Exhibit 10.34
LEASE
by and between
BMR-GATEWAY BOULEVARD LLC,
a Delaware limited liability company
and
STEMCELLS, INC.,
a Delaware corporation

 

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

 

TABLE OF CONTENTS

                      Page
1.
  Lease of Premises     1  
2.
  Basic Lease Provisions     2  
3.
  Term     6  
4.
  Possession and Commencement Date     6  
5.
  Condition of Premises     10  
6.
  Rentable Area     11  
7.
  Rent     12  
8.
  Rent Adjustments     12  
9.
  Operating Expenses     12  
10.
  Taxes on Tenant’s Property     19  
11.
  Security Deposit     20  
12.
  Use     23  
13.
  Rules and Regulations, CC&Rs, Parking Facilities and Common Areas     25  
14.
  Project Control by Landlord     27  
15.
  Quiet Enjoyment     29  
16.
  Utilities and Services     29  
17.
  Alterations     33  
18.
  Repairs and Maintenance     36  
19.
  Liens     37  
20.
  Estoppel Certificate     38  
21.
  Hazardous Materials     39  
22.
  Odors and Exhaust     42  
23.
  Insurance; Waiver of Subrogation     43  
24.
  Damage or Destruction     46  
25.
  Eminent Domain     48  
26.
  Surrender     49  
27.
  Holding Over     49  
28.
  Indemnification and Exculpation     50  
29.
  Assignment or Subletting     51  
30.
  Subordination and Attornment     54  
31.
  Defaults and Remedies     55  

i

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

 

             
32.
  Bankruptcy     60  
33.
  Brokers     61  
34.
  Definition of Landlord     62  
35.
  Limitation of Landlord’s Liability     62  
36.
  Intentionally Omitted     63  
37.
  Representations     63  
38.
  Confidentiality     63  
39.
  Notices     63  
40.
  Rooftop Installation Area     64  
41.
  Miscellaneous     65  
42.
  Option to Extend Term     68  
43.
  Expansion Option     69  

ii

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

 

LEASE
     THIS LEASE (this “Lease”) is entered into as of this 2nd day of December,
2010 (the “Execution Date”), by and between BMR-GATEWAY BOULEVARD LLC, a
Delaware limited liability company (“Landlord”), and STEMCELLS, INC., a Delaware
corporation (“Tenant”).
RECITALS
     A. WHEREAS, Landlord owns certain real property (the “Property”) and the
improvements thereon located at 7707 Gateway Boulevard in Newark, California,
including the building known as Building No. 5 located thereon (the “Building”)
in which the Premises (as defined below) are located; and
     B. WHEREAS, Landlord wishes to lease to Tenant, and Tenant desires to lease
from Landlord, certain premises located in the Building, pursuant to the terms
and conditions of this Lease, as detailed below.
AGREEMENT
     NOW, THEREFORE, Landlord and Tenant, in consideration of the mutual
promises contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound, agree as follows:
1. Lease of Premises. Effective on the Term Commencement Date, Landlord hereby
leases to Tenant, and Tenant hereby leases from Landlord for use by Tenant (and
its permitted successors and assigns) in accordance with the Permitted Use (as
defined below) and no other uses, that portion of the Building consisting of
approximately one-half of the first (1st) floor of the Building and one-half of
the second (2nd) floor of the Building, as collectively shown on Exhibit A
attached hereto, including exclusive shafts, cable runs, mechanical spaces and
rooftop areas (the “Premises”). The Premises shall consist of approximately
forty-three thousand (43,000) square feet of Rentable Area (as defined in
Section 6.3 below). The Property and all landscaping, parking facilities,
loading docks, private drives and other improvements and appurtenances related
thereto, including, without limitation, the Building, the Amenities Building (as
defined below) and the eight (8) other buildings currently located on the
Property, and each additional building that is constructed on the Property
(following substantial completion of such buildings) are hereinafter
collectively referred to as the “Project.” The Project is commonly known as the
Pacific Research Center. All portions of the Building that are for the
non-exclusive use of the tenants of the Building only, and not the tenants of
the Project generally, such as service corridors, stairways, elevators, public
restrooms, equipment rooms, loading docks and public lobbies (all to the extent
located in the Building), are hereinafter referred to as the “Building Common
Area”. The current Building Common Areas are depicted in the grey shaded areas
of Exhibit A attached hereto. All portions of the Project that are for the
non-exclusive use of tenants of the Project generally, including, without
limitation, driveways, sidewalks, parking areas, landscaped areas, and the
amenities building depicted on the Project Site Plan attached hereto as
Exhibit A-1 (“Amenities Building”) in which Landlord shall

 

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

 

provide, among other things, (i) a cafeteria serving hot and cold food prepared
on-site, (ii) a fitness center with Class A workout equipment and related men’s
and women’s locker room and shower facilities, (iii) a conference center with
four (4) serviced conference rooms available on a first-reserved basis, (iv) a
Project central mailroom, (v) the Project maintenance shop, (vi) the Project
security command center and (vii) Project management offices (collectively, the
“Amenities Building Services”), but excluding the Building Common Area and the
common areas of any other building in the Project, are hereinafter referred to
as the “Project Common Area.” Subject to the terms and provisions of this Lease,
Landlord will provide the Amenities Building Services listed in items
(i) through (iv) above throughout the Term. The Building Common Area and the
Project Common Area are collectively hereinafter referred to as the “Common
Areas.” All of the area in the Amenities Building is currently used to provide
the Amenities Building Services; however, if at any time any portion of the
Amenities Building is used as tenant space rentable to other Project tenants or
for other uses aside from the provision of the Amenities Building Services, then
the leasable area of the Amenities Building will be separated such that only
that proportion of the Amenities Building dedicated exclusively to the provision
of the Amenities Building Services to the tenants of the Project will be
included in the Project Common Areas (and the Project Operating Expenses will
only include those costs associated with the portion of the Amenities Building
used for the provision of the Amenities Building Services in accordance with
Article 9 below), and such leasable areas will be included in the Project for
purposes of calculating Operating Expenses (i.e., the square footage of the
Project will be increased to reflect such areas).
2. Basic Lease Provisions. For convenience of the parties, certain basic
provisions of this Lease are set forth herein. The provisions set forth herein
are subject to the remaining terms and conditions of this Lease and are to be
interpreted in light of such remaining terms and conditions.
     2.1. This Lease shall take effect upon the Execution Date and, except as
specifically otherwise provided within this Lease, each of the provisions hereof
shall be binding upon and inure to the benefit of Landlord and Tenant from the
date of execution and delivery hereof by all parties hereto.

2

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

 

     2.2. In the definitions below, each current Rentable Area (as defined in
Article 6 below) is expressed in rentable square footage. Rentable Area and
Tenant’s Pro Rata Shares (as defined in Section 7.2 below) are all subject to
adjustment as provided in this Lease.

              Means the Following (As of the Term Definition or Provision  
Commencement Date)
Approximate Rentable Area of Premises
  43,000 square feet
Approximate Rentable Area of Building
  148,848 square feet
Approximate Rentable Area of Project
  1,389,517 square feet
Tenant’s Pro Rata Share of Building
    28.9 %
Tenant’s Pro Rata Share of Project
    3.1 %
Load Factor for Building
    13 %

     2.3. Monthly and annual installments of Base Rent for the Premises (“Base
Rent”) as of the Term Commencement Date, subject to adjustment as follows:

                          Base Rent per             Square Feet of   Square Foot
of         Lease Year   Rentable Area   Rentable Area   Monthly Base Rent  
Annual Base Rent
Term
Commencement
Date-Month 14 of
the initial Term
  43,000   $2.20 monthly
(subject to
abatement as set
forth in Section 7.1
below)   $94,600   $1,135,200
Months 15-26 of
the initial Term
  43,000   $2.30 monthly   $98,900   $1,186,800
Months 27-38 of
the initial Term
  43,000   $2.40 monthly   $103,200   $1,238,400
Months 39-50 of
the initial Term
  43,000   $2.50 monthly   $107,500   $1,290,000
Months 51-62 of
the initial Term
  43,000   $2.60 monthly   $111,800   $1,341,600

3

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

 

                          Base Rent per             Square Feet of   Square Foot
of         Lease Year   Rentable Area   Rentable Area   Monthly Base Rent  
Annual Base Rent
Months 63-74 of
the initial Term
  43,000   $2.67 monthly   $114,810   $1,377,720
Months 75-86 of
the initial Term
  43,000   $2.74 monthly   $117,820   $1,413,840
Months 87-98 of
the initial Term
  43,000   $2.81 monthly   $120,830   $1,449,960
Months 99-110 of
the initial Term
  43,000   $2.88 monthly   $123,840   $1,486,080
Months 111-122 of
the initial Term
  43,000   $2.95 monthly   $126,850   $1,522,200
Month 123-Term
Expiration Date
  43,000   $3.02 monthly   $129,860   $1,558,320

     2.4. Estimated Term Commencement Date: July 1, 2011
     2.5. Estimated Term Expiration Date: One hundred thirty four (134) months
following the Term Commencement Date.
     2.6. Security Deposit: $335,825.00 (based on three (3) months’ Base Rent at
the average monthly rate over the initial Term), subject to increase only in the
event Tenant elects to expand the Premises or if the Additional TI Allowance
results in an increase of the average monthly Base Rent amount by more than five
percent (5%), at which point, within ten (10) business days of any such increase
in Base Rent, Tenant shall pay to Landlord the additional increase to the
Security Deposit.
     2.7. Permitted Use: Office, R&D, manufacturing support and laboratory use
as further detailed in that certain side letter agreement dated of even dated
herewith, which is incorporated herein by this reference, and to the extent
authorized by the City of Newark (“City”), biotechnology manufacturing, in
conformity with all federal, state, municipal and local laws, codes, ordinances,
rules and regulations of Governmental Authorities (as defined below),
committees, associations, or other regulatory committees, agencies or governing
bodies having jurisdiction over the Premises, the Building, the Property, the
Project, Landlord or Tenant, including both statutory and common law and
hazardous waste rules and regulations (“Applicable Laws”) (collectively, the
“Permitted Use”). As of the Execution Date the zoning for the Project is MT-1.
Landlord acknowledges and recognizes the oral acknowledgement by the City
Community Development Director that laboratories devoted to experimentation,
research and development, do not require a conditional use permit in order to
perform such activities at the Project.

4

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

 

                 
 
    2.8.     Address for Rent Payment:   BMR-Gateway Boulevard LLC  
 
              P.O. Box 511231
 
              Los Angeles, California 90051-2997
 
               
 
    2.9.     Address for Notices to Landlord:   BMR-Gateway Boulevard LLC
 
               
 
              17190 Bernardo Center Drive
 
              San Diego, California 92128
 
              Attn: Vice President, Real Estate Counsel
 
               
 
    2.10.     Address for Notices to Tenant:    

             
 
        Prior to Term Commencement Date:   StemCells, Inc.
 
          3155 Porter Drive
 
          Palo Alto, CA 94304
 
          Attn: Senior Vice President,
 
                   Operations
 
           
 
        Following Term Commencement Date:   StemCells, Inc.
 
          7707 Gateway Boulevard, Suite 200
 
          Newark, California 94560
 
          Attn: Senior Vice President,
 
                   Operations
 
           
 
        With a copy to:   StemCells, Inc.
 
          7707 Gateway Boulevard, Suite 200
 
          Newark, California 94560
 
          Attn: General Counsel

                        2.11.     The following Exhibits are attached hereto and
incorporated herein by reference:
 
               
 
          Exhibit A   Premises
 
          Exhibit A-1   Project Site Plan
 
          Exhibit B   Work Letter
 
          Exhibit B-1   Landlord’s Work
 
          Exhibit C   Acknowledgement of Term Commencement Date and Term
Expiration Date
 
          Exhibit D   Form of Additional TI Allowance and Expansion Space
Additional TI Allowance Acceptance Letter
 
          Exhibit E   Form of Letter of Credit
 
          Exhibit F   Rules and Regulations
 
          Exhibit G   [Intentionally omitted]
 
          Exhibit H   Tenant’s Personal Property
 
          Exhibit I   Form of Estoppel Certificate
 
          Exhibit J   Expansion Space
 
          Exhibit K   Form of Memorandum of Lease

5

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

 

3. Term. The actual term of this Lease shall be approximately one hundred
thirty-four (134) months (as the same may be extended pursuant to Article 42
hereof, and as the same may be earlier terminated in accordance with this Lease,
the “Term”) and shall commence on the actual Term Commencement Date (as defined
in Article 4) and end on the date that is one hundred thirty-four (134) months
after the actual Term Commencement Date (such date, the “Term Expiration Date”),
subject to extension (as provided in Article 42) and earlier termination of this
Lease as provided herein; provided that if the Term Expiration Date as
calculated above is not the last day of the month, then the Term Expiration Date
shall be the last day of the month which is one hundred thirty-four (134) months
after the Term Commencement Date. TENANT HEREBY WAIVES THE REQUIREMENTS OF
SECTION 1933 OF THE CALIFORNIA CIVIL CODE, AS THE SAME MAY BE AMENDED FROM TIME
TO TIME.
4. Possession and Commencement Date.
     4.1. The “Term Commencement Date” shall be the date which is seven
(7) months after Landlord delivers possession of the Premises to Tenant for the
completion of the Tenant Improvements (as defined below), except as extended by
any Landlord Delays. Landlord shall deliver the Premises to Tenant upon the full
execution and delivery of this Lease, and, thereafter, provided Tenant has
complied with the provisions of Section 4.5, Tenant and its authorized
representatives, agents and contractors will have the right to access and use
the Premises for the purpose of completing the Tenant Improvements in the
Premises, preparing the Premises for Tenant’s business operations and conducting
business from the Premises in the event the Tenant Improvements are
Substantially Complete prior to the Term Commencement Date. Tenant’s occupancy
of the Premises for the Permitted Use prior to the Term Commencement Date shall
not accelerate the Term Commencement Date or the Term Expiration Date, but such
occupancy shall be on all terms and conditions of this Lease other than the
obligation to pay Base Rent during such period. Tenant shall execute and deliver
to Landlord written acknowledgment of the actual Term Commencement Date and the
Term Expiration Date within ten (10) days after Tenant takes occupancy of the
Premises, in the form attached as Exhibit C hereto. Failure to execute and
deliver such acknowledgment, however, shall not affect the Term Commencement
Date or Landlord’s or Tenant’s liability hereunder.
          (a) Failure by Tenant to obtain validation by any medical review board
or other similar governmental licensing of the Premises required for the
Permitted Use by Tenant shall not serve to extend the Term Commencement Date.
Notwithstanding Section 2.7 above, Landlord acknowledges that Tenant intends to
obtain a conditional use permit from the City for the Permitted Use (including
biotechnology manufacturing) following the Execution Date and approval of the
Permitted Use by the Gateway Technology Center Property Owners Association
(collectively, the “Required Approvals”), and Landlord consents to such action
by Tenant and agrees that in the event Tenant, despite its diligent efforts to
do so, is unable to obtain the Required Approvals allowing Tenant to use the
Premises for the Permitted Use (including biotechnology manufacturing), Tenant
will be permitted to terminate this Lease by providing prior written notice to
Landlord no later than February 28, 2011. In the event of a termination pursuant
to this Section 4.1(a), this Lease shall terminate as of the date of Tenant’s
notice and

6

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

 

neither party shall have any further liability to the other on account of this
Lease; provided that Landlord will refund all amounts paid to it by Tenant
(e.g., Security Deposit and any prepaid Rent). Landlord shall not expend any TI
Allowance prior to the earlier of: (i) the date upon which the Required
Approvals are obtained or (ii) the date on which Tenant delivers written notice
of its election to waive its right to terminate the Lease pursuant to this
Article 4 (the “Approval Date”); provided that from and after the Approval Date,
the TI Allowance will be disbursable in accordance with this Lease and the Work
Letter (even for work performed prior to the Approval Date). Tenant will not
have any right to terminate this Lease after the Approval Date except as
otherwise provided in this Lease.
          (b) In the event there are any actual delays in the Substantial
Completion of the Tenant Improvements or Expansion Space Tenant Improvements
caused by Landlord, Landlord’s architect, contractors or agents, including,
without limitation, as a result of (i) Landlord’s failure to approve any item
within the time limits set forth in the Work Letter, (ii) failure to deliver the
Premises (or any Expansion Space) as and when required pursuant to this Lease,
or (iii) failure to timely pay Tenant or any contractors, subcontractors,
architects, engineers or other parties as required pursuant to the Work Letter,
then after notice to Landlord of such delay and the expiration of a two
(2) business day cure period, any such delay shall be deemed a “Landlord Delay.”
The Term Commencement Date or Expansion Space Rent Commencement Date (as
applicable) will be extended on a day for day basis by the number of days of
Landlord Delay which actually results in a delay in Substantial Completion;
provided that the Term Expiration Date will be calculated from the date upon
which the Term Commencement Date would have occurred but for the Landlord Delay.
The term “Substantially Complete” or “Substantial Completion” with respect to
the Tenant Improvements, means that the Tenant Improvements are substantially
complete in accordance with the Approved Plans (as defined in the Work Letter),
except for minor punch list items.
     4.2. Tenant shall cause to be constructed the tenant improvements in the
Premises (the “Tenant Improvements”) pursuant to the Work Letter attached hereto
as Exhibit B (the “Work Letter”) at a cost to Landlord not to exceed (a) Seven
Million Nine Hundred Fifty-Five Thousand Dollars ($7,955,000) (based upon One
Hundred Eighty-Five Dollars ($185.00) per square foot of Rentable Area (as
defined below)) (the “Base TI Allowance”) plus (b) if properly requested by
Tenant pursuant to this Section, up to Two Million One Hundred Fifty Thousand
Dollars ($2,150,000) (based upon Fifty Dollars ($50.00) per square foot of
Rentable Area) (the “Additional TI Allowance”), for a total of Ten Million One
Hundred Five Thousand Dollars ($10,105,000) (based upon Two Hundred Thirty-Five
Dollars ($235.00) per square foot of Rentable Area), plus (c) if the Expansion
Space is leased pursuant to Article 43, the Expansion Space TI Allowance (as
defined in Article 43), if properly requested by Tenant (as applicable). The
Base TI Allowance, together with the Additional TI Allowance and the Expansion
Space TI Allowance (if properly requested by Tenant pursuant to this Articles 4
and 43, respectively), shall be referred to herein as the “TI Allowance.” The TI
Allowance may be applied to the costs of (n) demolition and construction, with
up to Five Dollars ($5.00) per square foot of Rentable Area available for wiring
and cabling costs, (o) project management by Landlord (which fee shall equal one
percent (1%) of the cost of the Tenant Improvements, including the Base TI
Allowance and, if used by Tenant, the Additional TI Allowance and the Expansion
Space TI

7

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

 

Allowance), (p) space planning, project management, architect, engineering and
other related services performed by third parties unaffiliated with Tenant,
(q) building permits for the Tenant Improvements and other taxes, fees, charges
and levies by Governmental Authorities (as defined below) for permits or for
inspections of the Tenant Improvements, (r) compliance of the Tenant
Improvements with applicable building codes and regulations, including, without
limitation, costs to build the Tenant Improvements in compliance with the
Americans with Disabilities Act, 42 U.S.C. § 12101, et seq. (and any state and
local accessibility laws, codes, ordinances and rules (collectively, and
together with regulations promulgated pursuant thereto, the “ADA”), or Title 24
of the California Code of Regulations (“Title 24”) required as a result of the
design of the Tenant Improvements (with non-compliant conditions in the Common
Area existing as of the date of this Lease to be remedied by Landlord as part of
the Landlord’s Work, at Landlord’s sole cost and expense), (s) signage and
(t) costs and expenses for labor, material, equipment and fixtures. In no event
shall the TI Allowance be used for (w) payments to Tenant or any affiliates of
Tenant, (x) the purchase of any furniture, personal property or other
non-building system equipment, (y) costs resulting from any default by Tenant of
its obligations under this Lease or (z) costs that are recoverable by Tenant
from a third party (e.g., insurers, warrantors, or tortfeasors). Except for the
1% project management fee set forth above, Tenant shall not be obligated to pay
any additional construction management fee to Landlord for Landlord’s role in
reviewing or approving the initial Tenant Improvements or plans related thereto,
provided Tenant shall be responsible for the project management fee as set forth
in Section 17.10 in connection with any Alterations performed by Tenant pursuant
to the terms of this Lease and the project management fee as set forth in
Article 43 relating to the Expansion Space Tenant Improvements.
     4.3. If the Additional TI Allowance is disbursed by Landlord, Base Rent
(commencing on the Rent Commencement Date (as defined in Section 7) shall be
increased by twelve-thousandths of One Dollar ($.012) per square foot of
Rentable Area per month for every dollar per square foot of Rentable Area of the
Additional TI Allowance so disbursed. Tenant shall have until December 31, 2011
(the “TI Deadline”), to expend any unused portion of the TI Allowance (excluding
the Expansion Space TI Allowance, which shall be governed by Section 43.3
below), after which date Landlord’s obligation to fund such costs shall expire.
The amount by which Base Rent shall be increased shall be determined (and Base
Rent shall be increased accordingly) as of the Term Commencement Date and, if
such determination does not reflect use by Tenant of all of the Additional TI
Allowance, shall be determined again as of the TI Deadline, with Tenant paying
(on the next succeeding day that Base Rent is due under this Lease (the “TI
True-Up Date”)) any underpayment of the further adjusted Base Rent for the
period beginning on the Term Commencement Date and ending on the TI True-Up
Date. The Additional TI Allowance will be disbursed on an “as needed” basis and
only the amounts disbursed by Landlord pursuant to the Work Letter will be used
for purposes of the above Base Rent calculation.
     4.4. Landlord shall not be obligated to expend any portion of the
Additional TI Allowance until Landlord shall have received from Tenant a letter
in the form attached as Exhibit D hereto executed by an authorized officer of
Tenant with respect to the Additional TI Allowance. In no event shall any unused
TI Allowance entitle Tenant to a credit against Rent

8

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

 

payable under this Lease, except with respect to the Expansion Space Base TI
Allowance, as set forth in Article 43 hereof. Tenant shall deliver to Landlord
(i) a certificate of occupancy for the Premises (provided that Landlord will
perform any work necessary to obtain the building department’s completion sign
off on Landlord’s Work as a condition of Substantial Completion of Landlord’s
Work) and (ii) a Certificate of Substantial Completion in the form of the
American Institute of Architects document G704, executed by Tenant’s architect
and the Contractor.
     4.5. Prior to entering upon the Premises, Tenant shall furnish to Landlord
evidence satisfactory to Landlord that insurance coverages required of Tenant
under the provisions of Article 23 are in effect, and such entry shall be
subject to all the terms and conditions of this Lease other than the payment of
Base Rent or Tenant’s Pro Rata Share of Operating Expenses (as defined below).
     4.6. Tenant shall select the construction manager, architect, engineer,
general contractor (“Contractor”) and major subcontractors, pursuant to a
competitive bidding process involving three candidates that shall be mutually
agreed upon by Landlord and Tenant prior to commencing the bidding process.
Landlord will be provided with copies of the bids and shall have the right to
reasonably disapprove the bid selected by Tenant. Landlord’s failure to object
in writing to the bid selected by Tenant within ten (10) business days following
its receipt thereof shall be deemed Landlord’s approval of such bid. The
Contractor’s proposal for the cost of construction of the Tenant Improvements
(or Expansion Space Tenant Improvements) shall either be a fixed fee or
guaranteed maximum price proposal acceptable to both Landlord and Tenant. The
general contract for the Tenant Improvements (or Expansion Space Tenant
Improvements) may include liquidated damages payable by Contractor to Tenant in
the event Substantial Completion of the Tenant Improvements (or Expansion Space
Tenant Improvements) is not achieved by the Estimated Term Commencement Date (or
estimated Expansion Space Rent Commencement Date) for any reason other than
Force Majeure or delays attributable to any Tenant initiated Changes (as defined
in the Work Letter). Landlord may refuse to consent to the use of contractors,
subcontractors or material suppliers that Landlord reasonably believes could
cause labor disharmony with Landlord’s contractors, subcontractors or material
suppliers performing services at the Building.
     4.7. Commencing on the Execution Date and simultaneously with Tenant’s
performance of the Tenant Improvements, Landlord shall perform the core and
shell work listed on Exhibit B-1 (the “Landlord’s Work”). All Landlord’s Work
that must be completed in order to allow Tenant to Substantially Complete the
Tenant Improvements by the Substantial Completion date set forth in the Schedule
prepared in accordance with Section 1.2 of the Work Letter shall be
Substantially Complete on or before June 1, 2011 and, except for completion of
construction of the freight elevator, all Landlord’s Work shall be Substantially
Complete on or before June 15, 2011 and the freight elevator shall be complete
by July 31, 2011 ; provided, Tenant agrees that (i) in the event the Landlord’s
Work that must be completed in order to allow Tenant to Substantially Complete
the Tenant Improvements prior to the Substantial Completion date set forth in
the Schedule prepared in accordance with Section 1.2 of the Work Letter is not
Substantially Complete on or before June 1, 2011, (ii) in the event all
Landlord’s Work (except for completion of construction of the freight elevator)
is not Substantially Complete on or before

9

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

 

June 15, 2011 for any reason or (iii) in the event the freight elevator is not
complete on or before July 31, 2011 for any reason then (a) this Lease shall not
be void or voidable and (b) Landlord shall not be liable to Tenant for any loss
or damage resulting therefrom, but any such delays will be “Landlord Delays” as
defined in Section 4.1 above without any notice or cure period. During the
completion of the Tenant Improvements, Tenant and its contractors,
subcontractors and material suppliers will be given access to the Premises using
one of the passenger elevators in the Building, which Landlord will dedicate for
construction use and provide any protection Landlord deems necessary to the
interior of the elevator due to such construction use, but upon occupancy of the
Building by another tenant, elevator use shall be subject to reasonable
restrictions based on the needs of such other tenant(s). The term “Substantially
Complete” or “Substantial Completion” with respect to the Landlord’s Work, means
that the Landlord’s Work is substantially complete except for minor punch list
items. Notwithstanding anything in this Lease (including the Work Letter) to the
contrary, Landlord’s obligation to timely achieve Substantial Completion shall
be subject to extension on a day-for-day basis as a result of Force Majeure (as
defined below). When the Landlord’s Work is deemed Substantially Complete by
Landlord, Landlord shall deliver written notice to Tenant thereof and shall
schedule a walk-through inspection with Tenant’s architect and the Contractor to
verify Substantial Completion and identify any minor punch list items which will
not affect Substantial Completion of the Tenant Improvements or occupancy of the
Premises for the Permitted Use. Such minor punch list items will be remedied or
completed by Landlord within thirty (30) days after such inspection.
5. Condition of Premises. Tenant acknowledges that neither Landlord nor any
agent of Landlord has made any representation or warranty with respect to the
condition of the Premises, the Building or the Project, or with respect to the
suitability of the Premises, the Building or the Project for the conduct of
Tenant’s business, except as set forth in this Lease. Tenant acknowledges that
(a) it is fully familiar with the condition of the Premises as of the Execution
Date and agrees to take the same in its condition “as is” as of the Term
Commencement Date and (b) Landlord shall have no obligation to alter, repair or
otherwise prepare the Premises for Tenant’s occupancy except as provided in this
Lease or the Work Letter or to pay for or construct any improvements to the
Premises, except for the Base TI Allowance and, if properly requested by Tenant,
the Additional TI Allowance (and Expansion Space TI Allowance, if any). Tenant
shall have until the date that is ninety (90) days after the Term Commencement
Date to notify Landlord that any portion of the Landlord’s Work or the Building
systems (i.e., plumbing, HVAC and electrical) installed or repaired by Landlord
(but not including any such systems installed as part of the Tenant
Improvements) was not in working order, when received by Tenant; otherwise,
Tenant’s taking of possession of the Premises shall conclusively establish that
the Premises, the Building and the Project were at such time in good, sanitary
and satisfactory condition and repair. In the event that Tenant notifies
Landlord that the Landlord’s Work or Building systems installed or repaired by
Landlord are not in working order, as verified by Landlord, then Landlord shall
use commercially reasonable efforts to correct or repair such condition and the
cost of such corrective actions or repairs performed in the first twelve
(12) months of the Term, shall not be included in Operating Expenses nor
otherwise charged to Tenant as Additional Rent.

