Exhibit 10.20

LOGO [g147496g73k46.jpg]

Lease

Willow Park

Menlo Park, California

Willow Park Holding Company I, L.P., a Delaware limited partnership,

as Landlord,

and

Pacific Biosciences of California, Inc., a Delaware corporation

dba Pac Bio, Inc.,

as Tenant

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

Table of Contents

 

Section         Page   1.   Basic Provisions      1      1.1    Parties      1
     1.2    Premises      1      1.3    Term      1      1.4    Base Rent      1
     1.5    Tenant’s Share of Operating Expenses      1      1.6    Tenant’s
Estimated Monthly Rent Payment      1      1.7    Security Deposit      1     
1.8    Permitted Use      1      1.9    Guarantor      2      1.10    Addenda   
  2      1.11    Exhibits      2      1.12    Address for Rent Payments      2
     1.13    Brokers      2    2.   Premises and Common Areas      2      2.1   
Letting      2      2.2    Common Areas - Definition      2      2.3    Common
Areas - Tenant’s Rights      2      2.4    Common Areas - Rules and Regulations
     2      2.5    Common Area Changes      2      2.6    Parking      3     
2.7    Access      3    3.   Term      3      3.1    Term      3      3.2   
Delay in Possession      3      3.3    Commencement Date Certificate      3   
4.   Rent      3      4.1    Base Rent      3      4.2    Operating Expenses   
  3    5.   Security Deposit      5    6.   Use      5      6.1    Permitted Use
     5      6.2    Hazardous Substances      5      6.3    Tenant’s Compliance
with Requirements      6      6.4    Inspection; Compliance with Law      6     
6.5    Tenant Move-in Questionnaire      6      6.6    Exculpation      7     
6.7    Disclosure      7      6.8    Landlord Indemnification      7    7.  
Maintenance, Repairs, Trade Fixtures and Alterations      7      7.1    Tenant’s
Obligations      7      7.2    Landlord’s Obligations      7      7.3   
Alterations      8      7.4    Surrender/Restoration      8    8.   Insurance;
Indemnity      8      8.1    Payment of Premiums and Deductibles      8      8.2
   Tenant’s Insurance      8      8.3    Landlord’s Insurance      9      8.4   
Waiver of Subrogation      9      8.5    Indemnity      9      8.6    Exemption
of Landlord from Liability      9    9.   Damage or Destruction      9      9.1
   Termination Right      9      9.2    Damage Caused by Tenant      10    10.  
Real Property Taxes      10      10.1    Payment of Real Property Taxes      10
     10.2    Real Property Tax Definition      10      10.3    Additional
Improvements      10      10.4    Joint Assessment      10      10.5    Tenant’s
Property Taxes      10    11.   Utilities      10    12.   Assignment and
Subleasing      10      12.1    Prohibition      10   

 

i

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

 

12.2

   Request for Consent      11     

12.3

   Criteria for Consent      11     

12.4

   Effectiveness of Transfer and Continuing Obligations      11     

12.5

   Rent Adjustment/Recapture      12     

12.6

   Transfer Premium      12     

12.7

   Waiver      12     

12.8

   Special Transfer Prohibitions      12     

12.9

   Affiliates      12   

13.

 

Default; Remedies

     12     

13.1

   Default      12     

13.2

   Remedies      13     

13.3

   Late Charges      14   

14.

  Condemnation      14   

15.

  Estoppel Certificate and Financial Statements      15     

15.1

   Estoppel Certificate      15     

15.2

   Financial Statement      15   

16.

  Additional Covenants and Provisions      15     

16.1

   Severability      15     

16.2

   Interest on Past-Due Obligations      15     

16.3

   Time of Essence      15     

16.4

   Landlord Liability      15     

16.5

   Entire Agreement      15     

16.6

   Notice Requirements      15     

16.7

   Date of Notice      16     

16.8

   Waivers      16     

16.9

   Holdover      16     

16.10

   Cumulative Remedies      16     

16.11

   Binding Effect: Choice of Law      16     

16.12

   Landlord      16     

16.13

   Attorneys’ Fees and Other Costs      16     

16.14

   Landlord’s Access; Showing Premises; Repairs      16     

16.15

   Signs      16     

16.16

   Termination; Merger      17     

16.17

   Quiet Possession      17     

16.18

   Subordination; Attornment; Non-Disturbance      17     

16.19

   Rules and Regulations      17     

16.20

   Security Measures      17     

16.21

   Reservations      17     

16.22

   Conflict      17     

16.23

   Offer      18     

16.24

   Amendments      18     

16.25

   Multiple Parties      18     

16.26

   Authority      18     

16.27

   Recordation      18     

16.28

   Confidentiality      18     

16.29

   Landlord Renovations      18     

16.30

   Waiver of Jury Trial      18     

16.31

   Cubicles and Equipment      18     

16.32

   Building Information      18     

16.33

   Landlord’s Work      18   

 

 

ii

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

Glossary

The following terms in the Lease are defined in the paragraphs opposite the
terms.

 

Term    Defined in Paragraph Addendum   

Addendum 1

Addendum 2   

Addendum 2

Additional Rent   

4.1

Affiliates   

12.9

Alteration/Alterations   

7.3

Applicable Requirements   

6.3

Architect   

Exhibit F

Base Rent   

1.4

Basic Provisions   

1

Brokers   

1.13

Building   

1.2

Building Operating Expenses   

4.2(b)

CM Fee   

Exhibit F

Code   

12.8

Commencement Date   

1.3

Commencement Date Certificate   

3.3

Common Areas   

2.2

Common Area Operating Expenses   

4.2(b)

condemnation   

14

Construction Documents   

Exhibit F

Contractor   

Exhibit F

Cubicles and Equipment   

16.32

Default   

13.1

Expansion Option/Expansion Options   

Addendum 2

Expansion Option Notice   

Addendum 2

Expansion Space Commencement Date   

Addendum 2

Expansion Spaces   

Addendum 2

Expiration Date   

1.3

Extended Term/Extended Terms   

Addendum 1

Final Plans and Specifications   

Exhibit F

Final Preliminary Plans and Specifications   

Exhibit F

First Floor Expansion Space   

Addendum 2

Hazardous Substance   

6.2(a)

HVAC   

4.2(a)(x)

Industrial Center   

1.2

Knowledge   

Addendum2

Landlord   

1.1

Landlord Entities   

6.2(c)

Landlord Response Period   

12.2

Lease   

1.1

Lenders   

6.4

Mortgage   

16.18(a)

nondisturbance agreement   

16.18(c)

Operating Expenses   

4.2

Option/Options   

Addendum 1

Option Notice   

Addendum 1

Option Trigger Date   

Addendum 1

Party/Parties   

1.1

Permitted Use   

1.8

Phase   

1.2

Phase Operating Expenses   

4.2(b)

Preliminary Plans and Specifications   

Exhibit F

Premises   

1.2

Prevailing Party   

16.13

Prevailing Rental Rate   

Addendum 1

Proposed Effective Date   

12.2

Qualified Arbitrator   

Addendum 1

Real Property Taxes   

10.2

Renovations   

16.29

Rent   

4.1

Rent Commencement Date   

1.4

Reportable Use   

6.2(a)

Requesting Party   

15.1

Responding Party   

15.1

Rules and Regulations   

16.19

Second Floor Expansion Space   

Addendum 2

Second Response Period   

12.2

 

iii

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

Security Deposit   

1.7

Sole Arbitrator   

Addendum 1

Subject Space   

12.2

Tenant   

1.1

Tenant Entities   

6.2(c)

Tenant Improvement Allowance   

Exhibit F

Tenant Improvement Costs   

Exhibit F

Tenant Improvements   

Exhibit F

Tenant Move-in Questionnaire   

6.5

Tenant’s Broker   

Addendum 2

Tenant’s Notice   

12.2

Tenant’s Property   

7.1

Tenant’s Share   

1.5

Term   

1.3

Transfer Plans and Specifications   

12.3

Transfer Premium   

12.6

Transferee   

12.1

Transferee HazMat Certificate   

12.4

Transfers   

12.1

Utility Expenses   

11

 

iv

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

AMB Property Corporation

Lease

1. Basic Provisions (“Basic Provisions”).

1.1 Parties. This Lease (“Lease”) dated December     , 2010, is made by and
between Willow Park Holding Company I, L.P., a Delaware limited partnership
(“Landlord”) and Pacific Biosciences of California, Inc., a Delaware corporation
dba Pac Bio, Inc. (“Tenant”) (collectively, the “Parties” or individually, a
“Party”).

1.2 Premises. The premises (“Premises”), which are the subject of this Lease,
are located in the industrial center commonly known as Willow Park (the
“Industrial Center”). The Premises consist of approximately 14,001 square feet
located on the ground floor of the building (“Building”) commonly known as 1350
Willow Road, Suite 101, Menlo Park, California and as depicted on Exhibit A. The
Building is also identified on Exhibit A. The phase (“Phase”), which is also
identified on Exhibit A, consists of a portion of the Industrial Center in which
the Building is located.

Tenant shall have nonexclusive rights to the Common Areas (as defined in
Paragraph 2.2 below) but shall not have any rights to the roof, exterior walls,
or utility raceways of the Building or to any other buildings in the Industrial
Center, except to the extent required by the terms of Paragraph 7.1 of this
Lease. The Industrial Center consists of the Premises, the Building, the Phase,
the Common Areas, the land upon which they are located, and all other buildings
and improvements within the boundaries of the Industrial Center.

1.3 Term. Approximately five (5) years and sixteen (16) days (“Term”) commencing
on December 15, 2010 (“Commencement Date”) and ending December 31, 2015
(“Expiration Date”). Pursuant to the terms of this Lease, including without
limitation, Exhibit F hereto, Tenant shall have the right to access the Premises
for purposes of constructing the Tenant Improvements (as defined in Exhibit F),
office set-up and conducting large company meetings commencing on the
Commencement Date.

1.4 Base Rent. Base monthly rent (“Base Rent”) shall be payable as follows:

 

Months of Term

  

Monthly Base Rent

 

Commencement Date – 2/28/11

   $ 0   

3/1/11 – 5/31/11

   $ 0   

6/1/11 – 3/31/12

   $ 18,901.35   

4/1/12 – 3/31/13

   $ 19,881.42   

4/1/13 – 3/31/14

   $ 20,477.86   

4/1/14 – 3/31/15

   $ 21,092.20   

4/1/15 – 12/31/15

   $ 21,724.96   

As used in this Lease, the term “Rent Commencement Date’ shall mean March 1,
2011 unless Landlord does not deliver possession of the Premises on or before
December 15, 2010, in which case “Rent Commencement Date” shall mean the date
which is two (2) months and sixteen (16) days following the date Landlord
delivers possession of the Premises to Tenant.

1.5 Tenant’s Share of Operating Expenses (“Tenant’s Share”).

 

(a)

   Common Area Operating Expenses      1.40 % 

(b)

   Building Operating Expenses      28.00 % 

(c)

   Phase Operating Expenses      0 % 

1.6 Tenant’s Estimated Monthly Rent Payment. Following is the estimated monthly
Rent payment to Landlord pursuant to the provisions of this Lease. This estimate
is made at the inception of the Lease and is subject to adjustment pursuant to
the provisions of this Lease. The Estimated Total Monthly Payment, set forth
below, shall be paid upon the execution of this Lease for the first month of the
Lease Term for which Rent is payable.

 

(a)

   Base Rent (Paragraph 4.1)    $ 18,901.35   

(b)

   Operating Expenses (Paragraph 4.2, excluding Real Property Taxes, Landlord
Insurance, and HVAC)    $              ** 

(c)

   Landlord Insurance (Paragraph 8.3)    $ 280.00   

(d)

   Real Property Taxes (Paragraph 10)    $ 2,380.00       Estimated Total
Monthly Payment    $              **    

**     The estimated monthly payment of Operating Expenses shall be determined
by Landlord in January 2011 and Landlord shall notify Tenant in writing of such
estimated amount upon such determination.

          

1.7 Security Deposit . $21,724.96 (“Security Deposit”).

1.8 Permitted Use (“Permitted Use”). General office, manufacturing, wet
laboratory and other research and development uses consistent with biotechnology
and medical device companies, but only to the extent permitted by the City in
which the Premises are located and all agencies and governmental authorities
having jurisdiction of the Premises.

 

1

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

1.9 Guarantor. None

1.10 Addenda. Attached hereto are the following Addenda, all of which constitute
a part of this Lease:

 

Addendum 1:    Options to Extend Addendum 2:    Options to Expand

1.11 Exhibits. Attached hereto are the following Exhibits, all of which
constitute a part of this Lease:

 

Exhibit A:    Description of Premises. Exhibit B:    Commencement Date
Certificate. Exhibit C:    Tenant Move-in and Lease Renewal Environmental
Questionnaire Exhibit D:    Move Out Standards Exhibit E:    Rules and
Regulations Exhibit F:    Tenant Improvements

1.12 Address for Rent Payments. All amounts payable by Tenant to Landlord shall,
until further notice from Landlord, be paid to Landlord at the following
address:

Willow Park Holding Company I, L.P.

c/o AMB Property Corporation

P.O. Box 6156

Hicksville, NY 11802-6156

1.13 Brokers. Tenant represents that it has not dealt with any real estate
brokers or agents other than Cassidy Turley BT Commercial representing Landlord
and Cornish & Carey Commercial representing Tenant (collectively, the
“Brokers”). The Brokers shall receive commissions pursuant to a separate listing
agreement with Landlord.

2. Premises and Common Areas.

2.1 Letting. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the Premises upon all of the terms, covenants, and conditions, set
forth in this Lease. Any statement of square footage set forth in this Lease or
that may have been used in calculating Base Rent and/or Operating Expenses is an
approximation which Landlord and Tenant agree is reasonable, and the Base Rent
and Tenant’s Share based thereon is not subject to revision whether or not the
actual square footage is more or less. Tenant accepts the Premises in its
present “As-Is” condition, state of repair and operating order. On the
Commencement Date, Landlord shall deliver the Premises, HVAC systems serving the
lab, roof and lights in good working order and repair with the existing building
operating systems, including electrical, mechanical, plumbing, lighting and
sprinkler systems in good working order and repair. Tenant shall have a warranty
period of one hundred twenty (120) days (i) (which warranty period shall
commence fifteen (15) days following the Commencement Date) with respect to the
HVAC systems serving the lab to confirm such condition and (ii) (which warranty
period shall commence one (1) month following the Rent Commencement Date) with
respect to the remaining elements of the Building referenced above to confirm
such condition. Tenant’s failure to notify Landlord in writing within such
respective one hundred twenty (120) day periods of any deficiencies in such
systems shall be deemed Tenant’s approval of the condition thereof.

2.2 Common Areas - Definition. “Common Areas” are all areas and facilities
outside the Premises and within the exterior boundary line of the Industrial
Center and interior utility raceways within the Premises that are provided and
designated by the Landlord from time to time for the general nonexclusive use of
Landlord, Tenant, and other tenants of the Industrial Center and their
respective employees, suppliers, shippers, tenants, contractors, and invitees.

2.3 Common Areas - Tenant’s Rights. Landlord hereby grants to Tenant, for the
benefit of Tenant and its employees, suppliers, shippers, contractors,
customers, and invitees, during the term of this Lease, the nonexclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Landlord under the terms hereof or under the terms of any rules and
regulations or covenants, conditions, and restrictions governing the use of the
Industrial Center.

2.4 Common Areas - Rules and Regulations. Landlord shall have the exclusive
control and management of the Common Areas and shall have the right, from time
to time, to establish, modify, amend, and enforce reasonable Rules and
Regulations with respect thereto in accordance with Paragraph 16.19.

2.5 Common Area Changes. Landlord shall have the right, in Landlord’s sole
discretion, from time to time:

(a) To make changes to the Common Areas, including, without limitation, changes
in the locations, size, shape, and number of driveways, entrances, parking
spaces, parking areas, loading and unloading areas, ingress, egress, direction
of traffic, landscaped areas, walkways, and utility raceways;

(b) To close temporarily any of the Common Areas for maintenance purposes so
long as reasonable access to the Premises remains available;

 

2

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

(c) To designate other land outside the boundaries of the Industrial Center to
be a part of the Common Areas;

(d) To add additional buildings and improvements to the Common Areas;

(e) To use the Common Areas while engaged in making additional improvements,
repairs, or alterations to the Industrial Center, or any portion thereof; and

(f) To do and perform such other acts and make such other changes in, to, or
with respect to the Common Areas and Industrial Center as Landlord may, in the
exercise of sound business judgment, deem to be appropriate.

2.6 Parking. At no additional cost to Tenant, Tenant may use Tenant’s Share of
the undesignated vehicle parking spaces, on an unreserved and unassigned basis,
on those portions of the Common Areas designated by Landlord for such
parking. Landlord shall exercise reasonable efforts to ensure that such spaces
are available to Tenant for its use, but Landlord shall not be required to
enforce Tenant’s right to use the same. Tenant shall not use more parking spaces
than such number. Such parking spaces shall be used only for parking by vehicles
no larger than full sized passenger automobiles or pick-up trucks and in no
event shall Tenant or any of Tenant’s Entities park or permit any parking of
vehicles overnight. Tenant shall not permit or allow any vehicles that belong to
or are controlled by Tenant or Tenant’s employees, suppliers, shippers,
customers or invitees to be loaded, unloaded or parked in areas other than those
designated by Landlord for such activities. If Tenant permits or allows any of
the prohibited activities described herein, then Landlord shall have the right,
without notice, in addition to such other rights and remedies that it may have,
to remove or tow away the vehicle involved and charge the cost to Tenant, which
cost shall be immediately payable as additional rent upon demand by Landlord.
Landlord may change the number of parking spaces and configuration of the
parking areas at any time, and may assign reserved parking spaces to any tenant,
in Landlord’s sole discretion; provided, Landlord shall not reduce Tenant’s
Share of undesignated vehicle parking spaces.

2.7 Access. Subject to emergencies, Applicable Requirements (defined below) and
the terms of Paragraphs 9 and 14, Landlord shall use its commercially reasonable
efforts to provide access to Tenant (i) through that certain gate which
separates Adams Court and the Phase, twenty four (24) hours a day, seven
(7) days a week and (ii) to the Premises twenty four (24) hours a day, seven
(7) days a week.

3. Term.

3.1 Term. The Commencement Date, Expiration Date, and Term of this Lease are as
specified in Paragraph 1.3.

3.2 Delay in Possession. If for any reason Landlord cannot deliver possession of
the Premises to Tenant by the Commencement Date, Landlord shall not be subject
to any liability therefor, nor shall such failure affect the validity of this
Lease or the obligations of Tenant hereunder. In such case, Tenant shall not,
except as otherwise provided herein, be obligated to pay Rent or perform any
other obligation of Tenant under the terms of this Lease until Landlord delivers
possession of the Premises to Tenant.

3.3 Commencement Date Certificate. At the request of Landlord, Tenant shall
execute and deliver to Landlord a completed certificate (“Commencement Date
Certificate”) in the form attached hereto as Exhibit B.

4. Rent.

4.1 Base Rent. Tenant shall pay to Landlord Base Rent and other monetary
obligations of Tenant to Landlord under the terms of this Lease (such other
monetary obligations are herein referred to as “Additional Rent”) in lawful
money of the United States, without offset or deduction, in advance on or before
the first day of each month of the Term; provided, except as set forth in
Paragraph 1.4 above, Tenant shall not be obligated to pay Base Rent for the
first five (5) months and sixteen (16) days following the Commencement Date.
Base Rent and Additional Rent for any period during the term hereof which is for
less than one full month shall be prorated based upon the actual number of days
of the month involved. Payment of Base Rent and Additional Rent shall be made to
Landlord at its address stated herein or to such other persons or at such other
addresses as Landlord may from time to time designate in writing to Tenant. Base
Rent and Additional Rent are collectively referred to as “Rent.” All monetary
obligations of Tenant to Landlord under the terms of this Lease are deemed to be
Rent.

4.2 Operating Expenses. Commencing on the Rent Commencement Date, Tenant shall
pay to Landlord on the first (1st) day of each month during the Term hereof, in
addition to the Base Rent, Tenant’s Share of all Operating Expenses in
accordance with the following provisions.

