Exhibit 10.6 F

 

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LEASE AGREEMENT

 

between

 

2000 SIERRA POINT, LLC,

a Delaware limited liability company

 

as “Landlord”

 

and

 

TERCICA, INC.,

a Delaware corporation

 

as “Tenant”

 

Dated March 7, 2005

 

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TABLE OF CONTENTS

 

SECTION

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   PAGE

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Index of Defined Terms    vi Basic Lease Information    vii 1.    Premises    1
2.    Term; Possession    1 3.    Rent    3      3.1    Base Rent    3      3.2
   Additional Rent: Increases in Operating Costs and Taxes    3           3.2.1
   Definitions    3           3.2.2    Additional Rent    7      3.3    Payment
of Rent    9 4.    Security Deposit    9      4.1    Security Deposit    9     
4.2    Letter of Credit    10 5.    Use and Compliance with Laws    11      5.1
   Use    11      5.2    Hazardous Materials    12           5.2.1   
Definitions    12           5.2.2    Tenant’s Covenants    13           5.2.3   
Compliance    13           5.2.4    Landlord’s Rights    14           5.2.5   
Tenant’s Indemnification    14 6.    Tenant Improvements & Alterations    15 7.
   Maintenance and Repairs    17 8.    Tenant’s Taxes    18 9.    Utilities and
Services    19      9.1    Description of Services    19      9.2    Payment for
Additional Utilities and Services    19      9.3    Interruption of Services   
19 10.    Exculpation and Indemnification    20

 

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    10.1    Tenant’s Indemnification of Landlord    20     10.2    Damage to
Tenant and Tenant’s Property    20     10.3    Survival    21 11.   Insurance   
21     11.1    Tenant’s Insurance    21          11.1.1    Liability Insurance
   21          11.1.2    Property Insurance    21          11.1.3    Business
Interruption Insurance    22          11.1.4    Requirements For All Policies   
22          11.1.5    Updating Coverage    22          11.1.6    Certificates of
Insurance    22     11.2    Landlord’s Insurance    23     11.3    Mutual Waiver
of Right of Recovery & Waiver of Subrogation    23 12.   Damage or Destruction
   23     12.1    Landlord’s Duty to Repair    23     12.2    Landlord’s Right
to Terminate    24     12.3    Tenant’s Right to Terminate    24     12.4   
Waiver    24 13.   Condemnation    25     13.1    Definitions    25     13.2   
Effect on Lease    25     13.3    Restoration    25     13.4    Abatement and
Reduction of Rent    26     13.5    Awards    26     13.6    Waiver    26 14.  
Assignment and Subletting    26     14.1    Landlord’s Consent Required    26  
  14.2    Reasonable Consent    27     14.3    Excess Consideration    27    
14.4    No Release of Tenant    28     14.5    Expenses and Attorneys’ Fees   
28     14.6    Effectiveness of Transfer    28     14.7    Landlord’s Right to
Space    28

 

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    14.8   Assignment of Sublease Rents    29     14.9   Permitted Transfers   
29 15.   Default and Remedies    30     15.1   Events of Default    30     15.2
  Remedies    31         15.2.1    Termination    31         15.2.2   
Continuation of Lease    32         15.2.3    Re-Entry    32         15.2.4   
Termination    33         15.2.5    Cumulative Remedies    33         15.2.6   
No Surrender    33 16.   Late Charge and Interest    33     16.1   Late Charge
   33     16.2   Interest    33 17.   Waiver    34 18.   Entry, Inspection and
Closure    34 19.   Surrender and Holding Over    35     19.1   Surrender    35
    19.2   Holding Over    35 20.   Encumbrances    36     20.1   Subordination
   36     20.2   Mortgagee Protection    36 21.   Estoppel Certificates and
Financial Statements    36     21.1   Estoppel Certificates    36     21.2  
Financial Statements    37 22.   Notices    37 23.   Attorneys’ Fees    37 24.  
Quiet Possession    38 25.   Security Measures    38 26.   Tenant Parking    38

 

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27.   Force Majeure    39 28.   Common Areas    39 29.   Rules and Regulations
   40 30.   Landlord’s Liability    41 31.   Consents and Approvals    41    
31.1    Determination in Good Faith    41     31.2    No Liability Imposed on
Landlord    41 32.   Waiver of Right to Jury Trial    41 33.   Brokers    42 34.
  Relocation of Premises    42 35.   Entire Agreement    42 36.   Miscellaneous
   43 37.   Authority    43 38.   Option to Renew    43 1.   Second Floor Option
and Right of First Offer    F–1     1.1    Grant of Option and Right of First
Offer; Conditions    F–1     1.2    Terms for Expansion Space or Offering Space
   F–2     1.3    Termination of Right of First Offer    F–3     1.4    Offering
Amendment    F–3     1.5    Prevailing Market    F–4 2.   Third Floor Option and
Right of First Offer    F–4     2.1    Grant of Third Floor Option and First
Offer Right; Conditions    F–4     2.2    Terms for 3rd Floor Space    F–5    
2.3    Termination of 3rd Floor First Offer Right    F–5     2.4    3rd Floor
Amendment    F–6 3.   Monument Signage    F–6

 

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EXHIBITS

 

Exhibit A

   Description of Premises

Exhibit B

   Work Letter

Exhibit C

   Commencement Certificate

Exhibit D

   Project Rules Rider

Exhibit E

   Prohibited Uses Rider

Exhibit F

   Additional Provisions Rider

Exhibit G

   Common Area Work

Exhibit H

   3rd Floor Space

Exhibit I

   Current Conference Room Rates

Exhibit J

   Occupied Fourth Floor Premises

 

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INDEX OF DEFINED TERMS

 

Additional Rent    7 Alterations    15 Applicable Measurement Standards    1
Arbitration Period Base Rent    45 Award    25 Base Operating Costs    3 Base
Taxes    3 Building    1 Building Systems    12 Claims    20 Commencement Date
   1 Common Areas    39 Condemnation    25 Condemnor    25 Controls    18 Date
of Condemnation    25 Election Notice    43 Encumbrance    36 Environmental
Losses    13 Environmental Requirements    13 Event of Default    30 Expense
Statement    7 Expiration Date    1 Fees    37 Handled by Tenant    13 Handling
by Tenant    13 Hazardous Materials    12 HVAC    12 Initial Rent Determination
Period    44 Interest Rate    34 Land    1 Landlord    1 Landlord’s Broker    42
Laws    4 Lease    1 Minimum HVAC Hours    19 Mortgagee    36 Objection Notice
   8 Operating Costs    3 Parking Area    1 Permitted Hazardous Materials    13
Premises    1 Prevailing Market Rent    44 Prohibited Use    12 Project    1
Project Rules    40 Proposed Transferee    27 Renewal Option    43 Rent    9
Rental Tax    18 Representatives    13 Review Notice    7 Scheduled Commencement
Date    1 Security Deposit    9 Service Failure    19 Taxes    6 Tenant    1
Tenant Improvements    15 Tenant’s Broker    42 Tenant’s Share    6 Tenant’s
Taxes    18 Tenant’s Work    15 Term    1 Trade Fixtures    17 Transfer    26
Transferee    27 Visitors    13 Work Letter    1

 

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BASIC LEASE INFORMATION

 

Lease Date:    For identification purposes only, the date of this Lease is March
7, 2005 Landlord:   

2000 SIERRA POINT, LLC,

a Delaware limited liability company

Tenant:   

TERCICA, INC.,

a Delaware corporation

Project:    2000 Sierra Point Parkway, Brisbane, California Building Address:   

