a right of first offer (“ROFO”) to lease all or a
portion of the Rentable Area within the Building not yet included as part of the
Premises (“ROFO Premises”), subject to the following conditions:

 

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(a) The ROFO shall be subject to the rights of Hitachi America, Ltd. and
Tercica, Inc. under their respective leases existing as of the Commencement Date
with respect to all or a portion of the ROFO Premises. The ROFO shall also be
subject to any renewals or term extensions of the leases of any current or
future tenants in the building with respect to their then leased premises, other
than Pharmix.

(b) The ROFO Premises will be incorporated into this Lease except that (a) the
economic terms shall be as set forth in the ROFO Notice or as otherwise agreed
by the parties, (b) Tenant’s Pro Rata Share shall be increased to reflect the
addition of the ROFO Premises, and (c) the number of parking spaces shall be
adjusted to reflect the addition of the ROFO Premises. Unless specified
otherwise in the ROFO Notice, the ROFO Premises shall be leased on an “as is”
basis and Landlord shall have no obligation to improve the ROFO Premises or
grant Tenant any improvement allowance for the ROFO Premises. The Term
applicable to the ROFO Premises will be the same of the Term of the Lease.

(c) The ROFO Premises offered to Tenant must be accepted by and leased to Tenant
in its entirety.

(d) Anything herein to the contrary notwithstanding, Tenant shall have no rights
with respect to the ROFO Premises if:

(i) Tenant is in default under any of the terms, covenants or conditions of this
Lease (after any applicable notice and opportunity to cure), either on the date
Landlord delivers the ROFO Notice to Tenant or when the ROFO Premises are to be
incorporated into this Lease;

(ii) Tenant has assigned or sublet the Premises (other than pursuant to a
Permitted Transfer) as of the date Landlord would otherwise deliver the ROFO
Notice;

(iii) Tenant or a Permitted Transferee is not occupying the Premises on the date
Landlord would otherwise deliver the ROFO Notice;

(iv) the ROFO Premises is not intended for the exclusive use of Tenant or a
Permitted Transferee.

29.2. Tenant’s sole rights as to the ROFO Premises shall be as follows:

(a) Prior to offering the ROFO Premises for lease to any third party not
described in Section 29.1(a), Landlord shall deliver a written notice (the “ROFO
Notice”) to Tenant setting forth the terms upon which Landlord proposes to lease
the ROFO Premises.

(b) Tenant shall have seven (7) business days in which to accept the terms
contained in the ROFO Notice or otherwise to reach agreement to incorporate the
ROFO Premises into the Lease. If Landlord and Tenant do not so reach agreement
within such period and thereafter incorporate the ROFO Premises into the Lease,
Landlord shall be free to market the ROFO Premises to third parties; provided
that Landlord shall not enter into an agreement to lease the ROFO Premises on
terms that are materially more favorable to the third party than those set forth
in the ROFO Notice. For purposes hereof, the terms offered to a third party
shall be deemed to be materially more favorable than those set forth in the ROFO
Notice if there is more than a ten percent (10%) reduction in the effective cost
per square foot of Rentable Area,

 

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considering all of the applicable economic terms, including, without limitation,
the length of term, the net rent, any expense or other financial escalation and
any financial concessions including free rent and tenant improvement allowance.
If the terms agreed to with a third party are materially more favorable than
those set forth in the ROFO Notice, then Landlord shall so inform Tenant and
Tenant shall have the right, for a period of seven (7) business days, to accept
such terms in writing and thereafter promptly, to enter into an amendment of the
Lease incorporating the ROFO Premises. In the event Landlord and Tenant do not
enter into such amendment within the period specified, Landlord shall be free to
enter into a lease with a third party on terms not materially more favorable to
the third party than those offered to Tenant.

(c) If Landlord fails to enter into a non-binding letter of intent or binding
agreement with a third party with respect to the ROFO Premises within one
hundred eighty (180) days after the date of the ROFO Notice, Tenant’s ROFO
rights shall be reinstated, and Landlord shall again be obligated to comply with
the provisions of this Section 29.

30. RIGHT OF FIRST REFUSAL

30.1. Tenant shall have a continuing right of first refusal (“ROFR”) to lease
all of the remainder of the Rentable Area located on the fifth (5th) floor of
the Building not yet included as part of the Premises (“ROFR Premises”), subject
to the following conditions:

(a) The ROFR shall be subject to any renewals or term extensions of the leases
of any current or future tenants in the building with respect to their then
leased premises, other than Pharmix.