(a) “Operating Expenses” are all costs incurred by Landlord relating to the
ownership and/or operation of the Industrial Center, Phase, Building, and
Premises including, but not limited to, the following:

(i) Expenses relating to the ownership, management, maintenance, repair,
replacement and/or operation of the Common Areas, including, without limitation,
parking areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, driveways, rail spurs, landscaped areas, striping, bumpers,
irrigation systems, drainage systems, lighting facilities, fences and gates,
exterior signs, and/or tenant directories.

(ii) Water, gas, electricity, telephone, and other utilities not paid for
directly by tenants of the Industrial Center.

 

3

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

(iii) Trash disposal, snow removal, security and the management and
administration of any and all portions of the Industrial Center, including,
without limitation, a property management fee, accounting, auditing, billing,
postage, salaries and benefits for clerical and supervisory employees, whether
located at the Industrial Center or off-site, payroll taxes and legal and
accounting costs and all fees, licenses and permits related to the ownership,
operation and management of the Industrial Center;

(iv) Reserves set aside for maintenance, repair and replacements of improvements
within the Industrial Center.

(v) Real Property Taxes.

(vi) Premiums and all applicable deductibles for the insurance policies
maintained by Landlord under Paragraph 8 below (excluding the premiums and
deductibles paid by Tenant to maintain the insurance coverage Tenant is required
to maintain pursuant to Paragraph 8.2(a) below).

(vii) Environmental monitoring and insurance programs.

(viii) Monthly amortization of capital improvements to any portion of the
Industrial Center which are not expensed by Landlord, including any capital
improvements made pursuant to Paragraph 7.2 below which are subject to
reimbursement under this Paragraph 4.2. The monthly amortization of any such
capital improvement shall be the sum of the (a) quotient obtained by dividing
the cost of the capital improvement by Landlord’s reasonable estimate of the
number of months of useful life of such improvement plus (b) an amount equal to
the cost of the capital improvement with interest thereon at the lesser of
10% per annum or the maximum interest rate permitted by law.

(ix) Maintenance of the Industrial Center, including, but not limited to,
painting, caulking, and repair and replacement of Building components,
including, but not limited to, roof membrane, elevators, and fire detection and
sprinkler systems.

(x) Heating, ventilating, and air conditioning systems (“HVAC”) the costs for
which are not the sole responsibility of Tenant or another tenant of the
Industrial Center.

(b) Tenant’s Share of Operating Expenses that are not specifically attributed to
the Premises, Building or Phase (“Common Area Operating Expenses”) shall be that
percentage shown in Paragraph 1.5(a). Tenant’s Share of Operating Expenses that
are attributable to the Building (“Building Operating Expenses”) shall be that
percentage shown in Paragraph 1.5(b). Tenant’s Share of Phase Operating Expenses
that are attributable to the Phase (“Phase Operating Expenses”) shall be that
percentage shown in Paragraph 1.5(c). Landlord, in its sole discretion, shall
determine which Operating Expenses are Common Area Operating Expenses, Building
Operating Expenses, Phase Operating Expenses or expenses to be entirely borne by
Tenant.

(c) The inclusion of the improvements, facilities, and services set forth in
Subparagraph 4.2(a) shall not impose any obligation upon Landlord either to have
said improvements or facilities or to provide those services.

(d) Tenant shall pay monthly in advance, on the same day that the Base Rent is
due, Tenant’s Share of the expenses set forth in Paragraph 1.6. Landlord shall
deliver to Tenant within 90 days after the expiration of each calendar year a
reasonably detailed statement showing Tenant’s Share of the actual expenses
incurred during the preceding year. If Tenant’s estimated payments under this
Paragraph 4(d) during the preceding year exceed Tenant’s Share as indicated on
said statement, Tenant shall be credited the amount of such overpayment against
Tenant’s Share of expenses next becoming due. If Tenant’s estimated payments
under this Paragraph 4.2(d) during said preceding year were less than Tenant’s
Share as indicated on said statement, Tenant shall pay to Landlord the amount of
the deficiency within 10 days after delivery by Landlord to Tenant of said
statement. At any time following at least ten (10) days written notice to
Tenant, Landlord may adjust the amount of the estimated Tenant’s Share of
expenses to reflect Landlord’s estimate of such expenses for the year.

                (e) Notwithstanding anything to the contrary contained herein,
for purposes of this Lease, the term “Operating Expenses” shall not include the
following: (i) costs (including permit, license, and inspection fees) incurred
in renovating, improving, decorating, painting, or redecorating vacant space or
space for other tenants within the Industrial Center; (ii) legal and auditing
fees (other than those fees reasonably incurred in connection with the ownership
and operation of all or any portion the Industrial Center); (iii) leasing
commissions, advertising expenses, and other costs incurred in connection with
the original leasing of the Industrial Center or future re-leasing of any
portion of the Industrial Center; (iv) depreciation of the Building or any other
improvements situated within the Industrial Center; (v) any items for which
Landlord is actually and directly reimbursed by any other tenant of the
Industrial Center; (vi) costs of repairs or other work necessitated by fire,
windstorm or other casualty (excluding any deductibles) and/or costs of repair
or other work necessitated by the exercise of the right of eminent domain to the
extent insurance proceeds or a condemnation award, as applicable, is actually
received by Landlord for such purposes; provided, such costs of repairs or other
work shall be paid by the parties in accordance with the provisions of Sections
7, 8 and 9 below; (vii) other than any interest charges as expressly provided
for in this Lease, any interest or payments on any financing for any portion of
the Industrial Center, interest and penalties incurred as a result of Landlord’s
late payment of any invoice (provided that Tenant pays Tenant’s Share of
expenses to Landlord when due as set forth herein), and any bad debt loss, rent
loss or reserves for same; (viii) any payments under a ground lease or master
lease; (ix) any capital improvements, unless such capital improvements are made
(a) in order to replace any building equipment needed to operate the Building or
Industrial Center at the same quality levels (or levels of efficiency) as prior
to the replacement, or (b) with the intention of reducing the costs of the
operations of the Building and/or Industrial Center, or (c) to comply with
government

 

4

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

regulations, laws, or ordinances including, but not limited to the Americans
with Disabilities Act, which first came into effect following the Commencement
Date; (x) costs incurred because Landlord or another tenant actually violated
the terms and conditions of any lease for premises within the Industrial Center
or due to Landlord’s gross negligence or willful misconduct; (xi) any items for
which Landlord is actually reimbursed by insurance or by direct reimbursement by
any other tenant of the Industrial Center; (xii) costs associated with the
investigation and/or remediation of Hazardous Substances (hereafter defined)
present in, on or about any portion of the Industrial Center, unless such costs
and expenses are the responsibility of Tenant as provided in Paragraph 6.2
hereof; (xiii) Landlord’s cost for the repairs and maintenance items set forth
in the first (1st) sentence (and subject to the terms) of Paragraph 7.2;
(xiv) overhead and profit increment paid to Landlord or to subsidiaries or
affiliates of Landlord for goods and/or services in the Industrial Center to the
extent the same exceeds the costs of such by unaffiliated third parties on a
competitive basis; or any costs included in Operating Expenses representing an
amount paid to a person, firm, corporation or other entity related to Landlord
which is in excess of the amount which would have been paid in the absence of
such relationship; (xv) the cost of correcting any building code or other code
violations which were violations prior to the Commencement Date of this Lease;
and (xvi) wages, salaries, or other compensation paid to any executive employees
of Landlord above the grade of building manager.

(f) After delivery to Landlord of at least thirty (30) days’ prior written
notice, Tenant, at its sole cost and expense through any accountant designated
by it, shall have the right to examine and/or audit the books and records
evidencing such expenses for the previous one (1) calendar year, during
Landlord’s reasonable business hours but not more frequently than once during
any calendar year. Tenant may not compensate any such accountant on a
contingency fee basis. The results of any such audit (and any negotiations
between the parties related thereto) shall be maintained strictly confidential
by Tenant, its lawyers and its accounting firm and shall not be disclosed,
published or otherwise disseminated to any other party other than to Landlord
and its authorized agents, except as otherwise required by Applicable
Requirements or court order. Landlord and Tenant each shall use its commercially
reasonable efforts to cooperate in such negotiations and to promptly resolve any
discrepancies between Landlord and Tenant in the accounting of such expenses.

5. Security Deposit. Tenant shall deposit with Landlord upon Tenant’s execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Tenant’s
faithful performance of Tenant’s obligations under this Lease. If Tenant fails
to pay Base Rent or Additional Rent or otherwise defaults under this Lease (as
defined in Paragraph 13.1), Landlord may use the Security Deposit for the
payment of any amount due Landlord or to reimburse or compensate Landlord for
any liability, cost, expense, loss, or damage (including reasonable attorneys’
fees) which Landlord may suffer or incur by reason thereof. Tenant shall on
demand pay Landlord the amount so used or applied so as to restore the Security
Deposit to the amount set forth in Paragraph 1.7. Landlord shall not be required
to keep all or any part of the Security Deposit separate from its general
accounts. Landlord shall, at the expiration or earlier termination of the Term
hereof and after Tenant has vacated the Premises, return to Tenant that portion
of the Security Deposit not used or applied by Landlord. No part of the Security
Deposit shall be considered to be held in trust, to bear interest, or to be
prepayment for any monies to be paid by Tenant under this Lease.

6. Use.

6.1 Permitted Use. Tenant shall use and occupy the Premises only for the
Permitted Use set forth in Paragraph 1.8. Tenant shall not commit any nuisance,
permit the emission of any objectionable noise or odor, suffer any waste, make
any use of the Premises which is contrary to any law or ordinance, or which will
invalidate or increase the premiums for any of Landlord’s insurance. Tenant
shall not service, maintain, or repair vehicles on the Premises, Building, or
Common Areas. Tenant shall not store foods, pallets, drums, or any other
materials outside the Premises. Tenant’s use is subject to, and at all times
Tenant shall comply with any and all Applicable Requirements, defined below.
Landlord reserves to itself the right, from time to time, to grant, without the
consent of Tenant, such easements, rights and dedications that Landlord deems
reasonably necessary, and to cause the recordation of parcel or subdivision maps
and/or restrictions, so long as such easements, rights, dedications, maps and
restrictions, as applicable, do not materially and adversely interfere with
Tenant’s operations in the Premises. Tenant agrees to sign any documents
reasonably requested by Landlord to effectuate any such easements, rights,
dedications, maps or restrictions. Tenant shall not initiate, submit an
application for, or otherwise request, any land use approvals or entitlements
with respect to the Premises or any other portion of the Industrial Center,
including without limitation, any variance, conditional use permit or rezoning,
without first obtaining Landlord’s prior written consent thereto, which consent
may be given or withheld in Landlord’s sole discretion.

6.2 Hazardous Substances.

                (a) Reportable Uses Require Consent. The term, “Hazardous
Substance,” as used in this Lease, shall mean any product, substance, chemical,
material, or waste whose presence, nature, quantity, and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release, or
effect, either by itself or in combination with other materials expected to be
on the Premises, is either: (i) potentially injurious to the public health,
safety or welfare, the environment, or the Premises; (ii) regulated or monitored
by any governmental authority; or (iii) a basis for potential liability of
Landlord to any governmental agency or third party under any applicable statute
or common law theory. Hazardous Substance shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil, or any products or by-products
thereof. Tenant shall not engage in any activity in or about the Premises which
constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances
without the express prior written consent of Landlord and compliance in a timely
manner (at Tenant’s sole cost and expense) with all Applicable Requirements (as
defined in Paragraph 6.3). “Reportable Use” shall mean (i) the installation or
use of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration, or
business plan is required to be filed with, any governmental authority, and
(iii) the presence in, on, or about the Premises of a Hazardous Substance with
respect to which any Applicable Requirements

 

5

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

require that a notice be given to persons entering or occupying the Premises or
neighboring properties. Notwithstanding the foregoing, Tenant may, without
Landlord’s prior consent, but upon notice to Landlord and in compliance with all
Applicable Requirements, use any ordinary and customary materials reasonably
required to be used by Tenant in the normal course of the Permitted Use, so long
as such use is not a Reportable Use and does not expose the Premises or
neighboring properties to any meaningful risk of contamination or damage, or
expose Landlord to any liability therefor. In addition, Landlord may (but
without any obligation to do so) condition its consent to any Reportable Use of
any Hazardous Substance by Tenant upon Tenant’s giving Landlord such additional
assurances as Landlord, in its reasonable discretion, deems necessary to protect
itself, the public, the Premises, and the environment against damage,
contamination, injury, and/or liability therefor, including but not limited to
the installation (and, at Landlord’s option, removal on or before Lease
expiration or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements) and/or the deposit
of an additional Security Deposit.

(b) Duty to Inform Landlord. If Tenant knows, or has reasonable cause to
believe, that a Hazardous Substance is located in, under, or about the Premises
or the Building, Tenant shall immediately give Landlord written notice thereof,
together with a copy of any statement, report, notice, registration,
application, permit, business plan, license, claim, action, or proceeding given
to, or received from, any governmental authority or private party concerning the
presence, spill, release, discharge of, or exposure to such Hazardous Substance.
Tenant shall not cause or permit any Hazardous Substance to be spilled or
released in, on, under, or about the Premises (including, without limitation,
through the plumbing or sanitary sewer system).

(c) Indemnification. Tenant shall indemnify, protect, defend, and hold Landlord,
Landlord’s affiliates, Lenders, and the officers, directors, shareholders,
partners, employees, managers, independent contractors, attorneys, and agents of
the foregoing (“Landlord Entities”) and the Premises harmless from and against
any and all damages, liabilities, judgments, costs, claims, liens, expenses,
penalties, loss of permits, and reasonable attorneys’ and consultants’ fees
arising out of or involving any Hazardous Substance on or brought onto the
Premises by or for Tenant or by any of Tenant’s employees, agents, contractors,
servants, visitors, suppliers, or invitees (such employees, agents, contractors,
servants, visitors, suppliers, and invitees as herein collectively referred to
as “Tenant Entities”). Tenant’s obligations under this Paragraph 6.2(c) shall
include, but not be limited to, the effects of any contamination or injury to
person, property, or the environment created or suffered by Tenant, and the cost
of investigation (including reasonable consultants’ and attorneys’ fees and
testing), removal, remediation, restoration and/or abatement thereof, or of any
contamination therein involved. Tenant’s obligations under this Paragraph 6.2(c)
shall survive the Expiration Date or earlier termination of this Lease.

6.3 Tenant’s Compliance with Requirements. Tenant shall, at Tenant’s sole cost
and expense, fully, diligently, and in a timely manner comply with all
“Applicable Requirements,” which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements, and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Landlord’s
engineers and/or consultants, relating in any manner to the Premises (including
but not limited to matters pertaining to (a) industrial hygiene,
(b) environmental conditions on, in, under, or about the Premises, including
soil and groundwater conditions, and (c) the use, generation, manufacture,
production, installation, maintenance, removal, transportation, storage, spill,
or release of any Hazardous Substance), now in effect or which may hereafter
come into effect. Tenant shall, within 5 days after receipt of Landlord’s
written request, provide Landlord with copies of all documents and information
evidencing Tenant’s compliance with any Applicable Requirements, and shall
immediately upon receipt notify Landlord in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint, or report pertaining to or involving failure by Tenant or
the Premises to comply with any Applicable Requirements.

6.4 Inspection; Compliance with Law. In addition to Landlord’s environmental
monitoring and insurance program, the cost of which is included in Operating
Expenses, Landlord and the holders of any mortgages, deeds of trust, or ground
leases on the Premises (“Lenders”) shall have the right to enter the Premises at
any time in the case of an emergency, and otherwise at reasonable times, for the
purpose of inspecting the condition of the Premises and for verifying compliance
by Tenant with this Lease and all Applicable Requirements; provided, however,
Tenant shall have the right to have a representative present during such
inspections and such inspections shall occur upon not less than 48 hours notice
during normal business hours. It is further agreed that Landlord shall have the
right to use any and all means Landlord deems necessary to enter the Premises in
an emergency and in the case of emergency advance notice shall not be required,
provided that Landlord agrees to use its commercially reasonable efforts to
contact Tenant’s 24/7 security number (650-269-8434) to notify Tenant of the
emergency. Landlord shall use commercially reasonable efforts to minimize any
interference with Tenant’s business operations during any entry into the
Premises. Landlord shall be entitled to employ experts and/or consultants in
connection therewith to advise Landlord with respect to Tenant’s installation,
operation, use, monitoring, maintenance, or removal of any Hazardous Substance
on or from the Premises. The cost and expenses of any such inspections shall be
paid by the party requesting same unless a violation of Applicable Requirements
exists or is imminent, or the inspection is requested or ordered by a
governmental authority. Tenant shall upon request reimburse Landlord or
Landlord’s Lender, as the case may be, for the costs and expenses of such
inspections.

6.5 Tenant Move-in Questionnaire. Prior to executing this Lease, Tenant has
completed, executed and delivered to Landlord Tenant’s Move-in and Lease Renewal
Environmental Questionnaire (the “Tenant Move-in Questionnaire”), a copy of
which is attached hereto as Exhibit C and incorporated herein by this reference.
Tenant covenants, represents and warrants to Landlord that the information on
the Tenant Move-in Questionnaire is true and correct and accurately describes
the use(s) of Hazardous Substances which will be made and/or used on the
Premises by Tenant. Subject to all of the terms and conditions of this Lease,
Landlord consents to Tenant’s use of such Hazardous Substances.

 

6

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

6.6 Exculpation. Tenant shall neither be liable for nor otherwise obligated to
Landlord under any provision of this Lease with respect to (i) any claim,
remediation obligation, investigation obligation, liability, cause of action,
attorney’s fees, consultants’ cost, expense or damage resulting from any
Hazardous Substance present in, on or about the Premises, the Building or the
Industrial Center to the extent neither caused nor otherwise permitted, directly
or indirectly, by Tenant or the Tenant Entities; or (ii) the removal,
investigation, monitoring or remediation of any Hazardous Substance present in,
on or about the Premises, the Building or the Industrial Center caused by any
source, including third parties other than Tenant and the Tenant Entities, as a
result of or in connection with the acts or omissions of persons other than
Tenant or the Tenant Entities; provided, however, Tenant shall be fully liable
for and otherwise obligated to Landlord under the provisions of this Lease for
all liabilities, costs, damages, penalties, claims, judgments, expenses
(including without limitation, reasonable attorneys’ and experts’ fees and
costs) and losses to the extent (a) Tenant or any of the Tenant Entities
contributes to the presence of such Hazardous Substances or Tenant and/or any of
the Tenant Entities exacerbates the conditions caused by such Hazardous
Substances, or (b) Tenant and/or the Tenant Entities allows or permits persons
over which Tenant or any of the Tenant Entities has control and/or for which
Tenant or any of the Tenant Entities are legally responsible for, to cause such
Hazardous Substances to be present in, on, under, through or about any portion
of the Premises, the Building or the Industrial Center, or does not take all
reasonably appropriate actions to prevent such persons over which Tenant or any
of the Tenant Entities has control and/or for which Tenant or any of the Tenant
Entities are legally responsible from causing the presence of Hazardous
Substances in, on, under, through or about any portion of the Premises, the
Building or the Industrial Center.

6.7 Disclosure. The land described herein contains residual Hazardous
Substances. Such condition renders the land and the Landlord, Tenant or other
possessor of the land subject to requirements, restrictions, provisions, and
liabilities contained in Chapter 6.5 and Chapter 6.8 of Division 20 of the
Health and Safety Code, as same may be amended from time, and any successor
statutes thereof. This statement is not a declaration that a hazard to public
health, safety and welfare exists.