2000 Sierra Point Parkway

Brisbane, California 94005

Premises:    Floor:    A portion of the 3rd and the entire 4th, as more
particularly described on Exhibit A hereto      Suite Number:    400     
Rentable Area:    Approximately 28,278 rentable square feet, subject to
remeasurement, as more particularly described in Section 1 below
Premises Mailing Address:   

2000 Sierra Point Parkway, Suite 400

Brisbane, California 94005

Term:    Seventy-five (75) full calendar months (plus any partial calendar month
at the beginning of the Term) Renewal Options:    One (1) option for five (5)
years

Scheduled

Commencement Date:

   July 15, 2005 Expiration Date:    The last day of the 75th full calendar
month in the Term

 

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Base Rent:   

Months

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Rate per rentable

square foot per month

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Monthly

Base Rent

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1-24,

and any partial month at

the beginning of the Term

   $1.95    $55,142.10*      25 – 36    $2.05    $57,969.90      37 – 48   
$2.15    $60,797.70      49 – 60    $2.25    $63,625.50      61 – 75    $2.35   
$66,453.30     

*  Subject to abatement, as more particularly described in Section 3 below, and
changes due to remeasurement, as more particularly described in Section 1 below.

Tenant’s Share of the

Building for Operating

Costs and Taxes:

   12.94%, subject to remeasurement, as more particularly described in Section 1
below Security Deposit:    Seven Hundred Ninety Thousand Dollars ($790,000.00),
subject to reduction as more particularly set forth in Section 4 below. Parking:
   For parking by Tenant and Tenant’s employees, 102 unreserved parking spaces
(based upon a ratio of 3.6 parking spaces per 1,000 rentable square feet) in the
area designated in writing from time to time by Landlord for parking by tenants
of the Project and their employees.

Landlord’s Address for

Payment of Rent:

  

2000 Sierra Point Parkway

Brisbane, California 94005

Attn: Management Office, Property Manager

Permitted Use:    General office use

 

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Landlord’s Address for Notices:   

Divco West Properties, LLC

c/o Management Office at Sierra Point Parkway

2000 Sierra Point Parkway

Brisbane, California 94005

Attn: Property Manager

Facsimile: (650) 589-6355

 

with a copy to:

 

Divco West Properties, LLC

c/o Divco West Property Services, LLC

400 Hamilton Avenue, Fourth Floor

Palo Alto, California 94301

Attention:    David A. Taran and Jacqueline Moore

Facsimile:   (650) 322-9999

Telephone:  (650) 688-4100

 

with a copy to:

 

SSL Law Firm LLP

2755 Campus Drive, Suite 245

San Mateo, California 94403

Attention:    Kyla K. Chin, Esq./Real Estate Notices (2039/0008)

Facsimile:   (650)240-1831

 

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Tenant’s Address for Notices:   

Prior to Commencement Date:

651 Gateway Boulevard, Suite 950

South San Francisco, California 94080

Attention:  General Counsel

Facsimile: (650)238-1520

 

After Commencement Date:

The Premises

Attention:  Chief Financial Officer

 

with a copy to:

 

The Premises

Attention:    General Counsel

 

with a copy to:

 

Greenberg Traurig, LLP

2000 University Avenue

East Palo Alto, California 94303

Attention:    Toni Pryor Wise, Esq.

Facsimile:    (650)328-8508

Broker(s):    Landlord’s Broker: BT Commercial      Tenant’s Broker: CB Richard
Ellis Guarantor(s):    None. Property Manager:    Divco West Property Services,
LLC Additional Provisions:    Expansion Right, Right of First Offer, Right of
First Refusal, Monument Signage Base Year:    The calendar year 2006
Minimum HVAC Hours:    7:00 a.m. to 6:00 p.m.

 

The Basic Lease Information set forth above is part of the Lease.

 

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THIS LEASE AGREEMENT (this “Lease”) is made as of the Lease Date set forth in
the Basic Lease Information, by and between the Landlord identified in the Basic
Lease Information (“Landlord”), and the Tenant identified in the Basic Lease
Information (“Tenant”). Landlord and Tenant hereby agree as follows:

 

1. PREMISES

 

Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, upon
the terms and subject to the conditions of this Lease, the space identified in
the Basic Lease Information as the Premises (the “Premises”), in the building
owned by Landlord having the address specified in the Basic Lease Information
(the “Building”). The Building, the parking facilities serving the Building (the
“Parking Area”), and the parcel(s) of land (the “Land”) on which the Building
and the Parking Area are situated, shall hereinafter be referred to collectively
as the “Project.”

 

The approximate configuration and location of the Premises is shown on Exhibit
A. Landlord and Tenant agree that the rentable area of the Premises for all
purposes under this Lease shall be the Rentable Area specified in the Basic
Lease Information; provided, however, that, at any time prior to the
Commencement Date Landlord may, at its option and at its own expense, or shall,
upon Tenant’s written request and at Tenant’s expense, cause an architect to
re-measure the Premises and/or the Project in accordance with the Applicable
Measurement Standards (as defined below). Any such re-measurement shall be final
and binding on Landlord and Tenant absent manifest error, and any calculations
contained in this Lease based on square footage, including, without limitation,
Base Rent and Tenant’s Share, shall be adjusted accordingly. Upon completion of
any such re-measurement, Landlord and Tenant shall, at the request of either
party, confirm the Rentable Area, the Base Rent and Tenant’s Share in writing.
As used herein, “Applicable Measurement Standards” means the ANSI/BOMA Z-65.1
1996 Standard Method of Measuring Floor Area in Office Buildings.

 

2. TERM; POSSESSION

 

The term of this Lease (the “Term”) shall commence on the Commencement Date as
described below and, unless sooner terminated, shall expire on the Expiration
Date set forth in the Basic Lease Information (the “Expiration Date”). The
“Commencement Date” shall be the earlier of (a) the date on which Tenant
Substantially Completes (as defined in the Work Letter attached as Exhibit B
(the “Work Letter”) the Tenant Improvements; or (b) the date identified as the
Scheduled Commencement Date set forth in the Basic Lease Information (the
“Scheduled Commencement Date”). When the Commencement Date has been established,
Landlord and Tenant shall at the request of either party execute a commencement
certificate in the form attached as Exhibit C wherein the parties specify, among
other things, the Commencement Date and the Expiration Date. Upon execution of
the Lease and Landlord’s receipt of Tenant’s Security Deposit, Landlord shall
deliver possession of the Premises (except a portion of the Premises consisting
of approximately 3,500 rentable square feet located on the 4th floor of the
Building as depicted on Exhibit J attached hereto (the “Occupied Fourth Floor
Premises”), which shall be delivered on or before April 11, 2005) to Tenant for
installation by Tenant of the Tenant Improvements. If Landlord fails to deliver
possession of the portion of the Premises located on the 4th floor of the
Building on or before April 11, 2005, the Commencement Date shall be delayed by
one (1) day for every day in the period beginning on April 11, 2005 and ending
on

 

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the date that Landlord actually delivers possession of such space to Tenant. In
addition, in the event that Landlord is unable for deliver the Occupied Fourth
Floor Premises to Tenant for purposes of constructing the Tenant Improvements at
the time Landlord delivers the remainder of the Premises to Tenant for such
purpose, Landlord shall pay to Tenant an amount equal to fifty percent (50%) of
any holdover rent that Tenant is required to pay and actually pays under the
Existing Lease (as defined below); provided, however, that in no event shall
Landlord be obligated to pay to Tenant more than $35,000.00 in the aggregate. As
used herein, the “Existing Lease” shall mean that certain Office Lease 651
Gateway Boulevard dated July 24, 2003 between Gateway Center LLC, as landlord,
and Tercica Medica, Inc., as tenant, as amended by that certain First Amendment
dated September 24, 2003, and as further amended by that certain Second
Amendment dated June 28, 2004.