(b) The ROFR Premises will be incorporated into this Lease except that (a) the
economic terms shall be as set forth in the ROFR or as otherwise agreed by the
parties, (b) Tenant’s Pro Rata Share shall be increased to reflect the addition
of the ROFR Premises, and (c) the number of parking spaces shall be adjusted to
reflect the addition of the ROFR Premises. Unless specified otherwise in the
ROFR, the ROFR Premises shall be leased on an “as is” basis and Landlord shall
have no obligation to improve the ROFR Premises or grant Tenant any improvement
allowance for the ROFR Premises. The Term applicable to the ROFR Premises will
be the same of the Term of the Lease.

(c) Anything herein to the contrary notwithstanding, Tenant shall have no rights
with respect to the ROFR Premises if:

(i) Tenant is in default under any of the terms, covenants or conditions of this
Lease (after any applicable notice and opportunity to cure), either on the date
Landlord delivers the ROFR Offer to Tenant or when the ROFR Premises are to be
incorporated into this Lease;

(ii) Tenant has assigned or sublet the Premises or any part of thereof (other
than pursuant to a Permitted Transfer) as of the date Landlord would otherwise
deliver the ROFR Offer;

(iii) Tenant or a Permitted Transferee is not occupying the Premises on the date
Landlord would otherwise deliver the ROFR Offer;

(iv) the ROFR Premises is not intended for the exclusive use of Tenant or a
Permitted Transferee.

 

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30.2. Tenant’s sole rights as to the ROFR Premises shall be as follows:

(a) Upon receipt of a signed non-binding letter of intent, or its equivalent, to
lease the ROFR Premises from any third party not described in Section 30.1(a)
which Landlord is willing to sign, Landlord shall deliver a copy of such letter
of intent to Tenant (the “ROFR Offer”).

(b) Tenant shall have seven (7) business days in which to accept the ROFR Offer
or to waive its rights under this Section. If Tenant accepts the ROFR Offer, the
ROFR Premises will be incorporated into this Lease except that (a) the economic
terms shall be as set forth in the ROFR Offer or as otherwise agreed by the
parties, (b) Tenant’s Pro Rata Share shall be increased to reflect the addition
of the ROFR Premises, and (c) the number of parking spaces shall be adjusted to
reflect the addition of the ROFR Premises. Unless specified otherwise in the
ROFR Offer, the ROFR Premises shall be leased on an “as is” basis and Landlord
shall have no obligation to improve the ROFR Premises or grant Tenant any
improvement allowance for the ROFR Premises. The Term applicable to the ROFR
Premises will be the same of the Term of the Lease. If Tenant elects to waive
its rights, Landlord shall be free to enter into a lease for the ROFR Premises
with the party named in the ROFR Offer on the same terms contained in the ROFR
Offer.

(c) If Landlord fails to enter into a binding agreement with such third party
within 180 days after the date of the ROFR Offer, Tenant’s ROFR rights shall be
reinstated, and Landlord shall again be obligated to comply with the provisions
of this Section 29.

31. MISCELLANEOUS

31.1. Entire Agreement. This Lease, including the exhibits which are
incorporated herein and made a part of this Lease, contains the entire agreement
between the parties and all prior negotiations and agreements are merged herein.
Tenant hereby acknowledges that neither Landlord nor Landlord’s Agents have made
any representations or warranties with respect to the Premises, the Property, or
this Lease except as expressly set forth herein, and no rights, easements or
licenses are or shall be acquired by Tenant by implication or otherwise unless
expressly set forth herein.

31.2. No Waiver. No failure by Landlord or Tenant to insist upon the strict
performance of any obligation of Tenant or Landlord under this Lease or to
exercise any right, power or remedy consequent upon a breach thereof, no
acceptance of full or partial Base Rent or Additional Rent during the
continuance of any such breach by Landlord, or payment of Base Rent or
Additional Rent by Tenant to Landlord, and no acceptance of the keys to or
possession of the Premises prior to the expiration of the Term by any employee
or agent of Landlord shall constitute a waiver of any such breach or of such
term, covenant or condition or operate as a surrender of this Lease. No waiver
of any breach shall affect or alter this Lease, but each and every term,
covenant and condition of this Lease shall continue in full force and effect
with respect to any other then-existing or subsequent breach thereof. The
consent of Landlord or Tenant given in any instance under the terms of this
Lease shall not relieve Tenant or Landlord, as applicable, of any obligation to
secure the consent of the other in any other or future instance under the terms
of this Lease.

31.3. Modification. Neither this Lease nor any term or provisions hereof may be
changed, waived, discharged or terminated orally, and no breach thereof shall be
waived, altered or modified, except by a written instrument signed by the party
against which the enforcement of the change, waiver, discharge or termination is
sought.