6.8 Landlord Indemnification. With respect to only those Hazardous Substances
present on, in or under the Industrial Center as of the date of this Lease (the
“Existing Hazardous Substances”), Landlord agrees to indemnify, defend (with
counsel reasonably acceptable to Tenant) and hold Tenant harmless from and
against any and all claims, judgments, damages, penalties, fines, liabilities,
losses, suits, administrative proceedings and costs (including, but not limited
to, reasonable attorneys’ and consultant fees and court costs), arising at any
time during or after the Term of this Lease, to the extent arising from (1) any
of the Existing Hazardous Substances and/or (2) the removal, investigation,
monitoring or remediation of any of the Existing Hazardous Substances; provided,
however, Landlord shall not indemnify, defend or hold Tenant harmless to the
extent (x) Tenant or any of the Tenant Entities contributes to or has
contributed to the presence of such Existing Hazardous Substances or Tenant
and/or any of the Tenant Entities exacerbates the conditions caused by such
Existing Hazardous Substances, or (y) Tenant and/or any of the Tenant Entities
allows or permits persons over which Tenant or any of the Tenant Entities has
control and/or for which Tenant or any of the Tenant Entities are legally
responsible for, to cause such Existing Hazardous Substances to be present in,
on, under, through or about any portion of the Premises, the Building or the
Industrial Center, or does not take all reasonably appropriate actions to
prevent such persons over which Tenant or any of the Tenant Entities has control
and/or for which Tenant or any of the Tenant Entities are legally responsible
from causing the presence of Existing Hazardous Substances in, on, under,
through or about any portion of the Premises, the Building or the Industrial
Center. Landlord’s obligations under this Paragraph 6.8 shall survive the
Expiration Date or earlier termination of this Lease.

7. Maintenance, Repairs, Trade Fixtures and Alterations.

7.1 Tenant’s Obligations. Subject to the provisions of Paragraph 7.2 (Landlord’s
Obligations), Paragraph 9 (Damage or Destruction), and Paragraph 14
(Condemnation), Tenant shall, at Tenant’s sole cost and expense and at all
times, keep the Premises and every part thereof in good order, condition, and
repair (whether or not such portion of the Premises requiring repair, or the
means of repairing the same, are reasonably or readily accessible to Tenant and
whether or not the need for such repairs occurs as a result of Tenant’s use, any
prior use, the elements, or the age of such portion of the Premises) including,
without limiting the generality of the foregoing, all equipment or facilities
specifically serving the Premises, such as plumbing, heating, ventilating, air
conditioning, electrical, lighting facilities, boilers, fired or unfired
pressure vessels, fire hose connectors if within the Premises, fixtures,
interior walls, interior surfaces of exterior walls, ceilings, floors, windows,
doors, plate glass, and skylights, but excluding any items which are the
responsibility of Landlord pursuant to Paragraph 7.2 below. Tenant’s obligations
shall include restorations, replacements, or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order,
condition, and state of repair. Subject to the terms of Paragraph 8.4 of this
Lease, Tenant shall also be solely responsible for the cost of all repairs and
replacements caused by the negligent acts or omissions or intentional misconduct
by Tenant or Tenant’s employees, contractors, agents, guests or invitees. If
Tenant refuses or neglects to perform its obligations under this paragraph to
the reasonable satisfaction of Landlord, Landlord may, but without obligation to
do so, at any time perform the same without Landlord having any liability to
Tenant for any loss or damage that may accrue to Tenant’s personal property or
equipment (“Tenant’s Property”) or to Tenant’s business by reason thereof. If
Landlord performs any such obligations, Tenant shall pay to Landlord, as
Additional Rent, Landlord’s costs and expenses incurred therefor.

7.2 Landlord’s Obligations. Subject to the provisions of Paragraph 6 (Use),
Paragraph 7.1 (Tenant’s Obligations), Paragraph 9 (Damage or Destruction), and
Paragraph 14 (Condemnation), Landlord, at its expense and not subject to the
reimbursement requirements of Paragraph 4.2, shall maintain and repair the roof
structure, foundations and the structure of the floors and of the exterior walls
of the Building. Landlord, subject to reimbursement pursuant to Paragraph 4.2,
shall maintain and repair the Building roof membrane, Common Areas, and utility
systems within the Industrial Center which are outside of the Premises
(including, without limitation, fire protection services and plumbing,
mechanical (including HVAC) and electrical systems serving the Building but
excluding the plumbing, mechanical and electrical systems exclusively serving
the Premises), and the parking areas, pavement, landscaping, sprinkler systems,

 

7

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

sidewalks, driveways, curbs and lighting systems in the Common Areas. In
addition, Landlord may, in Landlord’s sole discretion, and at Tenant’s sole
cost, elect to contract for all or any portion of the maintenance, repair and/or
replacement of the HVAC systems serving the Premises.

7.3 Alterations. Tenant shall not install any signs, fixtures, improvements, nor
make or permit any other alterations or additions (individually, an
“Alteration”, and collectively, the “Alterations”) to the Premises without the
prior written consent of Landlord, except for Alterations that cumulatively cost
less than Twenty Five Thousand Dollars ($25,000.00) and which do not affect the
Building systems or the structural integrity or structural components of the
Premises or the Building. In all events, Tenant shall deliver at least ten
(10) days prior notice to Landlord, from the date Tenant intends to commence
construction, sufficient to enable Landlord to post a Notice of
Non-Responsibility and Tenant shall obtain all permits or other governmental
approvals prior to commencing any of such work and deliver a copy of same to
Landlord. All Alterations shall be at Tenant’s sole cost and expense in
accordance with plans and specifications which have been previously submitted to
and approved in writing by Landlord, and shall be installed by a licensed,
insured, and bonded contractor (reasonably approved by Landlord) in compliance
with all applicable Laws (including, but not limited to, the ADA), and all
recorded matters and rules and regulations of the Industrial Center. In
addition, all work with respect to any Alterations must be done in a good and
workmanlike manner. Landlord’s approval of any plans, specifications or working
drawings for Tenant’s Alterations shall not create nor impose any responsibility
or liability on the part of Landlord for their completeness, design sufficiency,
or compliance with any laws, ordinances, rules and regulations of governmental
agencies or authorities. In performing the work of any such Alterations, Tenant
shall have the work performed in such a manner as not to obstruct access to the
Industrial Center, or the Common Areas for any other tenant of the Industrial
Center, and as not to obstruct the business of Landlord or other tenants in the
Industrial Center, or interfere with the labor force working in the Industrial
Center. Except with respect to the Tenant Improvements set forth in Exhibit F
attached hereto, as Additional Rent hereunder, Tenant shall reimburse Landlord,
within ten (10) days after demand, for actual and reasonable legal, engineering,
architectural, planning and other expenses incurred by Landlord in connection
with Tenant’s Alterations, plus Tenant shall pay to Landlord a fee equal to one
percent (1%) of the total cost of the Alterations. If Tenant makes any
Alterations, Tenant agrees to carry “Builder’s All Risk” insurance, in an amount
approved by Landlord and such other insurance as Landlord may require, it being
understood and agreed that all of such Alterations shall be insured by Tenant in
accordance with the terms of this Lease immediately upon completion thereof.
Tenant shall keep the Premises and the property on which the Premises are
situated free from any liens arising out of any work performed, materials
furnished or obligations incurred by or on behalf of Tenant. Tenant shall, prior
to construction of any and all Alterations, cause its contractor(s) and/or major
subcontractor(s) to provide insurance as reasonably required by Landlord, and
Tenant shall provide such assurances to Landlord, including without limitation,
waivers of lien, surety company performance bonds as Landlord shall require to
assure payment of the costs thereof to protect Landlord and the Industrial
Center from and against any loss from any mechanic’s, materialmen’s or other
liens.

7.4 Surrender/Restoration. Tenant shall surrender the Premises by the end of the
last day of the Lease term or any earlier termination date, clean and free of
debris and in good operating order, condition, and state of repair, ordinary
wear and tear excepted and in accordance with the Move Out Standards set forth
in Exhibit D to this Lease. Without limiting the generality of the above, Tenant
shall remove all Alterations designated by Landlord in Landlord’s sole
discretion, personal property, trade fixtures, and floor bolts, patch all
floors, and cause all lights to be in good operating condition, except Tenant
shall not remove Tenant Improvements described in Exhibit F to this Lease.

8. Insurance; Indemnity.

8.1 Payment of Premiums and Deductibles. The cost of the premiums and all
applicable deductibles for the insurance policies maintained by Landlord under
this Paragraph 8 shall be a Common Area Operating Expense reimbursable pursuant
to Paragraph 4.2 hereof. Premiums for policy periods commencing prior to, or
extending beyond, the term of this Lease shall be prorated to coincide with the
corresponding Commencement Date and Expiration Date.

8.2 Tenant’s Insurance.

(a) At its sole cost and expense, Tenant shall maintain in full force and effect
during the Term of the Lease the following insurance coverages insuring against
claims which may arise from or in connection with the Tenant’s operation and use
of the Premises.

(i) Commercial General Liability insurance with minimum limits of $1,000,000 per
occurrence and $3,000,000 general aggregate for bodily injury, personal injury,
and property damage. If required by Landlord, liquor liability coverage will be
included. Such insurance shall be endorsed to include Landlord and Landlord
Entities as additional insureds, shall be primary and noncontributory with any
Landlord insurance, and shall provide severability of interests between or among
insureds.

(ii) Workers’ Compensation insurance with statutory limits and Employers
Liability with a $1,000,000 per accident limit for bodily injury or disease.

(iii) Automobile Liability insurance covering all owned, nonowned, and hired
vehicles with a $1,000,000 per accident limit for bodily injury and property
damage.

(iv) Property insurance against “all risks” at least as broad as the current ISO
Special Form policy (and Tenant shall not be obligated to carry flood or
earthquake coverage provided Tenant agrees that Landlord shall not be liable for
any damage or loss arising from flood or earthquake and Tenant waives and
releases Landlord from all claims, losses, damages, liabilities, judgments and
costs arising from or related to Tenant not carrying such flood or earthquake
coverage) for loss to any tenant improvements or betterments, floor and wall
coverings, and business personal property on a full insurable replacement cost
basis with no coinsurance clause, and Business Income insurance covering at
least three (3) months of loss of income and continuing expense.

 

8

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

(b) Tenant shall deliver to Landlord certificates of all insurance reflecting
evidence of required coverages prior to initial occupancy, and annually
thereafter.

(c) Intentionally Omitted.

(d) All insurance required under Paragraph 8.2 (i) shall be issued by insurers
licensed to do business in the state in which the Premises are located and which
are rated A:VII or better by Best’s Key Rating Guide and (ii) shall be endorsed
to provide at least 30-days prior notification of cancellation in coverage to
said additional insureds.

8.3 Landlord’s Insurance. Landlord may, but shall not be obligated to, maintain
risk of direct physical loss property damage insurance coverage, including
earthquake and flood, covering the buildings within the Industrial Center,
Commercial General Liability insurance, and such other insurance in such amounts
and covering such other liability or hazards as deemed appropriate by Landlord.
The amount and scope of coverage of Landlord’s insurance shall be determined by
Landlord from time to time in its sole discretion and shall be subject to such
deductible amounts as Landlord may elect. Landlord shall have the right to
reduce or terminate any insurance or coverage.

8.4 Waiver of Subrogation. To the extent permitted by law and with permission of
their insurance carriers, Landlord and Tenant each waive any right to recover
against the other on account of any and all claims Landlord or Tenant may have
against the other with respect to property insurance actually carried, or
required to be carried hereunder, to the extent of the proceeds realized from
such insurance coverage.

8.5 Indemnity. Except to the extent caused by the gross active or gross passive
negligence or willful misconduct of Landlord or any Landlord Entity, Tenant
shall protect, defend, indemnify, and hold Landlord and Landlord Entities
harmless from and against any and all loss, claims, liability, or costs
(including court costs and reasonable attorneys’ fees) incurred by reason of:

(a) any damage to any property (including but not limited to property of any
Landlord Entity) or death, bodily, or personal injury to any person occurring in
or about the Premises, the Building, or the Industrial Center to the extent that
such injury or damage shall be caused by or arise from any actual or alleged
act, neglect, fault, or omission by or of Tenant, its agents, servants,
employees, invitees, contractors, suppliers, subtenants, or visitors;

(b) the conduct or management of any work or anything whatsoever done by the
Tenant on or about the Premises or from transactions of the Tenant concerning
the Premises;

(c) Tenant’s failure to comply with any and all governmental laws, ordinances,
and regulations applicable to the condition or use of the Premises or its
occupancy; or

(d) any breach or default on the part of Tenant in the performance of any
covenant or agreement to be performed pursuant to this Lease.

The provisions of this Paragraph 8.5 shall, with respect to any claims or
liability accruing prior to such termination, survive the Expiration Date or
earlier termination of this Lease.

8.6 Exemption of Landlord from Liability. Except to the extent caused by the
gross active or gross passive negligence or willful misconduct of Landlord or
any Landlord Entity, neither Landlord nor Landlord Entities shall be liable for
and Tenant waives any claims against Landlord and Landlord Entities for injury
or damage to the person or the property of Tenant, Tenant’s employees,
contractors, invitees, customers or any other person in or about the Premises,
Building or Industrial Center from any cause whatsoever, including, but not
limited to, damage or injury which is caused by or results from (i) fire, steam,
electricity, gas, water or rain, or from the breakage, leakage, obstruction or
other defects of pipes, fire sprinklers, wires, appliances, plumbing, heating,
ventilating, air conditioning or lighting fixtures or (ii) from the condition of
the Premises, other portions of the Building or Industrial Center. Landlord
shall not be liable for any damages arising from any act or neglect (passive or
active) of any other tenants of Landlord or any subtenant or assignee of such
other tenants nor from the failure by Landlord to enforce the provisions of any
other lease in the Industrial Center. Notwithstanding Landlord’s negligence
(active or passive), gross negligence (active or passive), or breach of this
Lease, Landlord shall under no circumstances be liable for (a) injury to
Tenant’s business, for any loss of income or profit therefrom or any indirect,
consequential or punitive damages or (b) any damage to property or injury to
persons arising from any act of God or war, violence or insurrection, including,
but not limited to, those caused by earthquakes, hurricanes, storms, drought,
floods, acts of terrorism, and/or riots.

9. Damage or Destruction.

9.1 Termination Right. Tenant shall give Landlord immediate written notice of
any damage to the Premises. Subject to the provisions of Paragraph 9.2, if the
Premises or the Building shall be damaged to such an extent that there is
substantial interference for a period exceeding one hundred eighty
(180) consecutive days with the conduct by Tenant of its business at the
Premises (provided, up to an additional sixty (60) days shall be added to such
one hundred eighty (180) consecutive day period to account for time Landlord may
require to obtain permits for such repairs), then either party, at any time
prior to commencement of repair of the Premises and following ten (10) days
written notice to the other party, may terminate this Lease effective thirty
(30) days after delivery of such notice to the other party. Within forty five
(45) days following the occurrence of such damage, Landlord shall inform Tenant
in

 

9

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

writing of Landlord’s estimate of the time required to complete repairs to the
Premises. Further, if any portion of the Premises is damaged and is not fully
covered by the aggregate of insurance proceeds received by Landlord and any
applicable deductible or if the holder of any indebtedness secured by the
Premises requires that the insurance proceeds be applied to such indebtedness,
and Tenant does not voluntarily contribute any shortfall thereof to Landlord,
then Landlord shall have the right to terminate this Lease by delivering written
notice of termination to Tenant within sixty (60) days after the date of notice
to Tenant of any such event. Such termination shall not excuse the performance
by Tenant of those covenants which under the terms hereof survive termination.
Rent shall be abated in proportion to the degree of interference during the
period that there is such substantial interference with the conduct of Tenant’s
business at the Premises. Abatement of rent and Tenant’s right of termination
pursuant to this provision shall be Tenant’s sole remedy with respect to any
such damage regardless of the cause thereof.

9.2 Damage Caused by Tenant. Tenant’s termination rights under Paragraph 9.1
shall not apply if the damage to the Premises or Building is the result of any
act or omission of Tenant or of any of Tenant’s agents, employees, customers,
invitees, or contractors.

10. Real Property Taxes.

10.1 Payment of Real Property Taxes. Landlord shall pay the Real Property Taxes
due and payable during the term of this Lease and, except as otherwise provided
in Paragraph 10.3, such payments shall be a Common Area Operating Expense
reimbursable pursuant to Paragraph 4.2.

10.2 Real Property Tax Definition. As used herein, the term “Real Property
Taxes” is any form of tax or assessment, general, special, ordinary, or
extraordinary, imposed or levied upon (a) the Industrial Center or Building,
(b) any interest of Landlord in the Industrial Center or Building,
(c) Landlord’s right to rent or other income from the Industrial Center or
Building, and/or (d) Landlord’s business of leasing the Premises. Real Property
Taxes include (a) any license fee, commercial rental tax, excise tax,
improvement bond or bonds, levy, or tax; (b) any tax or charge which replaces or
is in addition to any of such above-described “Real Property Taxes,” and (c) any
fees, expenses, or costs (including reasonable attorneys’ fees, expert fees, and
the like) incurred by Landlord in protesting or contesting any assessments
levied or any tax rate. Notwithstanding the foregoing, Real Property Taxes shall
not include any income taxes levied upon Landlord’s income from leasing the
Premises or any other property in the Industrial Center. Real Property Taxes for
tax years commencing prior to, or extending beyond, the term of this Lease shall
be prorated to coincide with the corresponding Commencement Date and Expiration
Date.

10.3 Additional Improvements. Operating Expenses shall not include Real Property
Taxes attributable to improvements placed upon the Industrial Center by other
tenants or by Landlord for the exclusive enjoyment of such other tenants. Tenant
shall, however, pay to Landlord at the time Operating Expenses are payable under
Paragraph 4.2, the entirety of any increase in Real Property Taxes if assessed
by reason of improvements placed upon the Premises by Tenant or at Tenant’s
request.

10.4 Joint Assessment. If the Building is not separately assessed, Real Property
Taxes allocated to the Building shall be a pro rata portion of the Real Property
Taxes for all of the land and improvements included within the tax parcel
assessed.

10.5 Tenant’s Property Taxes. Tenant shall pay prior to delinquency all taxes
assessed against and levied upon Tenant’s improvements, fixtures, furnishings,
equipment, and all personal property of Tenant contained in the Premises or
stored within the Industrial Center.

11. Utilities. Tenant shall pay directly for all utilities and services supplied
to the Premises, including but not limited to electricity, telephone, security,
gas, and cleaning of the Premises, together with any taxes thereon. For any such
utility fees or services that are not billed or metered separately to Tenant,
including without limitation, water and sewer charges, and garbage and waste
disposal (collectively, “Utility Expenses”), Tenant shall pay to Landlord
Tenant’s Share of Utility Expenses. If Landlord reasonably determines that
Tenant’s Share of Utility Expenses is not commensurate with Tenant’s use of such
services, Tenant shall pay to Landlord the amount which is attributable to
Tenant’s use of the utilities or similar services, as reasonably estimated and
determined by Landlord, based upon factors such as size of the Premises and
intensity of use of such utilities by Tenant such that Tenant shall pay the
portion of such charges reasonably consistent with Tenant’s use of such
utilities and similar services. If Tenant disputes any such estimate or
determination, then Tenant shall either pay the estimated amount or cause the
Premises to be separately metered at Tenant’s sole expense. Tenant shall also
pay Tenant’s Share of any assessments, charges, and fees included within any tax
bill for the lot on which the Premises are situated, including without
limitation, entitlement fees, allocation unit fees, sewer use fees, and any
other similar fees or charges.

12. Assignment and Subleasing.

12.1 Prohibition. Tenant shall not, without the prior written consent of
Landlord, assign, mortgage, hypothecate, encumber, grant any license or
concession, pledge or otherwise transfer this Lease or any interest herein,
permit any assignment or other such transfer of this Lease or any interest
hereunder by operation of law, sublet the Premises or any part thereof, or
permit the use of the Premises by any persons other than Tenant and Tenant’s
Entities (all of the foregoing are sometimes referred to collectively as
“Transfers” and any person to whom any Transfer is made or sought to be made is
sometimes referred to as a “Transferee”). No consent to any Transfer shall
constitute a waiver of the provisions of this Section, and all subsequent
Transfers may be made only with the prior written consent of Landlord, which
consent shall not be unreasonably withheld, but which consent shall be subject
to the provisions of this Section.