 

By taking possession of the Premises, Tenant agrees that the Premises are in
good order and satisfactory condition, and that there are no representations or
warranties by Landlord regarding the condition of the Premises or the Building.
However, notwithstanding the foregoing, Landlord agrees that it will deliver the
Premises vacant and in broom clean condition. Further, Landlord agrees that the
base Building, the base Building electrical, HVAC (i.e., heating, ventilation
and air conditioning) and plumbing systems up to the demising walls of the
Premises and the electrical, HVAC system and plumbing systems located in the
Premises shall be in good working order. If such systems are not in good working
order as of the date the Premises is delivered to Tenant and Tenant provides
Landlord with notice of the same within sixty (60) days following the date
Landlord delivers the Premises to Tenant, Landlord shall be responsible for
repairing or restoring same. Additionally, Landlord shall be responsible, at
Landlord’s sole cost and without inclusion of such cost in Operating Costs, for
any repairs, upgrades or modifications to the Building core restrooms on the 3rd
and 4th floors of the Building, to the Premises and to the Common Areas of the
Project (i) to the extent such upgrades or modifications are required by fire
and building codes applicable to the Project and Title III of the Americans with
Disabilities Act and/or similar handicapped access provisions of applicable
building codes, which are in effect and as interpreted, enforced and applied as
of the date of this Lease, and (ii) to the extent such upgrades or modifications
are required by the appropriate governmental agency or department in order to
obtain a building permit for the Tenant Improvements (collectively, “Required
Upgrades”). Notwithstanding the foregoing, the Required Upgrades shall
specifically exclude any repairs, upgrades or modifications within the Premises
(y) required as a result of Tenant’s elimination of the existing interior
corridor on the 4th floor of the Building, or (z) required as a result of
Tenant’s particular design and configuration of the Tenant Improvements that
results in a currently (i.e., as of the date of this Lease) compliant aspect of
the Premises becoming non-compliant (and, in such event, Tenant shall, at its
sole cost, perform or cause to be performed in accordance with the terms of this
Lease, such repairs, upgrades and/or modifications). The Required Upgrades shall
be completed using Building standard methods, materials and finishes. Landlord
shall use commercially reasonable efforts to complete the Required Upgrades
concurrently with the Tenant Improvements.

 

Tenant’s and Tenant’s contractors entry into the Premises for the purposes of
constructing the Tenant Improvements and installing furniture, equipment and
personal property in the Premises prior to the Commencement Date shall be upon
all of the terms of this Lease (including its obligations regarding indemnity
and insurance) except those regarding the obligation to pay Rent, which shall
commence on the Commencement Date.

 

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3. RENT

 

  3.1 Base Rent

 

Tenant agrees to pay to Landlord the Base Rent set forth in the Basic Lease
Information, without prior notice or demand, on the first day of each and every
calendar month during the Term, except that Base Rent for the first full
calendar month in which Base Rent is payable shall be paid upon Tenant’s
execution of this Lease and Base Rent for any partial calendar month at the
beginning of the Term shall be paid on the Commencement Date. Base Rent for any
partial calendar month at the beginning or end of the Term shall be prorated
based on the actual number of days in the month. Notwithstanding anything herein
to the contrary, Tenant shall not be obligated to pay Base Rent or Additional
Rent with respect to the first fifteen (15) months of the Term plus any partial
calendar month at the beginning of the Term (the “Abated Rent”). If Tenant
defaults under this Lease at any time during the Term and fails to cure such
default within any applicable cure period under this Lease, then all unamortized
Abated Rent (i.e. based upon the amortization of the Abated Rent in equal
monthly amounts, without interest, during the period commencing on the
Commencement Date and ending on the original Expiration Date) shall immediately
become due and payable. Only Base Rent and Tenant’s Share of Operating Costs and
Taxes shall be abated pursuant to this Section 3.1, and all other Rent and other
costs and charges specified in this Lease shall remain as due and payable
pursuant to the provisions of this Lease.

 

If the Basic Lease Information provides for any change in Base Rent by reference
to years or months (without specifying particular dates), the change will take
effect on the first (1st) day of the first full calendar month following the
applicable annual or monthly anniversary of the Commencement Date.

 

  3.2 Additional Rent: Increases in Operating Costs and Taxes

 

  3.2.1 Definitions

 

(a) “Base Operating Costs” means Operating Costs for the calendar year specified
as the Base Year in the Basic Lease Information. If for any reason the Building
is not constructed and ready for occupancy at the commencement of the Base Year,
then, subject to Section 3.2. 1(c) below, for the purpose of calculating Base
Operating Costs, Operating Costs for the Base Year shall be calculated based
upon the Operating Costs that would have been incurred if the Building had been
constructed and ready for occupancy before the commencement of the Base Year.

 

(b) “Base Taxes” means Taxes for the calendar year specified as the Base Year in
the Basic Lease Information. If the amount of Taxes imposed with respect to the
Project increases during the Base Year for any reason (including, without
limitation, because of any transfer of title to the Project or any construction
of improvements at the Project), then, for the purpose of calculating Base
Taxes, Taxes for the Base Year shall be calculated based upon the Taxes that
would have been imposed for the entire Base Year if such increase had occurred
before the commencement of the Base Year.

 

(c) “Operating Costs” means all costs of managing, operating, maintaining,
altering, and repairing the Premises, the Building and/or the Project or any
part thereof, including all costs,

 

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expenditures, fees and charges for; (A) operation, maintenance and repair of the
Project (including maintenance, repair and replacement of glass, the roof
covering or membrane, resurfacing, painting, restriping, cleaning and sweeping,
landscaping and fountains); (B) utilities and services (including
telecommunications facilities and equipment, recycling programs and trash
removal), and associated supplies and materials; (C) compensation (including
employment taxes and fringe benefits) for persons who perform duties in
connection with the operation, management, maintenance and repair of the Project
(including independent contractors), such compensation to be appropriately
allocated for persons who also perform duties unrelated to the Project; (D)
property (including coverage for earthquake and flood if carried by Landlord),
liability, rental income and other insurance relating to the Project, and
expenditures for deductible amounts paid under such insurance; provided,
however, that Tenant’s Share of any earthquake insurance deductibles for any
such earthquake event shall be amortized over the useful life of the
improvement(s) that are being repaired or reconstructed as a result of such
event, with interest on the unamortized amount at one percent (1%) in excess of
the Wall Street Journal prime lending rate announced from time to time or
Landlord’s borrowing rate with respect to Landlord’s financing, if any,
specifically obtained to fund Landlord’s reconstruction or repair of
improvements due to such earthquake event, if such rate is lower; (E) licenses,
permits and inspections; (F) [Intentionally Omitted]; (G) amortization of
capital improvements required to comply with any law, statute, ordinance or
governmental rule or regulation or any orders pursuant thereto (collectively
“Laws”), or which are intended to reduce Operating Costs or improve the utility,
efficiency or capacity of any Building System or the appearance of the Project,
with interest on the unamortized balance at the rate paid by Landlord on funds
borrowed to finance such capital improvements (or, if Landlord finances such
improvements out of Landlord’s funds without borrowing, the rate that Landlord
would have paid to borrow such funds, as reasonably determined by Landlord),
over such improvement’s life calculated in accordance with generally accepted
accounting principles; (H) an office in the Project for the management of the
Project, including expenses of furnishing and equipping such office and the
rental value of any space occupied for such purposes; (I) property management
fees (however, in no event shall the management fees for the Building (expressed
as a percentage of gross receipts for the Building) exceed the prevailing market
management fees (expressed as a percentage of gross receipts) for comparable
third party management companies offering comparable management services in
office buildings similar to the Building in class, size, age and location); (J)
accounting, legal and other professional services incurred in connection with
the operation of the Project and the calculation of Operating Costs and Taxes;
(K) a reasonable allowance for depreciation on machinery and equipment used to
maintain the Project and on other personal property owned by Landlord in the
Project (including window coverings and carpeting in Common Areas (as defined in
Section 28)); (L) contesting the validity or applicability of any Laws that may
affect the Project; (M) any Common Area maintenance fees and expenses (including
costs and expenses of operating, managing, owning and maintaining the Parking
Area and the Common Areas and any conference center in the Project); (N) parking
area directional signs and other markers and bumpers, as well as personnel to
implement any parking control other services and to police the automobile
parking and Common Areas; and (O) any other cost, expenditure, fee or charge,
whether or not hereinbefore described, which in accordance with generally
accepted property management practices would be considered an expense of
managing, operating, maintaining and repairing the Project. Operating Costs for
any calendar year, including the Base Year, during which average occupancy of
the Project is less than ninety-five