 

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31.4. Successors and Assigns. The terms, covenants and conditions contained in
this Lease shall bind and inure to the benefit of Landlord and Tenant and,
except as otherwise provided or limited herein, their respective personal
representatives and successors and assigns.

31.5. Validity. If any provision of this Lease or the application thereof to any
person, entity or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such provision
to persons, entities or circumstances other than those as to which it is invalid
or unenforceable, shall not be affected thereby, and each provision of this
Lease shall be valid and be enforced to the full extent permitted by law.

31.6. Jurisdiction. This Lease shall be construed and enforced in accordance
with the laws of the State of California. Any action that in any way involves
the rights, duties and obligations of the parties under this Lease may (and if
against Landlord, shall) be brought in the courts of the State of California or
the United States District Court for the District of California, and the parties
hereto hereby submit to the personal jurisdiction of said courts.

31.7. Attorneys’ Fees. In the event that either Landlord or Tenant fails to
perform any of its obligations under this Lease or in the event a dispute arises
concerning the meaning or interpretation of any provision of this Lease, the
defaulting party or the party not prevailing in such dispute, as the case may
be, shall pay any and all costs and expenses incurred by the other party in
enforcing or establishing its rights hereunder, including, without limitation,
court costs, costs of arbitration and reasonable attorneys’ fees.

31.8. Waiver of Jury Trial. To the extent permitted by law, Landlord and Tenant
each hereby voluntarily and knowingly waive and relinquish their right to a
trial by jury in any action, proceeding or counterclaim brought by either
against the other on any matter whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord with Tenant, or Tenant’s
use or occupancy of the Premises, including any claim of injury or damage, and
any emergency and other statutory remedy with respect thereto.

31.9. [intentionally omitted]

31.10. Light and Air. Tenant covenants and agrees that no diminution of light,
air or view by any structure that may hereafter be erected (whether or not by
Landlord) shall entitle Tenant to any reduction of the Base Rent or Additional
Rent under this Lease, result in any liability of Landlord to Tenant, or in any
other way affect this Lease or Tenant’s obligations hereunder.

31.11. Lease Memorandum. Neither Landlord or Tenant shall record this Lease or a
short form memorandum hereof without the consent of the other.

31.12. [intentionally omitted]

31.13. Terms. The term “Premises” includes the space leased hereby and any
improvements now or hereafter installed therein or attached thereto. The words
“Landlord” and “Tenant” as used herein shall include the plural as well as the
singular. If there is more than one Tenant or Landlord, the obligations under
this Lease imposed on Tenant or Landlord shall

 

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be joint and several. The captions preceding the articles of this Lease have
been inserted solely as a matter of convenience and such captions in no way
define or limit the scope or intent of any provision of this Lease.

31.14. Review and Approval. The review, approval, inspection or examination by
Landlord of any item to be reviewed, approved, inspected or examined by Landlord
under the terms of this Lease or the exhibits attached hereto shall not
constitute the assumption of any responsibility by Landlord for either the
accuracy or sufficiency of any such item or the quality of suitability of such
item for its intended use. Any such review, approval, inspection or examination
by Landlord is for the sole purpose of protecting Landlord’s interests in the
Property and under this Lease, and no third parties, including, without
limitation, Tenant or any person or entity claiming through or under Tenant, or
the contractors, agents, servants, employees, visitors or licensees of Tenant or
any such person or entity, shall have any rights hereunder with respect to such
review, approval, inspection or examination by Landlord.

31.15. No Beneficiaries. This Lease shall not confer or be deemed to confer upon
any person or entity other than the parties hereto, any right or interest,
including without limitation, any third party status or any right to enforce any
provision of this Lease.

31.16. Time of the Essence. Time is of the essence in respect of all provisions
of this Lease in which a definite time for performance is specified.

31.17. [intentionally omitted]

31.18. Construction. This Lease has been negotiated extensively by Landlord and
Tenant with and upon the advice of their respective legal counsel, all of whom
have participated in the drafting hereof. Consequently, Landlord and Tenant
agree that no party shall be deemed to be the drafter of this Lease and in the
event this Lease is ever construed by a court of law, such court shall not
construe this Lease or any provision of this Lease against any party as the
drafter of the Lease.

31.19. Survival. The obligations of this Lease shall survive the expiration of
the Term to the extent necessary to implement any requirement for the
performance of obligations or forbearance of any act by either party hereto
which has not been completed prior to the termination of this Lease. Such
survival shall be to the extent reasonably necessary to fulfill the intent
thereof, or if specified, to the extent of such specification, as same is
reasonably necessary to perform the obligations and/or forbearance of an act set
forth in such term, covenant or condition. Notwithstanding the foregoing, in the
event a specific term, covenant or condition is expressly provided for in such a
clear fashion as to indicate that such performance of an obligation or
forbearance of an act is no longer required, then the specific shall govern over
this general provision of this Lease.