10

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

 

6. Rentable Area.
     6.1. The term “Rentable Area” reflects such areas as reasonably calculated
by Landlord’s architect, as the same may be reasonably adjusted from time to
time by Landlord in consultation with Landlord’s architect to reflect (i) actual
physical changes in the size of the Premises, the Building or the Project, as
applicable or (ii) in the ratio of useable tenant space to Common Area; provided
that in no event shall the load factor for the Building increase by more than
five percent (5%) of the load factor as of the date of this Lease. Following
Tenant’s completion of Construction Plans for the Premises, Landlord’s architect
shall measure the Rentable Area of the Premises and certify the final Rentable
Area to Landlord and Tenant. Such certification shall include data and
calculations supporting how such measurement was arrived at so that Tenant’s
space planner/architect may review Landlord’s architect’s determination of the
Rentable Area of the Premises and Tenant may, within fifteen (15) business days
after Tenant’s receipt of Landlord’s architects certification, object to such
determination by written notice to Landlord. If Tenant objects to such
determination, Landlord’s architect and Tenant’s space planner/architect shall
promptly meet and attempt to agree upon the Rentable Area of the Premises. If
Landlord’s architect and Tenant’s space planner/architect cannot agree on the
Rentable Area of the Premises within thirty (30) days after Tenant’s objection
thereto, Landlord and Tenant shall mutually select an independent third party
space measurement professional to field measure the Premises. Such third party
independent measurement professional’s determination shall be conclusive and
binding on Landlord and Tenant. Landlord and Tenant shall each pay one-half
(1/2) of the fees and expenses of the independent third party space measurement
professional. Following such measurement, Landlord shall prepare and Tenant
shall enter into an amendment to this Lease memorializing any change in Rentable
Area of the Premises on account of such measurement and adjusting the Base Rent,
Security Deposit increase, TI Allowance and Tenant’s Pro Rata Share.
     6.2. The Rentable Area of the Building is generally determined by making
separate calculations of Rentable Area applicable to each floor within the
Building and totaling the Rentable Area of all floors within the Building. The
Rentable Area of a floor is computed by measuring to the outside finished
surface of the permanent outer Building walls. The full area calculated as
previously set forth is included as Rentable Area, without deduction for columns
and projections or vertical penetrations, including stairs, elevator shafts,
flues, pipe shafts, vertical ducts and the like, as well as such items’
enclosing walls.
     6.3. The term “Rentable Area,” when applied to the Premises, is that area
equal to the usable area of the Premises, plus an equitable allocation of
Rentable Area within the Building that is not then utilized or expected to be
utilized as usable area, including that portion of the Building devoted to
corridors, equipment rooms, restrooms, elevator lobby, atrium and mailroom.
     6.4. The Rentable Area of the Project is the total Rentable Area of all
buildings within the Project, but not including the Amenities Building.
     6.5. Review of allocations of Rentable Areas as between tenants of the
Building and the Project shall be made as frequently as Landlord deems
appropriate, including in order to

11

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

 

facilitate an equitable apportionment of Operating Expenses (as defined below).
If such review is by a licensed architect and allocations are certified by such
licensed architect as being correct, then Tenant shall be bound by such
certifications.
7. Rent.
     7.1. Tenant shall pay to Landlord as Base Rent for the Premises, commencing
on the date which is three (3) months after the Term Commencement Date (the
“Rent Commencement Date”), the sums set forth in Section 2.3 subject to the
rental adjustments provided in Article 8 hereof. Base Rent shall be paid in
equal monthly installments as set forth in Section 2.3, subject to the rental
adjustments provided in Article 8 hereof, each in advance on the first day of
each and every calendar month during the Term.
     7.2. In addition to Base Rent, Tenant shall pay to Landlord as additional
rent (“Additional Rent”) at times hereinafter specified in this Lease
(a) Tenant’s pro rata share, as set forth in Section 2.2 (“Tenant’s Pro Rata
Share”), of Operating Expenses (as defined below), (b) the Property Management
Fee (as defined below) and (c) any other amounts that Tenant assumes or agrees
to pay under the provisions of this Lease that are owed to Landlord. In
calculating Operating Expenses, Landlord will allocate Operating Expense items
which relate solely to one building of the Project and its occupants (including,
without limitation, portions thereof dedicated to non-exclusive use by building
occupants, similar to the Building Common Areas) to the specific building to
which such expenses relate. Any Operating Expenses which cannot be allocated
solely to one building and its occupants will be allocated on a proportionate
basis (based on relative square footage) among the buildings and occupants of
the Project (or those buildings to which such Operating Expense relates, and
their occupants, if it is less than the entire Project (e.g., property tax
statements for part, but not all, of the buildings within the Project).
     7.3. Base Rent and Additional Rent shall together be denominated “Rent.”
Rent shall be paid to Landlord, without abatement, deduction or offset (except
as expressly permitted under the terms and conditions of this Lease), in lawful
money of the United States of America at the office of Landlord as set forth in
Section 2.8 or to such other person or at such other place as Landlord may from
time designate in writing. In the event the Term commences or ends on a day
other than the first day of a calendar month, then the Rent for such fraction of
a month shall be prorated for such period on the basis of a thirty (30) day
month and shall be paid at the then-current rate for such fractional month.
8. Rent Adjustments. Base Rent shall be subject to an annual upward adjustment
as set forth in the table in Section 2.3. The first such adjustment shall become
effective commencing on the first (1st) annual anniversary of the Rent
Commencement Date, and subsequent adjustments shall become effective on every
successive annual anniversary, as set forth in the table in Section 2.3 for so
long as this Lease continues in effect.
9. Operating Expenses.
     9.1. As used herein, the term “Operating Expenses” shall include:

12

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

 

          (a) Government impositions including property tax costs consisting of
real and personal property taxes and assessments, including amounts due under
any improvement bond upon the Building or the Project, including the parcel or
parcels of real property upon which the Building and areas serving the Building
are located or assessments in lieu thereof imposed by any federal, state,
regional, local or municipal governmental authority, agency or subdivision
(each, a “Governmental Authority”) are levied; taxes on or measured by gross
rentals received from the rental of space in the Project; taxes based on the
square footage of the Premises, the Building or the Project, as well as any
parking charges, utilities surcharges or any other costs levied, assessed or
imposed by, or at the direction of, or resulting from Applicable Laws or
interpretations thereof, promulgated by any Governmental Authority in connection
with the use or occupancy of the Project or the parking facilities serving the
Project; taxes on this transaction or any document to which Tenant is a party
creating or transferring an interest in the Premises; any fee for a business
license to operate an office building; and any expenses, including the
reasonable cost of attorneys or experts, reasonably incurred by Landlord in
seeking reduction by the taxing authority of the applicable taxes, less tax
refunds obtained as a result of an application for review thereof (collectively,
“Taxes”). Notwithstanding anything to the contrary in this Lease, Taxes included
in Operating Expenses payable by Tenant shall not include any net income,
franchise, capital stock, estate or inheritance taxes, or taxes that are the
personal obligation of Tenant or of another tenant of the Project; Landlord’s
general income taxes, succession, transfer or gift tax; excise taxes imposed
upon Landlord based upon rentals or income received by it (except if levied in
lieu of real property taxes); taxes attributable to any period outside of the
Term (provided that any holdover by Tenant will be considered within the Term
for purposes of this provision); any assessments, charges, taxes, rents, fees,
rates, levies, excises, license fees, permit fees, inspection fees, impact fees,
concurrency fees or other fees or charges to the extent allocable to or caused
by the development or installation of on- or off-site improvements or utilities
(including without limitation street and intersection improvements, roads,
rights of way, lighting and signalization) related solely to any future
development of the vacant pad sites at the Project, or any allocations, reserves
or sinking funds relating to such development, unless the same are contained in
the property tax bills for the Project (in which case the portion allocable to
the new building(s) will be allocated to the tenants of such new building(s));
and
          (b) All other costs of any kind paid or incurred by Landlord in
connection with the operation or maintenance of the Building, Building Common
Area, the Project Common Areas (including the Amenities Building, which shall
include (i) Project office rent at fair market rental rates (not to exceed the
net average rental rate of the Project) for a commercially reasonable amount of
space for Project management personnel located in the Amenities Building, to the
extent an office used for Project operations is maintained at the Project, plus
customary expenses for such office and (ii) fair market rent (not to exceed the
net average rental rate of the Project) for the portion of the Amenities
Building used in providing the Amenities Building Services, provided, however,
Operating Expenses pertaining to the Amenities Building (including the Project
office rent and the Amenities Building rent) shall in no event exceed Ten Cents
($.10) per square foot of Rentable Area per month); provided that any costs for
services, maintenance, repairs, and the like provided directly by Landlord or
affiliates of Landlord shall be at commercially reasonable prices, including
costs of repairs and replacements to improvements

13

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

 

within the Project as appropriate to maintain the Project as required hereunder;
costs of utilities furnished to the Building Common Area and Project Common
Areas; sewer fees; cable television; trash collection; Building Common Area and
Project Common Area cleaning, including the windows of the Building and the
Amenities Building; heating; ventilation; air-conditioning; maintenance of
landscaping and grounds of the Building Common Area and Project Common Areas;
maintenance of drives and parking areas of the Building Common Area and Project
Common Areas; maintenance of the non-structural portions of the roof of the
Building and the Amenities Building; Building Common Area and Project Common
Area security services and devices; building supplies; maintenance or
replacement of equipment utilized for operation and maintenance of the Building,
Building Common Area, Project Common Areas or the Project as a whole (as
reasonably allocated to the Building as set forth in Section 7.2 above);
license, permit and inspection fees associated with Landlord’s maintenance,
repair and operation of the Building, Building Common Area, Project Common Areas
or the Project as a whole (as reasonably allocated to the Building as set forth
in Section 7.2 above); sales, use and excise taxes on goods and services
purchased by Landlord in connection with the operation, maintenance or repair of
the Building, Building Common Area, Project Common Areas or the Project as a
whole (as reasonably allocated to the Building as set forth in Section 7.2
above) and its systems and equipment; telephone, postage, stationery supplies
and other expenses incurred in connection with the operation, maintenance or
repair of the Project; reasonable accounting, legal and other professional fees
and expenses incurred in connection with Landlord’s maintenance, repair and
operation of the Project, including, without limitation, determining the
Operating Expenses payable by the tenants of the Project; costs of furniture,
draperies, carpeting, landscaping and other customary and ordinary items of
personal property provided by Landlord for use in Common Areas or in the Project
office; costs of complying with Applicable Laws (except to the extent such costs
are incurred to remedy non-compliance as of the Execution Date with Applicable
Laws); costs to keep the Project in compliance with, or fees otherwise required
under, any CC&Rs (as defined below), as long as such costs are not otherwise
excluded from Operating Expenses pursuant to the following paragraph; insurance
premiums, including premiums for public liability, property casualty,
earthquake, flood, terrorism and environmental coverages; portions of insured
losses paid by Landlord as part of the deductible portion of a loss pursuant to
the terms of insurance policies, provided Tenant’s share of any flood or
earthquake insurance deductible expense shall not exceed $100,000 and Tenant’s
share of any property or general liability insurance deductible shall not exceed
$25,000; service contracts for the Building, Building Common Area, Project
Common Areas or the Project as a whole (as reasonably allocated to the Building
as set forth in Section 7.2 above); costs of services of independent contractors
retained to do work of a nature referenced above; and costs of compensation
(including employment taxes and fringe benefits) of all persons in proportion to
the time such persons perform regular and recurring duties connected with the
day-to-day operation and maintenance of the Project, its equipment, the adjacent
walks, landscaped areas, drives and parking areas, including janitors, floor
waxers, window washers, watchmen, gardeners, sweepers and handymen; and capital
expenditures (including capital expenditures to increase energy efficiency),
(provided that such capital expenditures shall not include capital expenditures
(i) made for aesthetic purposes or to enhance the value of the Project (as
opposed to repairs, maintenance or replacement of Building or Project
components), (ii) that solely benefit one or more tenants of the Project (as
opposed to the Project as a whole), (iii) to repair or replace

14

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

 

structural components of the Building or foundation, or (iv) which are made to
comply with Applicable Laws in effect as of the Execution Date of this Lease and
provided further that such capital expenditures shall be amortized over such
item’s useful life as determined in accordance with Generally Accepted
Accounting Principles, consistently applied but not to exceed eleven (11) years
with interest calculated at nine percent (9%) per annum, for each such year of
useful life of the capital item during the Term). By way of example only,
capital expenditures to “comply with Applicable Laws” shall not include any
capital expenditures made by Landlord to comply with any nonresidential
voluntary measures of the California Green Building Standards Code or similar
voluntary measures unless such capital expenditures result in Operating Expense
savings.
          Notwithstanding the foregoing, Operating Expenses shall not include
any leasing commissions or other costs incurred in procuring tenants of the
Project, or any fee in lieu of commissions; expenses that relate to preparation
of rental space for a tenant or to provide any other accommodation for use by
less than all of the tenants of the Project; expenses of initial development and
construction, including grading, paving, landscaping and decorating (as
distinguished from maintenance, repair and replacement of the foregoing except
to the extent covered by warranty); legal expenses relating to other tenants;
costs of any nature to the extent reimbursed by condemnation awards, another
tenant of the Building (except as part of such tenant’s operating expense
obligations), warranties, or payment of insurance proceeds received by Landlord;
interest upon loans to Landlord or secured by a mortgage or deed of trust
covering the Project or a portion thereof (provided that interest upon a
government assessment or improvement bond payable in installments shall
constitute an Operating Expense under Subsection 9.1(a)); salaries of executive
officers of Landlord; depreciation claimed by Landlord for tax purposes
(provided that this exclusion of depreciation is not intended to delete from
Operating Expenses actual costs of repairs and replacements that are provided
for in Subsection 9.1(b)); costs incurred in keeping the Building systems
installed or repaired by Landlord as part of the Landlord Work in good working
order and condition during the first (1st) twelve (12) months of the Term; costs
incurred in connection with Landlord’s performance of the Landlord’s Work; taxes
that are excluded from Operating Expenses by the last sentence of Subsection
9.1(a); the cost of providing any service directly to and paid directly by any
tenant (outside of such tenant’s operating expense payments); ground lease
payments (if any); Landlord’s general corporate overhead; any compensation paid
to clerks, attendants or other persons in commercial concessions operated by
Landlord (other than in the parking facility for the Project); bad debt expenses
and interest, principal, points and fees on debts or amortization on any ground
lease, mortgage or mortgages or any other debt instrument encumbering the
Building (including the Property); marketing costs, including attorneys’ fees in
connection with the negotiation and preparation of letters, deal memos, letters
of intent, leases, subleases or assignments, space planning costs, and other
costs and expenses incurred in connection with lease, sublease or assignment
negotiations and transactions with present or prospective tenants or other
occupants of the Building; art work; expenses in connection with services or
other benefits that are not offered to Tenant or for which Tenant is charged
directly but that are provided to another tenant or occupant of the Building,
without charge; electric power costs or other utility costs for which any tenant
directly contracts with the local public service company; costs of any future
expansion of or development on the vacant pad sites located at the Project;
costs incurred solely

15

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

 

due to the gross negligence or willful misconduct of another tenant or Landlord
(or which would be a Tenant indemnity obligation hereunder if caused by Tenant’s
negligent acts or omissions); costs incurred to comply with Applicable Laws
relating to the removal of Hazardous Materials (as defined in Article 21 below)
or to remove, remedy, treat or contain any Hazardous Material to the extent such
costs (x) result from Landlord’s gross negligence or willful misconduct,
(y) resulted from Hazardous Materials which existed in the Building or on the
Property prior to the Execution Date (provided that any Hazardous Materials in
the Premises which are made Tenant’s responsibility pursuant to Article 21 below
shall remain Tenant’s direct obligation) and (z) as to any other Hazardous
Materials-related costs, Landlord will first exhaust any available insurance
proceeds and use good faith and commercially reasonable efforts (short of
litigation) to pursue any third parties for reimbursement of any such costs
prior to including such amounts in Operating Expenses; costs of upgrades to the
Building or Project solely effectuated for the purpose of obtaining or upgrading
a LEED certification or similar rating; and costs to perform any Open Space Work
(as defined in the CC&Rs) or to comply with requirements of any development
permits for the Project. To the extent that Tenant uses more than Tenant’s Pro
Rata Share of any item of Operating Expenses (without gross up for purposes of
such determination with respect to Operating Expenses of the Project), Tenant
shall pay Landlord for such excess in addition to Tenant’s obligation to pay
Tenant’s Pro Rata Share of Operating Expenses; provided that Landlord shall
supply Tenant with reasonable evidence supporting Landlord’s determination of
such excess use and the method of calculating the amounts being charged to
Tenant, and such over standard use charges will be subject to audit in
accordance with Section 9.3 below.
          In the event Landlord ceases to provide, or reduces the level of the
Amenities Building Services, then Operating Expenses will be appropriately
reduced to reflect such decrease in services; provided that the foregoing shall
not be deemed to constitute Tenant’s consent to any such cessation or reduction
during the Term unless attributable to (i) any reason beyond the control of
Landlord (e.g., due to a casualty to or condemnation of all or a portion of the
Amenities Building (but only for that period between the event of casualty or
the effective date of taking and completion of the necessary restoration work)
or as otherwise permitted under this Lease, (ii) Force Majeure, or (iii) any
change in Applicable Laws which prevents Landlord from providing some or all of
the Amenities Building Services.
     9.2. Tenant shall pay to Landlord on the first day of each calendar month
of the Term, as Additional Rent, (a) the Property Management Fee (as defined
below) and (b) Landlord’s estimate of Tenant’s Pro Rata Share of Operating
Expenses with respect to the Building and the Project, as applicable, for such
month.
          (x) The “Property Management Fee” shall equal two percent (2%) of the
Base Rent due from Tenant. Tenant shall pay the Property Management Fee in
accordance with Section 9.2 with respect to the entire Term, including any
extensions thereof or any holdover periods, regardless of whether Tenant is
obligated to pay Base Rent, Operating Expenses or any other Rent with respect to
any such period or portion thereof. Operating Expenses shall not include any
property management fee, administrative fee or similar compensation to Landlord
or any third party because the Property Management Fee shall be charged in lieu
of including all such amounts in Operating Expenses. During the period from the
Term Commencement Date

16

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

 

through the Rent Commencement Date, the Property Management Fee shall be
calculated based on the Base Rent payable by Tenant on the Rent Commencement
Date.
          (y) Within ninety (90) days after the conclusion of each calendar year
(or such longer period as may be reasonably required by Landlord), Landlord
shall furnish to Tenant a statement showing in reasonable detail the actual
Operating Expenses and Tenant’s Pro Rata Share of Operating Expenses for the
previous calendar year. Any additional sum due from Tenant to Landlord shall be
due and payable within thirty (30) days after Tenant’s receipt of the statement.
If the amounts paid by Tenant pursuant to this Section exceed Tenant’s Pro Rata
Share of Operating Expenses for the previous calendar year, then Landlord shall
credit the difference against the Rent next due and owing from Tenant; provided
that, if the Lease term has expired, Landlord shall accompany said statement
with payment for the amount of such difference. Notwithstanding the foregoing,
if Landlord fails to provide Tenant with a written statement of the actual
Operating Expenses incurred during the prior calendar year by July 31 of the
following year, Landlord shall be deemed to have waived any all rights of
Landlord to collect such underpayment of Operating Expenses by Tenant for the
prior calendar year.
          (z) Any amount due under this Section for any period that is less than
a full month shall be prorated (based on a thirty (30)-day month) for such
fractional month.
     9.3. Landlord’s annual statement shall be final and binding upon Tenant
unless Tenant, within forty-five (45) days after Tenant’s receipt thereof, shall
contest any item therein by giving written notice to Landlord, specifying each
item contested and the reasons therefor. If, during such forty-five (45)-day
period, Tenant reasonably and in good faith questions or contests the
correctness of Landlord’s statement of Tenant’s Pro Rata Share of Operating
Expenses, Landlord shall provide Tenant with reasonable access to Landlord’s
books and records to the extent relevant to determination of Operating Expenses,
and such information as Landlord reasonably determines to be responsive to
Tenant’s written inquiries. In the event that, after Tenant’s review of such
information, Landlord and Tenant cannot agree upon the amount of Tenant’s Pro
Rata Share of Operating Expenses, then Tenant shall have the right to have an
independent public accounting firm (the “Independent Auditor”) hired by Tenant
on an hourly basis and not on a contingent-fee basis (at Tenant’s sole cost and
expense) and approved by Landlord (which approval Landlord shall not
unreasonably withhold or delay) audit and review such of Landlord’s books and
records for the year in question as directly relate to the determination of
Operating Expenses for such year (the “Independent Review”). Landlord shall make
such books and records available for review by the Independent Auditor and/or
Tenant’s employees at the location where Landlord maintains them in the ordinary
course of its business (which location shall be in the State of California).
Landlord need not provide copies of any books or records to the Independent
Auditor at any other location. Tenant shall commence the Independent Review
within fifteen (15) days after the date Landlord has given Tenant access to
Landlord’s books and records for the Independent Review. Tenant shall complete
the Independent Review and notify Landlord in writing of Tenant’s specific
objections to Landlord’s calculation of Operating Expenses or Tenant’s Pro Rata
Share thereof (including the Independent Auditor’s written statement of the
basis, nature and amount of each proposed adjustment) no later than sixty
(60) days after Landlord has first given Tenant access to Landlord’s books and