 

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percent (95%) shall be calculated based upon the Operating Costs that would have
been incurred if the Project had an average occupancy of ninety-five percent
(95%) during the entire calendar year.

 

Operating Costs shall not include (i) capital improvements (except as otherwise
provided above); (ii) costs of special services rendered to individual tenants
(including Tenant) for which a special charge is made; (iii) interest and
principal payments on loans or indebtedness secured by the Project (except as
otherwise provided in clause (G) of the immediately preceding paragraph); (iv)
costs of improvements for Tenant or other tenants of the Project; (v) costs of
services or other benefits of a type which are not available to Tenant but which
are available to other tenants or occupants, and costs for which Landlord is
expressly entitled to be reimbursed by other tenants of the Project other than
through payment of tenants’ shares of increases in Operating Costs and Taxes;
(vi) leasing commissions, attorneys’ fees and other expenses incurred in
connection with leasing space in the Project or enforcing such leases; (vii)
depreciation or amortization, other than as specifically enumerated in the
definition of Operating Costs above; and (viii) costs, fines, interest or
penalties incurred due to Landlord’s violation of any Law. In addition,
Operating Costs shall not include the following:

 

  (A) Sums (other than management fees, it being agreed that the management fees
included in Operating Costs are as described in clause (I) above) paid to
subsidiaries or other affiliates of Landlord for services on or to the Project,
Building and/or Premises, but only to the extent that the costs of such services
exceed the competitive cost for such services rendered by persons or entities of
similar skill, competence and experience;

 

  (B) Any fines, penalties or interest resulting from the negligence or willful
misconduct of the Landlord or its agents, contractors, or employees;

 

  (C) Advertising and promotional expenditures;

 

  (D) Any cost or expense related to removal, cleaning, abatement or remediation
of “hazardous materials” existing as of the date of this Lease in or about the
Building, Common Area or Project;

 

  (E) Any costs, fines or penalties incurred due to violations by Landlord of
any law, order, rule or regulations of any governmental authority which was in
effect (and as interpreted and enforced) as of the date of this Lease except
where such costs, fines or penalties are incurred by Landlord for violations of
any such law, order, rule or regulation that is ultimately determined to be
invalid or inapplicable;

 

  (F) Costs incurred by Landlord for the repair of damage to the Building, to
the extent that Landlord is reimbursed for such costs by insurance proceeds,
contractor warranties, guarantees, judgments or other third party sources;

 

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  (G) Salaries or fringe benefits of employees whose time is not spent directly
and solely in the operation of the Project, provided that if any employee
performs services in connection with the Building and other buildings, costs
associated with such employee may be proportionately included in Operating Costs
based on the percentage of time such employee spends in connection with the
operation, maintenance and management of the Building;

 

  (H) The cost of operating any commercial concession which is operated by
Landlord in the Building, including, without limitation, any compensation paid
to clerks, attendants or other persons operating such commercial concessions on
behalf of Landlord, but only to the extent revenues from any such commercial
concessions exceed such costs and compensation;

 

  (I) All costs of purchasing or leasing major sculptures, paintings or other
major works or objects of art; and

 

  (J) Taxes.

 

(d) “Taxes” means: all real property taxes and general, special or district
assessments or other governmental impositions, of whatever kind, nature or
origin, imposed on or by reason of the ownership or use of the Premises, the
Building, or the Project; governmental charges, fees or assessments for transit
or traffic mitigation (including area-wide traffic improvement assessments and
transportation system management fees), housing, police, fire or other
governmental service or purported benefits to the Premises, the Building, or the
Project; personal property taxes assessed on the personal property of Landlord
used in the operation of the Premises, the Building, or the Project; service
payments in lieu of taxes and taxes and assessments of every kind and nature
whatsoever levied or assessed in addition to, in lieu of or in substitution for
existing or additional real or personal property taxes on the Premises, the
Building, or the Project or the personal property described above; any increases
in the foregoing caused by changes in assessed valuation, tax rate or other
factors or circumstances; and the reasonable cost of contesting by appropriate
proceedings the amount or validity of any taxes, assessments or charges
described above. To the extent paid by Tenant or other tenants as “Tenant’s
Taxes” (as defined in Section 8), “Tenant’s Taxes” shall be excluded from Taxes.
Taxes shall not include franchise, income, profit, or similar taxes imposed upon
or measured by the income or profits of Landlord; provided, however, if due to a
future change in the method of taxation, to the extent that any franchise,
income or profit or other tax shall be levied in substitution in whole or in
part or in lieu of any tax which would otherwise constitute a Tax under this
Lease, such franchise, income, profit or other tax shall be deemed to be Tax for
the purposes of this Lease.

 

(e) With respect to Operating Costs and Taxes which Landlord allocates to the
Building, “Tenant’s Share” shall be the percentage set forth in the Basic Lease
Information as Tenant’s Share of the Building for Operating Costs and Taxes, as
adjusted by Landlord from time to time for a remeasurement (pursuant to Section
1 above) of or changes in the physical size of the Premises or the Building,
whether such changes in size are due to an addition to or a sale or

 

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conveyance of a portion of the Building or changes in the physical size of the
Premises or the Building. Notwithstanding the foregoing, Landlord may equitably
adjust Tenant’s Share(s) for all or part of any item of expense or cost
reimbursable by Tenant that relates to a repair, replacement, or service that
benefits only the Premises or only a portion of the Building and/or the Project
or that varies with the occupancy of the Building and/or the Project.

 

  3.2.2 Additional Rent

 

(a) Tenant shall pay Landlord as “Additional Rent” for each calendar year
following the Base Year or each portion thereof during the Term Tenant’s Share
of the sum of (x) the amount (if any) by which Operating Costs for such period
exceed Base Operating Costs, and (y) the amount (if any) by which Taxes for such
period exceed Base Taxes.