 

10

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

12.2 Request for Consent. If Tenant seeks to make a Transfer, Tenant shall
notify Landlord, in writing, and deliver to Landlord at least thirty (30) days
(but not more than one hundred eighty (180) days) prior to the proposed
commencement date of the Transfer (the “Proposed Effective Date”) the following
information and documents (the “Tenant’s Notice”): (i) a description of the
portion of the Premises to be transferred (the “Subject Space”); (ii) all of the
terms of the proposed Transfer including without limitation, the Proposed
Effective Date, the name and address of the proposed Transferee, and a copy of
the existing or proposed assignment, sublease or other agreement governing the
proposed Transfer; (iii) current financial statements of the proposed Transferee
certified by an officer, member, partner or owner thereof, and any such other
information as Landlord may then reasonably require, including without
limitation, audited financial statements for the previous three (3) most recent
consecutive fiscal years; (iv) the Transfer Plans and Specifications (defined
below), if any; and (v) such other information as Landlord may then reasonably
require. Tenant shall give Landlord the Tenant’s Notice by registered or
certified mail addressed to Landlord at Landlord’s Address specified in the
Basic Provisions. Within fifteen (15) business days after Landlord’s receipt of
the Tenant’s Notice (the “Landlord Response Period”) Landlord shall notify
Tenant, in writing, of its determination with respect to such requested proposed
Transfer and the election to recapture as set forth below. If Landlord does not
elect to recapture pursuant to the provisions hereof and Landlord does consent
to the requested proposed Transfer, Tenant may thereafter assign its interests
in and to this Lease or sublease all or a portion of the Premises to the same
party and on the same terms as set forth in the Tenant’s Notice. If Landlord
fails to respond to Tenant’s Notice within Landlord’s Response Period, then,
after Tenant delivers to Landlord fifteen (15) business days written notice (the
“Second Response Period”) and Landlord fails to respond thereto prior to the end
of the Second Response Period, the proposed Transfer shall then be deemed
approved by Landlord.

12.3 Criteria for Consent. Tenant acknowledges and agrees that, among other
circumstances for which Landlord could reasonably withhold consent to a proposed
Transfer, it shall be reasonable for Landlord to withhold its consent where
(a) Tenant is or has been in default of its obligations under this Lease beyond
applicable notice and cure periods, (b) the use to be made of the Premises by
the proposed Transferee is prohibited under this Lease or differs from the uses
permitted under this Lease, (c) the proposed Transferee or its business is
subject to compliance with additional requirements of the ADA beyond those
requirements which are applicable to Tenant, unless the proposed Transferee
shall (1) first deliver plans and specifications for complying with such
additional requirements (the “Transfer Plans and Specifications”) and obtain
Landlord’s written consent thereto, and (2) comply with all Landlord’s
conditions contained in such consent, (d) the proposed Transferee does not
intend to occupy a substantial portion of the Premises assigned or sublet to it,
(e) Landlord reasonably disapproves of the proposed Transferee’s business
operating ability or history or creditworthiness or the character of the
business to be conducted by the proposed Transferee at the Premises, (f) the
proposed Transferee is a governmental agency or unit or an existing tenant in
the Industrial Center, (g) the proposed Transfer would violate any “exclusive”
rights of any occupants in the Industrial Center or cause Landlord to violate
another agreement or obligation to which Landlord is a party or otherwise
subject, (h) Landlord otherwise reasonably determines that the proposed Transfer
would have the effect of decreasing the value of the Building or the Industrial
Center, or increasing the expenses associated with operating, maintaining and
repairing the Industrial Center, (i) either the proposed Transferee, or any
person or entity which directly or indirectly, controls, is controlled by, or is
under common control with, the proposed Transferee: (i) occupies space in the
Building at the time of the request for consent, (ii) is negotiating with
Landlord to lease space in the Building at such time, or (iii) has negotiated
with Landlord during the 12 month period immediately preceding the Tenant’s
Notice, or (j) the proposed Transferee will use, store or handle Hazardous
Substances in or about the Premises of a type, nature or quantity not then
acceptable to Landlord.

        12.4 Effectiveness of Transfer and Continuing Obligations. Prior to the
date on which any permitted Transfer becomes effective, Tenant shall deliver to
Landlord (i) a counterpart of the fully executed Transfer document, (ii) an
executed Certificate substantially in the form of Exhibit C hereto (the
“Transferee HazMat Certificate”), and (iii) Landlord’s form of Consent to
Assignment or Consent to Sublease, as applicable, executed by Tenant and the
Transferee in which each of Tenant and the Transferee confirms its obligations
pursuant to this Lease. Failure or refusal of a Transferee to execute any such
consent instrument shall not release or discharge the Transferee from its
obligation to do so or from any liability as provided herein. The voluntary,
involuntary or other surrender of this Lease by Tenant, or a mutual cancellation
by Landlord and Tenant, shall not work a merger, and any such surrender or
cancellation shall, at the option of Landlord, either terminate all or any
existing subleases or operate as an assignment to Landlord of any or all of such
subleases. Each permitted Transferee shall assume and be deemed to assume this
Lease and shall be and remain liable jointly and severally with Tenant for
payment of Rent and for the due performance of, and compliance with all the
terms, covenants, conditions and agreements herein contained on Tenant’s part to
be performed or complied with, for the Term of this Lease. No Transfer shall
affect the continuing primary liability of Tenant (which, following assignment,
shall be joint and several with the assignee), and Tenant shall not be released
from performing any of the terms, covenants and conditions of this Lease. An
assignee of Tenant shall become directly liable to Landlord for all obligations
of Tenant hereunder, but no Transfer by Tenant shall relieve Tenant of any
obligations or liability under this Lease whether occurring before or after such
consent, assignment, subletting or other Transfer. The acceptance of any or all
of the Rent by Landlord from any other person (whether or not such person is an
occupant of the Premises) shall not be deemed to be a waiver by Landlord of any
provision of this Lease or to be a consent to any Transfer. Except as set forth
in Paragraph 12.9 below, if Tenant is a business entity, the direct or indirect
transfer of more than fifty percent (50%) of the ownership interest of the
entity (whether in a single transaction or in the aggregate through more than
one transaction) shall be deemed a Transfer and shall be subject to all the
provisions hereof and in such event, it shall be a condition to Landlord’s
consent to such ownership change that such entities or persons acquiring such
ownership interest assume, as a primary obligor, all rights and obligations of
Tenant under this Lease (and such entities and persons shall execute all
documents reasonably required to effectuate such assumption). Any and all
options, first rights of refusal, tenant improvement allowances and other
similar rights granted to Tenant in this Lease, if any, shall not be assignable
by Tenant unless expressly authorized in writing by Landlord (which shall be in
Landlord’s sole discretion). Except as set forth in Paragraph 12.9 below, any
transfer made without Landlord’s prior written consent, shall, at Landlord’s
option, be null, void and of no effect, and shall, at Landlord’s option,
constitute a material default by Tenant of this Lease. As Additional Rent
hereunder, Tenant shall pay to Landlord each time it requests a Transfer, an
administrative fee in the amount of two thousand five hundred dollars ($2,500)
and, in addition, Tenant shall promptly reimburse Landlord for actual legal and
other expenses incurred by Landlord in connection with any actual or proposed
Transfer.

 

11

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

12.5 Rent Adjustment/Recapture. In the event the proposed Transfer (together
with any prior Transfers) is of an amount of square footage equal to or greater
than fifty percent (50%) of the Premises, Landlord shall have the right to
recapture the Subject Space described in the Tenant’s Notice. If such recapture
notice is given, it shall serve to terminate this Lease with respect to the
proposed Subject Space, or, if the proposed Subject Space covers all the
Premises, it shall serve to terminate the entire Term of this Lease, in either
case, as of the Proposed Effective Date. However, no termination of this Lease
with respect to part or all of the Premises shall become effective without the
prior written consent, where necessary, of the holder of each deed of trust
encumbering the Premises or any other portion of the Industrial Center. If this
Lease is terminated pursuant to the foregoing provisions with respect to less
than the entire Premises, the Rent shall be adjusted on the basis of the
proportion of rentable square feet retained by Tenant to the rentable square
feet originally demised and this Lease as so amended shall continue thereafter
in full force and effect.

12.6 Transfer Premium. If Landlord consents to a Transfer, as a condition
thereto, Tenant shall pay to Landlord monthly, as Additional Rent, at the same
time as the monthly installments of Rent are payable hereunder, fifty percent
(50%) of any Transfer Premium, after first deducting commercially reasonable
brokerage commissions and reasonable attorneys’ fees. The term “Transfer
Premium” shall mean all rent, additional rent and other consideration payable by
such Transferee which either initially or over the term of the Transfer exceeds
the Rent or pro rata portion of the Rent, as the case may be, for such space
reserved in the Lease.

12.7 Waiver. Notwithstanding any Transfer, or any indulgences, waivers or
extensions of time granted by Landlord to any Transferee, or failure by Landlord
to take action against any Transferee, Tenant agrees that Landlord may, at its
option, proceed against Tenant without having taken action against or joined
such Transferee, except that Tenant shall have the benefit of any indulgences,
waivers and extensions of time granted to any such Transferee.

12.8 Special Transfer Prohibitions. Notwithstanding anything set forth above to
the contrary, Tenant may not (a) sublet the Premises or assign this Lease to any
person or entity in which Landlord owns an interest, directly or indirectly (by
applying constructive ownership rules set forth in Section 856(d)(5) of the
Internal Revenue Code (the “Code”); or (b) sublet the Premises or assign this
Lease in any other manner which could cause any portion of the amounts received
by Landlord pursuant to this Lease or any sublease to fail to qualify as “rents
from real property” within the meaning of Section 856(d) of the Code, or which
could cause any other income received by Landlord to fail to qualify as income
described in Section 856(c)(2) of the Code.

12.9 Affiliates. The assignment or subletting by Tenant of all or any portion of
this Lease or the Premises to (i) a parent or subsidiary of Tenant, or (ii) any
person or entity which controls, is controlled by or under the common control
with Tenant, or (iii) any entity which purchases all or substantially all of the
assets of Tenant, or (iv) any entity into which Tenant is merged or consolidated
(all such persons or entities described in clauses (i), (ii), (iii) and
(iv) being sometimes herein referred to as “Affiliates”) shall not be subject to
obtaining Landlord’s prior consent and no Transfer Premium shall be payable,
provided in all instances that:

(a) any such Affiliate was not formed as a subterfuge to avoid the obligations
of this Article 12;

(b) Tenant gives Landlord prior notice of any such assignment or sublease to an
Affiliate, except solely for those assignments or subleases in connection with
which any applicable law precludes Tenant’s delivery to Landlord of prior notice
of said assignment or sublease then, in all such instances, Tenant shall deliver
to Landlord subsequent notice of said assignment or sublease within ten
(10) days following the first (1st) day on which Tenant is permitted by law to
deliver notice of such assignment or sublease to Landlord;

(c) the successor of Tenant shall have throughout the Term a tangible net worth
and net assets, in the aggregate, computed in accordance with generally accepted
accounting principles (but excluding goodwill as an asset), which is sufficient
to meet the obligations of Tenant under this Lease, as reasonably determined by
Landlord;

(d) any such assignment or sublease shall be subject to all of the terms and
provisions of this Lease, and such assignee or sublessee (i.e. any such
Affiliate), other than in the case of an Affiliate resulting from a merger or
consolidation, shall assume, in a written document reasonably satisfactory to
Landlord and delivered to Landlord upon or prior to the effective date of such
assignment or sublease, all the obligations of Tenant under this Lease; and

(e) Tenant and any guarantor shall remain fully liable for all obligations to be
performed by Tenant under this Lease.

13. Default; Remedies.

13.1 Default. The occurrence of any one of the following events shall constitute
an event of default on the part of Tenant (“Default”):

(a) The abandonment of the Premises by Tenant;

(b) Failure to pay any installment of Base Rent, Additional Rent, or any other
monies due and payable hereunder, said failure continuing for a period of five
(5) days after Landlord’s delivery of written notice to Tenant that said payment
is past due. Tenant agrees that any such written notice delivered by Landlord
shall, to the fullest extent permitted by law, serve as the statutorily required
notice under applicable law to the extent Tenant fails to cure such failure to
pay within such five (5) day period. In addition to the foregoing, Tenant agrees
to notice and service of notice as provided for in accordance with applicable
statutory requirements;

 

12

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

(c) A general assignment by Tenant for the benefit of creditors;

(d) The filing of a voluntary petition of bankruptcy by Tenant; the filing of a
voluntary petition for an arrangement; the filing of a petition, voluntary or
involuntary, for reorganization; or the filing of an involuntary petition by
Tenant’s creditors;

(e) Receivership, attachment, or other judicial seizure of the Premises or all
or substantially all of Tenant’s assets on the Premises;

(f) Failure of Tenant to maintain insurance as required by Paragraph 8.2;

(g) Any breach by Tenant of its covenants under Paragraph 6.2;

(h) Failure in the performance of any of Tenant’s covenants, agreements, or
obligations hereunder (except those failures specified as events of Default in
other Paragraphs of this Paragraph 13.1 which shall be governed by such other
Paragraphs), which failure continues for 10 days after written notice thereof
from Landlord to Tenant; provided that, if Tenant has exercised reasonable
diligence to cure such failure and such failure cannot be cured within such
10-day period despite reasonable diligence, Tenant shall not be in default under
this subparagraph unless Tenant fails thereafter diligently and continuously to
prosecute the cure to completion; and

(i) Except as set forth in Paragraph 12.9, any transfer of a substantial portion
of the assets of Tenant, unless such transfer or obligation is undertaken or
incurred in the ordinary course of Tenant’s business, or in good faith for
equivalent consideration, or with Landlord’s consent.

13.2 Remedies. In the event of any Default by Tenant, Landlord shall have any or
all of the following remedies:

(a) Termination. In the event of any Default by Tenant, then in addition to any
other remedies available to Landlord at law or in equity and under this Lease,
Landlord shall have the immediate option to terminate this Lease and all rights
of Tenant hereunder by giving written notice of such intention to terminate. In
the event that Landlord shall elect to so terminate this Lease then Landlord may
recover from Tenant:

(1) the worth at the time of award of any unpaid Rent and any other sums due and
payable which have been earned at the time of such termination; plus

(2) the worth at the time of award of the amount by which the unpaid Rent and
any other sums due and payable which would have been earned after termination
until the time of award exceeds the amount of such rental loss Tenant proves
could have been reasonably avoided; plus

(3) the worth at the time of award of the amount by which the unpaid Rent and
any other sums due and payable for the balance of the term of this Lease after
the time of award exceeds the amount of such rental loss that Tenant proves
could be reasonably avoided; plus

(4) any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant’s failure to perform its obligations under this
Lease or which in the ordinary course would be likely to result therefrom,
including, without limitation, any costs or expenses incurred by Landlord (i) in
retaking possession of the Premises; (ii) in maintaining, repairing, preserving,
restoring, replacing, cleaning, the Premises or any portion thereof, including
such acts for reletting to a new lessee or lessees; (iii) for leasing
commissions; or (iv) for any other costs reasonably necessary or reasonably
appropriate to relet the Premises; plus

(5) such reasonable attorneys’ fees incurred by Landlord as a result of a
Default, and costs in the event suit is filed by Landlord to enforce such
remedy; and plus

(6) 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 law. As used in
subparagraphs (1) and (2) above, the “worth at the time of award” is computed by
allowing interest at an annual rate equal to twelve percent (12%) per annum or
the maximum rate permitted by law, whichever is less. As used in subparagraph
(3) above, the “worth at the time of award” is computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award, plus one percent (1%). Tenant waives redemption or relief from
forfeiture under California Code of Civil Procedure Sections 1174 and 1179, or
under any other present or future law, in the event Tenant is evicted or
Landlord takes possession of the Premises by reason of any Default of Tenant
hereunder.

(b) Continuation of Lease. In the event of any Default by Tenant, then 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 (Landlord 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).

(c) Re-entry. In the event of any Default by Tenant, Landlord shall also have
the right, with or without terminating this Lease, in compliance with applicable
law, to re-enter the Premises and remove all persons and property from the
Premises; such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Tenant.

 

13

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

(d) Reletting. In the event of the abandonment of the Premises by Tenant or in
the event that Landlord shall elect to re-enter or shall take possession of the
Premises pursuant to legal proceeding or pursuant to any notice provided by law,
then if Landlord does not elect to terminate this Lease as provided in Paragraph
a, Landlord may from time to time, without terminating this Lease, relet the
Premises or any part thereof for such term or terms and at such rental or
rentals and upon such other terms and conditions as Landlord in its sole
discretion may deem advisable with the right to make alterations and repairs to
the Premises. In the event that Landlord shall elect to so relet, then rentals
received by Landlord from such reletting shall be applied in the following
order: (1) to reasonable attorneys’ fees incurred by Landlord as a result of a
Default and costs in the event suit is filed by Landlord to enforce such
remedies; (2) to the payment of any indebtedness other than Rent due hereunder
from Tenant to Landlord; (3) to the payment of any costs of such reletting;
(4) to the payment of the costs of any alterations and repairs to the Premises;
(5) to the payment of Rent due and unpaid hereunder; and (6) the residue, if
any, shall be held by Landlord and applied in payment of future Rent and other
sums payable by Tenant hereunder as the same may become due and payable
hereunder. Should that portion of such rentals received from such reletting
during any month, which is applied to the payment of Rent hereunder, be less
than the Rent payable during the month by Tenant hereunder, then Tenant shall
pay such deficiency to Landlord. Such deficiency shall be calculated and paid
monthly. Tenant shall also pay to Landlord, as soon as ascertained, any costs
and expenses incurred by Landlord in such reletting or in making such
alterations and repairs not covered by the rentals received from such reletting;
provided, Tenant shall not be obligated to Landlord for any such costs
attributable to the removal (or repair following removal) of the Tenant
Improvements described in Exhibit F.

(e) Termination. No re-entry or taking of possession of the Premises by Landlord
pursuant to this Lease shall be construed as an election to terminate this Lease
unless a written notice of such intention is given to Tenant or unless the
termination thereof is decreed by a court of competent jurisdiction.
Notwithstanding any reletting without termination by Landlord because of any
Default by Tenant, Landlord may at any time after such reletting elect to
terminate this Lease for any such Default.

(f) Cumulative Remedies. The remedies herein provided are not exclusive and
Landlord shall have any and all other remedies provided herein or by law or in
equity.

(g) No Surrender. No act or conduct of Landlord, whether consisting of the
acceptance of the keys to the Premises, or otherwise, shall be deemed to be or
constitute an acceptance of the surrender of the Premises by Tenant prior to the
expiration of the Term, and such acceptance by Landlord of surrender by Tenant
shall only flow from and must be evidenced by a written acknowledgment of
acceptance of surrender signed by Landlord. The surrender of this Lease by
Tenant, voluntarily or otherwise, shall not work a merger unless Landlord elects
in writing that such merger take place, but shall operate as an assignment to
Landlord of any and all existing subleases, or Landlord may, at its option,
elect in writing to treat such surrender as a merger terminating Tenant’s estate
under this Lease, and thereupon Landlord may terminate any or all such subleases
by notifying the sublessee of its election so to do within five (5) days after
such surrender.

(h) Notice Provisions Tenant agrees that any notice given by Landlord pursuant
to Paragraph 13.1 of the Lease shall satisfy the requirements for notice under
California Code of Civil Procedure Section 1161, and Landlord shall not be
required to give any additional notice in order to be entitled to commence an
unlawful detainer proceeding. Should Landlord prepare any notice to Tenant for
failure to pay rent, additional rent or perform any other obligation under the
Lease, Tenant shall pay to Landlord, without any further notice from Landlord,
the additional sum of $75.00 which the parties hereby agree represents a fair
and reasonable estimate of the costs Landlord will incur by reason of preparing
such notice.