17

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

 

records for the Independent Review. Landlord shall review the results of any
such Independent Review. The parties shall endeavor to agree promptly and
reasonably upon Operating Expenses taking into account the results of such
Independent Review. If, as of sixty (60) days after Tenant has submitted the
Independent Review to Landlord, the parties have not agreed on the appropriate
adjustments to Operating Expenses or Tenant’s Pro Rata Share thereof, then the
parties shall engage a mutually agreeable independent third party accountant
with at least ten (10) years’ experience in commercial real estate accounting in
the greater Bay Area, California, area (the “Accountant”). If the parties cannot
agree on the Accountant, each shall within ten (10) days after such impasse
appoint an Accountant (different from the Independent Auditor and the
Independent Auditor’s firm) and, within ten (10) days after the appointment of
both such Accountants, those two Accountants shall select a third (which cannot
be the accountant and accounting firm that conducted the Independent Review). If
either party fails to timely appoint an Accountant, then the Accountant the
other party appoints shall be the sole Accountant. Within ten (10) days after
appointment of the Accountant(s), Landlord and Tenant shall each simultaneously
give the Accountants (with a copy to the other party) its determination of
Operating Expenses or Tenant’s Pro Rata Share thereof, with such supporting data
or information as each submitting party determines appropriate. Within ten
(10) days after such submissions, the Accountants shall by majority vote select
either Landlord’s or Tenant’s determination of Operating Expenses or Tenant’s
Pro Rata Share thereof. The Accountants may not select or designate any other
determination of Operating Expenses or Tenant’s Pro Rata Share thereof. The
determination of the Accountant(s) shall bind the parties. If the parties agree
or the Accountant(s) determine that Tenant’s Pro Rata Share of Operating
Expenses actually paid for the calendar year in question exceeded Tenant’s
obligations for such calendar year, then Landlord shall, at Tenant’s option,
either (a) credit the excess to the next succeeding installments of estimated
Additional Rent or (b) pay the excess to Tenant within thirty (30) days after
delivery of such results. If the parties agree or the Accountant(s) determine
that Tenant’s payments of Tenant’s Pro Rata Share of Operating Expenses for such
calendar year were less than Tenant’s obligation for the calendar year, then
Tenant shall pay the deficiency to Landlord within thirty (30) days after
delivery of such results. If the Independent Review reveals or the Accountant(s)
determine that the Operating Expenses billed to Tenant by Landlord and paid by
Tenant to Landlord for the applicable calendar year in question exceeded by more
than five percent (5%) what Tenant should have been billed during such calendar
year, then Landlord shall pay the reasonable cost of the Independent Review and
the Accountant(s). In all other cases, Tenant shall pay the cost of the
Independent Review and the Accountant(s).
     9.4. Tenant shall not be responsible for Operating Expenses attributable to
the time period prior to the Term Commencement Date; provided, however, that if
Tenant commences operating and conducting its business from the Premises prior
to the Term Commencement Date as permitted pursuant to Section 4.1, Tenant shall
be responsible for Operating Expenses associated with such early occupancy of
the Premises from the date it commences business operations within the Premises.
Tenant’s responsibility for Tenant’s Pro Rata Share of Operating Expenses shall
continue to the latest of (a) the date of termination of the Lease or (b) the
date Tenant has fully vacated the Premises (as evidenced by the absence of all
of Tenant’s employees and furnishings from the Premises, and the cessation of
all business operations of

18

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

 

Tenant therein, the surrender of the Premises in the condition set forth in
Section 18.2 and the satisfaction of all terms and conditions of Section 26.1.
     9.5. Operating Expenses for the calendar year in which Tenant’s obligation
to share therein commences and for the calendar year in which such obligation
ceases shall be prorated on a basis reasonably determined by Landlord. Expenses
such as taxes, assessments and insurance premiums that are incurred for an
extended time period shall be prorated based upon the time periods to which they
apply so that the amounts attributed to the Premises relate in a reasonable
manner to the time period wherein Tenant has an obligation to share in Operating
Expenses.
     9.6. Within thirty (30) days after the end of each calendar month, Tenant
shall submit to Landlord an invoice, or, in the event an invoice is not
available, an itemized list, of all costs and expenses that (a) Tenant has
incurred (either internally or by employing third parties) during the prior
month and (b) for which Tenant reasonably believes it is entitled to
reimbursements from Landlord pursuant to the terms of this Lease or that Tenant
reasonably believes is the responsibility of Landlord pursuant to this Lease or
the Work Letter.
     9.7. In the event that the Building is less than fully occupied, Tenant
acknowledges that Landlord may extrapolate those Variable Building Operating
Expenses (defined below) by dividing (a) the total cost of Variable Building
Operating Expenses by (b) the Rentable Area of the Building, that is occupied,
then multiplying (y) the resulting quotient by (z) ninety-five percent (95%) of
the total Rentable Area of the Building; provided that such adjustment shall not
result in an increase in Tenant’s cost of Variable Operating Expenses in excess
of ten percent (10%) above the Variable Operating Expenses that would be payable
by Tenant prior to making such adjustment. Tenant shall pay Tenant’s Pro Rata
Share of the product of (y) and (z); provided, however, that Landlord shall not
recover more than one hundred percent (100%) of such Operating Expenses. No
Operating Expenses attributable to the Project as a whole will be subject to
gross up. Notwithstanding the foregoing, in the event there is vacant space in
the Building, to the extent it is feasible, Landlord will not provide services
resulting in Operating Expenses to such space.
     9.8. “Variable Building Operating Expenses” shall mean the following
Operating Expenses which exclusively relate to the Building and which fluctuate
based on occupancy of the Building: (i) water, (ii) sewer, (iii) trash removal,
(iv) janitorial supplies, and (v) carpet/floor cleaning and repairs.
10. Taxes on Tenant’s Property.
     10.1. Tenant shall pay prior to delinquency any and all taxes levied
against any personal property or trade fixtures placed by Tenant in or about the
Premises.
     10.2. If any such taxes on Tenant’s personal property or unattached
equipment are levied against Landlord or Landlord’s property or, if the assessed
valuation of the Building, the Property or the Project is increased by inclusion
therein of a value attributable to Tenant’s personal property or unattached
equipment, as reasonably determined by Landlord (the

19

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

 

“Personal Property Taxes”), and if Landlord, after written notice to Tenant
including documentary evidence of Landlord’s basis for such determination, pays
the Personal Property Taxes based upon any such increase in the assessed value
of the Building, the Property or the Project, then Tenant shall, upon demand,
repay to Landlord the Personal Property Taxes so paid by Landlord; provided that
Tenant shall not be liable for such assessments associated with the value of any
other tenant’s personal property or trade fixtures as part of Operating
Expenses.
     10.3. If any improvements in or alterations to the Premises, whether owned
by Landlord or Tenant and whether or not affixed to the real property so as to
become a part thereof, are assessed for real property tax purposes at a
valuation higher than the valuation at which improvements in other spaces in the
Building are assessed, then the real property taxes and assessments levied
against Landlord or the Building, the Property or the Project by reason of such
excess assessed valuation shall be deemed to be taxes levied against personal
property of Tenant and shall be governed by the provisions of Section 10.2. Any
such excess assessed valuation due to personal property, unattached equipment or
improvements in or alterations to any space in the Building or Project leased by
other tenants of the Building or Project shall not be included in the Operating
Expenses defined in Article 9, but shall be treated, as to such other tenants,
as provided in this Section 10.3. If the records of the County Assessor are
available and sufficiently detailed to serve as a basis for determining whether
said Tenant improvements or alterations are assessed at a higher valuation than
the building standard, then such records shall be binding on both Landlord and
Tenant.
     10.4. Tenant, at its sole risk, cost and expense, shall have the right, to
request that Landlord seek, on Tenant’s behalf, a reduction in the assessed
valuation of the Tenant Improvements and trade fixtures or to contest any taxes
thereon that are to be paid by Tenant and Landlord agrees to proceed with such
request. If Tenant desires Landlord seek a reduction or contests such taxes,
despite the submission of such proceeding or contest by Landlord, Tenant shall
still be required to pay such taxes as part of Operating Expenses. Landlord, on
final determination of the proceeding or contest, if such proceeding or contest
is successful, shall promptly pay to Tenant any refund received by Landlord in
connection with such proceeding or contest.
11. Security Deposit.
     11.1. Tenant shall deposit with Landlord on or before the Execution Date
the sum set forth in Section 2.6 (the “Security Deposit”), which sum shall be
held by Landlord as security for the faithful performance by Tenant of all of
the terms, covenants and conditions of this Lease to be kept and performed by
Tenant during the period commencing on the Execution Date and ending upon the
expiration or termination of Tenant’s obligations under this Lease. If Tenant
defaults with respect to any provision of this Lease, including any provision
relating to the payment of Rent and such default is not timely cured in
accordance with the cure rights provided in this Lease as applicable to such
default (if any), then Landlord may (but shall not be required to) use, apply or
retain all or any part of the Security Deposit for the payment of any Rent or
any other sum in default, or to compensate Landlord for any other loss or damage
that Landlord may suffer by reason of Tenant’s default. If any portion of the
Security Deposit is so used or applied, then Tenant shall, within ten
(10) business days following demand therefor, deposit cash with

20

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

 

Landlord in an amount sufficient to restore the Security Deposit to its original
amount, and Tenant’s failure to do so shall be a material breach of this Lease.
The provisions of this Article shall survive the expiration or earlier
termination of this Lease. TENANT HEREBY WAIVES THE REQUIREMENTS OF SECTION
1950.7 OF THE CALIFORNIA CIVIL CODE, AS THE SAME MAY BE AMENDED FROM TIME TO
TIME.
     11.2. In the event of bankruptcy or other debtor-creditor proceedings
against Tenant, the Security Deposit shall be deemed to be applied first to the
payment of Rent and other charges due Landlord for all periods prior to the
filing of such proceedings.
     11.3. Landlord may deliver to any purchaser of Landlord’s interest in the
Premises the funds deposited hereunder by Tenant, and upon such purchaser’s
written acknowledgement of its receipt of such funds to Tenant, thereupon
Landlord shall be discharged from any further liability with respect to such
deposit. This provision shall also apply to any subsequent transfers.
     11.4. If Tenant shall fully and faithfully perform every provision of this
Lease to be performed by it as a condition of effective surrender of the
Premises, then the Security Deposit, or any balance thereof, shall be returned
to Tenant (or, at Landlord’s option, to the last assignee of Tenant’s interest
hereunder) within thirty (30) days after the expiration or earlier termination
of this Lease. Landlord’s obligation to return the unused balance of the
Security Deposit shall survive the expiration or earlier termination of this
Lease.
     11.5. [Intentionally Omitted]
     11.6. If the Security Deposit shall be in cash, Landlord shall hold the
Security Deposit in an account at a banking organization selected by Landlord;
provided, however, that Landlord shall not be required to maintain a separate
account for the Security Deposit, but may intermingle it with other funds of
Landlord. Landlord shall be entitled to all interest and/or dividends, if any,
accruing on the Security Deposit. Landlord shall not be required to credit
Tenant with any interest for any period during which Landlord does not receive
interest on the Security Deposit.
     11.7. The Security Deposit may be in the form of cash, a letter of credit
or any other security instrument acceptable to Landlord in its sole discretion.
Tenant may at any time, deliver a letter of credit (the “L/C Security”) as the
entire Security Deposit, as follows:
          (a) If Tenant elects to deliver L/C Security, then Tenant shall
provide Landlord, and maintain in full force and effect throughout the Term and
until the date that is sixty (60) days after the then-current Term Expiration
Date, a letter of credit in substantially the form of Exhibit E issued by an
issuer reasonably satisfactory to Landlord, in the amount of the Security
Deposit, with an initial term of at least one year. Landlord may require the L/C
Security to be re-issued by a different issuer at any time during the Term if
Landlord reasonably believes that the issuing bank of the L/C Security is or may
soon become insolvent; provided, however, Landlord shall return the existing L/C
Security to the existing issuer immediately upon receipt of the substitute L/C
Security. If any issuer of the L/C Security shall become insolvent or placed
into FDIC receivership, then Tenant shall promptly, after Tenant receives
knowledge of

21

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

 

such receivership or insolvency, deliver to Landlord (without the requirement of
notice from Landlord) substitute L/C Security issued by an issuer reasonably
satisfactory to Landlord, and otherwise conforming to the requirements set forth
in this Article. As used herein with respect to the issuer of the L/C Security,
“insolvent” shall mean the determination of insolvency as made by such issuer’s
primary bank regulator (i.e., the state bank supervisor for state chartered
banks; the OCC or OTS, respectively, for federally chartered banks or thrifts;
or the Federal Reserve for its member banks). If, at the Term Expiration Date,
any Rent remains uncalculated or unpaid, then: (i) Landlord shall with
reasonable diligence complete any necessary calculations; (ii) Tenant shall
extend the expiry date of such L/C Security from time to time as Landlord
reasonably requires (but in no event to a date more than sixty (60) days after
the Term Expiration Date); and (iii) in such extended period, Landlord shall not
unreasonably refuse to consent to an appropriate reduction of the L/C Security.
Tenant shall reimburse Landlord’s reasonable legal costs (as estimated by
Landlord’s counsel) in handling Landlord’s acceptance of L/C Security or its
replacement or extension; provided such reimbursement shall not exceed Two
Thousand Five Hundred Dollars ($2500) for each review of the initial L/C
Security or its replacement or extension.
          (b) If Tenant delivers to Landlord satisfactory L/C Security in place
of the entire Security Deposit, Landlord shall remit to Tenant any cash Security
Deposit Landlord previously held.
          (c) Landlord may draw upon the L/C Security, and hold and apply the
proceeds in the same manner and for the same purposes as the Security Deposit,
if: (i) an uncured Default (as defined below) exists; (ii) as of the date thirty
(30) days before any L/C Security expires (even if such scheduled expiry date is
after the Term Expiration Date) Tenant has not delivered to Landlord an
amendment or replacement for such L/C Security, reasonably satisfactory to
Landlord, extending the expiry date to the earlier of (1) sixty (60) days after
the then-current Term Expiration Date or (2) the date one year after the
then-current expiry date of the L/C Security; (iii) the L/C Security provides
for automatic renewals, Landlord asks the issuer to confirm the current L/C
Security expiry date, and the issuer fails to do so within ten (10) business
days; (iv) Tenant fails to pay (when and as Landlord reasonably requires) any
bank charges for Landlord’s transfer of the L/C Security; or (v) the issuer of
the L/C Security ceases, or announces that it will cease, to maintain an office
in the city where Landlord may present drafts under the L/C Security (and fails
to permit drawing upon the L/C Security by overnight courier or facsimile). This
Section does not limit any other provisions of this Lease allowing Landlord to
draw the L/C Security under specified circumstances.
          (d) Tenant shall not seek to enjoin, prevent, or otherwise interfere
with Landlord’s draw under L/C Security, even if it violates this Lease. Tenant
acknowledges that the only effect of a wrongful draw would be to substitute a
cash Security Deposit for L/C Security. Landlord shall not be liable to Tenant
for any damages as a result of a wrongful draw under the L/C Security and a
wrongful draw shall not be considered a Landlord breach or default under the
Lease. Landlord shall hold the proceeds of any draw in the same manner and for
the same purposes as a cash Security Deposit. In the event of a wrongful draw,
the parties shall cooperate to allow Tenant to post replacement L/C Security
simultaneously with the return to Tenant of the

22

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

 

wrongfully drawn sums, and Landlord shall upon request confirm in writing to the
issuer of the L/C Security that Landlord’s draw was erroneous.
          (e) If Landlord transfers its interest in the Premises, then Tenant
shall at Tenant’s expense, within thirty (30) days after receiving a request
from Landlord, deliver (and, if the issuer requires, Landlord shall consent to)
an amendment to the L/C Security naming Landlord’s grantee as substitute
beneficiary, or, in Tenant’s sole discretion, replace the L/C Security with a
cash Security Deposit delivered to Landlord’s transferee. If the required
Security Deposit changes while L/C Security is in force, then Tenant shall
deliver (and, if the issuer requires, Landlord shall consent to) a corresponding
amendment to the L/C Security.
12. Use.
     12.1. Tenant shall use the Premises for the Permitted Use, and shall not
use the Premises, or permit or suffer the Premises to be used, for any other
purpose without Landlord’s prior written consent, which consent Landlord may
withhold in its sole and absolute discretion.
     12.2. Tenant shall not use or occupy the Premises in violation of
Applicable Laws; provided however, Tenant shall not be required to cause the
Building or Project to comply with any Applicable Laws requiring any
improvements or alterations outside of the Premises (except (i) to the extent
such compliance relates to Tenant’s installation, use, or maintenance of its
equipment which Tenant is permitted to so install and maintain in accordance
with the terms and conditions of this Lease or (ii) for Operating Expenses
Tenant is responsible for pursuant to Article 9 of this Lease ). Subject to
Landlord’s acknowledgement set forth in Section 2.7, Tenant shall not use or
occupy the Premises in violation of zoning ordinances; or the certificate of
occupancy issued for the Building or the Project, and shall, upon five (5) days’
written notice from Landlord (which will include the notice of violation from
such Governmental Authority), discontinue any use of the Premises that is
conclusively determined by any Governmental Authority having jurisdiction to be
a violation of any of the above (subject to Tenant’s right to contest such
finding). Tenant shall comply with any direction of any Governmental Authority
having jurisdiction that shall, by reason of the nature of Tenant’s use or
occupancy of the Premises, impose any duty upon Tenant or Landlord with respect
to the Premises or with respect to the use or occupation thereof; provided that
Tenant shall not be in default of such obligation if it has the right to appeal
such directive and Tenant prosecutes such appeal in a timely fashion and in a
manner that does not impose or threaten to impose any lien, charge or other
obligation, penalty or sanction on Landlord or any portion of the Project and
Tenant shall indemnify Landlord for any Claims (as defined in Section 12.11)
arising out of or in connection with Tenant’s appeal of any such Governmental
Authority directive.
     12.3. Tenant shall not do or permit to be done anything that will
invalidate or increase the cost of any fire, environmental, extended coverage or
any other insurance policy covering the Building or the Project, and shall
comply with all reasonable and customary rules, orders, regulations and
requirements of the insurers of the Building and the Project, and Tenant shall
promptly, upon demand, reimburse Landlord for any additional premium charged for
such policy by reason of Tenant’s failure to comply with the provisions of this
Article. Landlord’s insurance will be underwritten for laboratory biotechnology
use.

23

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

 

     12.4. Tenant shall keep all doors opening onto public corridors closed,
except when in use for ingress and egress.
     12.5. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by Tenant, nor shall any changes be made to existing locks
or the mechanisms thereof without Landlord’s prior written consent. Tenant
shall, upon termination of this Lease, return to Landlord all keys to offices
and restrooms either furnished to or otherwise procured by Tenant. In the event
any key so furnished to Tenant is lost, Tenant shall pay to Landlord the cost of
replacing the same or of changing the lock or locks opened by such lost key if
Landlord shall deem it necessary to make such change.
     12.6. No awnings or other projections shall be attached to any outside wall
of the Building. No curtains, blinds, shades or screens shall be attached to or
hung in, or used in connection with, any window or door of the Premises other
than Landlord’s standard window coverings. Neither the interior nor exterior of
any windows shall be coated or otherwise sunscreened without Landlord’s prior
written consent. No equipment, furniture or other items of personal property
shall be placed on any exterior balcony without Landlord’s prior written
consent.
     12.7. Except for Tenant’s exterior signage in the common lobby of the
Building (as hereinafter provided), no sign, advertisement or notice (“Signage”)
shall be exhibited, painted or affixed by Tenant on any part of the Premises
(other than signs in the interior of the Premises which are not visible from
outside the Premises) or the Building without Landlord’s prior written consent.
In the event Landlord installs a new monument sign at the Project, Tenant will
have the right to a listing on such monument sign at a level which corresponds
to the Rentable Area of the Premises as compared to the Rentable Area of the
premises leased by third parties with right to such signage. Tenant shall have
the right to place its identification signage for the Premises on the main
entrance door of the Premises, in the second floor elevator lobby and the
directory tablet of the Building lobby, which directory tablet listing shall be
inscribed, painted or affixed for Tenant by Landlord at Tenant’s sole cost and
expense, and shall be of a size, color and type and be located in a place
reasonably acceptable to Landlord. The Building directory tablet shall be
provided exclusively for the display of the name and location of Building
tenants only. Tenant shall not place anything on the exterior of the corridor
walls or corridor doors other than Landlord’s standard lettering. Tenant shall
have Signage rights for the Premises substantially consistent with the Signage
permitted for other comparable Tenants in the Project, as Landlord reasonably
determines. At Landlord’s option, Landlord may install any such Signage, and
Tenant shall pay all costs associated with such installation within thirty
(30) days after demand therefor.
     12.8. Tenant shall only place equipment within the Premises with floor
loading consistent with the Building’s structural design as indicated on
Landlord’s as-built plans for the Building and such equipment shall be placed in
a location designed to carry the weight of such equipment.
     12.9. Tenant shall cause any equipment or machinery to be installed in the
Premises so as to reasonably prevent sounds or vibrations therefrom from
extending into the Common Areas

24

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

 

or other offices in the Project; provided that the foregoing shall not prohibit
Tenant from operating the Tenant Generator (as defined in Section 16.10 below)
for emergency use requirements, nor from testing and performing regular
maintenance on the equipment and machinery installed in the Premises and the
Tenant Generator at times reasonably approved by Landlord.
     12.10. Tenant shall not (a) do or permit anything to be done in or about
the Premises that shall unreasonably obstruct or interfere with the rights of
other tenants or occupants of the Building or the Project, or injure them,
(b) cause, maintain or permit any nuisance or waste in, on or about the
Premises, the Building or the Project or (c) take any other action that would in
Landlord’s reasonable determination in any manner adversely affect other
tenants’ quiet use and enjoyment of their space or adversely impact their
ability to conduct business in a professional and suitable work environment.
     12.11. Landlord shall be responsible for ensuring that the Common Areas
comply with the ADA (which cost may be included in Operating Expenses to the
extent permitted by Article 9 above) and that any non-compliance conditions
existing as of the date of this Lease be remedied by Landlord as part of the
Landlord’s Work. Notwithstanding any other provision herein to the contrary,
Tenant shall be responsible for all liabilities, costs and expenses arising out
of or in connection with the compliance of the Premises after the Substantial
Completion of Landlord’s Work (and any Tenant Alterations thereto, including the
Tenant Improvements and Expansion Space Tenant Improvements) with the ADA, and
Tenant shall indemnify, save, defend (at Landlord’s option and with counsel
reasonably acceptable to Landlord) and hold Landlord and its affiliates,
employees, agents and contractors; and any lender, mortgagee or beneficiary
(each, a “Lender” and, collectively with Landlord and its affiliates, employees,
agents and contractors, the “Landlord Indemnitees”) harmless from and against
any demands, claims, liabilities, losses, costs, expenses, actions, causes of
action, damages or judgments, and all reasonable expenses (including reasonable
attorneys’ fees, charges and disbursements) incurred in investigating or
resisting the same (collectively, “Claims”) arising out of any such failure of
the Premises to comply with the ADA. The provisions of this Section shall
survive the expiration or earlier termination of this Lease.
     12.12. Subject to (a) use of the loading dock and appurtenant parking by
other tenants of the Building and the Project (provided that such other tenants
will have no higher priority to use the loading dock than Tenant) and (b) the
other provisions of this Lease, Tenant shall have access to and use of the
loading dock and the parking areas twenty-four (24) hours per day seven (7) days
per week.
13. Rules and Regulations, CC&Rs, Parking Facilities and Common Areas.
     13.1. Tenant shall have the non-exclusive right, in common with others, to
use the Common Areas, subject to the rules and regulations reasonably adopted by
Landlord and attached hereto as Exhibit F, together with such other reasonable
and nondiscriminatory rules and regulations with respect to the Building Common
Area and Project Common Areas as are hereafter promulgated by Landlord in its
sole and absolute discretion (the “Rules and Regulations”). Tenant shall
faithfully observe and comply with the Rules and Regulations.

25

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

 

Landlord shall not be responsible to Tenant for the violation or non-performance
by any other tenant or any agent, employee or invitee thereof of any of the
Rules and Regulations; provided, that Landlord shall endeavor to enforce the
Rules and Regulations in a non-discriminatory manner.
     13.2. This Lease is subject to any covenants, conditions or restrictions
that are currently recorded, or may in the future be recorded, on the Project or
Property (the “CC&Rs”),as the same may be amended, amended and restated,
supplemented or otherwise modified from time to time; provided that any such
amendments, restatements, supplements or modifications do not materially modify
Tenant’s rights or obligations hereunder nor materially increase Tenant’s
occupancy costs for the Premises. Tenant shall comply with the CC&Rs.
     13.3. Tenant shall have a non-exclusive, irrevocable license, which license
shall be appurtenant to Tenant’s leasehold interest in the Premises, to use
Tenant’s Pro Rata Share of parking facilities serving the Building in common on
an unreserved basis with other tenants of the Building and the Project during
the Term, as the same may be extended pursuant to the terms hereof, at no
additional cost to Tenant. The parking ratio for the Project is approximately
three and two tenths (3.2) spaces per one thousand (1,000) square feet of
Rentable Area (“Parking Ratio”). Tenant will not be charged a separate fee for
parking, other than the parking repairs and maintenance costs charged to Tenant
as Operating Expenses pursuant to Article 9.
     13.4. Tenant agrees not to unreasonably overburden the parking facilities
and agrees to cooperate with Landlord and other tenants in the use of the
parking facilities. Landlord shall act reasonably to ensure that no other tenant
or occupant of the Project is overburdening the parking facilities of the
Building. In the event Tenant notifies Landlord that Tenant reasonably believes
the parking facilities are becoming overcrowded such that Tenant is unable to
utilize Tenant’s Pro Rata Share of parking facilities serving the Building,
Landlord will endeavor to take reasonable steps to alleviate such overcrowding.
Landlord reserves the right to determine that parking facilities are becoming
overcrowded and to limit Tenant’s use thereof to an amount not less than the
Parking Ratio above. Upon such determination, Landlord may reasonably allocate
parking spaces among Tenant and other tenants of the Building or the Project.
Nothing in this Section, however, is intended to create an affirmative duty on
Landlord’s part to monitor parking.
     13.5. Landlord reserves the right to modify the Common Areas (including the
Amenities Building), including the right to add or remove exterior and interior
landscaping and to subdivide real property; provided, however, such
modifications shall not materially increase Tenant’s Pro Rata Share of Operating
Expenses under this Lease and shall not materially diminish Tenant’s use of or
access to the Premises (including elements of the Common Areas reasonably
necessary for Tenant’s use of the Premises, e.g. driveways, interior roads and
parking areas) nor Tenant’s interest in the Amenities Building Services. Tenant
acknowledges that Landlord specifically reserves the right to allow the
exclusive use of corridors and restroom facilities located on specific floors to
one or more tenants occupying such floors; provided, however, that Tenant shall
not be deprived of the use of the corridors reasonably required to serve the
Premises or of restroom facilities serving the floor upon which the Premises are
located.