 

(b) Prior to the end of the Base Year and each calendar year thereafter,
Landlord shall notify Tenant of Landlord’s estimate of Operating Costs, Taxes
and Tenant’s Additional Rent for the following calendar year. Commencing on the
first day of January of each calendar year following the Base Year and
continuing on the first day of every month thereafter in such year, Tenant shall
pay to Landlord one-twelfth (1/12th) of the estimated Additional Rent. If
Landlord thereafter estimates that Operating Costs or Taxes for such year will
vary from Landlord’s prior estimate, Landlord may, by notice to Tenant, revise
the estimate for such year (and Additional Rent shall thereafter be payable
based on the revised estimate). Notwithstanding the foregoing, Landlord shall
not revise such estimate more than two (2) times per calendar year during the
Term of this Lease.

 

(c) As soon as reasonably practicable after the end of the Base Year and each
calendar year thereafter, Landlord shall furnish Tenant a statement with respect
to such year, showing Operating Costs, Taxes and Additional Rent for the year,
and the total payments made by Tenant with respect thereto (“Expense
Statement”). Unless Tenant raises any objections to Landlord’s Expense Statement
within ninety (90) days after receipt of the same by delivering written notice
to Landlord (a “Review Notice” ), such Expense Statement shall conclusively be
deemed correct and Tenant shall have no right thereafter to dispute such Expense
Statement or any item therein or the computation of Additional Rent based
thereon. Within a reasonable time after receipt of the Review Notice, Landlord
shall make all pertinent records available for inspection that are reasonably
necessary for Tenant to conduct its review. If any records are maintained at a
location other than the management office for the Building, Tenant may either
inspect the records at such other location or pay for the reasonable cost of
copying and shipping the records. If Tenant retains an agent to review
Landlord’s records, the agent must be with a CPA firm licensed to do business in
the state or commonwealth where the Project is located. Notwithstanding the
foregoing, Landlord agrees that Tenant may retain a third party agent to review
Landlord’s books and records which is not a CPA firm, so long as the third party
agent retained by Tenant shall have expertise in and familiarity with general
industry practice with respect to the operation of and accounting for a first
class office building; provided, however, that with respect to the second (2nd)
such audit and any audit thereafter performed by a non-CPA firm whose
compensation is contingent upon or correspondent to the financial impact on
Tenant resulting from such review, if the result of such audit reveals that
Operating Costs, Taxes or Additional Rent for the Building for the year in
question was not less than stated by more than five percent (5%), Tenant shall
reimburse Landlord for any actual, out-of-pocket costs incurred

 

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by Landlord in connection with such audit. Tenant shall be solely responsible
for all costs, expenses and fees incurred for the audit. However,
notwithstanding the foregoing, if Landlord and Tenant determine that Operating
Costs, Taxes or Additional Rent for the Building for the year in question were
less than stated by more than five percent (5%), Landlord, within thirty (30)
days after its receipt of paid invoices therefor from Tenant, shall reimburse
Tenant for the reasonable amounts paid by Tenant to third parties in connection
with such review by Tenant. If Tenant does object to such Expense Statement,
Tenant shall have the right to give Landlord, within ninety (90) days following
the date of the Review Notice, written notice (an “Objection Notice” ) stating
in reasonable detail any objection to Landlord’s Expense Statement for that
year. If Tenant fails to give Landlord an Objection Notice within the ninety
(90) day period described above, Tenant shall be deemed to have approved
Landlord’s Expense Statement and shall be barred from raising any claims
regarding the Operating Costs, Taxes and Additional Rent for that year. If
Tenant provides Landlord with a timely Objection Notice, Landlord and Tenant
shall work together in good faith to resolve any issues raised in Tenant’s
Objection Notice. If Landlord and Tenant determine that Operating Costs, Taxes
or Additional Rent for the calendar year are less than reported, Landlord shall
provide Tenant with a credit against the next installment of Rent in the amount
of the overpayment by Tenant. Likewise, if Landlord and Tenant determine that
Operating Costs, Taxes or Additional Rent for the calendar year are greater than
reported, Tenant shall pay Landlord the amount of any underpayment within 30
days. The records obtained by Tenant shall be treated as confidential. In no
event shall Tenant be permitted to examine Landlord’s records or to dispute any
Expense Statement unless Tenant is current in its payment of Rent to Landlord.

 

(d) Any objection of Tenant to Landlord’s Expense Statement and resolution of
any dispute shall not postpone the time for payment of any amounts due Tenant or
Landlord based on Landlord’s Expense Statement, nor shall any failure of
Landlord to deliver Landlord’s Expense Statement in a timely manner relieve
Tenant of Tenant’s obligation to pay any amounts due Landlord based on
Landlord’s Expense Statement.

 

(e) If Tenant’s Additional Rent as finally determined for any calendar year
exceeds the total payments made by Tenant on account thereof, Tenant shall pay
Landlord the deficiency within thirty (30) days of Tenant’s receipt of
Landlord’s Expense Statement. If the total payments made by Tenant on account
thereof exceed Tenant’s Additional Rent as finally determined for such year,
Tenant’s excess payment shall be credited toward the Rent next due from Tenant
under this Lease. For any partial calendar year at the beginning or end of the
Term, Additional Rent shall be prorated on the basis of a 365-day year by
computing Tenant’s Share of the increases in Operating Costs and Taxes for the
entire year and then prorating such amount for the number of days during such
year included in the Term. Notwithstanding the termination of this Lease,
Landlord shall pay to Tenant or Tenant shall pay to Landlord, as the case may
be, within thirty (30) days after Tenant’s receipt of Landlord’s final Expense
Statement for the calendar year in which this Lease terminates, the difference
between Tenant’s Additional Rent for that year, as finally determined, and the
total amount previously paid by Tenant on account thereof.

 

If for any reason Base Taxes or Taxes for any year during the Term are reduced,
refunded or otherwise changed, Tenant’s Additional Rent shall be adjusted
accordingly. Notwithstanding the first sentence of this paragraph, if Taxes are
temporarily reduced as a result

 

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of space in the Project being leased to a tenant that is entitled to an
exemption from property taxes or other taxes, then for purposes of determining
Additional Rent for each year in which Taxes are reduced by any such exemption,
Taxes for such year shall be calculated on the basis of the amount the Taxes for
the year would have been in the absence of the exemption. The obligations of
Landlord to refund any overpayment of Additional Rent and of Tenant to pay any
Additional Rent not previously paid shall survive the expiration of the Term.
Notwithstanding anything to the contrary in this Lease, if there is at any time
a decrease in Taxes below the amount of the Taxes for the Base Year, in no event
shall Tenant be entitled to a credit for the amount of such decrease.

 

  3.3 Payment of Rent

 

All amounts payable or reimbursable by Tenant under this Lease, including late
charges and interest (collectively, “Rent”), shall constitute rent and shall be
payable and recoverable as rent in the manner provided in this Lease. All sums
payable to Landlord on demand under the terms of this Lease shall be payable
within thirty (30) days after notice from Landlord of the amounts due. All rent
shall be paid without offset, recoupment or deduction in lawful money of the
United States of America to Landlord at Landlord’s Address for Payment of Rent
as set forth in the Basic Lease Information, or to such other person or at such
other place as Landlord may from time to time designate.