31.20. Counterparts. This Lease may be executed in counterparts, each of which
shall be an original, and all of which together shall constitute one original of
the Lease.

[Remainder of page left intentionally blank]

 

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
Effective Date.

 

LANDLORD:

   TENANT:

CLARENDON HILLS INVESTORS, LLC

  

COTHERIX, INC., a Delaware corporation

a California limited liability company

  

        By:        /s/ Stephen P. Diamond            

  

        By:        /s/ Donald J. Santel                    

        Name:  Stephen P. Diamond                   

  

        Name:  Donald J. Santel                          

        Its:        Manager                                     

  

        Its:        Chief Executive Officer              

  

        By:        /s/ Christine Gray-Smith            

  

        Name:  Christine Gray-Smith                  

  

        Its:        EVP & Chief Financial Officer  

 

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GLOSSARY

As used in this Lease, the following terms shall have the following meanings,
applicable, as appropriate, to both the singular and plural form of the terms
defined below:

“Abated Rent” is defined in Section 15.2(g).

“ADA” is defined in Section 11.1.

“Additional Rent” is defined in Section 5.3.

“Alterations” is as defined in Section 9.3.

“Applicable Laws” are defined in Section 11.1.

“Assignment” is defined in Section 14.1.

“Base Rent” means the amount stated in Article 1, to be adjusted and payable in
accordance with Article 5.

“Building” is defined in Section 2.1.

“Building Structure” is defined in Section 8.1.

“Building Systems” are defined in Section 7.2(b).

“Business Days” means Monday through Friday, excluding Saturdays, Sundays and
federal and state legal holidays.

“Common Area” is defined in Section 2.2.

“Commencement Date” means the date specified in Article 1.

“Effective Date” is defined in the introductory paragraph of this Lease.

“Environmental Activity” is defined in Section 12.1(a).

“Environmental Investigation” is defined in Section 12.7.

“Environmental Laws” are defined in Section 12.1(b).

“Event of Default” is defined in Section 15.1.

“Excess Rent” is defined in Section 14.4.

“Expiration Date” means the date specified in Article 1.

“Hazardous Material” is defined in Section 12.1(c).

“Initial Base Rent” is defined in Article 1.

 

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“Interest Rate” is defined in Section 5.3.

“Landlord” is defined in the introductory paragraph to this Lease.

“Landlord’s Agents” is defined in Section 12.4.

“Landlord’s Expense Statement” is defined in Section 7.3.

“Offer” is defined in Section 14.5.

“Operating Expenses” are defined in Section 7.2(b).

“Permitted Transfers” is defined in Section 14.8.

“Punch List” is defined in Exhibit E.

“Premises” is defined in Section 2.1.

“Prevailing Market Rent” is defined in Exhibit C.

“Property” is defined in Section 2.2.

“Real Estate Taxes” are defined in Section 7.2(a).

“Renewal Option” is defined in Section 4.3.

“Renewal Term” is defined in Section 4.3.

“Rent” means Base Rent, Additional Rent, and all other sums due from Tenant
under this Lease.

“Rent Commencement Date” is defined in Article 1.

“Rentable Area” shall be determined pursuant to current BOMA standards.

“ROFO” is defined in Section 29.1.

“ROFO Premises” is defined in Section 29.1.

“ROFR” is defined in Section 30.1.

“ROFR Premises” is defined in Section 30.1.

“Rules and Regulations” is defined in Section 23.1.

“Scheduled Date for Delivery of the Premises” is specified in Article 1.

“Security Deposit” is defined in Article 1.

“Sublease” is defined in Section 14.1.

“Successor” is defined in Section 16.5.

 

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“Supplemental Investigation” is defined in Section 12.7.

“Tenant” is defined in the introductory paragraph to this Lease.

“Tenant Delay” is defined in Exhibit E.

“Tenant Improvement Allowance” is specified in Article 1.

“Tenant Improvement Work” is defined Exhibit E

“Tenant Obligations” is defined in Section 8.2.

“Tenant Systems” is defined in Section 8.2.

“Tenant’s Agents” is defined in Section 2.2.

“Tenant’s Hazardous Materials” is defined in Section 12.1(d).

“Tenant’s Property” is defined in Section 9.6.

“Term” is defined in Article 1 and Section 4.1.

“Termination Date” is defined in Section 4.1.

“Termination Notice” is defined in Section 4.2.

“Transfer” is defined in Section 14.5.

“Transfer Costs” is defined in Section 14.4.