26

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

 

     13.6. Subject to Article 17 of this Lease, relating to the procedures for
design, approval and construction of Alterations, Article 21 of this Lease
regarding Tenant’s obligations with respect to Hazardous Materials, and to all
Applicable Laws, Tenant shall have the right to install or construct, from time
to time, a Hazardous Materials storage facility within the Common Area in a
location in proximity to the Building reasonably acceptable to Landlord and
classified by the UBC as an “H” occupancy area for the use and storage of
Hazardous Materials, which may be used by Tenant for temporary Hazardous
Materials waste storage (the “Hazardous Materials Storage Shed”). The Hazardous
Materials Storage Shed shall not exceed fifteen feet (15’) in diameter, nor
shall it exceed fifteen feet (15’) in height without Landlord’s consent.
Landlord hereby acknowledges that an underground water line and electrical power
conduit may be required to provide fire-sprinkler protection and safety and
security systems for the Hazardous Materials storage facility, and agrees that
Tenant shall have the right to trench between the Building and such storage
facility for the purpose of installing underground piping and conduit for such
purposes. Tenant’s installation and use of the Hazardous Materials Storage Shed
shall be at no additional Rent for the use of such facilities (nor shall the
area of such storage facility be incorporated into any conversion factor used in
the determination of rentable area of the Premises for the purpose of Tenant’s
Building or Project Pro Rata Share). Landlord shall have the right (to be
exercised at the time of Tenant’s request for Landlord’s consent) to construct
such Hazardous Materials Storage Shed, in its sole and absolute discretion, and
to require Tenant to remove any such improvements installed by Tenant and
restore the area in which it is located to their prior use and appearance upon
the expiration or earlier termination of the Term. In addition to the Hazardous
Materials Storage Shed, Tenant shall also have the right to store, in a secure
manner (in a small fenced enclosure or similar protected area) and location
adjacent to the exterior of the Building, any compressed gas storage tanks
required for Tenant’s Permitted Use in the Premises. The cost for permitting,
constructing, maintaining and removing any such improvements shall be payable by
Tenant. Unless specified by Landlord pursuant to the provisions of Article 17,
the Hazardous Materials Storage shed shall remain in the Common Areas upon
Tenant’s surrender of the Premises and shall be the property of Landlord.
14. Project Control by Landlord.
     14.1. Subject to the limitations of Section 13.5, Landlord reserves full
control over the Building and the Project to the extent not inconsistent with
Tenant’s access, use and enjoyment of the Premises and appurtenant rights as
provided by this Lease. This reservation includes Landlord’s right to subdivide
the Project; convert the Building and other buildings within the Project to
condominium units; change the size of the Project by selling all or a portion of
the Project or adding real property and any improvements thereon to the Project;
grant easements and licenses to third parties; maintain or establish ownership
of the Building separate from fee title to the Property; make additions to or
reconstruct portions of the Building and the Project; install, use, maintain,
repair, replace and relocate for service to the Premises and other parts of the
Building or the Project pipes, ducts, conduits, wires and appurtenant fixtures,
wherever located in the Premises, the Building or elsewhere at the Project; and
alter or relocate any other Common Area or facility, including private drives,
lobbies and entrances; provided that the foregoing shall not: (i) materially
impair access to and from the Premises from the parking areas or (ii) otherwise
unreasonably interfere with Tenant’s access to and use of the Premises, the

27

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

 

parking areas and the Common Areas adjacent to the Building in any material
manner without Tenant’s prior written consent, which consent may be withheld in
Tenant’s sole discretion.
     14.2. Possession of areas of the Premises necessary for utilities,
services, safety and operation of the Building is reserved to Landlord for
maintenance, repairs and alterations, subject to the provisions of this Lease.
     14.3. Tenant shall, at Landlord’s request (and at Landlord’s expense to the
extent legal review is reasonably required to determine the impact of such
documents on Tenant’s rights under this Lease), promptly execute such further
documents as may be reasonably appropriate to assist Landlord in the performance
of its obligations hereunder; provided that Tenant need not execute any document
that creates additional liability for Tenant or that deprives Tenant of the
quiet enjoyment and use of the Premises as provided for in this Lease.
     14.4. Landlord may, at any and all reasonable times during non-business
hours (or during business hours if Tenant so requests), and upon twenty-four
(24) hours’ prior written (for which notice an email communication to Tenant’s
facilities manager shall suffice) notice (provided that no time restrictions
shall apply or advance notice be required if an emergency necessitates immediate
entry) and subject to Tenant’s reasonable security and safety requirements(which
may be provided to Landlord from time to time, as reasonably determined by
Tenant to be appropriate for the protection of Tenant’s research and other
proprietary activities and information in the Premises), enter the Premises to
(a) inspect the same and to determine whether Tenant is in compliance with its
obligations hereunder, (b) supply any service Landlord is required to provide
hereunder, (c) show the Premises to prospective purchasers or tenants during the
final year of the Term, (d) post notices of nonresponsibility, (e) access the
telephone equipment, electrical substation and fire risers and (f) alter,
improve or repair any portion of the Building other than the Premises for which
access to the Premises is reasonably necessary. In connection with any such
alteration, improvement or repair as described in Subsection 14.4(f), Landlord
may erect in the Premises or elsewhere in the Project scaffolding and other
structures reasonably required for the alteration, improvement or repair work to
be performed. In no event shall Tenant’s Rent abate as a result of Landlord’s
activities pursuant to this Section; provided, however, that all such activities
shall be conducted in such a manner so as to cause as little interference to
Tenant as is reasonably possible. Landlord shall at all times retain a key with
which to unlock all of the doors in the Premises. If an emergency necessitates
immediate access to the Premises, Landlord may use whatever force is necessary
under the circumstances to enter the Premises, and any such emergency entry to
the Premises shall not constitute a forcible or unlawful entry to the Premises,
a detainer of the Premises, or an eviction of Tenant from the Premises or any
portion thereof. Notwithstanding anything to the contrary contained herein,
because of the proprietary nature of the materials and information in the
Premises and the potential for material harm to Tenant’s business in the event
such information were compromised, Tenant is hereby granted the right to
designate certain portions of the Premises as “Secured Area(s)” and reserves the
right to install door locks or other access control systems as necessary to
secure such Secured Area(s), and Landlord agrees not to enter such Secured
Area(s) except in the case of an emergency (as set forth above), unless it shall
have first obtained Tenant’s consent and Tenant has a reasonable opportunity to
have a representative

28

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

 

present (at the option of Tenant). Tenant hereby releases Landlord and waives
any Claim against Landlord arising out of or related to Landlord’s inability to
gain timely access to the Secured Areas.
15. Quiet Enjoyment. So long as Tenant is not in Default under this Lease,
Landlord or anyone acting through or under Landlord shall not disturb Tenant’s
occupancy of the Premises or Tenant’s use of the parking facilities and other
Common Areas of the Building, except as permitted by this Lease.
16. Utilities and Services.
     16.1. Tenant shall pay for all water (including the cost to service, repair
and replace reverse osmosis, de-ionized and other treated water), gas, heat,
light, power, telephone, internet service, cable television, other
telecommunications and other utilities supplied to the Premises, together with
any fees, surcharges and taxes thereon. Landlord shall install separate water,
gas and electrical meters or submeters for the Premises as part of the
Landlord’s Work, and such meters shall be registered in Tenant’s name for direct
payment to the applicable utility providers. If any other such utility is not
separately metered to Tenant, Tenant shall pay a reasonable proportion (to be
determined by Landlord based on Tenant’s usage) of all charges of such utility
jointly metered with other premises as Additional Rent. To the extent that
Tenant uses more than Tenant’s proportional share of any utilities that are not
separately metered to Tenant, including utilities for the Common Areas, then
Tenant shall pay Landlord for such excess in addition to Tenant’s obligation to
pay Tenant’s Pro Rata Share of Operating Expenses. In the event that the
Building is less than fully occupied, Tenant acknowledges that Landlord may
extrapolate the cost of water and sewer that vary depending on the occupancy of
the Building, by dividing (a) the total cost of water and sewer usage by (b) the
Rentable Area of the Building that is occupied, then multiplying (y) the
resulting quotient by (z) ninety-five percent (95%) of the total Rentable Area
of the Building; provided that such adjustment shall not result in an increase
in Tenant’s cost of such water and sewer fees in excess of ten percent (10%)
above the cost of such water and sewer fees that would be payable by Tenant
prior to making such adjustment. Tenant shall pay Tenant’s Pro Rata Share of the
product of (y) and (z); provided, however, that Landlord shall not recover more
than one hundred percent (100%) of such water and sewer costs.
     16.2. Landlord shall not be liable for, nor shall any eviction of Tenant
result from, the failure to furnish any utility or service, whether or not such
failure is caused by accident; breakage; repair; strike, lockout or other labor
disturbance or labor dispute of any character; act of terrorism; shortage of
materials, which shortage is not unique to Landlord or Tenant, as the case may
be; governmental regulation, moratorium or other governmental action, inaction
or delay; other causes beyond Landlord’s control (collectively, “Force Majeure”)
or Landlord’s negligence. In the event of such failure, Tenant shall not be
entitled to termination of this Lease or any abatement or reduction of Rent, nor
shall Tenant be relieved from the operation of any covenant or agreement of this
Lease. Notwithstanding the foregoing, or anything to the contrary in this Lease,
if as a result of Landlord’s gross negligence or willful misconduct, for more
than three (3) consecutive business days following written notice to Landlord:
(a) HVAC or electricity services to all or a material portion of the Premises is
interrupted or is unable to support Tenant’s normal occupancy requirements for
the Permitted Use, or (b) an interruption of

29

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

 

other essential utilities and building services, such as fire protection or
water, prevents the use or occupancy of all or a material portion of the
Premises for the Permitted Use (including biotechnology manufacturing to the
extent biotechnology manufacturing is a Permitted Use), then Tenant’s Base Rent
and Operating Expenses (or an equitable portion of such Base Rent and Additional
Rent based on the impact of such interruption on Tenant’s business operations,
to the extent that less than all of the Premises are affected) shall thereafter
be abated until the Premises are again usable by Tenant for the Permitted Use;
provided, however, that if Landlord is diligently pursuing the repair of such
utilities or services and Landlord provides substitute services reasonably
suitable for Tenant’s continued use and occupancy of the Premises for Permitted
Use purposes, as for example, bringing in portable air-conditioning equipment or
potable water supplies, then there shall not be an abatement of Base Rent. In
any such event, regardless of cause, Landlord shall diligently pursue the repair
of such utilities and services. The foregoing provisions shall be Tenant’s sole
recourse and remedy in the event of an interruption of services to the Premises
caused by Landlord’s gross negligence or willful misconduct. The foregoing
provisions shall not apply in case of the actions of parties other than
Landlord, in the case of simple negligence of Landlord, or in the case of damage
to, or destruction of, the Premises (which shall be governed by the provisions
of Article 24 of the Lease). In addition to Tenant’s abatement rights set forth
above, in the event that Tenant is prevented from using all or a portion of the
Premises due to the failure to furnish any utility or essential building service
(including due to a failure to repair and maintain as required by Article 18 of
this Lease) and such failure or circumstance continues for more than one hundred
thirty five (135) consecutive days, Tenant shall have the right to terminate
this lease upon five (5) business days notice to Landlord as a result of such
extended interruption. The foregoing provision shall not apply in the case of
damage to, or destruction of, the Premises (which shall be governed by the
provisions of Article 24 of the Lease).
     16.3. Tenant shall pay for, prior to delinquency of payment therefor, any
utilities and services that may be furnished to the Premises during or, if
Tenant occupies the Premises after the expiration or earlier termination of the
Term, after the Term, beyond those utilities provided by Landlord, including
telephone, internet service, cable television and other telecommunications,
together with any fees, surcharges and taxes thereon. Utilities and services
provided to the Premises that are separately metered shall be paid by Tenant
directly to the supplier of such utilities or services.
     16.4. Tenant shall not, without Landlord’s prior written consent, use any
device in the Premises (including data processing machines) that will in any way
(a) increase the amount of ventilation, air exchange, gas, steam, electricity or
water beyond the existing capacity of the Building or the Project as
proportionately allocated to the Premises based upon Tenant’s Pro Rata Share of
the Building as usually furnished or supplied for the use set forth in
Section 2.7 or (b) exceed Tenant’s Pro Rata Share of the Building’s capacity to
provide such utilities or services. Notwithstanding the foregoing, should Tenant
desire increased ventilation, air exchange, gas, steam, electricity or water in
the Building or Project, Tenant may offer to pay for all costs to increase the
Building or Project capacity and Landlord shall consider such request in its
reasonable discretion.

30

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

 

     16.5. Without limiting Tenant’s right to install supplemental equipment and
system improvements within the Premises as part of the Tenant Improvements and
subsequent Alterations (subject to Landlord’s applicable approval rights), if
Tenant shall require utilities or services in excess of those usually furnished
or supplied for tenants in similar spaces in the Building by reason of Tenant’s
equipment or extended hours of business operations, then Tenant shall first
procure Landlord’s consent for the use thereof, which consent Landlord may
condition upon the availability of such excess utilities or services, and Tenant
shall pay as Additional Rent an amount equal to the cost of providing such
excess utilities and services.
     16.6. Utilities and services provided to the Premises that are separately
metered shall be paid by Tenant directly to the supplier of such utility or
service.
     16.7. Landlord shall provide the Amenities Building Services as set forth
in this Lease throughout the Term and the cost of such Amenities Building
Services shall be a Project Operating Expense.
     16.8. Landlord shall provide water in the Building Common Area for lavatory
purposes only and such water shall be separately metered for the Building Common
Area; provided, however, that if Landlord determines that Tenant requires, uses
or consumes water in the Common Area for any purpose other than ordinary
lavatory purposes, then Tenant shall pay Landlord for such excess Common Area
water usage in addition to Tenant’s obligation to pay Tenant’s Pro Rata Share of
Operating Expenses.
     16.9. Landlord reserves the right (with such notice as is practical under
the circumstances, if any) to stop service of the elevator, plumbing,
ventilation, air conditioning, electric systems and Amenities Building Services
when Landlord deems necessary or desirable, due to accident, emergency or the
need to make repairs, alterations or improvements, until such repairs,
alterations or improvements shall have been completed, and except as provide in
Section 16.2 above, Landlord shall further have no responsibility or liability
for failure to supply elevator facilities, plumbing, ventilation, air
conditioning or electric service when prevented from doing so by Force Majeure;
a failure by a third party to deliver gas, oil or another suitable fuel supply;
or Landlord’s inability by exercise of reasonable diligence to obtain gas, oil
or another suitable fuel. Without limiting the foregoing, it is expressly
understood and agreed that any covenants on Landlord’s part to furnish any
service pursuant to any of the terms, covenants, conditions, provisions or
agreements of this Lease, or to perform any act or thing for the benefit of
Tenant, shall not be deemed breached if Landlord is unable to furnish or perform
the same by virtue of Force Majeure. Landlord shall use commercially reasonable
efforts in exercising its rights pursuant to this Section in a manner so as to
minimize or prevent interference with Tenant’s use of, or access to the Premises
and to perform such repairs outside of normal business hours.
     16.10. Tenant shall be entitled to use up to its proportionate share of
power from the Landlord’s existing emergency backup generator (the “Generator”)
on a non-exclusive basis with other Tenants in the Building. The cost of
maintaining, repairing and replacing the Generator shall constitute Operating
Expenses. Landlord expressly disclaims any warranties with regard to the
Generator or the installation thereof, including any warranty of merchantability
or fitness for a particular purpose; provided Landlord will conduct regular
testing and maintenance of the

31

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

 

Generator. Landlord shall maintain the Generator in good working condition, but
shall not be liable for any failure to make any repairs or to perform any
maintenance that is an obligation of Landlord unless such failure shall persist
for an unreasonable time after Tenant provides Landlord with written notice of
the need for such repairs or maintenance. The provisions of Section 16.2 of this
Lease shall apply to Landlord’s existing Generator, and shall not affect
Tenant’s operation or maintenance of any Tenant Generator that may be installed
by Tenant during the Lease Term as a trade fixture of Tenant in the Project
Common Areas adjacent to the Building as hereinafter provided: Landlord
acknowledges that Tenant may determine that a separate emergency backup
generator under Tenant’s control may be appropriate to protect its operations in
the Premises, and therefore, Landlord agrees that Tenant shall have the right to
install, as part of the initial Tenant Improvements or as subsequent
Alterations, Tenant’s own separately dedicated emergency generator on or about
the Building (the “Tenant Generator”) in locations reasonably acceptable to
Landlord, provided that, (a) such installation complies with all Applicable Laws
and provisions of this Lease, and (b) in the event that Tenant pays for the cost
of the Tenant Generator (and the cost thereof is not paid out of the TI
Allowance), the Tenant Generator and related equipment shall be deemed a Tenant
trade fixture, which shall remain Tenant’s personal property and will be removed
by Tenant upon the expiration or earlier termination of this Lease.
     16.11. For the Premises, Landlord shall (a) maintain and operate the
heating, ventilating and air conditioning systems at levels required for the
Permitted Use only (“HVAC”) and (b) subject to clause (a) above, furnish HVAC as
reasonably required (except as this Lease otherwise provides) for reasonably
comfortable occupancy of the Premises twenty-four (24) hours a day, every day
during the Term, subject to casualty, eminent domain or as otherwise specified
in this Article. The costs and expenses of Landlord’s operation, maintenance,
repair or replacement of the aforementioned HVAC shall be considered Operating
Expenses of the Building. Notwithstanding anything to the contrary in this
Section, (except as provided in Section 16.2 above) Landlord shall have no
liability, and Tenant shall have no right or remedy, on account of any
interruption or impairment in HVAC services; provided that Landlord diligently
endeavors to cure any such interruption or impairment. Pursuant to the terms of
the Work Letter, Tenant shall be permitted to install as part of the Tenant
Improvements, its own separate, dedicated package HVAC units to exclusively
serve the Premises (the “Tenant HVAC System”). Tenant shall be responsible for
the operation and maintenance and all associated costs of the Tenant HVAC
System. The Tenant HVAC System shall remain in the Premises upon Tenant’s
surrender of the Premises and shall be the property of Landlord.
     16.12. For any utilities serving the Premises for which Tenant is billed
directly by such utility provider, Tenant agrees to furnish to Landlord (a) any
invoices or statements for such utilities within thirty (30) days after Tenant’s
receipt thereof, (b) within thirty (30) days after Landlord’s request, any other
utility usage information reasonably requested by Landlord, and (c) within
thirty (30) days after each calendar year during the Term, an ENERGY STAR®
Statement of Performance (or similar comprehensive utility usage report for
laboratories such as Labs21®, about which information can be found at
www.labs21century.gov), if requested by Landlord) and any other information
reasonably requested by Landlord for the immediately preceding year; provided
that none of the foregoing results in more than a de minimus cost to

32

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

 

Tenant and is readily obtainable from the utility provider. Tenant shall retain
records of utility usage at the Premises, including invoices and statements from
the utility provider, for at least sixty (60) months following payment thereof,
or such other period of time as may be requested by Landlord. Tenant
acknowledges that any utility information for the Premises, the Building and the
Project may be shared with third parties, including Landlord’s consultants and
Governmental Authorities. In the event that Tenant fails to timely comply with
the reporting requirements in this Section, Tenant hereby appoints Landlord as
Tenant’s attorney-in-fact for the purpose of Landlord collecting utility usage
information directly from the applicable utility providers.
17. Alterations.
     17.1. Tenant shall make no alterations, additions or improvements in or to
the Premises or engage in any construction, demolition, reconstruction,
renovation, or other work (whether major or minor) of any kind in, at, or
serving the Premises (“Alterations”) without Landlord’s prior written approval,
which approval Landlord shall not unreasonably withhold; provided, however, that
in the event any proposed Alteration affects (a) any structural portions of the
Building, including exterior walls, roof, foundation, foundation systems
(including barriers and subslab systems), or core of the Building, (b) the
exterior of the Building or (c) any Building systems, including elevator,
plumbing, air conditioning, heating, electrical, security, life safety and
power, then Landlord may withhold its approval with respect thereto in its sole
and absolute discretion; and provided, further, that the Expansion Space Tenant
Improvements shall be governed by Articles 4 and 43 hereof and the Work Letter,
rather than this Article. Tenant shall, in making any such Alterations, use only
those architects, contractors, suppliers and mechanics of which Landlord has
given prior written approval, which approval shall be in Landlord’s sole and
absolute discretion. In seeking Landlord’s approval, Tenant shall provide
Landlord, at least fourteen (14) days in advance of any proposed construction,
with plans, specifications, bid proposals, certified stamped engineering
drawings and calculations by Tenant’s engineer of record or architect or record,
(including connections to the Building’s structural system, modifications to the
Building’s envelope, non-structural penetrations in slabs or walls, and
modifications or tie-ins to life safety systems), work contracts, requests for
laydown areas and such other information concerning the nature and cost of the
Alterations in all cases as Landlord may reasonably request. In no event shall
Tenant use or Landlord be required to approve any architects, consultants,
contractors, subcontractors or material suppliers that Landlord reasonably
believes could cause labor disharmony. Notwithstanding the foregoing, Tenant may
make strictly cosmetic changes to the Premises (“Cosmetic Alterations”) without
Landlord’s consent; provided that (y) the cost of any Cosmetic Alterations does
not exceed Fifty Thousand Dollars ($50,000) in any one instance, (z) such
Cosmetic Alterations do not (i) require any structural or other substantial
modifications to the Premises, (ii) require any changes to, or adversely affect,
the Building systems, (iii) affect the exterior of the Building or (iv) trigger
any requirement under Applicable Laws that would require Landlord to make any
alteration or improvement to the Premises, the Building or the Project. Tenant
shall give Landlord at least ten (10) days’ prior written notice of any Cosmetic
Alterations. Subject to the provisions of this Lease and all Applicable Laws,
Tenant shall have the right, to (A) construct and install the Hazardous
Materials Storage Shed and a compressed gas storage area in a portion of the
Common Areas as

33

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

 

provided in Section 13.6 above; (B) install rooftop antennae or satellite
dishes, and solar panels, on its Pro Rata Share of the Building’s roof for
Tenant’s sole use for administration of its business or research in the
Premises, or for generation of electricity, in accordance with Article 40 of
this Lease, (C) install a Tenant Generator, as provided in Section 16.10 above,
and (D) install and maintain its own security system for the Premises (including
card readers, cameras and on-site security guards) all of which unless otherwise
specified by Landlord pursuant to this Article 17 (other than the Tenant
Generator or on-site security guards hired by Tenant) shall remain in at the
Project upon Tenant’s surrender of the Premises and shall be the property of
Landlord.
     17.2. Tenant shall not construct or permit to be constructed partitions or
other obstructions that might interfere with free access to mechanical
installation or service facilities of the Building or with other tenants’
components located within the Building, or interfere with the moving of
Landlord’s equipment to or from the enclosures containing such installations or
facilities.
     17.3. Tenant shall accomplish any work performed on the Premises or the
Building in such a manner as to permit any life safety systems to remain fully
operable at all times.
     17.4. Any work performed on the Premises, the Building or the Project by
Tenant or Tenant’s contractors shall be done at such times and in such manner as
Landlord may from time to time reasonably designate. Tenant covenants and agrees
that all work done by Tenant or Tenant’s contractors shall be performed in
compliance with Applicable Laws. Within thirty (30) days after completion of any
Alterations, Tenant shall provide Landlord with complete “as-built” drawing
print sets and electronic CADD files on disc (excluding Cosmetic Alterations,
and otherwise only to the extent “as-built” drawings and CADD modifications are
typically provided for such Alterations or in the event such “as-built” drawings
and CADD modifications are actually obtained by Tenant) or files in such other
current format in common use as Landlord reasonably approves or requires showing
any changes in the Premises.
     17.5. Before commencing any Alterations, Tenant shall give Landlord at
least fourteen (14) days’ prior written notice of the proposed commencement of
such work and shall, if required by Landlord, secure, at Tenant’s own cost and
expense, a completion and lien indemnity bond satisfactory to Landlord for said
work; provided that no bond will be required unless such Alterations cost in
excess of Two Hundred Fifty Thousand Dollars ($250,000).
     17.6. Other than the Tenant Generator, all Alterations, attached equipment,
attached decorations, fixtures, trade fixtures, additions and improvements which
are paid for by Landlord, subject to Section 17.8, attached to or built into the
Premises, made by either of the Parties, including all floor and wall coverings,
built-in cabinet work and paneling, sinks and related plumbing fixtures,
laboratory benches, exterior venting fume hoods and walk-in freezers and walk-in
refrigerators, ductwork, conduits, electrical panels and circuits, shall
(unless, prior to such construction or installation, Landlord elects otherwise)
become the property of Landlord upon the expiration or earlier termination of
the Term, and shall remain upon and be surrendered with the Premises as a part
thereof. Notwithstanding the foregoing, any equipment, trade fixtures,
appliances, laboratory benches and equipment, fume hoods, refrigerators or
freezers or