 

4. SECURITY DEPOSIT

 

  4.1 Security Deposit

 

On execution of this Lease, Tenant shall deposit with Landlord two Letters of
Credit (as defined below) in the aggregate amount specified in the Basic Lease
Information as the Security Deposit (the “Security Deposit”), as security for
the performance of Tenant’s obligations under this Lease, including, without
limitation, Tenant’s obligation to pay Rent (including, without limitation, any
and all Rent payable pursuant to Section 15.2 of this Lease following an Event
of Default by Tenant), to repair damage to the Premises, and to surrender the
Premises in the condition required by this Lease. One Letter of Credit (“Letter
of Credit A”) shall be in an amount equal to Three Hundred Forty Thousand
Dollars ($340,000.00) and the second Letter of Credit (“Letter of Credit B”)
shall be in the amount of Four Hundred Thousand Fifty Dollars ($450,000.00).
Letter of Credit A and Letter of Credit B are sometimes collectively referred to
herein as the “Letters of Credit” or the “Letter of Credit”. Landlord may (but
shall have no obligation to) draw on the Letters of Credit and use the Security
Deposit or any portion thereof to cure any Event of Default under this Lease or
to compensate Landlord for any damage Landlord incurs as a result of Tenant’s
failure to perform any of Tenant’s obligations hereunder. In such event Tenant
shall reinstate the Letters of Credit to their original amounts or pay to
Landlord on demand an amount sufficient to replenish the Security Deposit. At
the expiration or termination of this Lease, Landlord shall return to Tenant the
Security Deposit or the balance thereof then held by Landlord and not applied as
provided above. Landlord may commingle the Security Deposit with Landlord’s
general and other funds. Landlord shall not be required to pay interest on the
Security Deposit to Tenant. Tenant hereby waives any restriction on the uses to
which the Security Deposit may be put that is contained in California Civil Code
Section 1950.7 and/or any successor statute, it being agreed that Landlord may,
in addition, apply all or any portion of the

 

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Security Deposit in payment of any and all sums reasonably necessary to
compensate Landlord for any other loss or damage, foreseeable or unforeseeable,
caused by Tenant’s breach or default hereunder. If Landlord transfers the
Premises during the Term, Landlord may transfer the net balance of the Security
Deposit to any transferee of Landlord’s interest in conformity with the
provisions of California Civil Code Section 1950.7 and/or any successor statute,
in which event the transferring Landlord will be released from all liability for
the return of the Security Deposit. In no event shall Landlord’s retention or
use of the Security Deposit be construed or otherwise operate to preclude
Landlord from enforcing the obligations of Tenant under this Lease or from
exercising any and all other rights and remedies against Tenant in the event of
any default or threatened default by Tenant under this Lease, including, without
limitation, all rights and remedies of Landlord at law or in equity.

 

  4.2 Letter of Credit

 

(a) Each “Letter of Credit” shall (a) be an unconditional and irrevocable letter
of credit issued to Landlord, as beneficiary, in form reasonably satisfactory to
Landlord, by a reputable bank reasonably approved by Landlord, (b) provide for
drawing thereon in the San Francisco, California Bay Area, (c) have a term of at
least one year (with the Letter of Credit required to provide for automatic
renewal so as to be available to be drawn on at any time during the Term,
including any extension thereof, plus a period of 30 calendar days thereafter),
(d) permit partial and multiple drawings, (e) expressly state that the Letter of
Credit and the right to draw thereunder may be transferred or assigned from time
to time by Landlord to any successor or assignee of Landlord under this Lease
(or to any lender with respect to the Property) without the payment of any fees
or charges by Landlord, and (f) provide to the effect that it shall
automatically renew for additional periods of one year each from the expiration
date or future expiration date, unless at least 30 days prior to any expiration
date, the issuer notifies Landlord by registered mail of the issuer’s election
not to renew the Letter of Credit.

 

(b) Tenant shall pay all expenses, points or fees incurred by Tenant in
obtaining the Letters of Credit and for any transfer of the Letters of Credit.
The full amount of the applicable Letter of Credit shall be available to
Landlord upon presentation of Landlord’s signed draft and signed certification
that Landlord is entitled to draw on such Letter of Credit in accordance with
the terms of this Lease. If Tenant breaches or defaults beyond any applicable
cure periods with respect to any provision of this Lease, Landlord may draw all
or any portion of the Letters of Credit to remedy such default. In the event
that Tenant is in default under Sections 15.1(e) or 15.1(f), the cure period
provided Tenant under Section 15.1(g) hereof shall begin to run upon the
existence of a default and no notice by Landlord to Tenant shall be necessary to
begin such period running. If any portion of the Letters of Credit is so drawn,
Tenant shall, within ten (10) days after demand therefor, increase the amount of
the Letters of Credit in an amount sufficient to restore the Letters of Credit
to their original amounts, and Tenant’s failure to do so shall be an Event of
Default.

 

(c) The Letters of Credit shall be renewed by the issuer (or replaced with a
similarly qualifying letter of credit acceptable to Landlord) at least fifteen
(15) calendar days prior to the expiration date thereof from time to time during
the Lease Term. If, for any reason, Tenant fails to cause the Letters of Credit
to be so renewed or replaced at least fifteen (15) days prior to their
respective expiration dates it shall be an Event of Default hereunder and
Landlord shall have the

 

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right to immediately draw upon the Letters of Credit in full. Within thirty (30)
days after the date of expiration or earlier termination of this Lease, subject
to the terms of this Lease, Landlord shall return the Letters of Credit to
Tenant and consent to Tenant’s termination of the Letters of Credit.

 

(d) Subject to the terms of this Section 4, and provided Tenant has timely paid
(within any applicable cure periods) all Rent due under this Lease during the
twelve (12) month period immediately preceding the effective date (each, a
“Reduction Date”) of any reduction of the Letter of Credit, Tenant shall have
the right to reduce the amount of the Letter of Credit so that the reduced
collective Letters of Credit amount will be as follows: (i) provided that Tenant
has received formal approval from the U.S. Food and Drug Administration to
market its lead drug candidate IGF-1 to the public (the “FDA Approval”) and has
provided Landlord with notice of the same, $450,000.00 effective as of the date
that Landlord receives notice from Tenant of the FDA approval (and Landlord
shall return Letter of Credit A to Tenant within ten (10) business days
following the date that Landlord receives notice from Tenant of the FDA Approval
and documented evidence of the same, which evidence is reasonable acceptable to
Landlord); and (ii) $225,000.00 effective as of the first day of the 51st month
of the Term. If Tenant is not entitled to reduce the Letter of Credit as of a
particular Reduction Date, then any subsequent reduction(s) Tenant is entitled
to hereunder shall be reduced by the amount of the reduction Tenant would have
been entitled to had Tenant timely paid all Rent during the twelve (12) months
prior to that particular earlier reduction effective date. Any reduction in the
Letter of Credit shall be accomplished by Tenant providing Landlord with a
substitute letter of credit in the reduced amount.

 

5. USE AND COMPLIANCE WITH LAWS

 

  5.1 Use

 

The Premises shall be used and occupied for the purpose described in the Basic
Lease Information under “Permitted Use” and for no other use or purpose.