13.3 Late Charges. Tenant hereby acknowledges that late payment by Tenant to
Landlord of Rent and other sums due hereunder will cause Landlord to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges. Accordingly, if any installment of Rent or other sum due
from Tenant shall not be received by Landlord or Landlord’s designee within five
(5) days after such amount shall be due, then, without any requirement for
notice to Tenant, Tenant shall pay to Landlord a late charge equal to 5% of such
overdue amount; provided, however, the foregoing late charge shall not be
applicable to the first (1st) instance of late payment of Rent by Tenant until
three (3) business days after written notice to Tenant of such late payment. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Landlord will incur by reason of late payment by Tenant.
Acceptance of such late charge by Landlord shall in no event constitute a waiver
of Tenant’s Default with respect to such overdue amount, nor prevent Landlord
from exercising any of the other rights and remedies granted hereunder. In
addition, should Landlord be unable to negotiate any payment made by Tenant on
the first attempt by Landlord and without any notice to Tenant, Tenant shall pay
to Landlord a fee of $50.00 per item which the parties hereby agree represents a
fair and reasonable estimate of the costs Landlord will incur by reason of
Landlord’s inability to negotiate such item(s).

14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of exercise of said power (all
of which are herein called “condemnation”), this Lease shall terminate as to the
part so taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than 10% of the floor area of the Premises, or
more than 25% of the portion of the Common Areas designated for Tenant’s
parking, is taken by condemnation, Tenant may, at Tenant’s option, to be
exercised in writing within 10 days after Landlord shall have given Tenant
written notice of such taking (or in the absence of such notice, within 10 days
after the condemning authority shall have taken possession), terminate this
Lease as of the date the condemning authority takes such possession. If Tenant
does not terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Premises remaining,
except that the Base Rent shall be reduced in the same proportion as the
rentable floor area of the Premises taken bears to the total rentable floor area
of the Premises and Landlord shall, if necessary, promptly proceed to restore
the Premises or the Building, as applicable, to substantially its

 

14

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

same condition prior to such partial condemnation, allowing for the reasonable
effects of such partial condemnation, and a proportionate allowance shall be
made to Tenant for the Rent corresponding to the time during which, and to the
part of the Premises of which, Tenant is deprived on account of such partial
condemnation and restoration. Landlord shall not be required to spend funds for
restoration in excess of the amount received by Landlord as compensation
awarded. No reduction of Base Rent shall occur if the condemnation does not
apply to any portion of the Premises. Any award for the taking of all or any
part of the Premises under the power of eminent domain or any payment made under
threat of the exercise of such power shall be the property of Landlord;
provided, however, that Tenant shall be entitled to any compensation, separately
awarded to Tenant, for Tenant’s relocation expenses and/or loss of Tenant’s
trade fixtures. In the event that this Lease is not terminated by reason of such
condemnation, Landlord shall to the extent of its net severance damages in the
condemnation matter, repair any damage to the Premises caused by such
condemnation authority. Tenant shall be responsible for the payment of any
amount in excess of such net severance damages required to complete such repair.

15. Estoppel Certificate and Financial Statements.

15.1 Estoppel Certificate. Each party (herein referred to as “Responding Party”)
shall within 10 business days after written notice from the other Party (the
“Requesting Party”) execute, acknowledge, and deliver to the Requesting Party,
to the extent it can truthfully do so, an estoppel certificate in a form
reasonably acceptable to the Responding Party, or any of Landlord’s lenders or
any prospective purchasers of the Premises or the Industrial Center as the case
may be, plus such additional information, confirmation, and statements as be
reasonably requested by the Requesting Party.

15.2 Financial Statement. If Landlord desires to finance, refinance, or sell the
Building, Industrial Center, or any part thereof, Tenant shall deliver to any
potential lender or purchaser designated by Landlord such financial statements
of Tenant as are prepared by Tenant in the ordinary course of business,
including but not limited to Tenant’s financial statements for the past 3 years
(if then available). All such financial statements shall be received by Landlord
and such lender or purchaser in confidence and shall be used only for the
purposes herein set forth. Landlord agrees to execute and Landlord shall use its
commercially reasonable efforts to cause Landlord’s lender or purchaser to
execute a non-disclosure agreement reasonably acceptable to such parties related
to such financial statements of Tenant. Tenant shall not be required to deliver
such financial statements to Landlord so long as Tenant is a publicly-held
company whose stock is listed on a national exchange.

16. Additional Covenants and Provisions.

16.1 Severability. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall not affect the validity of any other
provision hereof.

16.2 Interest on Past-Due Obligations. Any monetary payment due Landlord
hereunder not received by Landlord within 10 days following the date on which it
was due shall bear interest from the date due at 12% per annum, but not
exceeding the maximum rate allowed by law in addition to the late charge
provided for in Paragraph 13.3.

16.3 Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.

16.4 Landlord Liability. Tenant, its successors, and assigns shall not assert
nor seek to enforce any claim for breach of this Lease against any of Landlord’s
assets other than Landlord’s interest in the Industrial Center. Tenant agrees to
look solely to such interest for the satisfaction of any liability or claim
against Landlord under this Lease. In no event whatsoever shall Landlord (which
term shall include, without limitation, any general or limited partner,
trustees, beneficiaries, officers, directors, or stockholders of Landlord) ever
be personally liable for any such liability.

16.5 Entire Agreement. It is understood and acknowledged that there are no oral
agreements between the parties hereto affecting this Lease and this Lease
supersedes and cancels any and all previous negotiations, arrangements,
brochures, agreements and understandings, if any, between the parties hereto or
displayed by Landlord to Tenant with respect to the subject matter thereof, and
none thereof shall be used to interpret or construe this Lease. This Lease and
any side letter or separate agreement executed by Landlord and Tenant in
connection with this Lease and dated of even date herewith contain all of the
terms, covenants, conditions, warranties and agreements of the parties relating
in any manner to the rental, use and occupancy of the Premises, shall be
considered to be the only agreement between the parties hereto and their
representatives and agents, and none of the terms, covenants, conditions or
provisions of this Lease can be modified, deleted or added to except in writing
signed by the parties hereto. All negotiations and oral agreements acceptable to
both parties have been merged into and are included herein. There are no other
representations or warranties between the parties, and all reliance with respect
to representations is based totally upon the representations and agreements
contained in this Lease. The parties acknowledge that (i) each party and/or its
counsel have reviewed and revised this Lease, and (ii) no rule of construction
to the effect that any ambiguities are to be resolved against the drafting party
shall be employed in the interpretation or enforcement of this Lease or any
amendments or exhibits to this Lease or any document executed and delivered by
either party in connection with this Lease.

16.6 Notice Requirements. All notices required or permitted by this Lease shall
be in writing and may be delivered in person (by hand, messenger, or courier
service) or may be sent by regular, certified, or registered mail or U.S. Postal
Service Express Mail, with postage prepaid, or by facsimile transmission during
normal business hours, and shall be deemed sufficiently given if served in a
manner specified in this Paragraph 16.6. The addresses noted adjacent to a
Party’s signature on this Lease shall be that Party’s address for delivery or
mailing of notice purposes. Either Party may by written notice to the other
specify a different address for notice purposes, except that upon Tenant’s
taking possessing of the Premises, the Premises shall constitute Tenant’s
address for the purpose of mailing or delivering

 

15

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

notices to Tenant. A copy of all notices required or permitted to be given to
Landlord hereunder shall be concurrently transmitted to such party or parties at
such addresses as Landlord may from time to time hereafter designate by written
notice to Tenant.

16.7 Date of Notice. Any notice sent by registered or certified mail, return
receipt requested, shall be deemed given on the date of delivery shown on the
receipt card, or if no delivery date is shown, the postmark thereon. If sent by
regular mail, the notice shall be deemed given 48 hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or an overnight courier that guarantees next day
delivery shall be deemed given 24 hours after delivery of the same to the United
States Postal Service or courier. If any notice is transmitted by facsimile
transmission or similar means, the same shall be deemed served or delivered upon
telephone or facsimile confirmation of receipt of the transmission thereof,
provided a copy is also delivered via hand or overnight delivery or certified
mail. If notice is received on a Saturday, Sunday, or legal holiday, it shall be
deemed received on the next business day.

16.8 Waivers. No waiver by Landlord of a Default by Tenant shall be deemed a
waiver of any other term, covenant, or condition hereof, or of any subsequent
Default by Tenant of the same or any other term, covenant, or condition hereof.
In addition the acceptance by Landlord of any rent or other payment after it is
due, whether or not a notice of default has been served or any action
(including, without limitation, an unlawful detainer action) has been filed by
Landlord thereon, shall not be deemed a waiver of Landlord’s rights to proceed
on any notice of default or action which has been filed against Tenant based
upon Tenant’s breach of the Lease.

16.9 Holdover. Tenant has no right to retain possession of the Premises or any
part thereof beyond the expiration or earlier termination of this Lease. If
Tenant holds over with the consent of Landlord: (a) the Base Rent payable shall
be increased to 150% of the Base Rent applicable during the month immediately
preceding such expiration or earlier termination; (b) Tenant’s right to
possession shall terminate on 30 days notice from Landlord; and (c) all other
terms and conditions of this Lease shall continue to apply. Nothing contained
herein shall be construed as a consent by Landlord to any holding over by
Tenant. Tenant shall indemnify, defend, and hold Landlord harmless from and
against any and all claims, demands, actions, losses, damages, obligations,
costs, and expenses, including, without limitation, reasonable attorneys’ fees
incurred or suffered by Landlord by reason of Tenant’s failure to surrender the
Premises on the expiration or earlier termination of this Lease in accordance
with the provisions of this Lease.

16.10 Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies in
law or in equity.

16.11 Binding Effect: Choice of Law. This Lease shall be binding upon the
Parties, their personal representatives, successors, and assigns, and be
governed by the laws of the State in which the Premises are located. Any
litigation between the Parties hereto concerning this Lease shall be initiated
in the county in which the Premises are located.

16.12 Landlord. The covenants and obligations contained in this Lease on the
part of Landlord are binding on Landlord, its successors, and assigns only
during their respective period of ownership of an interest in the Building. In
the event of any transfer or transfers of such title to the Building, Landlord
(and, in the case of any subsequent transfers or conveyances, the then grantor)
shall be concurrently freed and relieved from and after the date of such
transfer or conveyance, without any further instrument or agreement, of all
liability with respect to the performance of any covenants or obligations on the
part of Landlord contained in this Lease thereafter to be performed.

16.13 Attorneys’ Fees and Other Costs. If any Party brings an action or
proceeding to enforce the terms hereof or declare rights hereunder, the
Prevailing Party (as hereafter defined) in any such proceeding shall be entitled
to reasonable attorneys’ fees. The term “Prevailing Party” shall include,
without limitation, a Party who substantially obtains or defeats the relief
sought. Landlord shall be entitled to reasonable attorneys’ fees, costs, and
expenses incurred in the preparation and service of notices of Default (as
defined in this Lease) and consultations in connection therewith, whether or not
a legal action is subsequently commenced in connection with such Default or
resulting breach. Tenant shall reimburse Landlord on demand for all reasonable
legal, engineering, and other professional services expenses incurred by
Landlord in connection with all requests by Tenant or any lender of Tenant for
consent, waiver or approval of any kind.

16.14 Landlord’s Access; Showing Premises; Repairs. Subject to the terms of
Paragraph 6.4 above, Landlord and Landlord’s agents shall have the right to
enter the Premises at any time, in the case of an emergency, and otherwise at
reasonable times upon reasonable notice for the purpose of showing the same to
prospective purchasers, lenders, or tenants, and making such alterations,
repairs, improvements, or additions to the Premises or to the Building, as
Landlord may reasonably deem necessary, provided, in no event shall Tenant be
obligated to disclose or provide access to Tenant’s proprietary or confidential
information in connection with such inspections. Landlord may at any time place
on or about the Premises or Building any ordinary “For Sale” signs, and Landlord
may at any time during the last 180 days of the term hereof place on or about
the Premises any ordinary “For Lease” signs. All such activities of Landlord
shall be without abatement of rent or liability to Tenant.

16.15 Signs. Tenant shall not place any signs at or upon the exterior of the
Premises or the Building, except that Tenant may, with Landlord’s prior written
consent, install (but not on the roof) monument signage (in proportion to
Tenant’s Share) on any monument sign for the Building and exterior Building
signage (so long as Tenant leases the entire Building) so long as such signs are
in a location designated by Landlord and comply with sign ordinances and the
signage criteria established for the Industrial Center by Landlord.

 

16

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

16.16 Termination; Merger. Unless specifically stated otherwise in writing by
Landlord, the voluntary or other surrender of this Lease by Tenant, the mutual
termination or cancellation hereof, or a termination hereof by Landlord for
Default by Tenant, shall automatically terminate any sublease or lesser estate
in the Premises; provided, however, Landlord shall, in the event of any such
surrender, termination, or cancellation, have the option to continue any one or
all of any existing subtenancies. Landlord’s failure within 10 days following
any such event to make a written election to the contrary by written notice to
the holder of any such lesser interest shall constitute Landlord’s election to
have such event constitute the termination of such interest.

16.17 Quiet Possession. Upon payment by Tenant of the Base Rent and Additional
Rent for the Premises and the performance of all of the covenants, conditions,
and provisions on Tenant’s part to be observed and performed under this Lease,
Tenant shall have quiet possession of the Premises for the entire term hereof,
subject to all of the provisions of this Lease.

16.18 Subordination; Attornment; Non-Disturbance.

(a) Subordination. Subject to the nondisturbance provisions of subparagraph
16.18(c), this Lease shall be subject and subordinate to any ground lease,
mortgage, deed of trust, or other hypothecation or mortgage (collectively,
“Mortgage”) now or hereafter placed by Landlord upon the real property of which
the Premises are a part, to any and all advances made on the security thereof,
and to all renewals, modifications, consolidations, replacements, and extensions
thereof. Tenant agrees that any person holding any Mortgage shall have no duty,
liability, or obligation to perform any of the obligations of Landlord under
this Lease. In the event of Landlord’s default with respect to any such
obligation, Tenant will give any Lender, whose name and address have previously
been furnished in writing to Tenant, notice of a default by Landlord. Tenant may
not exercise any remedies for default by Landlord unless and until Landlord and
the Lender shall have received written notice of such default and a reasonable
time (not less than 90 days) shall thereafter have elapsed without the default
having been cured. If any Lender shall elect to have this Lease superior to the
lien of its Mortgage and shall give written notice thereof to Tenant, this Lease
shall be deemed prior to such Mortgage. The provisions of a Mortgage relating to
the disposition of condemnation and insurance proceeds shall prevail over any
contrary provisions contained in this Lease.

(b) Attornment. Subject to the nondisturbance provisions of subparagraph (c) of
this Paragraph 16.18, Tenant agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Mortgage. In
the event of such foreclosure, such new owner shall not: (i) be liable for any
act or omission of any prior landlord or with respect to events occurring prior
to acquisition of ownership, (ii) be subject to any offsets or defenses which
Tenant might have against any prior Landlord, or (iii) be liable for security
deposits or be bound by prepayment of more than one month’s rent.

(c) Non-Disturbance. With respect to a Mortgage entered into by Landlord after
the execution of this Lease and to any and all advances made on the security
thereof, and to all renewals, modifications, consolidations, replacements and
extensions thereof, Tenant’s subordination of this Lease shall be subject to
receiving assurance (a “nondisturbance agreement”) from the Mortgage holder that
Tenant’s possession and this Lease will not be disturbed so long as Tenant is
not in default and attorns to the record owner of the Premises.

(d) Self-Executing. The agreements contained in this Paragraph 16.18 shall be
effective without the execution of any further documents; provided, however,
that upon written request from Landlord or a Lender in connection with a sale,
financing, or refinancing of Premises, Tenant and Landlord shall execute such
further writings as may be reasonably required to separately document any such
subordination or nonsubordination, attornment, and/or nondisturbance agreement,
as is provided for herein. Landlord is hereby irrevocably vested with full power
to subordinate this Lease to a Mortgage.

16.19 Rules and Regulations. Tenant agrees that it will abide by, and to cause
its employees, suppliers, shippers, customers, tenants, contractors, and
invitees to abide by, all reasonable rules and regulations (“Rules and
Regulations”) which Landlord may make from time to time for the management,
safety, care, and cleanliness of the Common Areas, the parking and unloading of
vehicles, and the preservation of good order, as well as for the convenience of
other occupants or tenants of the Building and the Industrial Center and their
invitees. The current Rules and Regulations are attached hereto as Exhibit E.
Landlord shall not be responsible to Tenant for the noncompliance with said
Rules and Regulations by other tenants of the Industrial Center.

16.20 Security Measures. Tenant acknowledges that the rental payable to Landlord
hereunder does not include the cost of guard service or other security measures.
Landlord has no obligations to provide same. Tenant assumes all responsibility
for the protection of the Premises, Tenant, its agents, and invitees and their
property from the acts of third parties.

16.21 Reservations. Landlord reserves the right to grant such easements that
Landlord deems necessary and to cause the recordation of parcel maps, so long as
such easements and maps do not unreasonably interfere with the use of the
Premises by Tenant. Tenant agrees to sign any documents reasonably requested by
Landlord to effectuate any such easements or maps. Tenant further agrees that
Landlord may at any time following the execution of this Lease, either directly
or through Landlord’s agents, identify Tenant’s name in any marketing materials
relating to the Building or Landlord’s portfolio and/or make press releases or
other announcements regarding the leasing of the Premises by Tenant, and Tenant
hereby waives any and all claims in connection therewith.

16.22 Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.

 

17

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

16.23 Offer. Preparation of this Lease by either Landlord or Tenant or
Landlord’s agent or Tenant’s agent and submission of same to Tenant or Landlord
shall not be deemed an offer to lease. This Lease is not intended to be binding
until executed and delivered by all Parties hereto.

16.24 Amendments. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification.

16.25 Multiple Parties. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as Tenant, the obligations of such
persons shall be the joint and several responsibility of all persons or entities
named herein as such Tenant.

16.26 Authority. Each person signing on behalf of Landlord or Tenant warrants
and represents that she or he is authorized to execute and deliver this Lease
and to make it a binding obligation of Landlord or Tenant.

16.27 Recordation. Tenant shall not record this Lease or a short form memorandum
hereof.

16.28 Confidentiality. Tenant acknowledges that the content of this Lease and
any related documents are confidential information. Tenant shall keep and
maintain such confidential information strictly confidential and shall not
disclose such confidential information to any person or entity other than
Tenant’s financial, legal and space planning consultants.

16.29 Landlord Renovations. Tenant acknowledges that Landlord may from time to
time, at Landlord’s sole option, renovate, improve, develop, alter, or modify
(collectively, the “Renovations”) portions of the Building, Premises, Common
Areas and the Industrial Center, including without limitation, systems and
equipment, roof, and structural portions of the same. In connection with such
Renovations, Landlord may, among other things, erect scaffolding or other
necessary structures in the Building, limit or eliminate access to portions of
the Industrial Center, including portions of the Common Areas, or perform work
in the Building, which work may create noise, dust or leave debris in the
Building; provided, such Renovations shall not unreasonably interfere with
Tenant’s access to the Premises or access to the parking areas. Tenant hereby
agrees that such Renovations and Landlord’s actions in connection with such
Renovations shall in no way constitute a constructive eviction of Tenant nor
entitle Tenant to any abatement of Rent. Landlord shall have no responsibility,
or for any reason be liable to Tenant, for any direct or indirect injury to or
interference with Tenant’s business arising from the Renovations, nor shall
Tenant be entitled to any compensation or damages from Landlord for loss of the
use of the whole or any part of the Premises or of Tenant’s Property,
Alterations or improvements resulting from the Renovations or Landlord’s actions
in connection with such Renovations, or for any inconvenience or annoyance
occasioned by such Renovations or Landlord’s actions in connection with such
Renovations.

16.30 WAIVER OF JURY TRIAL. THE PARTIES HERETO SHALL AND THEY HEREBY DO WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE
PARTIES HERETO AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN
ANY WAY RELATED TO THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT’S
USE OR OCCUPANCY OF THE PREMISES, THE BUILDING OR THE INDUSTRIAL CENTER, AND/OR
ANY CLAIM OF INJURY, LOSS OR DAMAGE.