34

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

 

similar items which Tenant pays for, shall be and remain Tenant’s property
regardless of the method of attachment to the Premises. The Premises shall at
all times remain the property of Landlord and shall be surrendered to Landlord
upon the expiration or earlier termination of this Lease. All Tenant
Improvements or Alterations attached to the Premises (other than Tenant’s trade
fixtures and equipment so long as such trade fixtures and equipment were paid
for by Tenant in which case such trade fixtures and equipment may be removed by
Tenant so long as Tenant repairs any damage caused by such removal) shall be the
property of Landlord.
     17.7. Tenant shall repair any damage to the Premises caused by Tenant’s
removal of any property and Signage from the Premises. During any such
restoration period, Tenant shall pay Rent to Landlord as provided herein as if
said space were otherwise occupied by Tenant. The provisions of this Section
shall survive the expiration or earlier termination of this Lease.
     17.8. Except as to those items listed on Exhibit H attached hereto (which
Exhibit may be updated by Tenant from and after the Term Commencement Date, but
in each case only upon receipt of Landlord’s prior written approval of such
updates in accordance with the procedures set forth hereafter), all initial
Tenant Improvements, all business and trade fixtures paid for by Landlord,
built-in machinery and equipment paid for by Landlord, built-in furniture and
cabinets, future Alterations which are affixed to the Premises (excluding any
later installed trade fixtures and equipment paid for by Tenant, which will
remain Tenant’s property whether or not included in Exhibit H), installed in and
upon the Premises shall be and remain the property of Landlord and shall not be
moved by Tenant at any time during the Term. Following the Term Commencement
Date, and prior to the commencement of any work relating to any Alterations
occurring thereafter, Tenant shall have the ability to update Exhibit H by
submitting such updated Exhibit H to Landlord at least twenty (20) days prior to
the installation at the Premises of any items requested to be included on
Exhibit H by Tenant. Within twenty (20) days of Landlord’s receipt of Tenant’s
updated Exhibit H, Landlord shall notify Tenant whether or not Landlord approved
the updated Exhibit H. If Landlord fails to respond within such twenty (20) day
period, Tenant shall provide a written reminder notice to Landlord. Landlord’s
failure to respond to such reminder notice within ten (10) days after delivery
of such reminder notice shall be deemed approval by Landlord of the updated
Exhibit H as submitted to Landlord. Any property or equipment which is not
attached or built in to the Premises will be and remain Tenant’s personal
property removable at any time by Tenant. If Tenant shall fail to remove any of
its effects from the Premises prior to termination of this Lease, then Landlord
may, at its option, remove the same in any manner that Landlord shall choose and
store said effects without liability to Tenant for loss thereof or damage
thereto, and Tenant shall pay Landlord, upon demand, any costs and expenses
incurred due to such removal and storage or Landlord may, at its sole option and
without notice to Tenant, sell such property or any portion thereof at private
sale and without legal process for such price as Landlord may obtain and apply
the proceeds of such sale against any (a) amounts due by Tenant to Landlord
under this Lease and (b) any expenses incident to the removal, storage and sale
of said personal property, provided that any remaining amounts shall be promptly
delivered to Tenant.
     17.9. Notwithstanding any other provision of this Article to the contrary,
in no event shall Tenant remove any improvement from the Premises as to which
Landlord contributed

35

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

 

payment, including the Tenant Improvements, Landlord’s Work and Expansion Space
Tenant Improvements made pursuant to the Work Letter without Landlord’s prior
written consent, which consent Landlord may withhold in its sole and absolute
discretion.
     17.10. Tenant shall pay to Landlord an amount equal to one percent (1%) of
the cost to Tenant of all Alterations installed by Tenant or its contractors or
agents to cover Landlord’s overhead and expenses for plan review, coordination,
scheduling and supervision thereof. For purposes of payment of such sum, Tenant
shall submit to Landlord copies of all bills, invoices and statements covering
the costs of such charges, accompanied by payment to Landlord of the fee set
forth in this Section. Tenant shall reimburse Landlord for any extra expenses
incurred by Landlord by reason of faulty work done by Tenant or its contractors,
or by reason of inadequate clean-up.
     17.11. Within sixty (60) days after final completion of any Alterations
performed by Tenant in the Premises or Common Areas, Tenant shall submit to
Landlord documentation showing the amounts expended by Tenant with respect to
such Alterations performed by Tenant, together with supporting documentation
reasonably acceptable to Landlord, and appropriate lien waivers and releases
indicating that the contractor and subcontractors engaged in such work have been
fully paid (or evidence that appropriate bonding has been obtained for the cost
of any work that is subject to a payment dispute).
     17.12. Tenant shall take, and shall cause its contractors to take,
commercially reasonable steps to protect the Premises during the performance of
any Alterations, including covering or temporarily removing any window coverings
so as to guard against dust, debris or damage.
     17.13. Tenant shall require its contractors and subcontractors performing
work on the Premises to name Landlord and its affiliates and Lenders as
additional insureds on their respective insurance policies.
     17.14. As used in this Lease, “Alterations” do not include the Landlord’s
Work and Tenant Improvements and Expansion Space Tenant Improvements to be
constructed pursuant to the attached Work Letter.
18. Repairs and Maintenance.
     18.1. Landlord shall repair and maintain the structural and exterior
portions of the Building and all Common Areas of the Building and the Project,
including, without limitation, the roof membrane and covering materials;
foundations; floor/ceiling slabs, columns, beams, shafts, exterior walls;
plumbing; fire sprinkler systems (if any); heating, ventilating, air
conditioning systems; elevators; and electrical systems installed or furnished
by Landlord. Subject to the provisions of this Lease and the limitations of
Section 9.1(b), if any, any costs incurred by Landlord pursuant to this
Section 18.1 shall constitute Operating Expenses, unless such costs are incurred
due in whole or in part to any act, neglect, fault or omissions of Tenant, or
its agents, contractors, employees or invitees, in which case Tenant shall pay
to Landlord the cost of such repairs and maintenance.

36

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

 

     18.2. Except for services of Landlord, if any, required by Section 18.1,
Tenant shall at Tenant’s sole cost and expense maintain and keep the Premises
and every part thereof in good condition and repair, damage thereto from
ordinary wear and tear excepted. Tenant shall, upon the expiration or sooner
termination of the Term, surrender the Premises to Landlord in as good a
condition as when received, ordinary wear and tear excepted. Tenant shall, upon
the expiration or sooner termination of the Term, at Landlord’s request, remove
all telephone and data systems, wiring and equipment from the Premises, but only
to the extent any of the foregoing were installed by Tenant (i.e. Tenant shall
not be required to remove any telephone and data systems, wiring and equipment
existing in the Premises as of the Execution Date) and repair any damage to the
Premises caused thereby. Landlord shall have no obligation to alter, remodel,
improve, repair, decorate or paint the Premises or any part thereof, other than
(a) pursuant to the terms and provisions of the Work Letter and (b) performing
the Landlord’s Work.
     18.3. Landlord shall not be liable for any failure to make any repairs or
to perform any maintenance that is an obligation of Landlord unless such failure
shall persist for an unreasonable time after Tenant provides Landlord with
written notice of the need of such repairs or maintenance. Tenant waives its
rights under Applicable Laws now or hereafter in effect to make repairs at
Landlord’s expense.
     18.4. If any excavation shall be made upon land adjacent to or under the
Building, or shall be authorized to be made, Tenant shall afford to the person
causing or authorized to cause such excavation, license to enter the Premises
for the purpose of performing such work as said person shall deem necessary or
desirable to preserve and protect the Building from injury or damage and to
support the same by proper foundations, without any claim for damages or
liability against Landlord and without reducing or otherwise affecting Tenant’s
obligations under this Lease; provided that Landlord shall endeavor to cause any
such person to perform any such work in a commercially reasonable manner which
minimizes interference with Tenant’s use and enjoyment of the Premises.
     18.5. This Article relates to repairs and maintenance arising in the
ordinary course of operation of the Building and the Project. In the event of a
casualty described in Article 24, Article 24 shall apply in lieu of this
Article. In the event of eminent domain, Article 25 shall apply in lieu of this
Article.
     18.6. Costs incurred by Landlord pursuant to this Article shall constitute
Operating Expenses, unless such costs are incurred due in whole or in part to
any act, neglect, fault or omissions of Tenant or its employees, agents,
contractors or invitees, in which case Tenant shall pay to Landlord the cost of
such repairs and maintenance.
19. Liens.
     19.1. Subject to the immediately succeeding sentence, Tenant shall keep the
Premises, the Building and the Project free from any liens arising out of work
performed, materials furnished or obligations incurred by Tenant. Tenant further
covenants and agrees that any mechanic’s lien filed against the Premises, the
Building or the Project for work claimed to have

37

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

 

been done for, or materials claimed to have been furnished to, shall be
discharged or bonded by Tenant within ten (10) business days after the filing
thereof, at Tenant’s sole cost and expense.
     19.2. Should Tenant fail to discharge or bond against any lien of the
nature described in Section 19.1, Landlord may, at Landlord’s election, pay such
claim or post a bond or otherwise provide security to eliminate the lien as a
claim against title, and Tenant shall immediately reimburse Landlord for the
costs thereof as Additional Rent. Tenant shall indemnify, save, defend (at
Landlord’s option and with counsel reasonably acceptable to Landlord) and hold
the Landlord Indemnitees harmless from and against any Claims arising from any
such liens, including any administrative, court or other legal proceedings
related to such liens.
     19.3. In the event that Tenant leases or finances the acquisition of
office, laboratory or manufacturing equipment, furnishings or other personal
property of a removable nature utilized by Tenant in the operation of Tenant’s
business, Tenant warrants that any Uniform Commercial Code financing statement
shall, upon its face or by exhibit thereto, indicate that such financing
statement is applicable only to removable personal property of Tenant located
within the Premises. In no event shall the address of the Premises, the Building
or the Project be furnished on a financing statement without qualifying language
as to applicability of the lien only to removable personal property located in
an identified suite leased by Tenant. Should any holder of a financing statement
record or place of record a financing statement that appears to constitute a
lien against any interest of Landlord or against equipment that may be located
other than within an identified suite leased by Tenant, Tenant shall, within
thirty (30) days after filing such financing statement, cause (a) a copy of the
Lender security agreement or other documents to which the financing statement
pertains to be furnished to Landlord to facilitate Landlord’s ability to
demonstrate that the lien of such financing statement is not applicable to
Landlord’s interest and (b) Tenant’s Lender to amend such financing statement
and any other documents of record to clarify that any liens imposed thereby are
not applicable to any interest of Landlord in the Premises, the Building or the
Project. Landlord shall endeavor to cooperate with Tenant in the event that
Tenant leases or finances the acquisition of office equipment, furnishings or
other personal property of a removable nature utilized by Tenant in the
operation of Tenant’s business, and shall execute a Landlord’s waiver and
consent in connection with such lease or equipment financing; provided such
waiver and consent is in a form approved by Landlord in its reasonable
discretion.
20. Estoppel Certificate. Tenant shall, within ten (10) business days of receipt
of written notice from Landlord, execute, acknowledge and deliver a statement in
writing substantially in the form attached to this Lease as Exhibit I, or on any
other form reasonably requested by a proposed Lender or purchaser,
(a) certifying that this Lease is unmodified and in full force and effect (or,
if modified, stating the nature of such modification and certifying that this
Lease as so modified is in full force and effect) and the dates to which rental
and other charges are paid in advance, if any, (b) acknowledging that there are
not, to Tenant’s knowledge, any uncured defaults on the part of Landlord
hereunder, or specifying such defaults if any are claimed, and (c) setting forth
such further factual information of which Tenant has or should have actual
knowledge with respect to this Lease or the Premises as may be reasonably
requested thereon. Any such statement may be relied upon by any prospective
purchaser or encumbrancer of all or

38

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

 

any portion of the real property of which the Premises are a part. Tenant’s
failure to deliver such statement within such the prescribed time shall, at
Landlord’s option, constitute a Default (as defined below) under this Lease,
and, in any event, shall be binding upon Tenant that the Lease is in full force
and effect and without modification except as may be represented by Landlord in
any certificate prepared by Landlord and delivered to Tenant for execution.
21. Hazardous Materials.
     21.1. Tenant shall not cause or permit any Hazardous Materials (as defined
below) to be brought upon, kept or used in or about the Premises, the Building
or the Project in violation of Applicable Laws by Tenant or its employees,
agents, contractors or invitees. If Tenant breaches such obligation, or if the
presence of Hazardous Materials as a result of such a breach results in
contamination of the Project, any portion thereof, or any adjacent property, or
if contamination of the Premises by Hazardous Materials otherwise occurs during
the Term or any extension or renewal hereof or holding over hereunder (other
than if such contamination results from (a) migration of Hazardous Materials
from outside the Premises not caused by Tenant or its employees, agents,
contractors or invitees or (b) to the extent such contamination is solely caused
by Landlord’s gross negligence or willful misconduct), then Tenant shall
indemnify, save, defend (at Landlord’s option and with counsel reasonably
acceptable to Landlord) and hold the Landlord Indemnitees harmless from and
against any and all Claims, including (a) diminution in value of the Project or
any portion thereof, (b) damages for the loss or restriction on use of rentable
or usable space or of any amenity of the Project, (c) damages arising from any
adverse impact on marketing of space in the Project or any portion thereof and
(d) sums paid in settlement of Claims that arise during or after the Term as a
result of such breach or contamination. This indemnification by Tenant includes
costs incurred in connection with any investigation of site conditions or any
clean-up, remedial, removal or restoration work required by any Governmental
Authority because of Hazardous Materials present in the air, soil or groundwater
above, on or under or about the Project. Without limiting the foregoing, if the
presence of any Hazardous Materials in, on, under or about the Project, any
portion thereof or any adjacent property caused or permitted by Tenant results
in any contamination of the Project, any portion thereof or any adjacent
property, then Tenant shall promptly take all actions at its sole cost and
expense as are necessary to return the Project, any portion thereof or any
adjacent property to its respective condition existing prior to the time of such
contamination or in compliance with Applicable Laws if the foregoing is not
possible; provided that Landlord’s written approval of such action shall first
be obtained, which approval Landlord shall not unreasonably withhold; and
provided, further, that it shall be reasonable for Landlord to withhold its
consent if such actions could have a material adverse long-term or short-term
effect on the Project, any portion thereof or any adjacent property. In the
event Landlord receives notice of a Claim for which Tenant is obligated to
indemnify Landlord pursuant to this Section 21.1, then Landlord shall
(i) promptly provide notice to Tenant of such Claim and (ii) not enter into any
settlement agreement without the express written consent of Tenant, which
consent shall not be unreasonably withheld, conditioned or delayed.
Notwithstanding anything in this Article 21 to the contrary, Tenant’s
indemnification obligation under this Section 21.1 shall not extend to
contamination of the soils or groundwater of the Project by Hazardous Materials
that migrate onto the Project from adjacent properties, or which are caused by
defects or breaks in the

39

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

 

underground sewer piping of the Project, except to the extent that such
contamination is attributable to the use or disposal of Hazardous Materials by
Tenant or its agents, employees, contractors or invitees.
     21.2. Landlord acknowledges that it is not the intent of this Article to
prohibit Tenant from operating its business for the Permitted Use. Tenant may
operate its business according to the custom of Tenant’s industry so long as the
use or presence of Hazardous Materials is strictly and properly monitored in
accordance with Applicable Laws. Landlord will reasonably cooperate with Tenant,
at Tenant’s sole cost and expense, in Tenant’s efforts to obtain or close any
Hazardous Materials licenses required for the operation of Tenant’s business,
including a radioactive license. As a material inducement to Landlord to allow
Tenant to use Hazardous Materials in connection with its business, Tenant agrees
to deliver to Landlord prior to the Term Commencement Date a list identifying
each type of Hazardous Material to be present at the Project and setting forth
any and all governmental approvals or permits required in connection with the
presence of such Hazardous Material at the Project (the “Hazardous Materials
List”). Tenant shall deliver to Landlord an updated Hazardous Materials List on
or prior to each annual anniversary of the Term Commencement Date and shall also
deliver an updated Hazardous Materials List before any new Hazardous Materials
are brought to the Project. Tenant shall deliver to Landlord true and correct
copies of the following documents (hereinafter referred to as the “Documents”)
relating to the handling, storage, disposal and emission of Hazardous Materials
prior to the Term Commencement Date or, if unavailable at that time,
concurrently with the receipt from or submission to any Governmental Authority:
permits; approvals; reports and correspondence; storage and management plans;
notices of violations of Applicable Laws; plans relating to the installation of
any storage tanks to be installed in, on, under or about the Project (provided
that installation of storage tanks shall only be permitted after Landlord has
given Tenant its written consent to do so, which consent Landlord may withhold
in its sole and absolute discretion), except as follows: (a) Tenant may install
one (1) above-ground storage tank (not to exceed two thousand (2,000) gallons)
associated with the Tenant Generator, subject to Landlord’s reasonable approval
and approval by the City of Newark; and (b) Tenant may install one above-ground
storage tank (not to exceed sixty (60) gallons) as part of the Hazardous
Materials Storage Shed improvements permitted under Section 16.1 above, subject
to Landlord’s reasonable approval and approval by the City of Newark); and all
closure plans or any other documents required by any and all Governmental
Authorities for any storage tanks installed in, on, under or about the Project
for the closure of any such storage tanks. Tenant shall not be required,
however, to provide Landlord with any portion of the Documents containing
information of a proprietary nature, which Documents, in and of themselves, do
not contain a reference to any Hazardous Materials or activities related to
Hazardous Materials.
     21.3. Notwithstanding the provisions of Sections 21.1 21.2 or 21.9, if
Tenant has asked Landlord to consent to a proposed transfer, assignment or
sublease of this Lease, it shall not be unreasonable for Landlord to withhold
its consent to such proposed transfer, assignment or subletting if the proposed
transferee, sublessee or assignee (a) has been required by any prior landlord,
Lender or Governmental Authority to take material remedial action in connection
with Hazardous Materials contaminating a property if the contamination resulted
from such party’s action or omission or use of the property in question, or
(b) is subject to a material enforcement

40

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

 

order issued by any Governmental Authority in connection with the use, disposal
or storage of Hazardous Materials. Tenant represents and warrants that it
(a) has not been required by any prior landlord, Lender or Governmental
Authority to take material remedial action in connection with Hazardous
Materials contaminating a property if the contamination resulted from such
party’s action or omission or use of the property in question, or (b) is not
subject to a material enforcement order issued by any Governmental Authority in
connection with the use, disposal or storage of Hazardous Materials.
     21.4. At any time, and from time to time, prior to the expiration of the
Term, Landlord shall have the right to conduct appropriate tests of the Project
or any portion thereof to demonstrate that Hazardous Materials are present or
that contamination has occurred due to Tenant or Tenant’s employees, agents,
contractors or invitees. Tenant shall pay all reasonable costs of such tests if
such tests reveal that Hazardous Materials exist at the Project in violation of
Tenant’s obligations under this Lease.
     21.5. If underground or other storage tanks storing Hazardous Materials
installed or utilized by Tenant are located on the Premises or are hereafter
placed on the Premises by Tenant or by any other party if such storage tanks are
utilized by Tenant, then Tenant shall monitor the storage tanks, maintain
appropriate records, implement reporting procedures, properly close any
underground storage tanks, and take or cause to be taken all other steps
necessary or required under the Applicable Laws. Tenant shall have no
responsibility or liability for underground or other storage tanks installed by
anyone other than Tenant unless Tenant utilizes such underground or other
storage tanks, in which case Tenant’s responsibilities for such tanks are as set
forth in this Section 21.5.
     21.6. Tenant shall promptly report to Landlord any actual or suspected
presence of mold or water intrusion at the Premises.
     21.7. Tenant’s obligations under this Article shall survive the expiration
or earlier termination of the Lease. During any period of time needed by Tenant
or Landlord after the termination of this Lease to complete the removal from the
Premises of any such Hazardous Materials, Tenant shall be deemed a holdover
tenant and subject to the provisions of Article 27 below.
     21.8. As used herein, the term “Hazardous Material” means any hazardous or
toxic substance, material or waste that is or becomes regulated by any
Governmental Authority.
     21.9. Notwithstanding anything to the contrary in this Lease, Landlord
shall have sole control over the equitable allocation of fire control areas (as
defined in the Uniform Building Code as adopted by the city or municipality(ies)
in which the Project is located (the “UBC”)) within the Project for the storage
of Hazardous Materials. Notwithstanding anything to the contrary in this Lease,
the quantity of Hazardous Materials allowed by this Section 21.9 is specific to
Tenant and shall not run with the Lease in the event of a Transfer (as defined
in Article 29). In the event of a Transfer, if the use of Hazardous Materials by
such new tenant (“New Tenant”) is such that New Tenant utilizes fire control
areas in the Project in excess of New Tenant’s Pro Rata Share of the Building or
the Project, as applicable, then New Tenant

41

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

 

shall, at its sole cost and expense and upon Landlord’s written request,
establish and maintain a separate area of the Premises classified by the UBC as
an “H” occupancy area for the use and storage of Hazardous Materials, or take
such other action as is necessary to ensure that its share of the fire control
areas of the Building and the Project is not greater than New Tenant’s Pro Rata
Share of the Building or the Project, as applicable.
     21.10. Landlord shall indemnify Tenant against any and all Claims resulting
from the presence of Hazardous Materials in, on or under the Project (a) in
violation of Applicable Laws as of the Execution Date, unless placed at the
Project by Tenant or its affiliates, employees, agents or contractors or
(b) caused by the gross negligence or willful misconduct of Landlord or its
agents, employees or contractors.
     21.11. Landlord represents and warrants that, as of the Execution Date, to
its knowledge, no Hazardous Materials exist in the Project, Premises or the
Common Area in violation of Applicable Laws other than as may be disclosed in
that certain Phase I Environmental Site Assessment dated as of July 11, 2006,
prepared by URS Corporation, which shall constitute the baseline environmental
condition of the Premises (the “Baseline Phase 1”) and, notwithstanding anything
to the contrary in this Lease, Tenant shall have no obligation to perform any
remediation recommendations that are inconsistent with the Baseline Phase 1
environmental condition of the Premises.
22. Odors and Exhaust. Tenant acknowledges that Landlord would not enter into
this Lease with Tenant unless Tenant gave Landlord reasonable assurances that
other occupants of the Building or the Project (including persons legally
present in any outdoor areas of the Project) will not be subjected to an Odor
Nuisance (as defined below), and that the Building and the Project will not be
damaged by any exhaust, in each case from Tenant’s operations in the Premises.
However, Landlord and Tenant acknowledge that the nature of Tenant’s business
and the Permitted Use will result in certain odors and fumes, which will be
abated in accordance with this Article 22. Landlord and Tenant therefore agree
as follows:
     22.1. Tenant shall not cause or conduct any activities that would cause an
Odor Nuisance. For purposes of this Article 22, an “Odor Nuisance” means any
release of any offensive or noxious odors or fumes from the Premises, which
release either creates a nuisance or materially and adversely impacts any
portion of the Building, the Project or the use of any portion of the Building
or Project by other tenants.
     22.2. Tenant shall design and construct ventilation equipment as part of
the Tenant Improvements to be constructed in the Premises. The parties
anticipate that the above referenced ventilation equipment is adequate,
suitable, and appropriate to vent the Premises in a manner that will prevent an
Odor Nuisance and Tenant shall vent the Premises through such system. If an Odor
Nuisance exists at any time, Tenant shall, in compliance with Applicable Laws,
make any changes to the ventilation system which Tenant determines are necessary
to abate the Odor Nuisance. The placement and configuration of all ventilation
exhaust pipes, louvers and other equipment to be installed by Tenant shall be
subject to Landlord’s approval, which approval Landlord may not unreasonably
withhold, condition or delay.