“Transfer Notice” is defined in Section 14.2.

“Transferee” is defined in Section 14.2.

 

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EXHIBIT A

PREMISES

[Picture of Rentable Floor Plan Area]

 

A-1

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EXHIBIT B

AGREEMENT REGARDING COMMENCEMENT DATE, RENT COMMENCEMENT DATE, EXPIRATION DATE,
BASE RENT AND RENTABLE AREA

(Letterhead of Landlord)

(Date)

                                                                               
                                    

                                                                               
                                    

Attention:                                     
                                                           

Re:    Lease between Clarendon Hills Investors, LLC (Landlord), and CoTherix,
Inc. (Tenant), for premises located at 2000 Sierra Point Parkway, Suite 501 &
600, Brisbane, California

Gentlemen/Ladies:

When countersigned by you, this letter will confirm the following for all
purposes under the Lease:

 

The Commencement Date is                                         
                                        
                                              

The Rent Commencement Date is                                         
                                                                            

The Expiration Date is                                         
                                        
                                                         

The Exercise Date for the First Renewal Option is
                                        
                                             

The Exercise Date for the Second Renewal Option is
                                                                               
 

Please acknowledge your agreement by signing and returning two copies of this
letter.

 

Very truly yours,

CLARENDON HILLS INVESTORS, LLC

By:                                      
                                               

Name:                                     
                                          

Its:                                      
                                               

Accepted and Agreed:

COTHERIX, INC.

By:                                      
                                             

Its:                                      
                                              

Name:                                     
                                          

Dated:                                     
                                          

 

B-1

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EXHIBIT C

DETERMINATION OF PREVAILING MARKET RENT

The term “Prevailing Market Rent” means the base monthly rent per rentable
square foot (net of all expenses) for direct leases from the landlord (as
opposed to subleases) of space of comparable size and location to the Premises
and in buildings similar in age and quality to the Premises for a comparable
term, taking into account any additional rent and all other payments or
escalations then being charged and allowances and economic concessions being
given for such comparable space over a comparable term. The Prevailing Market
Rent shall be proposed by Landlord and Landlord shall give Tenant written notice
of such proposal not later than twenty (20) days after delivery by Tenant of
Tenant’s notice of exercise of the Renewal Option. If Tenant disputes Landlord’s
proposal of the Prevailing Market Rent, Tenant shall so notify Landlord within
fifteen (15) business days following Landlord’s notice to Tenant of Landlord’s
proposal and, in such case, the Prevailing Market Rent shall be determined as
follows:

(a) Within thirty (30) days following Tenant’s notice to Landlord that it
disputes Landlord’s proposal of the Prevailing Market Rent, Landlord and Tenant
shall meet no less than two (2) times, at a mutually agreeable time and place,
to attempt to agree upon the Prevailing Market Rent.

(b) If within this 30-day period Landlord and Tenant cannot reach agreement as
to the Prevailing Market Rent, they shall each select one appraiser to determine
the Prevailing Market Rent. Each such appraiser shall arrive at a determination
of the Prevailing Market Rent and submit his or her conclusions to Landlord and
Tenant within thirty (30) days after the expiration of the 30-day consultation
period described in (a) above.

(c) If only one appraisal is submitted within the requisite time period, it
shall be deemed to be the Prevailing Market Rent. If both appraisals are
submitted within such time period, and if the two appraisals so submitted differ
by less than ten (10) percent of the higher of the two, the average of the two
shall be the Prevailing Market Rent. If the two appraisals differ by more than
ten (10) percent of the higher of the two, then the two appraisers shall
immediately select a third appraiser who will within thirty (30) days of his or
her selection make a determination of the Prevailing Market Rent and submit such
determination to Landlord and Tenant. This third appraisal will then be averaged
with the closer of the previous two appraisals and the result shall be the
Prevailing Market Rent.

(d) All appraisers specified pursuant hereto shall be members of the American
Institute of Real Estate Appraisers with not less than five (5) years experience
appraising office, research and development and industrial properties in the San
Francisco/Peninsula/South Bay area without preexisting business affiliations
with either Landlord or Tenant. Each party shall pay the cost of the appraiser
selected by such party and one-half of the cost of the third appraiser plus
one-half of any other costs incurred in the determination.

 

C-1

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EXHIBIT D

ACCEPTANCE FORM

This Acceptance form is executed with reference to that certain Lease dated as
of                     , 2006 by and between CLARENDON HILLS INVESTORS, LLC, a
California limited liability company (“Landlord”), and COTHERIX, INC., a
Delaware corporation (“Tenant”). Terms defined in the Lease and the exhibits
thereto shall have the same meaning when used herein.