16.31 Cubicles and Equipment. Landlord and Tenant acknowledge and agree that
Landlord shall lease to Tenant during the Term, at no additional cost, that
certain furniture, equipment and cubicles identified on Exhibit H attached
hereto and incorporated herein by this reference (the foregoing are
collectively, “Cubicles and Equipment”). Such leasing is on an “AS-IS, WITH ALL
FAULTS” basis and subject to all of the terms of this Lease (including, without
limitation, Paragraph 8 of this Lease), without recourse, representation or
warranty of any kind or nature, express or implied, including without
limitation, habitability, merchantability or fitness for a particular purpose.
At the expiration or earlier termination of this Lease, the Cubicles and
Equipment shall be returned and surrendered to Landlord in the same or
substantially similar condition and repair as when delivered to Tenant,
reasonable wear and tear excepted. Tenant shall be obligated to repair, maintain
and insure the Cubicles and Equipment, and Tenant shall not have the right or
ability to assign or sublet any of the Cubicles and Equipment except in
conjunction with this Lease and the Premises. Tenant shall pay any taxes,
assessments and insurance premiums attributable to the Cubicles and Equipment.
Tenant may, at Tenant’s option, remove the Cubicles and Equipment and either
dispose of such Cubicles and Equipment (with Landlord’s prior written consent)
or return such Cubicles and Equipment to Landlord at any time during the Term.

16.32 Building Information. Landlord shall provide to Tenant (i) a list of all
HVAC units that serve the Premises such list to include, to the extent
available, unit number, maker of unit, type of unit, model number, serial number
and size of unit, (ii) any historical HVAC maintenance records, (iii) copies of
past utilities bills, (iv) a copy of any CC&Rs relating to the Building and
(v) to the extent in Landlord’s possession, full CAD drawings, including
mechanical and electrical.

16.33 Landlord’s Work. Landlord shall perform the following work, at Landlord’s
sole cost and expense: installation of communications and generator power
conduits connecting both the power and data among all of the premises currently
occupied by Tenant, including the 1003-1005 Hamilton Avenue and 1010 Hamilton
Avenue premises.

///continued on next page///

 

18

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

The parties hereto have executed this Lease at the place and on the dates
specified below their respective signatures.

 

LANDLORD      TENANT

WILLOW PARK HOLDING COMPANY I, L.P.,

a Delaware limited partnership

    

PACIFIC BIOSCIENCES OF CALIFORNIA, INC.,

a Delaware corporation, dba Pac Bio, Inc.

By:   AMB PROPERTY, L.P.,

         a Delaware limited partnership

    

By:                   /s/ Hugh Martin                        

Its: President

Its:   Manager      Date:                       12/16/10                 
           

          By:   AMB PROPERTY CORPORATION,

                   a Maryland corporation,  its general partner

    

By:                   /s/ Matthew Murphy                 

Its: Secretary

     Date:                       12/16/2010                         

                    By:     /s/ Douglas P. McGregor        

                            Douglas P. McGregor          

     Tenant’s Address:                     Its:
  Vice President, Regional Manager      After the Commencement Date
                    Date:               12/17/10                            The
Premises Address      Prior to the Commencement Date     

 

    

 

    

 

 

Landlord’s Address:

Willow Park Holding Company I, L.P.

c/o AMB Property Corporation

Pier 1, Bay 1

San Francisco, California 94111

With a copy to:

1360 Willow Road, Suite 100

Menlo Park, California 94025

If Tenant is a CORPORATION, the authorized officers must sign on behalf of the
corporation and indicate the capacity in which they are signing. The Lease must
be executed by the chairman of the board, president or vice-president, and the
secretary, assistant secretary, chief financial officer or any assistant
treasurer, unless the bylaws or a resolution of the board of directors shall
otherwise provide, in which event, the bylaws or a certified copy of the
resolution, as the case may be, must be attached to this Lease.

 

19

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

Exhibit A

Description of Premises

This exhibit, entitled “Premises”, is and shall constitute Exhibit A to that
certain Lease dated December     , 2010 (the “Lease”), by and between Willow
Park Holding Company I, L.P., a Delaware limited partnership (“Landlord”) and
Pacific Biosciences of California, Inc., a Delaware corporation dba Pac Bio,
Inc. (“Tenant”) for the leasing of certain premises commonly known as 1350
Willow Road, Menlo Park, California (the “Premises”).

The Premises consist of the rentable square footage of space specified in the
Basic Provisions and has the address specified in the Basic Provisions. The
Premises are a part of and are contained in the Building specified in the Basic
Provisions. If set forth below (or attached), the cross-hatched area depicts the
Premises within the Industrial Center:

 

Exhibit A, Page 1

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

Exhibit B

Commencement Date Certificate

 

Landlord:    Willow Park Holding Company I, L.P., a Delaware limited partnership
Tenant:   

Pacific Biosciences of California, Inc.,

a Delaware corporation dba Pac Bio, Inc.

Lease Date:    December     , 2010 Premises:    1350 Willow Road, Suite 101,
Menlo Park, California 94025

Tenant hereby accepts the Premises as being in the condition required under the
Lease.

The Commencement Date of the Lease is December 15, 2010.

The Expiration Date of the Lease is December 31, 2015.

 

LANDLORD

 

WILLOW PARK HOLDING COMPANY I, L.P.,

a Delaware limited partnership

   

TENANT

 

PACIFIC BIOSCIENCES OF CALIFORNIA, INC.,

a Delaware corporation, dba Pac Bio, Inc.

      By:  

 

By:   AMB PROPERTY, L.P.,     Its:   President   a Delaware limited partnership
    Date:  

 

Its:

  Manager         By:   AMB PROPERTY CORPORATION,    

By:

Its:

 

 

Secretary

    a Maryland corporation, its general partner     Date:  

 

  By:  

 

    Tenant’s Address:     Douglas P. McGregor         Its:   Vice President,
Regional Manager    

After the Commencement Date

The Premises Address

  Date:  

 

            Prior to the Commencement Date    

 

   

 

   

 

Landlord’s Address:    

Willow Park Holding Company I, L.P.

c/o AMB Property Corporation

   

Pier 1, Bay 1

San Francisco, California 94111

    With a copy to:      

1360 Willow Road, Suite 100

Menlo Park, California 94025

     

If Tenant is a CORPORATION, the authorized officers must sign on behalf of the
corporation and indicate the capacity in which they are signing. The document
must be executed by the chairman of the board, president or vice-president, and
the secretary, assistant secretary, chief financial officer or any assistant
treasurer, unless the bylaws or a resolution of the board of directors shall
otherwise provide, in which event, the bylaws or a certified copy of the
resolution, as the case may be, must be attached to this document.

 

Exhibit B, Page 1

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

Exhibit C

Tenant Move-in and Lease Renewal Environmental Questionnaire

for Commercial and Industrial Properties

Property Name: Willow Park

Premises Address: 1350 Willow Road, Suite 101, Menlo Park, California 94025

Exhibit C to the Lease Dated December     , 2010

Between

Willow Park Holding Company I, L.P., a Delaware limited partnership (“Landlord”)

and

Pacific Biosciences of California, Inc., a Delaware corporation dba Pac Bio,
Inc. (“Tenant”)

Instructions: The following questionnaire is to be completed by the Tenant
Representative with knowledge of the planned/existing operations for the
specified building/location. A copy of the completed form must be attached to
all new leases and renewals, and forwarded to the Owner’s Risk Management
Department. Please print clearly and attach additional sheets as necessary.

 

1.0 Process Information

Describe planned use (new Lease) or existing operations (lease renewal), and
include brief description of manufacturing processes employed.

 

 

 

 

 

 

 

 

2.0 Hazardous Materials

Are hazardous materials used or stored? If so, continue with the next question.
If not, go to Section 3.0.

 

  2.1 Are any of the following materials handled on the
property?                                        
                                         Yes     No    

(A material is handled if it is used, generated, processed, produced, packaged,
treated, stored, emitted, discharged, or disposed.) If so, complete this
section. If this question is not applicable, skip this section and go on to
Section 5.0.

 

  ¨ Explosives    ¨ Fuels    ¨ Oils   ¨ Solvents    ¨ Oxidizers    ¨
Organics/Inorganics   ¨ Acids    ¨ Bases    ¨ Pesticides   ¨ Gases    ¨ PCBs   
¨ Radioactive Materials   ¨ Other (please specify)      

 

  2.2 If any of the groups of materials checked in Section 2.1, please list the
specific material(s), use(s), and quantity of each chemical used or stored on
the site in the Table below. If convenient, you may substitute a chemical
inventory and list the uses of each of the chemicals in each category
separately.

 

  Material   

Physical State

(Solid, Liquid,

or Gas)

   Usage   

Container

Size

  

Number of

Containers

  

Total

Quantity

                                                                               
                                   

 

  2.3 Describe the planned storage area location(s) for these materials. Please
include site maps and drawings as appropriate.

 

 

 

 

 

 

 

 

3.0 Hazardous Wastes

Are hazardous wastes generated?                                        
                                         
                                                    Yes     No    

If yes, continue with the next question. If not, skip this section and go to
Section 4.0.

 

  3.1 Are any of the following wastes generated, handled, or disposed of (where
applicable) on the property?

 

  ¨ Hazardous wastes    ¨ Industrial Wastewater   ¨ Waste oils    ¨ PCBs   ¨ Air
emissions    ¨ Sludges   ¨ Regulated Wastes    ¨ Other (please specify)

 

Exhibit C, Page 1

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

3.2 List and quantify the materials identified in Question 3-1 of this section.
Attach separate pages as necessary.

 

  

Waste

Generated

  

RCRA

listed

Waste?

   Source   

Approximate

Monthly

Quantity

  

Waste

Characterization

   Disposition                                                                 
                                                      

 

  3.3 Please include name, location, and permit number (e.g. EPA ID No.) for
transporter and disposal facility, if applicable). Attach separate pages as
necessary.

 

  

Transporter/Disposal

Facility Name

   Facility Location   

Transporter (T) or

Disposal (D) Facility

   Permit Number                                                               
                

 

  3.4 Are pollution controls or monitoring employed in the process to prevent or
minimize the release of wastes into the
environment?                                       
                                         
                                                                         Yes    
No    

If so, please describe.

 

 

 

 

 

 

 

 

4.0 USTS/ASTS

 

  4.1 Are underground storage tanks (USTs), aboveground storage tanks (ASTs), or
associated pipelines used for the storage of petroleum products, chemicals, or
liquid wastes present on site (lease renewals) or required for planned
operations (new tenants)?                                        
                                         
                                         
                                  Yes     No    

If not, continue with section 5.0. If yes, please describe capacity, contents,
age, type of the USTs or ASTs, as well any associated leak detection / spill
prevention measures. Please attach additional pages if necessary.

 

   Capacity    Contents   

Year

Installed

   Type (Steel, Fiberglass, etc)   

Associated Leak

Detection / Spill Prevention Measures*

                                                                               
                   

  * Note: The following are examples of leak detection / spill prevention
measures:

 

   Integrity testing    Inventory reconciliation    Leak detection system   
Overfill spill protection    Secondary containment    Cathodic protection

 

  4.2 Please provide copies of written tank integrity test results and/or
monitoring documentation, if available.

 

  4.3 Is the UST/AST registered and permitted with the appropriate regulatory
agencies?

                                                                            
                                         
                                         
                                   Yes     No    

If so, please attach a copy of the required permits.

 

  4.4 If this Questionnaire is being completed for a lease renewal, and if any
of the USTs/ASTs have leaked, please state the substance released, the media(s)
impacted (e.g., soil, water, asphalt, etc.), the actions taken, and all remedial
responses to the incident.

 

 

 

 

 

 

 

 

  4.5 If this Questionnaire is being completed for a lease renewal, have
USTs/ASTs been removed from the property?

Yes     No    

If yes, please provide any official closure letters or reports and supporting
documentation (e.g., analytical test results, remediation report results, etc.).

 

  4.6 For Lease renewals, are there any above or below ground pipelines on site
used to transfer chemicals or wastes?

Yes     No    

 

Exhibit C, Page 2

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

For new tenants, are installations of this type required for the planned
operations?

Yes          No        

If yes to either question, please describe.

 

 

 

 

 

5.0 Asbestos Containing Building Materials

Please be advised that this property participates in an Asbestos Operations and
Maintenance Program, and that an asbestos survey may have been performed at the
Industrial Center. If provided, please review the information that identifies
the locations of known asbestos containing material or presumed asbestos
containing material. All personnel and appropriate subcontractors should be
notified of the presence of these materials, and informed not to disturb these
materials. Any activity that involves the disturbance or removal of these
materials must be done by an appropriately trained individual/contractor.

 

6.0 Regulatory

 

  6.1 For Lease Renewals, are there any past, current, or pending regulatory
actions by federal, state, or local environmental agencies alleging
noncompliance with regulations?

Yes          No        

If so, please describe.

 

 

 

 

 

  6.2 For lease renewals, are there any past, current, or pending lawsuits or
administrative proceedings for alleged environmental damages involving the
property, you, or any owner or tenant of the property?

Yes          No        

If so, please describe.

 

 

 

 

 

  6.3 Does the operation have or require a National Pollutant Discharge
Elimination System (NPDES) or equivalent permit?

Yes          No        

If so, please attach a copy of this permit.

 

  6.4 For Lease renewals, have there been any complaints from the surrounding
community regarding facility operations?

Yes          No        

Have there been any worker complaints or regulatory investigations regarding
hazardous material exposure at the facility?

Yes          No        

If so, please describe status and any corrective actions taken. Please attach
additional pages as necessary.

 

 

 

 

 

  6.5 Has a Hazardous Materials Business Plan been developed for the site?

Yes          No        

If so, please attach a copy.

 

  6.6 Are any environmental documentation, chemical inventory, or management
plan required by the local Fire Department or Health Department?

Yes          No        

If so, please attach a copy.

Certification

I am familiar with the real property described in this questionnaire. By signing
below, I represent and warrant that the answers to the above questions are
complete and accurate to the best of my knowledge. I also understand that the
Owner will rely on the completeness and accuracy of my answers in assessing any
environmental liability risks associated with the property.

 

Signature:                                                                      
               Name:                             
                                                              
Title:                                                                      
                        Date:                             
                                                                
Telephone:                                                                      
            

Please forward the completed questionnaire to:

Mr. Steve Campbell

AMB Property, L.P.

Pier 1, Bay 1

San Francisco, CA 94111

 

Exhibit C, Page 3

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

Exhibit D

Move Out Standards

This “Move Out Standards” (Exhibit D) is dated December __, 2010, for the
reference purposes only and is made between Willow Park Holding Company I, L.P.,
a Delaware limited partnership (“Landlord”), and Pacific Biosciences of
California, Inc., a Delaware corporation dba Pac Bio, Inc. (“Tenant”), to be a
part of that certain Lease (the “Lease”) concerning certain premises more
commonly known as 1350 Willow Road, Suite 101, Menlo Park, California (the
“Premises”). Landlord and Tenant agree that the Lease is hereby modified and
supplemented as follows:

At the expiration or earlier termination of this Lease, and in addition to any
other provisions of the Lease regarding surrender of the Premises, Tenant shall
surrender the Premises in the same condition as they were upon delivery of
possession thereto under the Lease, reasonable wear and tear excepted, and shall
deliver all keys to Landlord except Tenant shall not remove the Tenant
Improvements described in Exhibit F hereto. Before surrendering the Premises,
Tenant shall remove all of its personal property and trade fixtures and such
Alterations or additions to the Premises made by Tenant as may be specified for
removal by Landlord. If Tenant fails to remove its personal property, fixtures
or Alterations or additions upon the expiration or earlier termination of the
Lease, the same shall be deemed abandoned and shall become the property of
Landlord. Tenant shall be liable to Landlord for all costs and damages incurred
by Landlord in removing, storing or selling such property, fixtures, Alterations
or additions and in restoring the Premises to the condition required pursuant to
the Lease.

Notwithstanding anything to the contrary in the Lease, Tenant shall surrender
the Premises, at the time of the expiration or earlier termination of the Lease,
in a condition that shall include, but is not limited to, the following:

 

1.    Lights:    Office and warehouse lights will be fully operational with all
bulbs functioning. 2.    Dock Levelers & Roll-Up Doors (if any):    Should be in
good working condition. 3.    Dock Seals (if any):    Free of tears and broken
backboards repaired. 4.    Warehouse Floor:    Free of stains and swept with no
racking bolts and other protrusions left in the floor. Cracks should be repaired
with an epoxy or polymer. 5.    Tenant-Installed Equipment & Wiring:    Removed
and space returned to move-in condition when originally leased. (Remove air
lines, junction boxes, conduit, etc.) 6.    Walls:    Sheetrock (drywall) damage
should be patched and fire-taped so that there are no holes in either office or
warehouse. 7.    Roof:    Any tenant-installed equipment must be removed and
roof penetrations properly repaired by licensed roofing contractor. Active leaks
must be fixed and latest landlord maintenance and repairs recommendation must
have been followed. 8.    Signs:    All exterior signs must be removed and holes
patched and paint touched up as necessary. All window signs should likewise be
removed. 9.    Heating & Air Conditioning System:    A written report from a
licensed HVAC contractor within the last three months stating that all
evaporative coolers and HVAC systems are operational and in good and safe
operating condition. 10.    Overall Cleanliness:    Clean windows, sanitize
bathroom(s), vacuum carpet and remove any and all debris from office and
warehouse. Remove all pallets and debris from exterior of Premises. 11.    Upon
Completion:    Contact Landlord’s property manager to coordinate date of turning
off power, turning in keys, and obtain final Landlord inspection of Premises
which, in turn, will facilitate refund of security deposit.

 

Exhibit D, Page 1

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

Exhibit E

Rules & Regulations

This Exhibit (Exhibit E) is dated December __, 2010, for the reference purposes
only and is made between Willow Park Holding Company I, L.P., a Delaware limited
partnership (“Landlord”), and Pacific Biosciences of California, Inc., a
Delaware corporation dba Pac Bio, Inc. (“Tenant”), to be a part of that certain
Lease (the “Lease”) concerning certain premises more commonly known as 1350
Willow Road, Suite 101, Menlo Park, California (the “Premises”). The terms,
conditions and provisions of this Exhibit E are hereby incorporated into and are
made a part of the Lease. Any capitalized terms used herein and not otherwise
defined herein shall have the meaning ascribed to such terms as set forth in the
Lease.

1. No advertisement, picture or sign of any sort shall be displayed on or
outside the Premises or the Building without the prior written consent of
Landlord. Landlord shall have the right to remove any such unapproved item
without notice and at Tenant’s expense.

2. Tenant shall not regularly park motor vehicles (other than Tenant’s company
owned or leased vehicles) in designated parking areas after the conclusion of
normal daily business activity.

3. Tenant shall not use any method of heating or air conditioning other than
that supplied by Landlord without the prior written consent of Landlord.

4. All window coverings installed by Tenant and visible from the outside of the
Building require the prior written approval of Landlord.

5. Tenant shall not use, keep or permit to be used or kept any foul or noxious
gas or substance or any flammable or combustible materials on or around the
Premises, the Building or the Industrial Center, except as consented to by
Landlord in writing as set forth in Paragraph 6 of the Lease.

6. Tenant shall not alter any lock or install any new exterior locks or bolts on
any door at the Premises without providing Landlord with a duplicate key for
such locks promptly following installation.

7. Tenant may make up to ten (10) duplicate keys without the prior consent
of Landlord.

8. Tenant shall park motor vehicles in those general parking areas as designated
by Landlord except for loading and unloading. During those periods of loading
and unloading, Tenant shall not unreasonably interfere with traffic flow within
the Industrial Center and loading and unloading areas of other Tenants.

9. Tenant shall not disturb, solicit or canvas any occupant of the Building or
Industrial Center and shall cooperate to prevent same.

10. No person shall go on the roof without Landlord’s permission, which
permission shall not be unreasonably withheld, delayed or conditioned.

11. Business machines and mechanical equipment belonging to Tenant which cause
noise or vibration that may be transmitted to the structure of the Building, to
such a degree as to be objectionable to Landlord or other Tenants, shall be
placed and maintained by Tenant, at Tenant’s expense, on vibration eliminators
or other devices sufficient to eliminate noise or vibration.