42

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

 

     22.3. Tenant acknowledges Landlord’s legitimate desire to maintain the
Project (indoor and outdoor areas) in a manner free of any Odor Nuisance and
Landlord may require Tenant to abate any such Odor Nuisance in a manner that
goes beyond the requirements of Applicable Laws in accordance with Section 22.6
below.
     22.4. In the event that at any time during the Term, Landlord receives
complaints from other tenants or occupants of the Building or Project of an Odor
Nuisance, Landlord and Tenant will work together to reasonably resolve any odor
issues. In such event, Tenant shall, at Tenant’s sole cost and expense, use
commercially reasonable efforts to install odor eliminators and other devices
(such as filters, air cleaners, scrubbers and whatever similar equipment may be
available at reasonable cost) to remove, eliminate and abate any Odor Nuisance.
Any work Tenant performs under this Section shall constitute Alterations.
     22.5. Tenant’s responsibility to remove, eliminate and abate any Odor
Nuisance shall continue throughout the Term. Landlord’s approval of the Tenant
Improvements shall not preclude Landlord from requiring additional measures to
eliminate any Odor Nuisance.
     22.6. If after Tenant has implemented measures pursuant to Section 22.4 and
if such measures have failed to abate the Odor Nuisance, then Landlord shall
notify Tenant what additional measures Landlord requests Tenant to undertake to
abate the Odor Nuisance. In the event Tenant fails to take such measures or
otherwise abate the Odor Nuisance within ten (10) business days after Landlord
has notified Tenant of the requested measures (the “Odor Cure Period”), then,
Landlord may, without limiting Landlord’s other rights and remedies and upon
twenty-four (24) hours notice to Tenant, purchase and install such odor control
equipment within the Premises or the Building Common Areas as contained in
Landlord’s prior notice; provided that such corrective work will be completed
in, on or to the ventilation system. Landlord will perform any such work in a
commercially reasonable manner and so as to minimize interference with Tenant’s
business operations. The cost of any corrective work will be split equally
between Landlord and Tenant up to a maximum of $60,000.00 in the aggregate, and
any costs in excess of that cap will be Landlord’s sole responsibility.
Notwithstanding the foregoing, if Tenant’s installation of requested odor
control equipment cannot be completed within the Odor Cure Period as a result of
Tenant having to order lead time items such as filters, air cleaners, scrubbers
and similar equipment, then Landlord shall not purchase and install odor control
equipment in accordance with this Section so long as Tenant has ordered the lead
time items within the Odor Cure Period and thereafter diligently prosecutes the
installation of such equipment to completion.
23. Insurance; Waiver of Subrogation.
     23.1. Landlord shall maintain insurance for the Building and the Project in
amounts equal to full replacement cost (exclusive of the costs of excavation,
foundations and footings, and without reference to depreciation taken by
Landlord upon its books or tax returns) or such lesser coverage as Landlord may
elect, provided that such coverage shall not be less than ninety percent (90%)
of such full replacement cost or the amount of such insurance Landlord’s Lender,
if any, requires Landlord to maintain, providing protection against any peril
generally included within the classification “Fire and Extended Coverage,”
together with insurance against sprinkler

43

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

 

damage (if applicable), vandalism and malicious mischief. Landlord, subject to
availability thereof, shall further insure, if Landlord deems it appropriate,
coverage against flood, environmental hazard, earthquake, loss or failure of
building equipment, rental loss during the period of repairs or rebuilding,
workmen’s compensation insurance and fidelity bonds for employees employed to
perform services. Notwithstanding the foregoing, Landlord may, but shall not be
deemed required to, provide insurance for any improvements installed by Tenant
or that are in addition to the standard improvements customarily furnished by
Landlord, without regard to whether or not such are made a part of or are
affixed to the Building.
     23.2. In addition, Landlord shall carry public liability insurance with a
single limit of not less than Five Million Dollars ($5,000,000) for death or
bodily injury, or property damage with respect to the Project.
     23.3. Tenant shall, at its own cost and expense, procure and maintain in
effect, beginning on the Term Commencement Date or the date of occupancy,
whichever occurs first, and continuing throughout the Term (and occupancy by
Tenant, if any, after termination of this Lease) comprehensive public liability
insurance with limits of not less than Five Million Dollars ($5,000,000) per
occurrence for death or bodily injury and property damage with respect to the
Premises (including $100,000 fire legal liability (each loss)).
     23.4. The insurance required to be purchased and maintained by Tenant
pursuant to this Lease shall name Landlord, BioMed Realty, L.P., BioMed Realty
Trust, Inc., and their respective officers, directors, employees, agents,
general partners, members, subsidiaries, affiliates and Lenders (“Landlord
Parties”) as additional insureds. Said insurance shall be with companies
authorized to do business in the state in which the Project is located and
having a rating of not less than policyholder rating of A and financial category
rating of at least Class XII in “Best’s Insurance Guide.” Tenant shall obtain
for Landlord from the insurance companies or cause the insurance companies to
furnish certificates of coverage to Landlord. No such policy shall be cancelable
or subject to reduction of coverage or other modification or cancellation except
after thirty (30) days’ prior written notice to Landlord from the insurer
(except in the event of non-payment of premium, in which case ten (10) days
written notice shall be given). All such policies shall be written as primary
policies, not contributing with and not in excess of the coverage that Landlord
may carry. Tenant’s policy may be a “blanket policy” that specifically provides
that the amount of insurance shall not be prejudiced by other losses covered by
the policy. Tenant shall, at least twenty (20) days prior to the expiration of
such policies, furnish Landlord with renewals or binders. Tenant agrees that if
Tenant does not take out and maintain such insurance, Landlord may (but shall
not be required to) procure said insurance on Tenant’s behalf and at its cost to
be paid by Tenant as Additional Rent.
     23.5. Except to the extent any leasehold improvements are insured by
Landlord (in which case the proceeds of such insurance shall be utilized to
restore such improvements in accordance with Section 24.7 below), Tenant assumes
the risk of damage to any fixtures, goods, inventory, merchandise, equipment and
leasehold improvements, and Landlord shall not be liable for injury to Tenant’s
business or any loss of income therefrom, relative to such damage, all as more
particularly set forth within this Lease. Tenant shall, at Tenant’s sole cost
and

44

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

 

expense, carry such insurance as Tenant desires for Tenant’s protection with
respect to personal property of Tenant or business interruption.
     23.6. In each instance where insurance is to name Landlord Parties as
additional insureds, Tenant shall, upon Landlord’s written request, also
designate and furnish certificates evidencing such Landlord Parties as
additional insureds to (a) any Lender of Landlord holding a security interest in
the Building, the Property or the Project, (b) the landlord under any lease
whereunder Landlord is a tenant of the Property if the interest of Landlord is
or shall become that of a tenant under a ground lease rather than that of a fee
owner and (c) any management company retained by Landlord to manage the Project.
     23.7. Landlord and Tenant each hereby waive any and all rights of recovery
against the other or against the officers, directors, employees, agents, general
partners, members, subsidiaries, affiliates and Lenders of the other on account
of loss or damage occasioned by such waiving party or its property or the
property of others under such waiving party’s control, in each case to the
extent that such loss or damage is insured against under any fire and extended
coverage insurance policy that either Landlord or Tenant may have in force at
the time of such loss or damage (or would have been covered had the insuring
party carried the insurance required under the provisions of this Lease). Such
waivers shall continue so long as they are available at a commercially
reasonable rate. Any termination of such a waiver shall be by written notice to
the other party, containing a description of the circumstances hereinafter set
forth in this Section. Landlord and Tenant, upon obtaining the policies of
insurance required or permitted under this Lease, shall give notice to the
insurance carrier or carriers that the foregoing mutual waiver of subrogation is
contained in this Lease. If such policies shall not be obtainable with such
waiver or shall be so obtainable only at a material premium over that chargeable
without such waiver, then the party seeking such policy shall notify the other
of such conditions, and the party so notified shall have ten (10) business days
thereafter to either (a) procure such insurance with companies reasonably
satisfactory to the other party or (b) agree to pay such additional premium (in
Tenant’s case, in the proportion that the area of the Premises bears to the
insured area). If the parties do not accomplish either (a) or (b), then this
Section shall have no effect during such time as such policies shall not be
obtainable or the party in whose favor a waiver of subrogation is desired
refuses to pay the additional premium. If such policies shall at any time be
unobtainable, but shall be subsequently obtainable, then neither party shall be
subsequently liable for a failure to obtain such insurance until a reasonable
time after notification thereof by the other party. If the release of either
Landlord or Tenant, as set forth in the first sentence of this Section, shall
contravene Applicable Laws, then the liability of the party in question shall be
deemed not released but shall be secondary to the other party’s insurer.
     23.8. Landlord may require insurance policy limits required under this
Lease to be raised to conform with requirements of Landlord’s Lender or to bring
coverage limits to levels then being required of new tenants within the Project.
     23.9. Any costs incurred by Landlord pursuant to this Article shall
constitute a portion of Operating Expenses.

45

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

 

24. Damage or Destruction.
     24.1. In the event of a partial destruction of (a) the Premises or
(b) Common Areas of the Building or the Project ((a) and (b) together, the
“Affected Areas”) by fire or other perils covered by extended coverage insurance
not exceeding twenty-five percent (25%) of the full insurable value thereof, and
provided that (w) repairs of such damage are reasonably estimated to be
completed prior to the last twenty-four (24) months of the current Lease Term,
(x) the damage thereto is such that the Affected Areas may be repaired,
reconstructed or restored within a period of twelve (12) months from the date of
the happening of such casualty (in accordance with a Damage Repair Estimate, as
defined below), (y) Landlord shall receive insurance proceeds sufficient to
cover the cost of such repairs (except for any deductible amount provided by
Landlord’s policy, which deductible amount, if paid by Landlord, shall
constitute an Operating Expense, subject to the caps set forth in Article 9)
(Landlord’s decision to self-insure or failure to otherwise maintain the
insurance required under Section 23.1 of this Lease shall cause this clause
(y) to be deemed satisfied regardless of the amount of insurance proceeds
received by Landlord) and (z) such casualty was not intentionally caused by
Tenant or its employees, agents or contractors (a “Required Restoration Event”),
then Landlord shall commence and proceed diligently with the work of repair,
reconstruction and restoration of the Affected Areas and this Lease shall
continue in full force and effect.
     24.2. In the event of any damage to or destruction of the Building or the
Project other than as described in Section 24.1, Landlord may elect to repair,
reconstruct and restore the Building or the Project, as applicable, in which
case this Lease shall continue in full force and effect. If Landlord elects not
to repair the Building or the Project, as applicable, then this Lease shall
terminate as of the date of such damage or destruction. In the event of any
damage or destruction (regardless of whether such damage falls under
Section 24.1 or this Section 24.2), if (i) in Landlord’s determination as set
forth in the Damage Repair Estimate (defined below), the Affected Areas cannot
be restored within twelve (12) months after the date of such casualty,
(ii) subject to Section 24.6, the Affected Areas are not actually repaired
within twelve (12) months after the date of such casualty, or (iii) the damage
and destruction occurs within the last twelve (12) months of the current Lease
Term, then Tenant shall have the right to terminate this Lease, effective as of
the date of such damage or destruction, by delivering to Landlord its written
notice of termination no later than fifteen (15) days after Landlord delivers
Landlord’s Damage Repair Estimate (or, subject to Section 24.6, in the event the
Affected Areas are not restored within twelve (12) months after the date of such
casualty, at any time following such twelve (12) month period).
     24.3. As soon as reasonably practicable, but in any event within sixty
(60) days following the date of damage or destruction, Landlord shall notify
Tenant of Landlord’s good faith estimated assessment of the period of time in
which the repairs will be completed (“Damage Repair Estimate”), which assessment
shall be based upon the opinion of a contractor reasonably selected by Landlord
and experienced in comparable repairs of similar buildings. Additionally,
Landlord shall give written notice to Tenant within sixty (60) days following
the date of damage or destruction of its election not to repair, reconstruct or
restore the Building or the Project, as applicable.

46

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

 

     24.4. Upon any termination of this Lease under any of the provisions of
this Article, the parties shall be released thereby without further obligation
to the other from the date possession of the Premises is surrendered to
Landlord, except with regard to (a) items occurring prior to the damage or
destruction and (b) provisions of this Lease that, by their express terms,
survive the expiration or earlier termination hereof.
     24.5. In the event of repair, reconstruction and restoration as provided in
this Article, all Rent to be paid by Tenant under this Lease shall be abated
proportionately based on the extent to which Tenant’s use of the Premises is
impaired during the period of such repair, reconstruction or restoration, unless
Landlord provides Tenant with other space during the period of repair that, in
Tenant’s reasonable opinion, is suitable for the temporary conduct of Tenant’s
business; provided, however, that the amount of such abatement shall be reduced
by the proceeds of business interruption or loss of rental income insurance
actually received by Tenant with respect to the Premises.
     24.6. Notwithstanding anything to the contrary contained in this Article,
should Landlord be delayed or prevented from completing the repair,
reconstruction or restoration of the damage or destruction to the Premises after
the occurrence of such damage or destruction by Force Majeure, then the time for
Landlord to commence or complete repairs shall be extended on a day-for-day
basis; provided, however, that, at Landlord’s election, Landlord shall be
relieved of its obligation to make such repair, reconstruction or restoration
(in which case Tenant will be permitted to terminate this Lease by providing
written notice to Landlord). In no event shall any Force Majeure event pursuant
to this Section 24.6 exceed eighteen (18) months.
     24.7. If Landlord is obligated to or elects to repair, reconstruct or
restore as herein provided, then Landlord shall be obligated to make such
repair, reconstruction or restoration only with regard to (a) those portions of
the Premises that were originally provided at Landlord’s expense and (b) the
Common Area portion of the Affected Areas. The repair, reconstruction or
restoration of improvements not originally provided by Landlord or at Landlord’s
expense shall be the obligation of Tenant except as provided in Section 23.5
above, and in the event Landlord maintains insurance on any leasehold
improvements, Landlord shall fund such insurance proceeds toward the cost of
repair, restoration or reinstatement of such improvements. In the event Tenant
has elected to upgrade certain improvements, Landlord shall, upon the need for
replacement due to an insured loss, provide only the building standard, unless
Tenant again elects to upgrade such improvements and pay any incremental costs
related thereto, except to the extent that excess insurance proceeds, if
received, are adequate to provide such upgrades, in addition to providing for
basic repair, reconstruction and restoration of the Premises, the Building and
the Project.
     24.8. Notwithstanding anything to the contrary contained in this Article,
Landlord shall not have any obligation whatsoever to repair, reconstruct or
restore the Premises if the damage resulting from any casualty covered under
this Article occurs during the last twenty-four (24) months of the Term or any
extension hereof, or to the extent that insurance proceeds are not available
therefor; provided that in the event Landlord does not elect to make such
repairs, this Lease shall terminate effective as of the date of such damage or
destruction.

47

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

 

     24.9. Landlord’s obligation, should it elect or be obligated to repair or
rebuild, shall be limited to the Affected Areas. Tenant shall, at its expense,
replace or fully repair all of Tenant’s personal property and any Alterations
installed by Tenant existing at the time of such damage or destruction. If
Affected Areas are to be repaired in accordance with the foregoing, Landlord
shall make available to Tenant any portion of insurance proceeds it receives
that are allocable to the Alterations constructed by Tenant pursuant to this
Lease; provided Tenant is not then in Default under this Lease, and subject to
the requirements of any Lender of Landlord.
     24.10. In the event of damage and destruction to the Premises, Building or
Common Areas, Landlord will consider, in its sole discretion, based on market
factors in existence at the time of such damage and destruction, executing a
lease if requested by Tenant for temporary or replacement premises in vacant
space in the Project or other buildings in the Newark area owned by Landlord
upon terms to be negotiated at such time.
25. Eminent Domain.
     25.1. In the event (a) the whole of all Affected Areas or (b) such part
thereof as shall substantially interfere with Tenant’s use and occupancy of the
Premises for the Permitted Use shall be taken for any public or quasi-public
purpose by any lawful power or authority by exercise of the right of
appropriation, condemnation or eminent domain, or sold to prevent such taking (a
“Material Taking”), Tenant or Landlord may terminate this Lease effective as of
the date possession is required to be surrendered to said authority, except with
regard to (y) items occurring prior to the taking and (z) provisions of this
Lease that, by their express terms, survive the expiration or earlier
termination hereof.
     25.2. In the event of a taking that does not amount to a Material Taking of
(a) the Building or the Project or (b) drives, walkways or parking areas serving
the Building or the Project for any public or quasi-public purpose by any lawful
power or authority by exercise of right of appropriation, condemnation, or
eminent domain, or sold to prevent such taking, then, without regard to whether
any portion of the Premises occupied by Tenant was so taken, Landlord may elect
to terminate this Lease (except with regard to (a) items occurring prior to the
damage or destruction and (b) provisions of this Lease that, by their express
terms, survive the expiration or earlier termination hereof) as of such taking
if such taking is, in Landlord’s sole opinion, of a material nature such as to
make it uneconomical to continue use of the unappropriated portion for purposes
of renting office or laboratory space.
     25.3. Tenant shall be entitled to any award that is specifically awarded as
compensation for (a) the taking of Tenant’s personal property that was installed
at Tenant’s expense, (b) the costs of Tenant moving to a new location and
(c) other leasehold damages suffered by Tenant and compensable by Applicable Law
as set forth in the specific award. Except as set forth in the previous
sentence, any award for such taking shall be the property of Landlord.
     25.4. If, upon any taking of the nature described in this Article, this
Lease continues in effect, then Landlord shall promptly proceed to restore the
Affected Areas to substantially their same condition prior to such partial
taking. To the extent such restoration is infeasible, as

48

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

 

determined by Landlord in its sole and absolute discretion, the Rent shall be
decreased proportionately to reflect the loss of any portion of the Premises no
longer available to Tenant.
26. Surrender.
     26.1. At least ten (10) days prior to Tenant’s surrender of possession of
any part of the Premises, Tenant shall provide Landlord with (a) a facility
decommissioning and Hazardous Materials closure plan for the Premises (“Exit
Survey”) prepared by an independent third party reasonably acceptable to
Landlord, and (b) written evidence of all appropriate governmental releases
obtained by Tenant in accordance with Applicable Laws, including laws pertaining
to the surrender of the Premises. In addition, Tenant agrees to remain
responsible after the surrender of the Premises for the remediation of any
recognized environmental conditions set forth in the Exit Survey and compliance
with any recommendations set forth in the Exit Survey (to the extent such
conditions or recommendations are Tenant’s responsibility pursuant to this Lease
and do not relate to any conditions identified in the Baseline Phase I).
Tenant’s obligations under this Section shall survive the expiration or earlier
termination of the Lease.
     26.2. No surrender of possession of any part of the Premises shall release
Tenant from any of its obligations hereunder, unless such surrender is accepted
in writing by Landlord (provided no acceptance of surrender will be required if
it occurs at the end of the Term of this Lease).
     26.3. The voluntary or other surrender of this Lease by Tenant shall not
effect a merger with Landlord’s fee title or leasehold interest in the Premises,
the Building, the Property or the Project, unless Landlord consents in writing,
and shall, at Landlord’s option, operate as an assignment to Landlord of any or
all subleases.
     26.4. The voluntary or other surrender of any ground or other underlying
lease that now exists or may hereafter be executed affecting the Building or the
Project, or a mutual cancellation thereof or of Landlord’s interest therein by
Landlord and its lessor shall not effect a merger with Landlord’s fee title or
leasehold interest in the Premises, the Building or the Property and shall, at
the option of the successor to Landlord’s interest in the Building or the
Project, as applicable, operate as an assignment of this Lease.
27. Holding Over.
     27.1. If, with Landlord’s prior written consent, Tenant holds possession of
all or any part of the Premises after the Term, Tenant shall become a tenant
from month to month after the expiration or earlier termination of the Term, and
in such case Tenant shall continue to pay (a) Base Rent in accordance with
Article 7, as adjusted in accordance with Article 8, and (b) any amounts for
which Tenant would otherwise be liable under this Lease if the Lease were still
in effect, including payments for Tenant’s Pro Rata Share of Operating Expenses.
Any such month-to-month tenancy shall be subject to every other term, covenant
and agreement contained herein.

49

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

 

     27.2. Notwithstanding the foregoing, if Tenant remains in possession of the
Premises after the expiration or earlier termination of the Term without
Landlord’s prior written consent, Tenant shall become a tenant at sufferance
subject to the terms and conditions of this Lease, except that the monthly rent
shall be equal to one hundred fifty percent (150%) of the Rent in effect during
the last thirty (30) days of the Term. In addition, if Tenant remains in
possession of the Premises after the expiration or earlier termination of the
Term without Landlord’s prior written consent for a period of more than three
(3) months, Tenant shall be liable to Landlord for any and all damages suffered
by Landlord as a result of such holdover, including any lost rent or
consequential, special and indirect damages.
     27.3. Acceptance by Landlord of Rent after the expiration or earlier
termination of the Term shall not result in an extension, renewal or
reinstatement of this Lease.
     27.4. The foregoing provisions of this Article are in addition to and do
not affect Landlord’s right of reentry or any other rights of Landlord hereunder
or as otherwise provided by Applicable Laws.
28. Indemnification and Exculpation.
     28.1. Tenant agrees to indemnify, save, defend (at Landlord’s option and
with counsel reasonably acceptable to Landlord) and hold the Landlord
Indemnitees harmless from and against any and all Claims arising from injury or
death to any person or damage to any property occurring within or about the
Premises, the Building, the Property or the Project arising directly or
indirectly out of Tenant’s or Tenant’s employees’, agents’, contractors’ or
invitees’ use or occupancy of the Premises or a breach or default by Tenant in
the performance of any of its obligations hereunder, except to the extent caused
by Landlord’s negligence or willful misconduct or gross negligence. In the event
Landlord receives notice of a Claim for which Tenant is obligated to indemnify
Landlord pursuant to the preceding sentence, the Landlord shall (x) promptly
provide notice to Tenant of such Claim and (y) not enter into any settlement
agreement without the express written consent of Tenant, which consent shall not
be unreasonably withheld, conditioned or delayed.
     28.2. Notwithstanding any provision of Section 28.1 to the contrary,
Landlord shall not be liable to Tenant for, and Tenant assumes all risk of,
damage to personal property or scientific research, including loss of records
kept by Tenant within the Premises and damage or losses caused by fire,
electrical malfunction, gas explosion or water damage of any type (including
broken water lines, malfunctioning fire sprinkler systems, roof leaks or
stoppages of lines), unless any such loss is due to Landlord’s willful disregard
of written notice by Tenant of need for a repair that Landlord is responsible to
make for an unreasonable period of time. Tenant further waives any claim for
injury to Tenant’s business or loss of income relating to any such damage or
destruction of personal property as described in this Section.
     28.3. Landlord shall not be liable for any damages arising from any act,
omission or neglect of any other tenant in the Building or the Project, or of
any other third party.

50

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

 

     28.4. Tenant acknowledges that security devices and services, if any, while
intended to deter crime, may not in given instances prevent theft or other
criminal acts. Landlord shall not be liable for injuries or losses caused by
criminal acts of third parties, and Tenant assumes the risk that any security
device or service may malfunction or otherwise be circumvented by a criminal. If
Tenant desires protection against such criminal acts, then Tenant shall, at
Tenant’s sole cost and expense, obtain appropriate insurance coverage.
     28.5. Landlord agrees to indemnify, save, defend (at Tenant’s option and
with counsel reasonably acceptable to Tenant) and hold Tenant and its employees,
agents and contractors harmless from and against any and all Claims arising from
injury or death to any person or damage to any property occurring within or
about the Premises, the Building, the Property or the Project arising out of
Landlord’s gross negligence, willful misconduct or breach of this Lease.
     28.6. Except as otherwise provided herein or as may be provided by law in
the event of Tenant’s breach of Article 21 or Section 26.1, in no event shall
either Landlord or Tenant be liable to the other for any consequential, special
or indirect damages arising out of this Lease.
     28.7. The provisions of this Article shall survive the expiration or
earlier termination of this Lease.
29. Assignment or Subletting.
     29.1. Except as hereinafter expressly permitted, Tenant shall not, either
voluntarily or by operation of Applicable Laws, directly or indirectly sell,
hypothecate, assign, pledge, encumber or otherwise transfer this Lease, or
sublet the Premises (each, a “Transfer”), without Landlord’s prior written
consent. Notwithstanding the foregoing, Tenant shall have the right to Transfer
without Landlord’s prior written consent the Premises or any part thereof to any
person that as of the date of determination and at all times thereafter
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with Tenant, or that becomes a parent,
or affiliate of Tenant, or is a successor of Tenant by reason of merger,
consolidation or public offering or sale of stock, membership or partnership
interests or assets (“Tenant’s Affiliate”), provided that Tenant shall notify
Landlord in writing at least thirty (30) but not more than ninety (90) calendar
days prior to the effectiveness of such Transfer (if prior notice is permissible
in accordance with Applicable Laws and is not prohibited by the terms of any
acquisition agreement, and if prior notice is not permissible, Tenant shall
provide notice of such Transfer as soon as any such notice is permitted pursuant
to Applicable Laws or the terms of any acquisition agreement) to Tenant’s
Affiliate (an “Exempt Transfer”) and otherwise comply with the requirements of
this Lease regarding such Transfer. For purposes of Exempt Transfers, “control”
requires both (a) owning (directly or indirectly) at least fifty percent (50%)
of the stock or other equity interests of another person and (b) possessing,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such person. An Exempt Transfer shall also include a
public or private placement or offering of stock in Tenant to raise additional
capital, including any initial public offering of such stock (collectively, an
“Additional Funding”), so long as following any such Additional Funding, Tenant
remains substantially the same legal entity that exist prior to such Additional
Funding. In no event shall Tenant perform a Transfer to or with an entity that
is a tenant at the Project or that is in

51

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

 

discussions or negotiations with Landlord or an affiliate of Landlord to lease
premises at the Project or a property owned by Landlord or an affiliate of
Landlord.
     29.2. In the event Tenant desires to effect a Transfer, then, at least
thirty (30) but not more than ninety (90) calendar days prior to the date when
Tenant desires the assignment or sublease to be effective (the “Transfer Date”),
Tenant shall provide written notice to Landlord (the “Transfer Notice”)
containing information (including references) concerning the character of the
proposed transferee, assignee or sublessee; the Transfer Date; any ownership or
commercial relationship between Tenant and the proposed transferee, assignee or
sublessee; and the consideration and all other material terms and conditions of
the proposed Transfer, all in such detail as Landlord shall reasonably require.
     29.3. Landlord, in determining whether consent should be given to a
proposed Transfer, may give consideration to (a) the financial strength of such
transferee, assignee or sublessee (notwithstanding Tenant remaining liable for
Tenant’s performance), (b) any change in use that such transferee, assignee or
sublessee proposes to make in the use of the Premises and (c) Landlord’s desire
to exercise its rights under Section 29.8 to cancel this Lease. In no event
shall Landlord be deemed to be unreasonable for declining to consent to a
Transfer to a transferee, assignee or sublessee of poor reputation, lacking
financial qualifications or seeking a change in the Permitted Use, or
jeopardizing directly or indirectly the status of Landlord or any of Landlord’s
affiliates as a Real Estate Investment Trust under the Internal Revenue Code of
1986 (as the same may be amended from time to time, the “Revenue Code”).
Notwithstanding anything contained in this Lease to the contrary, (w) no
Transfer shall be consummated on any basis such that the rental or other amounts
to be paid by the occupant, assignee, manager or other transferee thereunder
would be based, in whole or in part, on the income or profits derived by the
business activities of such occupant, assignee, manager or other transferee;
(x) Tenant shall not furnish or render any services to an occupant, assignee,
manager or other transferee with respect to whom transfer consideration is
required to be paid, or manage or operate the Premises or any capital additions
so transferred, with respect to which transfer consideration is being paid;
(y) Tenant shall not consummate a Transfer with any person in which Landlord
owns an interest, directly or indirectly (by applying constructive ownership
rules set forth in Section 856(d)(5) of the Revenue Code); and (z) Tenant shall
not consummate a Transfer with any person or in any manner that could cause any
portion of the amounts received by Landlord pursuant to this Lease or any
sublease, license or other arrangement for the right to use, occupy or possess
any portion of the Premises to fail to qualify as “rents from real property”
within the meaning of Section 856(d) of the Revenue Code, or any similar or
successor provision thereto or which could cause any other income of Landlord to
fail to qualify as income described in Section 856(c)(2) of the Revenue Code.
     29.4. As conditions precedent to Tenant subleasing the Premises or to
Landlord considering a request by Tenant to Tenant’s transfer of rights or
sharing of the Premises, Landlord may require any or all of the following:
          (a) Tenant shall remain fully liable under this Lease during the
unexpired Term;