Tenant hereby certifies to Landlord that Tenant has inspected the Premises as of
                     (the “Date of Inspection”). Tenant further acknowledges
that Tenant hereby accepts the delivery of the Premises in its existing
condition, subject to the provisions of the Lease (included any stated
warranties) and the attached Punch List of minor items to be completed following
delivery.

Tenant represents and warrants to Landlord that the person executing this
Acceptance Form on behalf of Tenant represents and warrants to Landlord that is
duly authorized to execute and deliver this Acceptance Form on behalf of Tenant.

THIS ACCEPTANCE FORM is executed by Tenant as of the Date of Inspection.

 

TENANT:

COTHERIX, INC.

By:                                      
                                                           

Name:                                     
                                                      

Its:                                      
                                                            

 

LANDLORD:

CLARENDON HILLS INVESTORS, LLC

By:                                      
                                                           

Name:                                     
                                                      

Its:                                      
                                                            

 

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EXHIBIT E

WORK LETTER

 

1. Tenant Improvement Work. Landlord shall Deliver the Premises to Tenant
consistent with the space plan designed by Huntsman Architects dated May 5, 2006
(the “Tenant Improvement Work”) and included within this Exhibit as Schedule 1.
All work performed by Landlord pursuant to this Work Letter shall be defined as
the “Tenant Improvement Work.” Following Delivery of the Premises, Landlord
shall have no further responsibility to perform improvements to the Premises,
subject to the Punch List of minor items to be completed following Delivery. The
guidelines for the Tenant Improvement Work consist of:

 

  a. CARPET

Commercial Quality carpet, direct glue, $23 per square yard for goods, not
including installation.

 

  b. RESILIENT FLOORING

VCT tile in the coffee rooms, 5th and 6th floor freight elevator rooms, and
server room.

 

  c. SPECIALTY FLOORING

Install Nikzad IMPORT INC., bamboo flooring in reception area (up to 600 square
feet). Product to be Vertical Carbonized Dark Bamboo, 6 5/8” x  5/8” or product
with equivalent cost.

 

  d. BASE

Typical 4” resilient rubber base throughout, with 4” wood base in the reception
area. Where necessary for aesthetics or wall repair, 6” base may be used; if it
is used, it must meet mutual requirements for aesthetics.

 

  e. WALLS

All necessary walls to be demolished and constructed per plan and all new walls
and existing walls (as needed) installed with sound insulation batt material in
and above partition. Server room to be constructed to appropriate fire rating
per building codes.

 

  f. PAINT

One base paint color and up to 3 accent paint colors to be selected by Tenant.

 

  g. CASEWORK

Landlord shall provide and install up to ten (10) linear feet of new laminate
cabinetry (floor cabinets and hanging cabinets above counter). Landlord shall
provide and install up to twenty (20) linear feet of granite countertops (cost
of granite slabs not to exceed $200 per slab). Landlord shall relocate and
reinstall existing cabinetry and countertops as desired.

 

  h. DOORS AND FRAMES

Standard interior doors to be 8’ high. Private offices and conference room doors
to be veneer with anodized aluminum frames, all other doors to be paint grade

 

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with anodized aluminum frames. The boardroom will have 9’ veneer doors. The
interior telephone rooms and 6th floor mail room will have 8’ paint grade doors
with a narrow vision panel. The existing fire-rated 5th floor corridor doors
shall be painted and reused. No hold open is required at the elevator lobby
doors.

 

  i. PERIMETER OFFICES

All perimeter offices and selected conference rooms walls to have one (1) 8’ x
3’ glass panel in an anodized aluminum frame. 9’ tall (floor-to-ceiling) doors
and butt glazed panels shall be utilized for the 6th floor board room. Touch up
exterior metal mullions and sill with paint as needed.

 

  j. LIGHTING

The existing lighting fixtures will remain and additional matching lighting
fixtures will be installed per plan. Occupancy sensors to be installed in
private offices and conference rooms, per Title 24 requirements. Tenant to
select and pay for specialty fixture for boardroom, Landlord to install.

 

  k. CEILING GRID

The existing acoustic ceiling grid shall remain, ceiling tiles replaced so that
there are no stained, broken, or non-matching ceiling tiles throughout the
Premises.

 

  l. BREAK ROOM EQUIPMENT

Per floor, owner to provide and install 1 (one) breakroom with 1 dishwasher, 1
garbage disposal, 1 hot water dispenser, 1 sink/faucet. Tenant to provide and
install 1 full height refrigerator, 2 microwaves, 1 coffee maker, water cooler
and vending machines.