 

Tenant shall comply with all present and future Laws regarding Tenant’s use,
condition, configuration and occupancy of the Premises (and make any repairs,
alterations or improvements as required to comply with all such Laws, other than
any repairs, alterations or improvements which are Landlord’s responsibility
under Section 2 or Section 7(b)), and shall observe the Project Rules (as
defined in Section 29). Landlord, at its sole cost and expense (except to the
extent properly included in Operating Costs due to a change in Law following the
date of this Lease), shall be responsible for correcting any violations of Title
III of the Americans with Disabilities Act or of applicable building, fire or
other codes with respect to the Premises and the Common Areas of the Project,
provided that Landlord’s obligation with respect to the Premises shall be
limited to violations that arise out of the condition of the Premises prior to
Tenant’s construction of the initial Tenant Improvements and the installation of
any furniture, equipment and other personal property of Tenant. Notwithstanding
the foregoing, Landlord shall have the right to contest, any alleged violation
in good faith, including, without limitation, the right to apply for and obtain
a waiver or deferment of compliance, the right to assert any and all defenses
allowed by Law and the right to appeal any decisions, judgments or rulings to
the fullest extent permitted by Law. Landlord, after the exhaustion of any and
all rights to appeal or contest (or

 

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sooner, if Landlord’s deferral of any work will delay construction of the
initial Tenant Improvements or will cause Tenant to incur any liability), will
make all repairs, additions, alterations or improvements necessary to comply
with the terms of any final order or judgment. Notwithstanding the foregoing,
Tenant, not Landlord, shall be responsible for the correction of any violations
that arise out of or in connection with any claims brought under any provision
of the Americans with Disabilities Act other than Title III, the specific nature
of Tenant’s business in the Premises (other than general office use), the acts
or omissions of Tenant, its agents, employees or contractors, Tenant’s
arrangement of any furniture, equipment or other property in the Premises, any
repairs, alterations, additions or improvements performed by or on behalf of
Tenant and any design or configuration of the Premises specifically requested by
Tenant after being informed that such design or configuration may not be in
strict compliance with the ADA.

 

Tenant shall not do, bring, keep or sell anything in or about the Premises that
is prohibited by, or that will cause a cancellation of or an increase in the
existing premium for, any insurance policy covering the Project or any part
thereof. Tenant shall not permit the Premises to be occupied or used in any
manner that will constitute waste or a nuisance, or disturb the quiet enjoyment
of or otherwise annoy other tenants in the Project. Without limiting the
foregoing, the Premises shall not be used for any use listed in Exhibit E
attached hereto (“Prohibited Use”). Tenant shall not, without the prior consent
of Landlord, (i) bring into the Building or the Premises anything that may cause
substantial noise, odor or vibration, overload the floors in the Premises or the
Building (including, without limitation, by placing in the Premises any object
whose weight distribution results in pressure in excess of eighty (80) pounds
per square foot) or any of the heating, ventilating and air-conditioning
(“HVAC”), mechanical, elevator, plumbing, electrical, fire protection, life
safety, security or other systems in the Building (“Building Systems”), or
jeopardize the structural integrity of the Building or any part thereof; (ii)
connect to the utility systems of the Building any apparatus, machinery or other
equipment other than typical office equipment (including kitchen equipment that
is customarily used in connection with general office use); or (iii) connect to
any electrical circuit in the Premises any equipment or other load with
aggregate electrical power requirements in excess of one hundred percent (100%)
of the rated capacity of the circuit. Tenant shall have no rights to use the
subsurface of the Land or any airspace above the underside of the roof or floor
above the Premises or above any paved or landscaped areas on the Land or Common
Areas, and Landlord reserves the right to use all such subsurface and airspace
areas, including, without limitation, the right to perform construction work
thereon. Any diminution or shutting off of light, air or view by any structure
which may be erected by Landlord shall in no way affect this Lease or impose any
liability on Landlord. Tenant shall have no right whatsoever to the exterior of
exterior walls or the roof of the Premises or the Building or any portion of the
Property outside the Premises except as provided in Section 28 of this Lease and
Sections 2 and 3 of the Project Rules Rider.

 

  5.2 Hazardous Materials

 

  5.2.1 Definitions

 

(a) “Hazardous Materials” shall mean any substance: (A) that now or in the
future is regulated or governed by, requires investigation or remediation under,
or is defined as a hazardous waste, hazardous substance, pollutant or
contaminant under any federal, state or local statute, code, ordinance,
regulation, rule or order, and any amendment thereto, including the

 

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Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C.
§9601 et seq., and the Resource Conservation and Recovery Act, 42 U.S.C. §6901
et seq., or (B) that is toxic, explosive, corrosive, flammable, radioactive,
carcinogenic, dangerous or otherwise hazardous, including gasoline, diesel fuel,
petroleum hydrocarbons, polychlorinated biphenyls (PCBs), asbestos, radon and
urea formaldehyde foam insulation.

 

(b) “Environmental Requirements” shall mean all present and future Laws, orders,
permits, licenses, approvals, authorizations and other requirements of any kind
applicable to Hazardous Materials.

 

(c) “Handled by Tenant” and “Handling by Tenant” shall mean and refer to any
installation, handling, generation, storage, use, disposal, discharge, release,
abatement, removal, transportation, or any other activity of any type by Tenant
or its agents, employees, contractors, licensees, assignees, sublessees,
transferees, affiliates or representatives (collectively, “Representatives”) or
its guests, customers, invitees, or visitors (collectively, “Visitors”), at or
about the Premises in connection with or involving Hazardous Materials, but in
any event excluding Landlord and Landlord’s Representatives.

 

(d) “Environmental Losses” shall mean all costs and expenses of any kind,
damages, including foreseeable and unforeseeable consequential damages, fines
and penalties incurred in connection with any violation of and compliance with
Environmental Requirements and all losses of any kind attributable to the
diminution of value, loss of use or adverse effects on marketability or use of
any portion of the Premises or Project as a result thereof.

 

  5.2.2 Tenant’s Covenants

 

No Hazardous Materials shall be Handled by Tenant at or about the Premises or
Project without Landlord’s prior written consent, which consent may be granted,
denied, or conditioned upon compliance with Landlord’s requirements, all in
Landlord’s absolute discretion. Notwithstanding the foregoing, normal quantities
and use of those Hazardous Materials customarily used in the conduct of general
office activities, such as copier fluids and cleaning supplies (“Permitted
Hazardous Materials”), may be used and stored at the Premises without Landlord’s
prior written consent, provided that Tenant’s activities at or about the
Premises and Project and the Handling by Tenant of all Hazardous Materials shall
comply at all times with all Environmental Requirements. At the expiration or
termination of this Lease, Tenant shall promptly remove from the Premises and
Project all Hazardous Materials Handled by Tenant at the Premises or the
Project. Tenant shall keep Landlord fully and promptly informed of all Handling
by Tenant of Hazardous Materials other than Permitted Hazardous Materials.
Tenant shall be responsible and liable for the compliance with all of the
provisions of this Section by all of Tenant’s Representatives and Visitors, and
all of Tenant’s obligations under this Section (including its indemnification
obligations under Section 5.2.5 below) shall survive the expiration or
termination of this Lease.

 

  5.2.3 Compliance

 

Tenant shall at Tenant’s expense promptly take all actions required by any
governmental agency or entity in connection with or as a result of the Handling
by Tenant of Hazardous

 

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Materials at or about the Premises or Project, including inspection and testing,
performing all cleanup, removal and remediation work required with respect to
those Hazardous Materials, complying with all closure requirements and
post-closure monitoring, and filing all required reports or plans. All of the
foregoing work and all Handling by Tenant of all Hazardous Materials shall be
performed in a good, safe and workmanlike manner by consultants qualified and
licensed to undertake such work and in a manner that will not interfere with any
other tenant’s quiet enjoyment of the Project or Landlord’s use, operation,
leasing and sale of the Project. Tenant shall deliver to Landlord prior to
delivery to any governmental agency, or promptly after receipt from any such
agency, copies of all permits, manifests, closure or remedial action plans,
notices, and all other documents relating to the Handling by Tenant of Hazardous
Materials at or about the Premises or Project. If any lien attaches to the
Premises or the Project in connection with or as a result of the Handling by
Tenant of Hazardous Materials, and Tenant does not cause the same to be
released, by payment, bonding or otherwise, within ten (10) days after the
attachment thereof, Landlord shall have the right but not the obligation to
cause the same to be released and any sums expended by Landlord (plus Landlord’s
administrative costs) in connection therewith shall be payable by Tenant on
demand.