52

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

 

          (b) Tenant shall provide Landlord with evidence reasonably
satisfactory to Landlord that the value of Landlord’s interest under this Lease
shall not be diminished or reduced by the proposed Transfer. Such evidence shall
include evidence respecting the relevant business experience and financial
responsibility and status of the proposed transferee, assignee or sublessee;
          (c) Tenant shall reimburse Landlord for Landlord’s actual costs and
expenses, including reasonable attorneys’ fees, charges and disbursements
incurred in connection with the review, processing and documentation of such
request (provided that such costs and expenses do not exceed Two Thousand Five
Hundred Dollars ($2,500) in any one instance);
          (d) If Tenant’s transfer of rights or sharing of the Premises provides
for the receipt by, on behalf of or on account of Tenant of any consideration of
any kind whatsoever (including a premium rental for a sublease or lump sum
payment for an assignment, but excluding Tenant’s reasonable costs in marketing
and subleasing the Premises and provided that nothing contained in this Section
29.4(d) shall be construed to entitle Landlord to any consideration attributable
to any intellectual property or goodwill of Tenant) in excess of the rental and
other charges due to Landlord under this Lease, Tenant shall pay fifty percent
(50%) of all of such excess to Landlord, after deductions for any transaction
costs incurred by Tenant, including reasonable marketing expenses, tenant
improvement allowances actually provided by Tenant, alterations, cash
concessions, brokerage commissions, attorneys’ fees and free rent actually paid
by Tenant. If said consideration consists of cash paid to Tenant, payment to
Landlord shall be made upon receipt by Tenant of such cash payment;
          (e) The proposed transferee, assignee or sublessee shall agree that,
in the event Landlord gives such proposed transferee, assignee or sublessee
notice that Tenant is in default under this Lease, such proposed transferee,
assignee or sublessee shall thereafter make all payments otherwise due Tenant
directly to Landlord, which payments shall be received by Landlord without any
liability being incurred by Landlord, except to credit such payment against
those due by Tenant under this Lease, and any such proposed transferee, assignee
or sublessee shall agree to attorn to Landlord or its successors and assigns
should this Lease be terminated for any reason; provided, however, that in no
event shall Landlord or its Lenders, successors or assigns be obligated to
accept such attornment;
          (f) Landlord’s consent to any such Transfer shall be effected on
Landlord’s forms;
          (g) Tenant shall not then be in default hereunder in any respect;
          (h) Such proposed transferee, assignee or sublessee’s use of the
Premises shall be the same as the Permitted Use;
          (i) Landlord shall not be bound by any provision of any agreement
pertaining to the Transfer, except for Landlord’s written consent to the same;

53

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

 

          (j) Tenant shall pay all transfer and other taxes (including interest
and penalties) assessed or payable for any Transfer;
          (k) Landlord’s consent (or waiver of its rights) for any Transfer
shall not waive Landlord’s right to consent to any later Transfer;
          (l) Tenant shall deliver to Landlord one executed copy of any and all
written instruments evidencing or relating to the Transfer; and
          (m) A list of Hazardous Materials (as defined in Section 21.7),
certified by the proposed transferee, assignee or sublessee to be true and
correct, that the proposed transferee, assignee or sublessee intends to use or
store in the Premises. Additionally, Tenant shall deliver to Landlord, on or
before the date any proposed transferee, assignee or sublessee takes occupancy
of the Premises, all of the items relating to Hazardous Materials of such
proposed transferee, assignee or sublessee as described in Section 21.2.
     29.5. Any Transfer that is not in compliance with the provisions of this
Article shall be void.
     29.6. The consent by Landlord to a Transfer shall not relieve Tenant or
proposed transferee, assignee or sublessee from obtaining Landlord’s consent to
any further Transfer, nor shall it release Tenant or any proposed transferee,
assignee or sublessee of Tenant from full and primary liability under this
Lease.
     29.7. Notwithstanding any Transfer, Tenant shall remain fully and primarily
liable for the payment of all Rent and other sums due or to become due
hereunder, and for the full performance of all other terms, conditions and
covenants to be kept and performed by Tenant. The acceptance of Rent or any
other sum due hereunder, or the acceptance of performance of any other term,
covenant or condition thereof, from any person or entity other than Tenant shall
not be deemed a waiver of any of the provisions of this Lease or a consent to
any Transfer.
     29.8. Intentionally Omitted.
     29.9. If Tenant sublets the Premises or any portion thereof, Tenant hereby
immediately and irrevocably assigns to Landlord, as security for Tenant’s
obligations under this Lease, all rent from any such subletting, and appoints
Landlord as assignee and attorney-in-fact for Tenant, and Landlord (or a
receiver for Tenant appointed on Landlord’s application) may collect such rent
and apply it toward Tenant’s obligations under this Lease; provided that, until
the occurrence of a Default (as defined below) by Tenant, Tenant shall have the
right to collect such rent.
30. Subordination and Attornment.
     30.1. This Lease shall be subject and subordinate to the lien of any
mortgage, deed of trust, or lease in which Landlord is tenant now or hereafter
in force against the Building or the Project and to all advances made or
hereafter to be made upon the security thereof without the

54

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

 

necessity of the execution and delivery of any further instruments on the part
of Tenant to effectuate such subordination. As of the Execution Date, there is
no deed of trust encumbering the Project.
     30.2. Notwithstanding the foregoing, Tenant shall execute and deliver upon
demand such further instrument or instruments evidencing such subordination of
this Lease to the lien of any such mortgage or mortgages or deeds of trust or
lease in which Landlord is tenant as may be required by Landlord, provided that
such instrument contains commercially reasonable non-disturbance covenants of
the Mortgagee and that Tenant’s occupancy and rights under this Lease shall not
be materially and adversely modified as long as Tenant is not in Default under
this Lease. If any such mortgagee, beneficiary or landlord under a lease wherein
Landlord is tenant (each, a “Mortgagee”) so elects, however, this Lease shall be
deemed prior in lien to any such lease, mortgage, or deed of trust upon or
including the Premises regardless of date and Tenant shall execute a statement
in writing to such effect at Landlord’s request. If Tenant fails to execute any
commercially reasonable document required from Tenant under this Section within
ten (10) business days after written request therefor, Tenant hereby constitutes
and appoints Landlord or its special attorney-in-fact to execute and deliver any
such document or documents in the name of Tenant. Such power is coupled with an
interest and is irrevocable.
     30.3. Upon written request of Landlord and opportunity for Tenant to review
and approve (which Tenant shall not unreasonably withhold, condition or delay),
Tenant agrees to execute any Lease amendments not materially altering the terms
of this Lease, if required by a mortgagee or beneficiary of a deed of trust
encumbering real property of which the Premises constitute a part incident to
the financing of the real property of which the Premises constitute a part.
     30.4. In the event any proceedings are brought for foreclosure, or in the
event of the exercise of the power of sale under any mortgage or deed of trust
made by Landlord covering the Premises, Tenant shall at the election of the
purchaser at such foreclosure or sale attorn to the purchaser upon any such
foreclosure or sale and recognize such purchaser as Landlord under this Lease.
31. Defaults and Remedies.
     31.1. Late payment by Tenant to Landlord of Rent and other sums due shall
cause Landlord to incur costs not contemplated by this Lease, the exact amount
of which shall be extremely difficult and impracticable to ascertain. Such costs
include processing and accounting charges and late charges that may be imposed
on Landlord by the terms of any mortgage or trust deed covering the Premises.
Therefore, if any installment of Rent due from Tenant is not received by
Landlord within five (5) business days after such payment is due, Tenant shall
pay to Landlord (a) an additional sum of six percent (6%) of the overdue Rent as
a late charge plus (b) interest at an annual rate (the “Default Rate”) equal to
the lesser of (a) twelve percent (12%) and (b) the highest rate permitted by
Applicable Laws. The parties agree that this late charge represents a fair and
reasonable estimate of the costs that Landlord shall incur by reason of late
payment by Tenant and shall be payable as Additional Rent to Landlord due with
the next installment of Rent or within five (5) business days after Landlord’s
demand, whichever is

55

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

 

earlier. Landlord’s acceptance of any Additional Rent (including a late charge
or any other amount hereunder) shall not be deemed an extension of the date that
Rent is due or prevent Landlord from pursuing any other rights or remedies under
this Lease, at law or in equity. Notwithstanding the foregoing, Landlord shall
not assess a late charge in accordance with this Section 31.1 until Landlord has
given written notice of the payment default for the first late payment in any
twelve (12) month period, and only if Tenant has not cured such default within
five (5) days after receipt of such notice. No other notices shall be required
during the twelve (12) months following such notice for a late charge to be
incurred in accordance with this Section 31.1.
     31.2. No payment by Tenant or receipt by Landlord of a lesser amount than
the Rent payment herein stipulated shall be deemed to be other than on account
of the Rent, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as Rent be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord’s
right to recover the balance of such Rent or pursue any other remedy provided in
this Lease or in equity or at law. If a dispute shall arise as to any amount or
sum of money to be paid by Tenant to Landlord hereunder, Tenant shall have the
right to make payment “under protest,” such payment shall not be regarded as a
voluntary payment, and there shall survive the right on the part of Tenant to
institute suit for recovery of the payment paid under protest.
     31.3. If Tenant fails to pay any sum of money required to be paid by it
hereunder, or shall fail to perform any other act on its part to be performed
hereunder, in each case within the applicable cure period (if any) described in
Section 31.4, then Landlord may, without waiving or releasing Tenant from any
obligations of Tenant, but shall not be obligated to, make such payment or
perform such act; provided that such failure by Tenant unreasonably interfered
with the use of the Building or the Project by any other tenant or with the
efficient operation of the Building or the Project, or resulted or could have
resulted in a violation of Applicable Laws or the cancellation of an insurance
policy maintained by Landlord. Notwithstanding the foregoing, in the event of an
emergency, Landlord shall have the right to enter the Premises and act in
accordance with its rights as provided elsewhere in this Lease. In addition to
the late charge described in Section 31.1, Tenant shall pay to Landlord as
Additional Rent all sums so paid or incurred by Landlord, together with interest
at the Default Rate, computed from the date such sums were paid or incurred.
     31.4. The occurrence of any one or more of the following events shall
constitute a “Default” hereunder by Tenant:
          (a) [intentionally omitted];
          (b) Tenant fails to make any payment of Rent, as and when due, or to
satisfy its obligations under Article 19, where such failure shall continue for
a period of three (3) business days after written notice thereof from Landlord
to Tenant;
          (c) Tenant fails to observe or perform any obligation or covenant
contained herein (other than described in Subsections 31.4(a) and 31.4(b)) to be
performed by Tenant,

56

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

 

          where such failure continues for a period of ten (10) days after
written notice thereof from Landlord to Tenant; provided that, if the nature of
Tenant’s default is such that it reasonably requires more than ten (10) days to
cure, Tenant shall not be deemed to be in Default if Tenant commences such cure
within said ten (10) day period and thereafter diligently prosecute the same to
completion; and provided, further, that such cure is completed no later than
thirty (30) days after Tenant’s receipt of written notice from Landlord;
          (d) Tenant makes an assignment for the benefit of creditors;
          (e) A receiver, trustee or custodian is appointed to or does take
title, possession or control of all or substantially all of Tenant’s assets and
such action is not dismissed within thirty (30) days;
          (f) Tenant files a voluntary petition under the United States
Bankruptcy Code or any successor statute (as the same may be amended from time
to time, the “Bankruptcy Code”) or an order for relief is entered against Tenant
pursuant to a voluntary proceeding commenced under any chapter of the Bankruptcy
Code;
          (g) Any involuntary petition is filed against Tenant under any chapter
of the Bankruptcy Code and is not dismissed within one hundred twenty
(120) days;
          (h) Tenant fails to deliver an estoppel certificate in accordance with
Article 20; or
          (i) Tenant’s interest in this Lease is attached, executed upon or
otherwise judicially seized and such action is not released within one hundred
twenty (120) days of the action.
          Notices given under this Section shall specify the alleged default and
shall demand that Tenant perform the provisions of this Lease or pay the Rent
that is in arrears, as the case may be, within the applicable period of time, or
quit the Premises. No such notice shall be deemed a forfeiture or a termination
of this Lease unless Landlord elects otherwise in such notice.
     31.5. In the event of a Default by Tenant, and at any time thereafter, with
or without notice or demand and without limiting Landlord in the exercise of any
right or remedy that Landlord may have, Landlord have the right to do any or all
of the following:
          (a) Halt any Tenant Improvements and Alterations and order Tenant’s
contractors, subcontractors, consultants, designers and material suppliers to do
stop work;
          (b) Terminate Tenant’s right to possession of the Premises by any
lawful means, in which case Tenant shall immediately surrender possession of the
Premises to Landlord. In such event, Landlord shall have the immediate right to
re-enter and remove all persons and property, and such property may be removed
and stored in a public warehouse or elsewhere at the cost and for the account of
Tenant, all without service of notice or resort to legal

57

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

 

process and without being deemed guilty of trespass or becoming liable for any
loss or damage that may be occasioned thereby; and
          (c) Terminate this Lease by any lawful means, in which event Tenant
shall immediately surrender possession of the Premises to Landlord. In such
event, Landlord shall have the immediate right to re-enter and remove all
persons and property, and such property may be removed and stored in a public
warehouse or elsewhere at the cost and for the account of Tenant, all without
service of notice or resort to legal process and without being deemed guilty of
trespass or becoming liable for any loss or damage that may be occasioned
thereby. In the event that Landlord shall elect to so terminate this Lease, then
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant’s default, including:
               (i) The worth at the time of award of any unpaid Rent that had
accrued at the time of such termination; plus
               (ii) The worth at the time of award of the amount by which the
unpaid Rent that would have accrued during the period commencing with
termination of the Lease and ending at the time of award exceeds that portion of
the loss of Landlord’s rental income from the Premises that Tenant proves to
Landlord’s reasonable satisfaction could have been reasonably avoided; plus
               (iii) The worth at the time of award of the amount by which the
unpaid Rent for the balance of the Term after the time of award exceeds that
portion of the loss of Landlord’s rental income from the Premises that Tenant
proves to Landlord’s reasonable satisfaction could have been reasonably avoided;
plus
               (iv) Any other amount necessary to compensate Landlord for all
the detriment caused by Tenant’s failure to perform its obligations under this
Lease or that in the ordinary course of things would be likely to result
therefrom, including the cost of restoring the Premises to the condition
required under the terms of this Lease, including any rent payments not
otherwise chargeable to Tenant (e.g., during any “free” rent period or rent
holiday); plus
               (v) At Landlord’s election, such other amounts in addition to or
in lieu of the foregoing as may be permitted from time to time by Applicable
Laws.
As used in Subsections 31.5(c)(i) and 31.5(c)(ii), “worth at the time of award”
shall be computed by allowing interest at the Default Rate. As used in
Subsection 31.5(c)(iii), the “worth at the time of the award” shall be computed
by taking the present value of such amount, using the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award plus one
(1) percentage point.
     31.6. In addition to any other remedies available to Landlord at law or in
equity and under this Lease, Landlord shall have the remedy described in
California Civil Code Section 1951.4 and may continue this Lease in effect after
Tenant’s Default and abandonment and recover Rent as it becomes due, provided
Tenant has the right to sublet or assign, subject only to reasonable
limitations. In addition, Landlord shall not be liable in any way whatsoever for
its

58

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

 

failure or refusal to relet the Premises. For purposes of this Section, the
following acts by Landlord will not constitute the termination of Tenant’s right
to possession of the Premises:
          (a) Acts of maintenance or preservation or efforts to relet the
Premises, including alterations, remodeling, redecorating, repairs, replacements
or painting as Landlord shall consider advisable for the purpose of reletting
the Premises or any part thereof; or
          (b) The appointment of a receiver upon the initiative of Landlord to
protect Landlord’s interest under this Lease or in the Premises.
Notwithstanding the foregoing, in the event of a Default by Tenant, Landlord may
elect at any time to terminate this Lease and to recover damages to which
Landlord is entitled.
     31.7. If Landlord does not elect to terminate this Lease as provided in
Section 31.5, then Landlord may, from time to time, recover all Rent as it
becomes due under this Lease. At any time thereafter, Landlord may elect to
terminate this Lease and to recover damages to which Landlord is entitled.
     31.8. In the event Landlord elects to terminate this Lease and relet the
Premises, Landlord may execute any new lease in its own name. Tenant hereunder
shall have no right or authority whatsoever to collect any Rent from such
tenant. The proceeds of any such reletting shall be applied as follows:
          (a) First, to the payment of any indebtedness other than Rent due
hereunder from Tenant to Landlord, including storage charges or brokerage
commissions owing from Tenant to Landlord as the result of such reletting;
          (b) Second, to the payment of the costs and expenses of reletting the
Premises, including (i) alterations and repairs that Landlord deems reasonably
necessary and advisable and (ii) reasonable attorneys’ fees, charges and
disbursements incurred by Landlord in connection with the retaking of the
Premises and such reletting;
          (c) Third, to the payment of Rent and other charges due and unpaid
hereunder; and
          (d) Fourth, to the payment of future Rent and other damages payable by
Tenant under this Lease.
     31.9. All of Landlord’s rights, options and remedies hereunder shall be
construed and held to be nonexclusive and cumulative. Landlord shall have the
right to pursue any one or all of such remedies, or any other remedy or relief
that may be provided by Applicable Laws, whether or not stated in this Lease. No
waiver of any default of Tenant hereunder shall be implied from any acceptance
by Landlord of any Rent or other payments due hereunder or any omission by
Landlord to take any action on account of such default if such default persists
or is repeated, and no express waiver shall affect defaults other than as
specified in said waiver.

59

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

 

     31.10. Landlord’s termination of (a) this Lease or (b) Tenant’s right to
possession of the Premises shall not relieve Tenant of any liability to Landlord
that has previously accrued or that shall arise based upon events that occurred
prior to the later to occur of (i) the date of Lease termination or (ii) the
date Tenant surrenders possession of the Premises.
     31.11. To the extent permitted by Applicable Laws, Tenant waives any and
all rights of redemption granted by or under any present or future Applicable
Laws if Tenant is evicted or dispossessed for any cause, or if Landlord obtains
possession of the Premises due to Tenant’s default hereunder or otherwise.
     31.12. Landlord shall not be in default under this Lease unless Landlord
fails to perform obligations required of Landlord within a reasonable time, but
in no event shall such failure continue for more than thirty (30) days after
written notice from Tenant specifying the nature of Landlord’s failure;
provided, however, that if the nature of Landlord’s obligation is such that more
than thirty (30) days are required for its 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. In no event
shall Tenant have the right to terminate or cancel this Lease or to withhold or
abate rent or to set off any Claims against Rent as a result of any default or
breach by Landlord of any of its covenants, obligations, representations,
warranties or promises hereunder, unless such remedy is granted by a court of
competent jurisdiction, except as may otherwise be expressly set forth in this
Lease.
     31.13. In the event of any default by Landlord, Tenant shall give notice by
registered or certified mail to any (a) beneficiary of a deed of trust or
(b) mortgagee under a mortgage covering the Premises, the Building or the
Project and to any landlord of any lease of land upon or within which the
Premises, the Building or the Project is located, and shall offer such
beneficiary, mortgagee or landlord a reasonable opportunity to cure the default,
including time to obtain possession of the Building or the Project by power of
sale or a judicial action if such should prove necessary to effect a cure;
provided that Landlord shall furnish to Tenant in writing, upon written request
by Tenant, the names and addresses of all such persons who are to receive such
notices.
32. Bankruptcy. In the event a debtor, trustee or debtor in possession under the
Bankruptcy Code, or another person with similar rights, duties and powers under
any other Applicable Laws, proposes to cure any default under this Lease or to
assume or assign this Lease and is obliged to provide adequate assurance to
Landlord that (a) a default shall be cured, (b) Landlord shall be compensated
for its damages arising from any breach of this Lease and (c) future performance
of Tenant’s obligations under this Lease shall occur, then such adequate
assurances shall include any or all of the following, as designated by Landlord
in its sole and absolute discretion:
     32.1. Those acts specified in the Bankruptcy Code or other Applicable Laws
as included within the meaning of “adequate assurance,” even if this Lease does
not concern a shopping center or other facility described in such Applicable
Laws;
     32.2. A prompt cash payment to compensate Landlord for any monetary
defaults or actual damages arising directly from a breach of this Lease;

60

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

 

     32.3. A cash deposit in an amount at least equal to the then-current amount
of the Security Deposit; or
     32.4. The assumption or assignment of all of Tenant’s interest and
obligations under this Lease.
33. Brokers. Tenant represents and warrants that it has had no dealings with any
real estate broker or agent in connection with the negotiation of this Lease
other than Randy Scott of Cornish & Carey, Palo Alto (“Broker”), and that it
knows of no other real estate broker or agent that is or might be entitled to a
commission in connection with this Lease (except for GVA Kidder Matthews which
represents Landlord). Landlord shall compensate Broker in relation to this Lease
pursuant to a separate agreement between Landlord and Broker.
     33.1. Tenant represents and warrants that no broker or agent has made any
representation or warranty relied upon by Tenant in Tenant’s decision to enter
into this Lease, other than as contained in this Lease.
     33.2. Tenant acknowledges and agrees that the employment of brokers by
Landlord is for the purpose of solicitation of offers of leases from prospective
tenants and that no authority is granted to any broker to furnish any
representation (written or oral) or warranty from Landlord unless expressly
contained within this Lease. Landlord is executing this Lease in reliance upon
Tenant’s representations, warranties and agreements contained within
Sections 33.1 and 33.2.
     33.3. Tenant agrees to indemnify, save, defend (at Landlord’s option and
with counsel reasonably acceptable to Landlord) and hold the Landlord
Indemnitees harmless from any and all cost or liability for compensation claimed
by any broker or agent, other than Broker, employed or engaged by Tenant or
claiming to have been employed or engaged by Tenant.

61

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

 

34. Definition of Landlord. With regard to obligations imposed upon Landlord
pursuant to this Lease, the term “Landlord,” as used in this Lease, shall refer
only to Landlord or Landlord’s then-current successor-in-interest. In the event
of any transfer, assignment or conveyance of Landlord’s interest in this Lease
or in Landlord’s fee title to or leasehold interest in the Property, as
applicable, Landlord herein named (and in case of any subsequent transfers or
conveyances, the subsequent Landlord) shall be automatically freed and relieved,
from and after the date of such transfer, assignment or conveyance, from all
liability for the performance of any covenants or obligations contained in this
Lease thereafter to be performed by Landlord and, without further agreement, the
transferee, assignee or conveyee of Landlord’s in this Lease or in Landlord’s
fee title to or leasehold interest in the Property, as applicable, shall be
deemed to have assumed and agreed to observe and perform any and all covenants
and obligations of Landlord hereunder during the tenure of its interest in the
Lease or the Property. Landlord or any subsequent Landlord may transfer its
interest in the Premises or this Lease without Tenant’s consent.
35. Limitation of Landlord’s Liability.
     35.1. If Landlord is in default under this Lease and, as a consequence,
Tenant recovers a monetary judgment against Landlord, the judgment shall be
satisfied only out of (a) the proceeds of sale received on execution of the
judgment and levy against the right, title and interest of Landlord in the
Building and the Project of which the Premises are a part, (b) rent or other
income or insurance or condemnation proceeds from such real property receivable
by Landlord or (c) the consideration received by Landlord from the sale,
financing, refinancing or other disposition of all or any part of Landlord’s
right, title or interest in the Building or the Project of which the Premises
are a part.
     35.2. Landlord shall not be personally liable for any deficiency under this
Lease. If Landlord is a partnership or joint venture, then the partners of such
partnership shall not be personally liable for Landlord’s obligations under this
Lease, and no partner of Landlord shall be sued or named as a party in any suit
or action, and service of process shall not be made against any partner of
Landlord except as may be necessary to secure jurisdiction of the partnership or
joint venture. If Landlord is a corporation, then the shareholders, directors,
officers, employees and agents of such corporation shall not be personally
liable for Landlord’s obligations under this Lease, and no shareholder,
director, officer, employee or agent of Landlord shall be sued or named as a
party in any suit or action, and service of process shall not be made against
any shareholder, director, officer, employee or agent of Landlord. If Landlord
is a limited liability company, then the members of such limited liability
company shall not be personally liable for Landlord’s obligations under this
Lease, and no member of Landlord shall be sued or named as a party in any suit
or action, and service of process shall not be made against any member of
Landlord except as may be necessary to secure jurisdiction of the limited
liability company. No partner, shareholder, director, employee, member or agent
of Landlord shall be required to answer or otherwise plead to any service of
process, and no judgment shall be taken or writ of execution levied against any
partner, shareholder, director, employee, member or agent of Landlord.