 

  m. ELECTRICAL

All electrical wiring to meet current code. All required switches and outlets to
be provided per plan. Hardwire door bell in elevator lobby to be used to gain
access when receptionist is away from lobby. Entry to space to be on card key
access when receptionist is away from lobby. Receptionist to lock and release
entry doors from reception desk.

 

  n. HVAC

All mechanical systems to meet current code. Per plan, HVAC system should
include approximately 12-14 zones. A separate heat pump will be used to cool the
Server Room.

 

  o. WINDOW COVERINGS

Replace any inoperable, damaged or bent window blinds. Replace existing bubbling
window film with comparable window film.

 

  p. SIGNAGE

Building lobby identification to be owner’s responsibility as well as signage at
entry to tenant space.

 

  q. RESTROOMS

Replace carpet in restroom with floor tile to match existing tile or existing
threshold. Replace stained toilet seats in restrooms and replace damaged mirrors
in restrooms, if necessary. Replace ceiling tile above lavs with new tile. Paint
existing vinyl wallcovering.

 

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  r. LIFE SAFETY

Furnish and install all required fire and life safety devices. Install one type
of exit sign.

 

  s. SECURITY

All points of entry to tenant space including stairwell access to 6th floor and
Employee meeting room on the 5th floor to be secured with electronic card key
access.

 

  t. STAIRWELL

Clean stairwell for Tenant’s daily use.

 

2. Additional Tenant Improvement Work at Tenant Expense. Tenant may request the
enhancements to the Tenant Improvement Work listed below. These improvements
shall be completed by Landlord but shall be at the Tenant’s sole cost and
expense and delay caused by such work shall be considered “Tenant Delay,” as set
out in Paragraph 5 below. Any of such items shall also be considered “Tenant
Improvement Work” for all purposes under this Lease.

 

  a. CARPET

Carpet which costs in excess of $23 per square yard for goods, not including
installation. Additionally, the 5th common areas (lobby, hallway, and restrooms)
may be re-carpeted to match the interior Premises improvements.

 

  b. RESILIENT FLOORING

4mm Rubber Tile or Forbo Marmoleum may be used in lieu of VCT tile.

 

  c. CASEWORK

Cabinetry can be upgraded to stain grade. Cabinets with countertops can also be
installed in additional rooms, including conference rooms.

 

  d. FABRIC WRAPPED PANELS

Acoustical and tackable fabric wrapped panel system may be installed in selected
conference rooms.

 

  e. PERIMETER OFFICES

Additional 8’ x 3’ glass panels in anodized aluminum frames may be installed in
front of perimeter offices and conference rooms. Larger glass panels may be
utilized in lieu of the 8’ x 3’ glass panels provided by Landlord.

 

  f. SECURITY

IT Server room, Legal / Finance File Room, and Regulatory Affairs file room to
be secured with electronic card key access.

 

  g. LIGHTING

Accent lighting to be provided in lobby.

 

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  h. NEW COFFEE ROOM

A new coffee room located on the 6th floor with new plumbing lines, 1 garbage
disposal, 1 hot water dispenser, 1 sink/faucet, 1 full height refrigerator, 2
microwaves, 1 toaster, 1 coffee maker, 1 water cooler and 1 vending machine. A
new espresso maker requiring 220v to be provided by Tenant.

 

  i. STAIRWELL

Install carpet runner in stairwell between 5th and 6th floor.

 

  j. BOARDROOM AND CONFERENCE ROOMS ENHANCEMENTS

An automatic roller shade or other window covering for privacy may be installed.
An automatic projection screen may be installed.

  Credenza cabinet with mini-refrigerator may be installed for the Boardroom.

 

  3. Exclusions from the Tenant Improvement Work. Tenant, at its own cost and
expense, shall be responsible for its voice and data wiring, furniture and
workstations, refrigerator or other appliances (other than as noted elsewhere as
provided by owner), and all other personal fixtures. Following the acceptance by
both Parties of the Tenant Improvement Work, the cost of change orders requested
by Tenant, if any, shall be fulfilled by Landlord at Tenant’s sole cost and
expense and any delay caused by such change orders shall be considered “Tenant
Delay,” as set forth in Paragraph 5 below.

 

  4. Inspection & Punch List. When Landlord considers the Tenant Improvement
Work to be substantially complete so as to satisfy the criteria for “ready for
occupancy”, Landlord will notify Tenant and within one (1) business day
thereafter, Landlord’s representative and Tenant’s representative shall conduct
a walk-through of the Premises to verify that they have been completed in
compliance with the Project Specifications and to identify any necessary
corrective work, repairs and minor completion items, i.e., to develop a “punch
list” (the “Punch List”). Neither Landlord’s representative nor Tenant’s
representative shall unreasonably withhold their agreement on completion of the
Tenant Improvement Work, Delivery of the Premises, or the specific punch list
items. Landlord shall use reasonable efforts to complete any punch list items
within fifteen (15) days after agreement thereon. Notwithstanding the foregoing,
Tenant reserves the right for its representative to inspect the Tenant
Improvement Work at any time and from time to time during the course of the
Tenant Improvement Work.