12. All goods, including material used to store goods, delivered to the Premises
of Tenant shall be immediately moved into the Premises and shall not be left in
parking or receiving areas overnight.

13. Tractor trailers which must be unhooked or parked with dolly wheels beyond
the concrete loading areas must use steel plates or wood blocks under the dolly
wheels to prevent damage to the asphalt paving surfaces. No parking or storing
of such trailers will be permitted in the auto parking areas of the Industrial
Center or on streets adjacent thereto.

14. Forklifts which operate on asphalt paving areas shall only use tires that do
not damage the asphalt.

15. Tenant is responsible for the storage and removal of all trash and refuse.
All such trash and refuse shall be contained in suitable receptacles stored
behind screened enclosures at locations approved by Landlord.

16. Tenant shall not store or permit the storage or placement of goods, or
merchandise or pallets or equipment of any sort outside of the Premises nor in
or around the Building, the Industrial Center or any of the Common Areas of the
foregoing. No displays or sales of merchandise shall be allowed in the parking
lots or other Common Areas.

17. Tenant shall not permit any animals, including, but not limited to, any
household pets, to be brought or kept in or about the Premises, the Building,
the Industrial Center or any of the Common Areas of the foregoing.

18. Tenant shall not permit any motor vehicles to be washed on any portion of
the Premises or in the Common Areas of the Industrial Center, nor shall Tenant
permit mechanical work or maintenance of motor vehicles to be performed on any
portion of the Premises or in the Common Areas of the Industrial Center.

 

Exhibit E, Page 1

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

Exhibit F

Tenant Improvements

This Exhibit (Exhibit F) is dated December __, 2010, for reference purposes only
and is made by and between Willow Park Holding Company I, L.P., a Delaware
limited partnership (“Landlord”), and Pacific Biosciences of California, Inc., a
Delaware corporation dba Pac Bio, Inc. (“Tenant”), to be a part of that certain
Lease (“Lease”) concerning certain premises more commonly known as 1350 Willow
Road, Suite 101, Menlo Park, California (the “Premises”). Landlord and Tenant
agree that the Lease is hereby modified and supplemented as follows:

1. Tenant To Construct Tenant Improvements. Subject to the provisions below,
Tenant shall be solely responsible for the planning, construction and completion
of the interior tenant improvements (“Tenant Improvements”) to the Premises in
accordance with the terms and conditions of this Exhibit F. Except as set forth
in Paragraph 5.A. of this Exhibit F with respect to Tenant’s use of a portion of
the Tenant Improvement Allowance for furniture costs, the Tenant Improvements
shall not include any of Tenant’s personal property, trade fixtures,
furnishings, equipment or similar items.

2. Tenant Improvement Plans.

A. Preliminary Plans and Specifications. Promptly after execution of the Lease,
and subject to Paragraph 2.F below, Tenant shall retain a licensed and insured
architect (“Architect”) to prepare preliminary working architectural and
engineering plans and specifications (“Preliminary Plans and Specifications”)
for the Tenant Improvements. Tenant shall deliver the Preliminary Plans and
Specifications to Landlord. The Preliminary Plans and Specifications shall be in
sufficient detail to show locations, types and requirements for all heat loads,
people loads, floor loads, power and plumbing, regular and special HVAC needs,
telephone communications, telephone and electrical outlets, lighting, lighting
fixtures and related power, and electrical and telephone switches. Landlord
shall reasonably approve or disapprove the Preliminary Plans and Specifications
within five (5) days after Landlord receives the Preliminary Plans and
Specifications and, if disapproved, Landlord shall return the Preliminary Plans
and Specifications to Tenant, who shall make all necessary revisions within ten
(10) days after Tenant’s receipt thereof. This procedure shall be repeated until
Landlord approves the Preliminary Plans and Specifications. The approved
Preliminary Plans and Specifications, as modified, shall be deemed the “Final
Preliminary Plans and Specifications”.

B. Final Plans and Specifications. After the Final Preliminary Plans and
Specifications are approved by Landlord and are deemed to be the Final
Preliminary Plans and Specifications, Tenant shall cause the Architect to
prepare in twenty (20) days following Landlord’s approval of the Final
Preliminary Plans and Specifications the final working architectural and
engineering plans, specifications and drawings, (“Final Plans and
Specifications”) for the Tenant Improvements. Tenant shall then deliver the
Final Plans and Specifications to Landlord. Landlord shall reasonably approve or
disapprove the Final Plans and Specifications within five (5) days after
Landlord receives the Final Plans and Specifications and, if disapproved,
Landlord shall return the Final Plans and Specifications to Tenant who shall
make all necessary revisions within ten (10) days after Tenant’s receipt
thereof. This procedure shall be repeated until Landlord approves, in writing,
the Final Plans and Specifications. The approved Final Plans and Specifications,
as modified, shall be deemed the “Construction Documents”.

C. Miscellaneous. All deliveries of the Preliminary Plans and Specifications,
the Final Preliminary Plans and Specifications, the Final Plans and
Specifications, and the Construction Documents shall be delivered by messenger
service, by personal hand delivery or by overnight parcel service. While
Landlord has the right to approve the Preliminary Plans and Specifications, the
Final Preliminary Plans and Specifications, the Final Plans and Specifications,
and the Construction Documents, Landlord’s interest in doing so is to protect
the Premises, the Building and Landlord’s interest. Accordingly, Tenant shall
not rely upon Landlord’s approvals and Landlord shall not be the guarantor of,
nor responsible for, the adequacy and correctness or accuracy of the Preliminary
Plans and Specifications, the Final Preliminary Plans and Specifications, the
Final Plans and Specifications, and the Construction Documents, or the
compliance thereof with applicable laws, and Landlord shall incur no liability
of any kind by reason of granting such approvals.

D. Building Standard Work. The Construction Documents shall provide that the
Tenant Improvements to be constructed in accordance therewith must be at least
equal, in quality, to Landlord’s building standard materials, quantities and
procedures then in use by Landlord.

E. Construction Agreements. Tenant hereby covenants and agrees that a provision
shall be included in each and every agreement made with the Architect and the
Contractor with respect to the Tenant Improvements specifying that Landlord
shall be a third party beneficiary thereof, including without limitation, a
third party beneficiary of all covenants, representations, indemnities and
warranties made by the Architect and/or Contractor.

F. Selection of Architect and Contractor. Tenant agrees to include, in Tenant’s
process of selection of an architect and contractor for the Tenant Improvements,
an architect and contractor recommended by Landlord. Tenant shall give
reasonable and adequate consideration to Landlord’s selections, although Tenant
shall not be required to contract with the architect and/or contractor
recommended by Landlord.

3. Permits. Tenant at its sole cost and expense (subject to the provisions of
Paragraph 5 below) shall obtain all governmental approvals of the Construction
Documents to the full extent necessary for the issuance of a building permit for
the Tenant Improvements based upon such Construction Documents. Tenant at its
sole cost and expense shall also cause to be obtained all other necessary
approvals and permits from all governmental agencies having jurisdiction or
authority for the construction and installation of the Tenant Improvements in
accordance with the approved Construction Documents. Tenant at its sole cost and
expense (subject to the provisions of Paragraph 5 below) shall undertake all
steps necessary to insure that the construction of the Tenant Improvements is
accomplished in strict compliance with all Applicable Requirements (as defined
in the Lease).

 

Exhibit F, Page 1

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

4. Construction.

A. Tenant shall be solely responsible for the construction, installation and
completion of the Tenant Improvements in accordance with the Construction
Documents approved by Landlord and is solely responsible for the payment of all
amounts when payable in connection therewith without any cost or expense to
Landlord, except for Landlord’s obligation to contribute the Tenant Improvement
Allowance in accordance with the provisions of Paragraph 5 below. Tenant shall
diligently proceed with the construction, installation and completion of the
Tenant Improvements in accordance with the Construction Documents and the
completion schedule reasonably approved by Landlord. No material changes shall
be made to the Construction Documents and the completion schedule approved by
Landlord without Landlord’s prior written consent, which consent shall not be
unreasonably withheld or delayed.

B. Tenant at its sole cost and expense (subject to the provisions of Paragraph 5
below) shall, subject to Paragraph 2.F above, employ a licensed, insured and
bonded general contractor (“Contractor”) to construct the Tenant Improvements in
accordance with the Construction Documents. The construction contracts between
Tenant and the Contractor and between the Contractor and subcontractors shall be
subject to Landlord’s prior written approval, which approval shall not be
unreasonably withheld or delayed. Proof that the Contractor is licensed in
California, is bonded as required under California law, and has the insurance
specified in Exhibit F-1, attached hereto and incorporated herein by this
reference, shall be provided to Landlord at the time that Tenant requests
approval of the Contractor from Landlord. Tenant shall comply with or cause the
Contractor to comply with all other terms and provisions of Exhibit F-1.

C. Prior to the commencement of the construction and installation of the Tenant
Improvements, Tenant shall provide the following to Landlord, all of which shall
be to Landlord’s reasonable satisfaction:

(i) An estimated budget and cost breakdown for the Tenant Improvements.

(ii) Estimated completion schedule for the Tenant Improvements.

(iii) Copies of all required approvals and permits from governmental agencies
having jurisdiction or authority for the construction and installation of the
Tenant Improvements.

(iv) Evidence of Tenant’s procurement of insurance required to be obtained
pursuant to the provisions of Paragraphs 4.B and 4.G.

D. Landlord shall at all reasonable times have a right to inspect the Tenant
Improvements (provided Landlord does not materially interfere with the work
being performed by the Contractor or its subcontractors) and Tenant shall
immediately cease work upon written notice from Landlord if the Tenant
Improvements are not in compliance with the Construction Documents approved by
Landlord. If Landlord shall give notice of faulty construction or any other
deviation from the Construction Documents, Tenant shall cause the Contractor to
make corrections promptly. However, neither the privilege herein granted to
Landlord to make such inspections, nor the making of such inspections by
Landlord, shall operate as a waiver of any rights of Landlord to require good
and workmanlike construction and improvements constructed in accordance with the
Construction Documents.

E. Subject to Landlord complying with its obligations in Paragraph 5 below,
Tenant shall pay and discharge promptly and fully all claims for labor done and
materials and services furnished in connection with the Tenant Improvements. The
Tenant Improvements shall not be commenced until ten (10) days after Landlord
has received notice from Tenant stating the date the construction of the Tenant
Improvements is to commence so that Landlord can post and record any appropriate
Notice of Non-responsibility.

F. Tenant acknowledges and agrees that the agreements and covenants of Tenant in
the Lease shall be fully applicable to Tenant’s construction of the Tenant
Improvements.

G. Tenant shall maintain, and cause to be maintained, during the construction of
the Tenant Improvements, at its sole cost and expense, insurance of the types
and in the amounts specified in Exhibit F-1 and in Section 8 of the Lease,
together with builders’ risk insurance for the amount of the completed value of
the Tenant Improvements on an all-risk non-reporting form covering all
improvements under construction, including building materials, and other
insurance in amounts and against such risks as the Landlord shall reasonably
require in connection with the Tenant Improvements.

H. No materials, equipment or fixtures shall be delivered to or installed upon
the Premises pursuant to any agreement by which another party has a security
interest or rights to remove or repossess such items, without the prior written
consent of Landlord, which consent shall not be unreasonably withheld.

I. Landlord reserves the right to establish reasonable rules and regulations for
the use of the Building during the course of construction of the Tenant
Improvements, including, but not limited to, construction parking, storage of
materials, hours of work, use of elevators, and clean-up of construction related
debris.

J. Upon completion of the Tenant Improvements, Tenant shall deliver to Landlord
the following, all of which shall be to Landlord’s reasonable satisfaction:

(i) Any certificates required for occupancy, including a permanent and complete
Certificate of Occupancy issued by the City of Menlo Park.

(ii) A Certificate of Completion signed by the Architect who prepared the
Construction Documents, reasonably approved by Landlord.

 

Exhibit F, Page 2

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

(iii) A cost breakdown itemizing all expenses for the Tenant Improvements,
together with invoices and receipts for the same or other evidence of payment.

(iv) Final and unconditional mechanic’s lien waivers for all the Tenant
Improvements.

(v) A Notice of Completion for execution by Landlord, which certificate once
executed by Landlord shall be recorded by Tenant in the official records of the
county of San Mateo, and Tenant shall then deliver to Landlord a true and
correct copy of the recorded Notice of Completion.

(vi) A true and complete copy of all as-built plans and drawings for the Tenant
Improvements.

5. Tenant Improvement Allowance.

A. Subject to Tenant’s compliance with the provisions of this Exhibit F,
Landlord shall provide to Tenant an allowance in the amount of One Hundred Sixty
Eight Thousand Twelve and 00/100 Dollars ($168,012.00) (the “Tenant Improvement
Allowance”) to construct and install only the Tenant Improvements; provided,
however, Tenant shall have the right to utilize (i) up to Thirty Five Thousand
Two and 50/100 Dollars ($35,002.50) of the Tenant Improvement Allowance for the
purchase of furniture for the Premises (as evidenced by third party invoices for
such furniture costs) and (ii) all or a portion of the Tenant Improvement
Allowance for the tenant improvements being constructed by Tenant at premises
owned by affiliates of Landlord and to be leased by Tenant located at 1003 –
1005 and 1010 Hamilton Avenue, Menlo Park, California, subject to the terms of
the leases between Tenant and such affiliates of Landlord. The Tenant
Improvement Allowance shall be used to design, prepare, plan, obtain the
approval of, construct and install the Tenant Improvements and for no other
purpose. Except as otherwise expressly provided herein, Landlord shall have no
obligation to contribute the Tenant Improvement Allowance unless and until the
Construction Documents have been approved by Landlord and Tenant has complied
with all requirements set forth in Paragraph 4.C. of this Exhibit F. In addition
to the foregoing, Landlord shall have no obligation to disburse all or any
portion of the Tenant Improvement Allowance to Tenant unless Tenant makes a
progress payment request pursuant to the terms and conditions of Section 5.B.
below prior to December 31, 2012 (time being of the essence). The costs to be
paid out of the Tenant Improvement Allowance shall include all reasonable costs
and expenses associated with the design, preparation, approval, planning,
construction and installation of the Tenant Improvements (the “Tenant
Improvement Costs”), including all of the following:

(i) All costs of the Preliminary Plans and Specifications, the Final Plans and
Specifications, and the Construction Documents, and engineering costs associated
with completion of the State of California energy utilization calculations under
Title 24 legislation:

(ii) All costs of obtaining building permits and other necessary authorizations
from local governmental authorities;

(iii) All costs of interior design and finish schedule plans and specifications
including as-built drawings, if applicable;

(iv) All direct and indirect costs of procuring, constructing and installing the
Tenant Improvements in the Premises, including, but not limited to, the
construction fee for overhead and profit and the cost of all on-site supervisory
and administrative staff, office, equipment and temporary services rendered by
the Contractor in connection with the construction of the Tenant Improvements;
provided, however, that the construction fee for overhead and profit, the cost
of all on-site supervisory and administrative staff, office, equipment and
temporary services shall not exceed amounts which are reasonable and customary
for such items in the local construction industry;

(v) All fees payable to the Architect and any engineer if they are required to
redesign any portion of the Tenant Improvements following Tenant’s and
Landlord’s approval of the Construction Documents;

(vi) Utility connection fees;

(vii) Inspection fees and filing fees payable to local governmental authorities,
if any;

(viii) All costs of all permanently affixed equipment and non-trade fixtures
provided for in the Construction Documents, including the cost of installation;

(ix) A construction management fee payable to Landlord in the amount of three
percent (3%) of the total Tenant Improvement Allowance (“CM Fee”); and

(x) The costs incurred by the Architect for an initial test fit of the Premises.

Except as set forth in Paragraph 5.E below, the Tenant Improvement Allowance
shall be the maximum contribution by Landlord for the Tenant Improvement Costs,
and the disbursement of the Tenant Improvement Allowance is subject to the terms
contained hereinbelow.

B. Except for payment of the CM Fee (which CM Fee shall be deducted from the
Tenant Improvement Allowance by Landlord on a percentage completion basis), and
subject to Section 5.A. above, Landlord will make payments to Tenant from the
Tenant Improvement Allowance to reimburse Tenant for Tenant Improvement Costs
paid or incurred by Tenant. Payment of the CM Fee shall be the first payment
from the Tenant Improvement Allowance and shall be made by means of a deduction
or credit against the Tenant Improvement Allowance. All other payments of the
Tenant Improvement Allowance shall be by progress payments not more frequently
than once per month and only after satisfaction of the following conditions
precedent: (a) receipt by Landlord of conditional mechanics’ lien releases for
the work completed and to be paid by said progress payment, conditioned only on
the payment of the sums set forth in the

 

Exhibit F, Page 3

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

mechanics’ lien release, executed by the Contractor and all subcontractors,
labor suppliers and materialmen; (b) receipt by Landlord of unconditional
mechanics’ lien releases from the Contractor and all subcontractors, labor
suppliers and materialmen for all work other than that being paid by the current
progress payment previously completed by the Contractor, subcontractors, labor
suppliers and materialmen and for which Tenant has received funds from the
Tenant Improvement Allowance to pay for such work; (c) receipt by Landlord of
any and all documentation reasonably required by Landlord detailing the work
that has been completed and the materials and supplies used as of the date of
Tenant’s request for the progress payment, including, without limitation,
invoices, bills, or statements for the work completed and the materials and
supplies used; and (d) completion by Landlord or Landlord’s agents of any
inspections of the work completed and materials and supplies used as deemed
reasonably necessary by Landlord. Except for the CM Fee payment (credit), Tenant
Improvement Allowance progress payments shall be paid to Tenant within fourteen
(14) days from the satisfaction of the conditions set forth in the immediately
preceding sentence. The preceding notwithstanding, all Tenant Improvement Costs
paid or incurred by Tenant prior to Landlord’s approval of the Construction
Documents in connection with the design and planning of the Tenant Improvements
by Architect shall be paid from the Tenant Improvement Allowance, without any
retention, within fourteen (14) days following Landlord’s receipt of invoices,
bills or statements from Architect evidencing such costs. Notwithstanding the
foregoing to the contrary, Landlord shall be entitled to withhold and retain
five percent (5%) of the Tenant Improvement Allowance (or of any Tenant
Improvement Allowance progress payment) until the lien-free expiration of the
time for filing of any mechanics’ liens claimed or which might be filed on
account of any work ordered by Tenant or the Contractor or any subcontractor in
connection with the construction and installation of the Tenant Improvements.

C. Landlord shall not be obligated to pay any Tenant Improvement Allowance
progress payment or the Tenant Improvement Allowance retention (or any payment
under Paragraph 5.E. below) if on the date Tenant is entitled to receive such
payment or retention, Tenant is in default of this Lease. Such payments shall
resume upon Tenant curing any such default within the time periods which may be
provided for in the Lease.

D. Except as provided in Paragraph 5.A. above, should the total cost of
constructing the Tenant Improvements be less than the Tenant Improvement
Allowance, the Tenant Improvement Allowance shall be automatically reduced to
the amount equal to said actual cost.

6. Termination. If the Lease is terminated prior to the date on which the Tenant
Improvements are completed, for any reason due to the default of Tenant
hereunder, in addition to any other remedies available to Landlord under the
Lease, Tenant shall pay to Landlord as Additional Rent under the Lease, within
five (5) days of receipt of a statement therefor, any and all costs incurred by
Landlord and not reimbursed or otherwise paid by Tenant through the date of
termination in connection with the Tenant Improvements to the extent planned,
installed and/or constructed as of such date of termination, including, but not
limited to, any costs related to the removal of all or any portion of the Tenant
Improvements and restoration costs related thereto. Upon the expiration or
earlier termination of the Lease, Tenant shall not be required to remove the
Tenant Improvements it being the intention of the parties that the Tenant
Improvements are to be considered incorporated into the Building.