62

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

 

     35.3. Each of the covenants and agreements of this Article shall be
applicable to any covenant or agreement either expressly contained in this Lease
or imposed by Applicable Laws and shall survive the expiration or earlier
termination of this Lease.
36. Intentionally Omitted.
37. Representations. Tenant guarantees, warrants and represents that (a) Tenant
is duly incorporated or otherwise established or formed and validly existing
under the laws of its state of incorporation, establishment or formation,
(b) Tenant has and is duly qualified to do business in the state in which the
Property is located, (c) Tenant has full corporate, partnership, trust,
association or other appropriate power and authority to enter into this Lease
and to perform all Tenant’s obligations hereunder, (d) each person (and all of
the persons if more than one signs) signing this Lease on behalf of Tenant is
duly and validly authorized to do so and (e) neither (i) the execution, delivery
or performance of this Lease nor (ii) the consummation of the transactions
contemplated hereby will violate or conflict with any provision of documents or
instruments under which Tenant is constituted or to which Tenant is a party. In
addition, Tenant guarantees, warrants and represents that none of (x) it,
(y) its affiliates or partners nor (z) to the best of its knowledge, its
members, shareholders or other equity owners or any of their respective
employees, officers, directors, representatives or agents is a person or entity
with whom U.S. persons or entities are restricted from doing business under
regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of
the Treasury (including those named on OFAC’s Specially Designated and Blocked
Persons List) or under any statute, executive order (including the September 24,
2001, Executive Order Blocking Property and Prohibiting Transactions with
Persons Who Commit, Threaten to Commit, or Support Terrorism) or other similar
governmental action.
38. Confidentiality. Landlord and Tenant shall keep the terms and conditions of
this Lease and any information provided to Landlord or Tenant or their
respective employees, agents or contractors pursuant to Article 9 confidential
and shall not (a) disclose to any third party any terms or conditions of this
Lease or any other Lease-related document (including subleases, assignments,
side letters, work letters, construction contracts, letters of credit,
subordination agreements, non-disturbance agreements, brokerage agreements or
estoppels) or (b) provide to any third party an original or copy of this Lease
(or any Lease-related document). Landlord shall not release to any third party
any non-public financial information or non-public information about Tenant’s
ownership structure that Tenant gives Landlord. Notwithstanding the foregoing,
confidential information under this Section may be released by Landlord or
Tenant under the following circumstances: (x) if required by Applicable Laws
(including to comply with any Securities Exchange Commission (“SEC”)
regulations) or in any judicial proceeding; provided that the releasing party
has given the other party reasonable notice of such requirement, if feasible,
(y) to a party’s attorneys, accountants, brokers and other bona fide consultants
or advisers (with respect to this Lease only); provided such third parties agree
to be bound by this Section or (z) to bona fide prospective assignees or
subtenants of this Lease; provided they agree in writing to be bound by this
Section.
39. Notices. Any notice, consent, demand, bill, statement or other communication
required or permitted to be given hereunder shall be in writing and shall be
given by personal delivery,

63

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

 

overnight delivery with a reputable nationwide overnight delivery service, or
certified mail (return receipt requested), and if given by personal delivery,
shall be deemed delivered upon receipt; if given by overnight delivery, shall be
deemed delivered one (1) day after deposit with a reputable nationwide overnight
delivery service; and, if given by certified mail (return receipt requested),
shall be deemed delivered three (3) business days after the time the notifying
party deposits the notice with the United States Postal Service. Any notices
given pursuant to this Lease shall be addressed to Tenant at the Premises, or to
Landlord or Tenant at the addresses shown in Sections 2.9 and 2.10,
respectively. Either party may, by notice to the other given pursuant to this
Section, specify additional or different addresses for notice purposes.
40. Rooftop Installation Area.
     40.1. Tenant may use those portions of the Building identified as a
“Rooftop Installation Area” on Exhibit A attached hereto (the “Rooftop
Installation Area”) solely to operate, maintain, repair and replace rooftop
antennae, mechanical equipment, communications antennas, deionized water stills,
solar panels, dedicated rooftop exhaust ducts, ventilation equipment, HVAC units
and related equipment and other equipment installed by Tenant in the Rooftop
Installation Area in accordance with this Article (“Tenant’s Rooftop
Equipment”). Tenant’s Rooftop Equipment shall be only for Tenant’s use of the
Premises for the Permitted Use. Tenant shall have the right to install exhaust
fans as part of Tenant’s Rooftop Equipment (provided that any such installations
shall be made in compliance with this Lease and all Applicable Laws and subject
to Landlord’s approval, in Landlord’s reasonable discretion).
     40.2. Tenant shall install Tenant’s Rooftop Equipment at its sole cost and
expense (which may be funded from the TI Allowance if such equipment is
installed as part of the Tenant Improvements or Expansion Space Tenant
Improvements), at such times and in such manner as Landlord may reasonably
designate, and in accordance with this Article and the applicable provisions of
this Lease regarding Alterations. Tenant’s Rooftop Equipment and the
installation thereof shall be subject to Landlord’s prior written approval,
which approval shall not be unreasonably withheld. Among other reasons, Landlord
may withhold approval if the installation or operation of Tenant’s Rooftop
Equipment could reasonably be expected to damage the structural integrity of the
Building or to transmit vibrations or noise or cause other adverse effects
beyond the Premises to an extent not customary in first class laboratory
Buildings, unless Tenant implements measures that are acceptable to Landlord in
its reasonable discretion to avoid any such damage or transmission.
     40.3. Tenant shall comply with any roof or roof-related warranties. Tenant
shall obtain a letter from Landlord’s roofing contractor within thirty (30) days
after completion of any Tenant work on the rooftop stating that such work did
not affect any such warranties. Tenant, at its sole cost and expense, shall
inspect the Rooftop Installation Area at least annually, and correct any loose
bolts, fittings or other appurtenances and repair any damage to the roof caused
by the installation or operation of Tenant’s Rooftop Equipment. Tenant shall not
permit the installation, maintenance or operation of Tenant’s Rooftop Equipment
to violate any Applicable Laws or constitute a nuisance. Tenant shall pay
Landlord within thirty (30) days after demand (a) all applicable taxes, charges,
fees or impositions imposed on Landlord by Governmental Authorities as the
result of Tenant’s use of the Rooftop Installation Areas in excess of those for

64

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

 

which Landlord would otherwise be responsible for the use or installation of
Tenant’s Rooftop Equipment and (b) the amount of any increase in Landlord’s
insurance premiums as a result of the installation of Tenant’s Rooftop
Equipment. Upon Tenant’s written request to Landlord, Landlord shall use
commercially reasonable efforts to cause other tenants to remedy any
interference in the operation of Tenant’s Rooftop Equipment caused by any such
tenants’ equipment installed after the applicable piece of Tenant’s Rooftop
Equipment; provided, however, that Landlord shall not be required to request
that such tenants waive their rights under their respective leases.
     40.4. If Tenant’s Equipment (a) causes physical damage to the structural
integrity of the Building, (b) interferes with any telecommunications,
mechanical or other systems located at or near or servicing the Building or the
Project that were installed prior to the installation of Tenant’s Rooftop
Equipment, (c) interferes with any other service provided to other tenants in
the Building or the Project by rooftop or penthouse installations that were
installed prior to the installation of Tenant’s Rooftop Equipment or
(d) interferes with any other tenants’ business, in each case in excess of that
permissible under Federal Communications Commission regulations, then Tenant
shall cooperate with Landlord to determine the source of the damage or
interference and promptly repair such damage and eliminate such interference, in
each case at Tenant’s sole cost and expense, within ten (10) days after receipt
of notice of such damage or interference (which notice may be oral; provided
that Landlord also delivers to Tenant written notice of such damage or
interference within twenty-four (24) hours after providing oral notice).
     40.5. Landlord reserves the right to cause Tenant to relocate Tenant’s
Rooftop Equipment to comparably functional space on the roof or in the penthouse
of the Building by giving Tenant prior written notice thereof. Landlord agrees
to pay the reasonable costs thereof. Tenant shall arrange for the relocation of
Tenant’s Rooftop Equipment within sixty (60) days after receipt of Landlord’s
notification of such relocation. In the event Tenant fails to arrange for
relocation within such sixty (60)-day period, Landlord shall have the right to
arrange for the relocation of Tenant’s Rooftop Equipment in a manner that does
not unnecessarily interrupt or interfere with Tenant’s use of the Premises for
the Permitted Use.
     40.6. Unless specified by Landlord pursuant to the provisions of
Article 17, Tenant’s Rooftop Equipment shall remain in the Rooftop Installation
Area upon Tenant’s surrender of the Premises and shall be the property of
Landlord.
41. Miscellaneous.
     41.1. Landlord reserves the right to change the name of the Building or the
Project in its sole discretion.
     41.2. To induce Landlord to enter into this Lease, Tenant agrees that, if
Tenant is not then a publicly traded company on a United States exchange, Tenant
shall (a) promptly furnish to Landlord, from time to time (but not more than
twice per calendar year), upon Landlord’s written request, the most recent
audited year-end financial statements reflecting Tenant’s current financial
condition and (b) within ninety (90) days after the end of Tenant’s financial
year, furnish Landlord with a certified copy of Tenant’s audited year-end
financial statements for the

65

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

 

previous year; provided, that as long as the common stock of Tenant (or its
permitted assigns) is publicly-traded and such information is available as part
of Tenant’s (or its permitted assigns’) 10-K or 10-Q report filings on the SEC’s
Edgar website, and such materials are current per SEC filing requirements, then
the above requirements shall be fulfilled by such filings. Tenant represents and
warrants that all financial statements, records and information furnished by
Tenant to Landlord in connection with this Lease are true, correct and complete
in all respects. If audited financials are not otherwise prepared, unaudited
financials certified by the chief financial officer of Tenant as true, correct
and complete in all respects shall suffice for purposes of this Section. This
Section 41.2 shall not apply if Tenant is a publicly traded entity and nothing
in this Section 41.2 shall require Tenant to create audited financial statements
if Tenant does not otherwise do so in the ordinary course of its business.
     41.3. Where applicable in this Lease, the singular includes the plural and
the masculine or neuter includes the masculine, feminine and neuter. The words
“include,” “includes,” “included” and “including” shall mean “‘include,’ etc.,
without limitation.” The section headings of this Lease are not a part of this
Lease and shall have no effect upon the construction or interpretation of any
part hereof.
     41.4. If either party commences an action against the other party arising
out of or in connection with this Lease, then the substantially prevailing party
shall be reimbursed by the other party for all reasonable costs and expenses,
including reasonable attorneys’ fees and expenses, incurred by the substantially
prevailing party in such action or proceeding and in any appeal in connection
therewith.
     41.5. Submission of this instrument for examination or signature by Tenant
does not constitute a reservation of or option for a lease, and shall not be
effective as a lease or otherwise until execution by and delivery to both
Landlord and Tenant.
     41.6. Time is of the essence with respect to the performance of every
provision of this Lease in which time of performance is a factor.
     41.7. [Intentionally Omitted].
     41.8. Whenever consent or approval of either party is required, that party
shall not unreasonably withhold such consent or approval, except as may be
expressly set forth to the contrary.
     41.9. The terms of this Lease are intended by the parties as a final
expression of their agreement with respect to the terms as are included herein,
and may not be contradicted by evidence of any prior or contemporaneous
agreement.
     41.10. Any provision of this Lease that shall prove to be invalid, void or
illegal shall in no way affect, impair or invalidate any other provision hereof,
and all other provisions of this Lease shall remain in full force and effect and
shall be interpreted as if the invalid, void or illegal provision did not exist.

66

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

 

     41.11. Upon Tenant’s written request and payment of the costs associated
therewith, Landlord shall record a short form or memorandum of this Lease in the
form attached hereto as Exhibit K. Neither party shall record this Lease. Tenant
shall be responsible for the cost of recording any short form or memorandum of
this Lease, including any transfer or other taxes incurred in connection with
said recordation.
     41.12. The language in all parts of this Lease shall be in all cases
construed as a whole according to its fair meaning and not strictly for or
against either Landlord or Tenant.
     41.13. Each of the covenants, conditions and agreements herein contained
shall inure to the benefit of and shall apply to and be binding upon the parties
hereto and their respective heirs; legatees; devisees; executors;
administrators; and permitted successors, assigns, sublessees. Nothing in this
Section shall in any way alter the provisions of this Lease restricting
assignment or subletting.
     41.14. This Lease shall be governed by, construed and enforced in
accordance with the laws of the state in which the Premises are located, without
regard to such state’s conflict of law principles.
     41.15. Landlord and Tenant guarantee, warrant and represent that the
individual or individuals signing this Lease have the power, authority and legal
capacity to sign this Lease on behalf of and to bind all entities, corporations,
partnerships, limited liability companies, joint venturers or other
organizations and entities on whose behalf said individual or individuals have
signed.
     41.16. This Lease may be executed in one or more counterparts, each of
which, when taken together, shall constitute one and the same document.
     41.17. No provision of this Lease may be modified, amended or supplemented
except by an agreement in writing signed by Landlord and Tenant. The waiver by
Landlord or Tenant of any breach by the other party of any term, covenant or
condition herein contained shall not be deemed to be a waiver of any subsequent
breach of the same or any other term, covenant or condition herein contained.
     41.18. To the extent permitted by Applicable Laws, the parties waive trial
by jury in any action, proceeding or counterclaim brought by the other party
hereto related to matters arising out of or in any way connected with this
Lease; the relationship between Landlord and Tenant; Tenant’s use or occupancy
of the Premises; or any claim of injury or damage related to this Lease or the
Premises.

67

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

 

42. Option to Extend Term. Tenant shall have the option (“Option”) to extend the
Term by five (5) years (the “Option Term”) as to the entire Premises (and no
less than the entire Premises) upon the following terms and conditions. Any
extension of the Term pursuant to the Option shall be on all the same terms and
conditions as this Lease, except as follows:
     42.1. Base Rent during the Option Term shall equal the fair market rent for
similar premises in similar buildings in the cities of Newark and Fremont as of
the commencement of the Option Term, including fair market rent increases
(“FMR”). If Landlord and Tenant cannot agree on the FMR for the Option Term
within thirty (30) days after the date on which Tenant notifies Landlord that it
is exercising the Option, then, no later than an additional thirty (30) days
thereafter (the “Submission Period”), Landlord and Tenant shall each furnish to
the other a notice in writing (an “FMR Notice”) stating such party’s estimate of
the FMR. Such notices shall be accompanied by a statement from a qualified,
licensed real estate appraiser with at least ten (10) years’ experience in the
Fremont/Newark area (an “Appraiser”) stating such Appraiser’s opinion of FMR. If
only one (1) party’s Appraiser timely submits its opinion of FMR, such FMR shall
be binding on Landlord and Tenant. If, within twenty (20) days after expiration
of the Submission Period, Landlord and Tenant still cannot agree on the FMR, the
two (2) Appraisers shall appoint a third qualified, licensed real estate
appraiser (the “Referee”) within seven (7) days. If the Appraisers are unable to
agree upon the selection of the Referee, then the Referee shall be selected
within ten (10) days thereafter from among the Northern California panel of
qualified Real Estate Industry Arbitrators of the American Arbitrator
Association (the “Association”) pursuant to the Real Estate Industry Arbitration
rules of the Association. The Referee shall, within thirty (30) days after
appointment, render the Referee’s decision as to the FMR, which opinion shall be
strictly limited to choosing one of the two determinations made by the
Appraisers. The decision by the Referee shall be binding upon Landlord and
Tenant, and each shall pay for its own appraisal. The cost of the Referee shall
be shared equally by Landlord and Tenant. In determining FMR, Landlord, Tenant
and, if applicable, the Appraisers and Referee shall each take into account all
relevant factors, including, without limitation, (a) the size of the Premises
and length of the Option Term, (b) rent in comparable buildings in the relevant
competitive market, including concessions offered to new tenants, such as free
rent, tenant improvement allowances, and moving allowances, (c) Tenant’s
creditworthiness and (d) the quality and location of the Building and the
Project.
     42.2. The Option is not assignable separate and apart from this Lease.
     42.3. The Option is conditional upon Tenant giving Landlord written notice
of its election to exercise the Option at least twelve (12) months prior to the
end of the expiration of the initial Term. Time shall be of the essence as to
Tenant’s exercise of the Option. Tenant assumes full responsibility for
maintaining a record of the deadlines to exercise the Option. Tenant
acknowledges that it would be inequitable to require Landlord to accept any
exercise of the Option after the date provided for in this Section.
     42.4. Notwithstanding anything contained in this Article to the contrary,
Tenant shall not have the right to exercise the Option:

68

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

 

          (a) At any time after any Default as described in Article 31 of the
Lease and continuing until Tenant cures any such Default; or
          (b) In the event that Tenant has defaulted in the performance of its
obligations under this Lease three (3) or more times and a service or late
charge has become payable under Section 31.1 for each of such defaults during
the twelve (12)-month period immediately prior to the date that Tenant intends
to exercise the Option, whether or not Tenant has cured such defaults.
     42.5. The period of time within which Tenant may exercise the Option shall
not be extended or enlarged by reason of Tenant’s inability to exercise such
Option because of the provisions of Section 41.4 or Section 42.5.
     42.6. All of Tenant’s rights under the provisions of the Option shall
terminate and be of no further force or effect even after Tenant’s due and
timely exercise of the Option if, after such exercise, but prior to the
commencement date of the Option Term, (a) Tenant fails to pay to Landlord a
monetary obligation of Tenant for a period of thirty (30) days after written
notice from Landlord to Tenant, (b) Tenant fails to commence to cure a material
non-monetary default within thirty (30) days after the date Landlord gives
notice to Tenant of such default or (c) Tenant has Defaulted under this Lease
two (2) or more times.
43. Expansion Option.
     43.1. Subject to the conditions set forth in this Article and the rights of
third parties existing as of the Effective Date of this Lease to the Expansion
Space, Tenant shall have the right, but not the obligation, to expand the
Premises (the “Expansion Option”) to include up to approximately thirty thousand
(30,000) square feet of contiguous Rentable Area in the Building, as more
particularly shown on the floor plan attached hereto as Exhibit J (the
“Expansion Space”). Notwithstanding anything to the contrary contained herein,
in the event Landlord enters into negotiations with a third party to lease all
or any portion of the Expansion Space during the Expansion Option Period (as
hereinafter defined), Landlord will provide Tenant with written notice that it
has a tenant interested in leasing the Expansion Space at the time it enters
into a letter of intent or similarly agrees on general bona fide terms of
leasing the Expansion Space (or portion thereof), which shall be made subject to
Tenant’s right to exercise the Expansion Option, and Tenant shall have a period
of ten (10) business days after its receipt of such notice to exercise the
Expansion Option in accordance with the terms of this Article 43.
     43.2. Tenant may exercise the Expansion Option by providing Landlord, no
later than the eighteen (18) month anniversary of the Term Commencement Date
(the “Expansion Option Period”), with written notice that Tenant has elected to
exercise the Expansion Option. Within ten (10) business days after exercising
the Expansion Option, Tenant and Landlord shall enter into a written amendment
to the Lease (the “Amendment”), which amendment shall provide, unless otherwise
agreed in writing, (a) the date on which the Expansion Space shall be delivered
to Tenant for Tenant’s construction of the Expansion Space Tenant Improvements
(the “Expansion Space Delivery Date”), which date shall be no later than ten
(10) business days after the date of full execution and delivery of the
Amendment and the date upon which the Expansion

69

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

 

Space Base Rent will commence, which date shall be four (4) months after the
Expansion Space Delivery Date (the “Expansion Space Rent Commencement Date”),
(b) that the Premises under this Lease shall be increased to include the square
feet of Rentable Area of the Expansion Space determined as of the Expansion
Space Delivery Date, which Rentable Area shall be remeasured as of the Expansion
Space Rent Commencement Date in accordance with the provisions of Article 6,
(c) that Tenant’s lease of the Expansion Space shall terminate on the Term
Expiration Date, (d) the Expansion Space Base Rent (as defined below), with the
base rent applicable to the Expansion Space equal to the One and 70/100s Dollars
($1.70) per square foot of Rentable Area per month (the “Expansion Space Base
Rent”), increasing by Ten Cents ($0.10) on each annual anniversary of the
Expansion Space Rent Commencement Date in lease years two through five (2-5) (as
applicable to the Expansion Space) and then by Seven Cents ($0.07) on each
annual anniversary of the Expansion Space Rent Commencement Date in lease years
six through eleven (6-11) (as applicable to the Expansion Space), (e) Tenant’s
new Pro Rata Shares of Operating Expenses based upon the addition of the
Expansion Space to the Premises (which new Pro Rata Shares will become effective
as of the Expansion Space Rent Commencement Date), (f) the proportionate
increase to the Security Deposit (which increase shall be payable to Landlord
upon execution of the Amendment) and (g) that the tenant improvements in the
Expansion Space (the “Expansion Space Tenant Improvements”) will be constructed
by Tenant pursuant to the Work Letter at a cost to Landlord not to exceed
(a) Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000) (based upon
One Hundred Twenty-Five Dollars ($125.00) per square foot of Rentable Area of
Expansion Space (the “Expansion Space Base TI Allowance”) plus (ii) if properly
requested by Tenant pursuant to this Article, One Million Five Hundred Thousand
Dollars ($1,500,000) (based upon Fifty Dollars ($50.00) per square foot of
Rentable Area of Expansion Space) (the “Expansion Space Additional TI
Allowance”), for a total of Five Million Two Hundred Fifty Thousand Dollars
($5,250,000) (based upon One Hundred Seventy-Five Dollars ($175) per square foot
of Rentable Area, collectively the Expansion Space Base TI Allowance and the
Expansion Space Additional TI Allowance (if properly requested by Tenant
pursuant to Articles 4 and 43, respectively), shall be referred to herein as the
“Expansion Space TI Allowance”). In all other respects, this Lease shall remain
in full force and effect, and shall apply to the Expansion Space. The Expansion
Space TI Allowance may be applied to the costs of (n) construction, with up to
Five Dollars ($5.00) per square foot of Rentable Area available for wiring and
cabling costs, (o) project management by Landlord (which fee shall equal one
percent (1%) of the cost of the Expansion Space Tenant Improvements, including
the Expansion Space Base TI Allowance and, if used by Tenant, the Expansion
Space Additional TI Allowance), (p) space planning, project management,
architect, engineering and other related services performed by third parties
unaffiliated with Tenant, (q) building permits for the Expansion Space Tenant
Improvements and other taxes, fees, charges and levies by Governmental
Authorities (as defined below) for permits or for inspections of the Expansion
Space Tenant Improvements, (r) compliance of the Expansion Space Tenant
Improvements with applicable building codes and regulations, including, without
limitation, costs to build the Expansion Space Tenant Improvements in compliance
with the ADA or Title 24 required as a result of the design of the Expansion
Space Tenant Improvements, (s) costs and expenses for labor, material, equipment
and fixtures. In no event shall the Expansion Space TI Allowance be used for
(w) payments to Tenant or any affiliates of Tenant, (x) the purchase of any
furniture, personal property or other non-building system equipment, (y) costs
resulting from any default by Tenant of its obligations

70

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

 

under this Lease or (z) costs that are recoverable by Tenant from a third party
(e.g., insurers, warrantors, or tortfeasors). All Tenant TI Allowances will be
adjusted based upon the actual Rentable Area, as determined in accordance with
the provisions hereof.
     43.3. For any savings on the Expansion Space Base TI Allowance, Tenant
shall be entitled to a credit to the Expansion Space Base Rent equal to
twelve-thousandths of one dollar ($.012) per square foot of Rentable Area per
month for every dollar of the Expansion Space Base TI Allowance savings on the
initial Expansion Space Tenant Improvements; provided, however, in no event
shall the Expansion Space Base Rent be reduced below One Dollar ($1) per square
foot of Rentable Area per month, subject to annual increase as provided above.
If the Expansion Space Additional TI Allowance is disbursed by Landlord, (a) it
shall be conclusive that there was no savings on the Expansion Space Base TI
Allowance and (b) Expansion Space Base Rent shall be increased by
twelve-thousandths of One Dollar ($.012) per square foot of Rentable Area per
month for every dollar per square foot of Rentable Area of the Expansion Space
Additional TI Allowance so disbursed, subject to annual increase as provided
above.
     43.4. Tenant shall have until the date which is twelve (12) months after
the Expansion Space Rent Commencement Date (the “Expansion Space TI Deadline”),
to expend any unused portion of the Expansion Space Additional TI Allowance,
after which date Landlord’s obligation to fund such costs shall expire. The
amount by which Base Rent for the Expansion Space shall be increased or credited
shall be determined (and Base Rent for the Expansion Space shall be increased or
credited accordingly) as of the Expansion Space Rent Commencement Date and, if
such determination does not reflect use by Tenant of all of the Expansion Space
Additional TI Allowance, then such amount shall be determined again as of the
Expansion Space TI Deadline, with Tenant paying (on the next succeeding day that
Base Rent is due under this Lease (the “Expansion Space TI True-Up Date”)) any
underpayment of the further adjusted Base Rent for the period beginning on the
Expansion Space Rent Commencement Date and ending on the Expansion Space TI
True-Up Date.
     43.5. Notwithstanding anything in this Article to the contrary, Tenant
shall not exercise the Expansion Option during such period of time that Tenant
is in Default under any provision of this Lease. Any attempted exercise of the
Expansion Option during a period of time in which Tenant is so in Default shall
be void and of no effect. In addition, Tenant shall not be entitled to exercise
the Expansion Option if Landlord has given Tenant two (2) or more notices of
Default under this Lease, whether or not the Defaults are cured, during the
twelve (12) month period prior to the date on which Tenant seeks to exercise the
Expansion Option.
     43.6. Notwithstanding anything in this Lease to the contrary, the Expansion
Option shall expire on the date that is eighteen (18) months following the Term
Commencement Date.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

71

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

 

IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date
first above written.
LANDLORD:

            BMR-GATEWAY BOULEVARD LLC,
a Delaware limited liability company
      By:   /s/ Anne L. Hoffman         Name:   Anne L. Hoffman        Title:  
Sr. Vice President, Development        TENANT:

STEMCELLS, INC.,
a Delaware corporation
      By:   /s/ Ken Stratton         Name:   Ken Stratton        Title:  
General Counsel