 

  5. Tenant Delays. For the purposes of this Agreement, the parties agree that
Tenant shall bear the risk of any delay in the completion of the Tenant
Improvement Work caused by any of the following, and that each day of Tenant
Delay will result in a reduction in the abated rent period by on e day and an
increase in the Scheduled Date for Delivery of Premises by one day: (i) Tenant’s
failure to respond within a reasonable time (not to exceed three business days
unless a longer time is provided in the Lease or this Tenant Improvement Work
Letter) during the design or construction periods to requests for approval,
consent, explanation or interpretation of anything relating to the construction
of the Tenant Improvement Work; (ii) Tenant’s failure to sign off on
Construction Permit Plans by May 19., 2002 and sign off on the Finish Package by
June 2, 2006, or within three (3) business days after receipt of the same for
approval; and (iii) the effect of any change orders or other revisions of any
items of the Tenant Improvement Work (including all items in Section 2, the
Additional Tenant Improvement Work at Tenant Expense) requested and agreed to by
Tenant, but not to exceed the number of days agreed to by Landlord and Tenant at
the time of such change order or revision (collectively, a “Tenant Delay”).

 

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  6. Insurance. Until acceptance of the Premises by Tenant (subject to
completion of minor punch list items), the risk of loss with respect to the
Tenant Improvement Work and all materials, supplies and work in progress shall
be with Landlord.

 

  7. Tenant’s Contractors & Vendors. At least thirty days prior to the date the
Premises are required to be ready for occupancy, Tenant or its vendors shall be
allowed access to the Premises for the purposes of furniture installation and
installation of its voice and data wiring or other work not requested of
Landlord. Landlord shall permit such entry provided Tenant’s contractors work in
harmony with and do not in any way disturb or interfere with Landlord’s
contractors. Such entry by Tenant and its contractors pursuant to this Section
shall be deemed to be under all of the terms, covenants, provisions and
conditions of the Lease except the covenant to pay rent.

 

  8. Change Orders. If any change to the Tenant Improvement Work is required or
desirable, Tenant can request it by sending a written Change Order request to
Landlord for review. Any Change Order request must describe in detail the
proposed change and the effect the change will have on the Tenant Improvement
Work and the project schedule. No Change Order will be deemed accepted or
binding on either party until there is mutual written agreement on the proposed
change and its effect on the cost of the Tenant Improvement Work, schedule and
other terms and conditions of this Agreement. If any re-drawing or re-drafting
of the construction plans is necessitated by Tenant’s requested changes, the
expense of any such re-drawing or re-drafting will be on Tenant.

 

  9. Payment of Employees, Suppliers and Contractors - Mechanics Liens. Landlord
is solely responsible for all payment due to or to become due to all its
employees, contractors, subcontractors or material suppliers, or other
independent contractors that it may employ to complete the Tenant Improvement
Work, including the withholding of appropriate taxes and the compliance with any
and all worker’s compensation laws or similar employer obligations for
requirements with respect to its employees. Landlord shall be responsible for
the discharge of any mechanics liens arising from or asserted in connection with
the Tenant Improvement Work. Landlord indemnifies, agrees to defend and saves
harmless Tenant and any affiliate, subsidiary, parent corporation, or the
employees or agents of any of them (the “Indemnified Parties”) against any and
all liability for any claim arising from Landlord’s breach under this Section.

 

  10. Relationship of the Parties & No Third Party Beneficiaries. Nothing
contained herein shall be deemed or construed by the parties hereto, nor by any
third party, as creating the relationship of principal and agent or of
partnership or of joint venture between the parties hereto, it being understood
and agreed that neither the method of funding the Tenant Improvement Work or
allocation of construction risk nor any other provision contained herein, nor
any acts of the parties hereto, shall be deemed to create any relationship
between the parties hereto other than the relationship of landlord and tenant.
The provisions of this Agreement are solely for the benefit of the parties
hereto, and no contractor, subcontractor, material supplier or other third party
shall be entitled to any benefits hereof or hereunder.

 

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  11. Warranties. The Tenant Improvement Work shall be completed substantially
in conformance with the plans and specifications approved by Tenant, and shall
be warranted to be free from defects in workmanship and design for one year from
the date placed in service. The benefit of all equipment warranties shall be
assigned to or passed through to Tenant.

 

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