7. Lease Provisions; Conflict. The terms and provisions of the Lease, insofar as
they are applicable, in whole or in part, to this Exhibit F, are hereby
incorporated herein by reference, and specifically including all of the
provisions of Section 16 of the Lease. In the event of any conflict between the
terms of the Lease and this Exhibit F, the terms of this Exhibit F shall
prevail. Any amounts payable by Tenant to Landlord hereunder shall be deemed to
be Additional Rent under the Lease and, upon any default in the payment of same,
Landlord shall have all rights and remedies available to it as provided for in
the Lease.

 

Exhibit F, Page 4

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

Exhibit F-1

Construction Insurance Requirements

Before commencing work, the Contractor shall procure and maintain at its sole
cost and expense until completion and final acceptance of the work, at least the
following minimum levels of insurance.

A. Workers’ Compensation in statutory amounts and Employers Liability Insurance
in the minimum amounts of $100,000 each accident for bodily injury by accident
and $100,000 each employee for bodily injury by disease with a $500,000 policy
limit, covering each and every worker used in connection with the contract work.

B. Comprehensive General Liability Insurance on an occurrence basis including,
but not limited to, protection for Premises/Operations Liability, Broad Form
Contractual Liability, Owner’s and Contractor’s Protective, and
Products/Completed Operations Liability*, in the following minimum limits of
liability.

 

Bodily Injury, Property Damage, and

  

Personal Injury Liability

   $2,000,000/each occurrence       $3,000,000/aggregate   

 

  * Products/Completed Operations Liability Insurance is to be provided for a
period of at least one (1) year after completion of work.

Coverage should include protection for Explosion, Collapse and Underground
Damage.

C. Comprehensive Automobile Liability Insurance with the following minimum
limits of liability.

 

Bodily Injury and Property    $1,000,000/each occurrence    Damage Liability   
$2,000,000/aggregate   

This insurance will apply to all owned, non-owned or hired automobiles to be
used by the Contractor in the completion of the work.

D. Umbrella Liability Insurance in a minimum amount of five million dollars
($5,000,000), providing excess coverage on a following-form basis over the
Employer’s Liability limit in Paragraph A and the liability coverages outlined
in Paragraphs B and C.

E. Equipment and Installation coverages in the broadest form available covering
Contractor’s tools and equipment and material not accepted by Tenant. Tenant
will provide Builders Risk Insurance on all accepted and installed materials.

All policies of insurance, duplicates thereof or certificates evidencing
coverage shall be delivered to Landlord prior to commencement of any work and
shall name Landlord, and its partners and lenders as additional insureds as
their interests may appear. All insurance policies shall (1) be issued by a
company or companies licensed to be business in the State of California,
(2) provide that no cancellation, non-renewal or material modification shall be
effective without thirty (30) days prior written notice provided to Landlord,
(3) provide no deductible greater than $15,000 per occurrence, (4) contain a
waiver to subrogation clause in favor of Landlord, and its partners and lenders,
and (5) comply with the requirements of Paragraph 8 of the Lease to the extent
such requirements are applicable.

 

Exhibit F-1, Page 1

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

Addendum 1

Options to Extend

This Addendum 1 (the “Addendum”) is incorporated as a part of that certain Lease
dated December __, 2010 (the “Lease”), by and between Willow Park Holding
Company I, L.P., a Delaware limited partnership (“Landlord”), and Pacific
Biosciences of California, Inc., a Delaware corporation dba Pac Bio, Inc.
(“Tenant”), for the leasing of those certain premises commonly known as 1350
Willow Road, Suite 101, Menlo Park, California, as more particularly described
in Exhibit A to the Lease (the “Premises”). Any capitalized terms used herein
and not otherwise defined herein shall have the meaning ascribed to such terms
as set forth in the Lease.

1. Grant of Extension Options. Subject to the provisions, limitations and
conditions set forth in Paragraph 5 below, Tenant shall have an Option
(individually, an “Option” and collectively, the “Options”) to extend the
initial Term of the Lease for two (2) consecutive five (5) year periods
(individually, an “Extended Term” and collectively, “Extended Terms”).

2. Tenant’s Option Notice. Tenant shall have the right to deliver written notice
to Landlord of its intent to exercise an Option (the “Option Notice”). If
Landlord does not receive an Option Notice from Tenant on a date which is
neither more than three hundred sixty five (365) days nor less than two hundred
twenty five (225) days prior to the end of the initial Term or first Extended
Term, as applicable, all rights under the applicable Option shall automatically
terminate and shall be of no further force or effect. Upon the proper exercise
of the first Option, subject to the provisions, limitations and conditions set
forth in this Addendum, the initial Term of the Lease shall be extended for the
first Extended Term and upon the proper exercise of the second Option, subject
to the provisions, limitations and conditions set forth in Paragraph 5 below,
the first Extended Term shall be extended for the second Extended Term;
provided, Tenant shall have no right to exercise the Option for the second
Extended Term if Tenant failed to properly exercise the Option for the first
Extended Term.

3. Determination of the Option Rent.

A. The Base Rent payable for each month during each Extended Term shall be set
at ninety-five percent (95%) of the then-prevailing fair market rental rate (the
“Prevailing Rental Rate”) for renewals of space of equivalent quality, type,
size and location in comparable R&D buildings in Menlo Park, with the length of
the applicable Extended Term, the then credit standing of Tenant, tenant
improvement allowances then being granted in the marketplace and other market
rent concessions then being offered in the marketplace to be taken into account.
The Prevailing Rental Rate shall include the periodic rental increases, if any,
that would be included for space leased for the period the Premises will be
covered by the Lease. As used herein, “then-prevailing” shall mean the time
period which is six (6) months prior to the commencement of the applicable
Extended Term and not the commencement date of the applicable Extended Term.
Within thirty (30) days after receipt of Tenant’s notice to renew, Landlord
shall deliver to Tenant written notice of Landlord’s determination of the
Prevailing Rental Rate and shall advise Tenant of the required adjustment to
Base Rent, if any, and the other terms and conditions offered. Tenant shall,
within ten (10) days after receipt of Landlord’s notice, time being of the
essence with respect thereto, notify Landlord in writing whether Tenant accepts
or rejects Landlord’s determination of the Prevailing Rental Rate.

B. If Tenant rejects Landlord’s determination of the Prevailing Rental Rate,
Tenant’s written notice shall include Tenant’s own determination of the
Prevailing Rental Rate. If Tenant does not deliver any written notice to
Landlord within ten (10) days after receipt of Landlord’s notice of the
Prevailing Rental Rate, Tenant shall be deemed to have withdrawn its exercise of
its rights under this Addendum, whereupon Tenant’s rights under this Addendum
shall be null and void and of no further force or effect. If Tenant and Landlord
disagree on the Prevailing Rental Rate, then Landlord and Tenant shall attempt
in good faith to agree upon the Prevailing Rental Rate. If by that date which is
four (4) months prior to the commencement of the applicable Extended Term (the
“Option Trigger Date”), Landlord and Tenant have not agreed in writing as to the
Prevailing Rental Rate, the parties shall determine the Prevailing Rental Rate
in accordance with the procedure set forth in Paragraph C below.

        C. If Landlord and Tenant are unable to reach agreement on the
Prevailing Rental Rate by the Option Trigger Date, then within ten (10) days of
the applicable Option Trigger Date, Landlord and Tenant shall each
simultaneously submit to the other in a sealed envelope its good faith estimate
of the Prevailing Rental Rate. If either Landlord or Tenant fails to propose a
Prevailing Rental Rate, then the Prevailing Rental Rate proposed by the other
party shall prevail. If the higher of such estimates is not more than one
hundred five percent (105%) of the lower, then the Prevailing Rental Rate shall
be the average of the two. Otherwise, the dispute shall be resolved by
arbitration in accordance with the remainder of this Paragraph C. Within seven
(7) days after the exchange of estimates, the parties shall select as an
arbitrator a licensed real estate broker with at least ten (10) years of
experience leasing premises in Class A office buildings in Central San Mateo
County (a “Qualified Arbitrator”). If the parties cannot agree on a Qualified
Arbitrator, then within a second period of seven (7) days, each shall select a
Qualified Arbitrator and within ten (10) days thereafter the two appointed
Qualified Arbitrators shall select a third Qualified Arbitrator (which third
Qualified Arbitrator shall not previously have represented either party hereto)
and the third Qualified Arbitrator shall be the sole arbitrator (the “Sole
Arbitrator”). If one party shall fail to select a Qualified Arbitrator within
the second seven (7)-day period, then the Qualified Arbitrator chosen by the
other party shall be the Sole Arbitrator. Within thirty (30) days after
submission of the matter to the Sole Arbitrator, the Sole Arbitrator shall
determine the Prevailing Rental Rate by choosing whichever of the estimates
submitted by Landlord and Tenant the Sole Arbitrator judges to be more accurate.
The Sole Arbitrator shall notify Landlord and Tenant of his or her decision,
which shall be final and binding. If the Sole Arbitrator believes that expert
advice would materially assist him or her, the Sole Arbitrator may retain one or
more qualified persons to provide expert advice. The fees of the arbitrator
selected by each party shall be borne by that party. The fees of the Sole
Arbitrator and the expenses of the arbitration proceeding, including the fees of
any expert witnesses retained by the Sole Arbitrator, shall be shared equally by
Landlord and Tenant.

 

Addendum 1, Page 1

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

D. If Tenant timely notifies Landlord that Tenant accepts Landlord’s
determination of the Prevailing Rental Rate, or following resolution of the
Prevailing Rental Rate via mutual agreement or via arbitration, whichever shall
be applicable, then, on or before the commencement date of the applicable
Extended Term, Landlord and Tenant shall execute an amendment to this Lease
prepared by Landlord extending the Term on the same terms provided in this
Lease, except as follows:

(i) Base Rent shall be adjusted to ninety-five percent (95%) of the Prevailing
Rental Rate (which shall be the rental rate set forth in Landlord’s
determination of the Prevailing Rental Rate, the rental rate determined by
mutual agreement or the Prevailing Rental Rate determined by arbitration, as the
case may be, but in no event less than the Base Rent payable by Tenant
immediately prior to the expiration of the initial Term of this Lease with
respect to the first Extended Term and in no event less than the Base Rent
payable by Tenant immediately prior to the expiration of the first Extended Term
with respect to the second Extended Term);

(ii) Tenant shall have no further renewal Option (except as expressly set forth
in this Addendum 1) unless expressly granted by Landlord in writing; and

(iii) Landlord shall lease the Premises to Tenant in their then-current
condition, and Landlord shall not provide to Tenant any allowances (e.g.,
improvement allowance) or other tenant inducements, or pay any leasing
commissions.

E. Tenant’s rights under this Addendum shall terminate if (1) this Lease or
Tenant’s right to possession of the Premises is terminated, (2) Tenant assigns
any of its interest in this Lease or sublets any portion of the Premises, or
(3) Tenant fails to timely exercise its Option under this Addendum, time being
of the essence with respect to Tenant’s exercise thereof. Tenant shall have no
other rights to extend the Term of the Lease under this Addendum unless Landlord
and Tenant otherwise agree in writing.

4. Condition of Premises for the Extended Term. If Tenant timely and properly
exercises this Option, in strict accordance with the terms contained herein,
Tenant shall accept the Premises in its then “As-Is” condition and, accordingly,
Landlord shall not be required to perform any additional improvements to the
Premises. Tenant shall not be responsible for brokerage commissions payable to a
broker procured or hired by Tenant in connection with the Option if Landlord has
agreed in writing to pay such commission.

5. Limitations On, and Conditions To, Extension Option. This Option is personal
to Tenant and may not be assigned, voluntarily or involuntarily, separate from
or as part of the Lease. At Landlord’s option, all rights of Tenant under this
Option shall terminate and be of no force or effect if any of the following
individual events occur or any combination thereof occur: (1) Tenant has been in
default at any time during the initial Term or first Extended Term, as
applicable, of the Lease, or is in default of any provision of the Lease on the
date Landlord receives the Option Notice; and/or (2) Tenant has assigned its
rights and obligations under all or part of the Lease or Tenant has subleased
all or part of the Premises; and/or (3) Tenant’s financial condition is
unacceptable to Landlord at the time the Option Notice is delivered to Landlord;
and/or (4) Tenant has failed to exercise properly this Option in a timely manner
in strict accordance with the provisions of this Addendum; and/or (5) Tenant no
longer has possession of all or any part of the Premises under the Lease, or if
the Lease has been terminated earlier, pursuant to the terms and provisions of
the Lease.

6. Time is of the Essence. Time is of the essence with respect to each and every
time period described in this Addendum.

 

Addendum 1, Page 2

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

Addendum 2

Option to Expand

This Addendum 2 (the “Addendum 2”) is incorporated as a part of that certain
Lease dated December __, 2010 (the “Lease”), by and between Willow Park Holding
Company I, L.P., a Delaware limited partnership (“Landlord”), and Pacific
Biosciences of California, Inc., a Delaware corporation dba Pac Bio, Inc.
(“Tenant”), for the leasing of those certain premises commonly known as 1350
Willow Road, Suite 101, Menlo Park, California, as more particularly described
in Exhibit A to the Lease (the “Premises”). Any capitalized terms used herein
and not otherwise defined herein shall have the meaning ascribed to such terms
as set forth in the Lease.

1. Grant of Options to Expand. Subject to the provisions, limitations and
conditions set forth in this Addendum 2, Tenant shall have an option (each, an
“Expansion Option” and collectively, Expansion Options”) to lease the premises
more particularly described in Schedule 1 attached hereto and incorporated
herein by this reference located on the first (1st) floor of the Building
(“First Floor Expansion Space”) and the premises more particularly described in
Schedule 2 attached hereto and incorporated herein by this reference located on
the second (2nd) floor of the Building (“Second Floor Expansion Space”)
(collectively, “Expansion Spaces”) on the terms and conditions as set forth
below. Tenant shall not have the right to lease less than all of the First Floor
Expansion Space or Second Floor Expansion Space.

2. Expansion Option Notices. In order to duly exercise an Expansion Option,
Tenant must deliver to Landlord prior written notice of its unconditional and
unequivocal intention to exercise the particular Expansion Option (an “Expansion
Option Notice”). The Expansion Option Notice with respect to the First Floor
Expansion Space must be delivered to Landlord on or before February 1, 2013 and
the Expansion Option Notice with respect to the Second Floor Expansion Space
must be delivered to Landlord no earlier than April 1, 2011 and no later than
May 31, 2011, time being of the essence. If Tenant timely and duly delivers to
Landlord the applicable Expansion Option Notice and Tenant also complies with
all of the other terms and provisions of this Addendum 2, the term for the
applicable Expansion Space shall be coterminous with the Term of this Lease and
shall begin, with respect to the First Floor Expansion Space, on May 1, 2013 and
with respect to the Second Floor Expansion Space, on June 1, 2011 (except such
date shall be July 1, 2011 with respect to the premises currently occupied by
Membrane Technology (“Membrane”), unless Membrane exercises their option to
renew the term of their lease, in which case, the Expansion Space Commencement
Date for the space occupied by Membrane shall be no earlier than January 1, 2012
(each, an “Expansion Space Commencement Date”); provided, however, Landlord and
Tenant acknowledge and agree that (a) the First Floor Expansion Space is
presently occupied by Knowledge Networks (“Knowledge”), (b) Knowledge has the
right to renew its existing term, which right has not, as of the date of this
Lease, been exercised or relinquished by Knowledge, (c) the terms of Tenant’s
Expansion Option with respect to the First Floor Expansion Space set forth above
in this Paragraph 2 shall only be applicable in the event Knowledge does in fact
exercise its renewal option with respect to the First Floor Expansion Space and
(d) in the event Knowledge does not exercise its renewal option, (x) the terms
set forth above in this Paragraph 2 with respect to Tenant’s Expansion Option
for the First Floor Expansion Space shall be null and void and of no force or
effect and (y) the terms of the Expansion Option with respect to the First Floor
Option Space shall be identical to the terms of the Expansion Option with
respect to the Second Floor Expansion Space.

3. Base Rent. The Base Rent payable by Tenant for the Expansion Spaces shall be
the same Base Rent on a per square foot basis as the Base Rent payable by Tenant
under this Lease. If the applicable Expansion Option is duly exercised, from and
after the applicable Expansion Space Commencement Date, the term “Premises” as
used herein shall mean and refer to the aggregate of the Premises, as described
herein as of the date of this Lease, and the applicable Expansion Space. In
addition to the increase in Base Rent, (i) the amount of the Security Deposit
shall be increased by the amount of the last month’s Base Rent payable for the
applicable Expansion Space, and Tenant shall pay and deliver same to Landlord
within ten (10) business days of delivery to Landlord of the applicable
Expansion Option Notice, (ii) the Tenant’s Share for all expenses shall increase
commensurate with the increase in the area of the Premises, (iii) the number of
Tenant’s parking spaces shall be increased commensurately, and (iv) the parties
shall execute an amendment to this Lease effectuating the foregoing within ten
(10) business days of delivery to Landlord of the applicable Expansion Option
Notice. All other terms and conditions shall remain the same.

4. Brokerage Commissions. Landlord and Tenant agree that Landlord will be
responsible for any and all brokerage commissions and finder’s fees payable or
allegedly payable to Cornish & Carey Commercial and Cassidy Turley BT Commercial
(collectively, “Brokers”) in connection with Tenant’s lease of the Expansion
Spaces. Tenant hereby further agrees that Landlord shall in no event or
circumstance be responsible or otherwise liable for the payment of any brokerage
commissions and/or finder’s fees to parties other than Brokers and, accordingly,
Tenant shall indemnify, defend and hold Landlord and each of its partners,
members, officers, directors, shareholders, representatives and agents harmless
from and against any and all losses, claims, damages, judgments, liabilities,
costs and expenses (including without limitation, reasonable attorneys’ and
experts’ fees and costs (collectively, “Claims”) arising from or made by any
party for the payment of any brokerage commission or finder’s fee, except Claims
made by Brokers.

5. Limitations On, and Conditions To, Options to Expand.

                A. The Expansion Options granted to Tenant herein are personal
to Tenant and may not be assigned, voluntarily or involuntarily, separate from
or as a part of the Lease except for an assignment to an Affiliate as part of
the assignment of the entirety of this Lease. At Landlord’s sole option, all
rights of Tenant and any Affiliate in, to and under this Addendum 2 shall
terminate and be of no force or effect if any of the following individual events
occur or any combination thereof occur at any time during the Term of the Lease:
(i) Tenant or the Affiliate, as the case may be, is in default of any provision
of the Lease at the time of Tenant’s or the Affiliate’s (as the case may be)
delivery to Landlord of an Expansion Option Notice; and/or (ii) Tenant or the
Affiliate (as the case may be) has assigned all of its rights and delegated its
obligations under the Lease to a party other than a Affiliate or Tenant has
subleased all or any portion of the Premises; and/or (iii) Tenant has failed to
timely, properly and duly exercise the applicable Expansion Option in strict
accordance with the provisions of this Addendum 2; and/or (iv) Tenant or the
Affiliate (as the case may be) no longer has possession of all or any portion of
the Premises.

 

Addendum 2, Page 1

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

B. If any of the following described events shall occur, the applicable
Expansion Option shall automatically terminate with respect to the applicable
Expansion Space and thereafter be of no further force or effect: (i) Tenant
elects not to exercise the applicable Expansion Option; (ii) Tenant fails to
timely deliver the applicable Expansion Option Notice to Landlord prior to the
dates set forth herein; or (iii) Tenant fails to deliver timely the increased
amount of the Security Deposit to Landlord. If any of the foregoing events
occur, Tenant shall have no further right to exercise the applicable Expansion
Option thereafter. It is the express intention of the parties hereto that the
Expansion Options are only available to be exercised, declined or deemed
declined by Tenant one time and neither of the Expansion Options shall be
construed nor interpreted as being continuing rights of Tenant or of a
continuing nature.

6. Time is of the Essence. Time is of the essence in the performance of the
parties’ respective obligations set forth in this Addendum 2.

 

Addendum 2, Page 2

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

Schedule 1

First Floor Expansion Space

LOGO [g147496g16d97.jpg]

 

 

Addendum 2, Page 3

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

Schedule 2

Second Floor Expansion Space

LOGO [g147496g96a31.jpg]

 

Addendum 2, Page 4