 

  5.2.4 Landlord’s Rights

 

Landlord shall have the right, but not the obligation, to enter the Premises at
any reasonable time (i) to confirm Tenant’s compliance with the provisions of
this Section 5.2, and (ii) to perform Tenant’s obligations under this Section if
Tenant has failed to do so after reasonable notice to Tenant. In exercising the
foregoing right, Landlord shall cooperate with Tenant’s reasonable security
measures, including, without limitation, accompaniment by a representative of
Tenant. Landlord shall also have the right to engage qualified Hazardous
Materials consultants to inspect the Premises and review the Handling by Tenant
of Hazardous Materials, including review of all permits, reports, plans, and
other documents regarding same. Notwithstanding the foregoing, except (i) to the
extent requested by Tenant, (ii) in connection with ongoing, scheduled
maintenance programs (of which Tenant has been initially notified), and/or (iii)
in the event of an emergency, Landlord shall provide to Tenant reasonable prior
notice (either written or oral) before Landlord enters the Premises. Tenant
shall pay to Landlord on demand the costs of Landlord’s consultants’ fees and
all costs incurred by Landlord in performing Tenant’s obligations under this
Section. Landlord shall use reasonable efforts to minimize any interference with
Tenant’s business caused by Landlord’s entry into the Premises, but Landlord
shall not be responsible for any interference caused thereby.

 

  5.2.5 Tenant’s Indemnification

 

Tenant agrees to indemnify, defend, protect and hold harmless Landlord and its
partners or members and its or their partners, members, directors, officers,
shareholders, employees and agents from all Environmental Losses and all other
claims, actions, losses, damages, liabilities, costs and expenses of every kind,
including reasonable attorneys’, experts’ and consultants’ fees and costs,
incurred at any time and arising from or in connection with the Handling by
Tenant of Hazardous Materials at or about the Project or Tenant’s failure to
comply in full with all Environmental Requirements with respect to the Premises.

 

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6. TENANT IMPROVEMENTS & ALTERATIONS

 

(a) Landlord and Tenant shall perform their respective obligations with respect
to design and construction of any improvements to be constructed and installed
in the Premises (the “Tenant Improvements”), as provided in the Work Letter.
Except for any Tenant Improvements to be constructed by Tenant as provided in
the Work Letter (“Tenant’s Work”), Tenant shall not make any alterations,
improvements or changes to the Premises, including installation of any security
system or telephone or data communication wiring (“Alterations”), without
Landlord’s prior written consent, which shall not be unreasonably withheld,
delayed or conditioned. However, Landlord’s consent shall not be required for
any Alteration that satisfies all of the following criteria (a “Minor
Alteration”): (a) is not visible from the exterior of the Premises or Building;
(b) will not affect the base Building; and (c) does not require work to be
performed inside the walls or above the ceiling of the Premises. Tenant shall
provide at least ten (10) days prior written notice to Landlord of any such
Minor Alteration. Tenant shall be entitled to make without Landlord’s prior
consent and without notice to Landlord, Alterations that satisfy all of the
following criteria (“Cosmetic Alterations”): (A) are of a cosmetic nature, such
as painting, wallpapering, hanging pictures and installing carpeting, (B) do not
require work to be performed inside the walls or above the ceiling of the
Premises, and (C) that will not affect the base Building. All Alterations shall
be completed by Tenant at Tenant’s sole cost and expense: (i) with due
diligence, in a good and workmanlike manner, using new materials; (ii) in
compliance with plans and specifications approved by Landlord, if such plans and
specifications are necessary for the issuance of required permits or if
reasonably deemed necessary by Landlord due to the nature of the work to be
performed (except in the case of Cosmetic Alterations); (iii) in compliance with
reasonable construction rules and regulations promulgated by Landlord from time
to time; (iv) in accordance with all applicable Laws, subject to Landlord’s
obligation set forth in Section 2 above (including all work within the Premises,
whether structural or non-structural, required to comply fully with all
applicable Laws and necessitated by Tenant’s Work, including all permits and
governmental approvals required for such Alterations, which shall be applied for
and obtained by Tenant); and (v) subject to all reasonable conditions which
Landlord may in Landlord’s discretion impose. Such conditions may include
requirements for Tenant to: (i) provide additional insurance (from Tenant or
Tenant’s contractors, subcontractors or design professionals); (ii) use design
professionals, contractors and subcontractors approved by Landlord in its
reasonable discretion; provided, however, that Landlord’s approval shall only be
required for design professionals, contractors and subcontractors that perform
work that affects the Building structure or systems; and (iii) remove all or
part of the Alterations prior to or upon expiration or termination of the Term,
as designated by Landlord. If any work outside the Premises, or any work on or
adjustment to any of the Building Systems, is required in connection with or as
a result of Tenant’s Work, such work shall be performed at Tenant’s expense
(other than work which is Landlord’s responsibility pursuant to Section 2 above)
by contractors approved by Landlord in its reasonable discretion. Landlord’s
right to review and approve (or withhold approval of) Tenant’s plans, drawings,
specifications, contractor(s) and other aspects of construction work proposed by
Tenant is intended solely to protect Landlord, the Project and Landlord’s
interests. No approval or consent by Landlord shall be deemed or construed to be
a representation or warranty by Landlord as to the adequacy, sufficiency,
fitness or suitability thereof or compliance thereof with applicable Laws or
other requirements.

 

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(b) Before making any Alterations (except for Cosmetic Alterations and Minor
Alterations) to the extent necessary for the issuance of required permits or if
reasonably deemed necessary by Landlord due to the nature of the work to be
performed, Tenant shall submit to Landlord for Landlord’s prior approval
reasonably detailed final plans and specifications prepared by a licensed
architect or engineer, and the name of the contractor and all subcontractors (to
the extent required by Section 6(a) above) proposed by Tenant to make the
Alterations and a copy of the contractor’s license. Tenant shall reimburse
Landlord within thirty (30) days of demand for any expenses incurred by Landlord
in connection with any Alterations made by Tenant, including all costs of work
in portions of the Building or the Project other than the Premises to comply
with governmental requirements (unless such compliance is the responsibility of
Landlord pursuant to Section 2 above), if such compliance is required as a
result of the Alterations, and any actual fees (without mark-up by Landlord)
charged by Landlord’s third party contractors or consultants to review plans and
specifications prepared by Tenant and to update, if appropriate, the existing
as-built plans and specifications of the Building to reflect the Alterations.
Tenant shall obtain all applicable permits, authorizations and governmental
approvals and deliver copies of the same to Landlord before commencement of any
Alterations. All Alterations shall be completed in compliance with the Project
Rules, all applicable governmental requirements, the plans and specifications
approved by Landlord (if any), and the provisions of Section 5.1.

 

(c) All Alterations shall be and remain the property of Tenant during the Term.
Upon the expiration or sooner termination of the Term, all Alterations shall
become a part of the realty and shall belong to Landlord without compensation,
and title shall pass to Landlord under this Lease as if by a bill of sale. All
Alterations shall be surrendered with the Premises in accordance with Section
19.1; provided, however, that Landlord may require, by notice to Tenant at least
thirty (30) days prior to the end of the Term, that Tenant remove any
Alterations and restore the Premises to the condition designated by Landlord,
all at Tenant’s sole cost and expense. Notwithstanding the foregoing, Tenant, at
the time it requests approval for a proposed Alteration, including any Tenant
Improvements, as such terms may be defined in the Work Letter attached hereto,
may request in writing that Landlord advise Tenant whether Landlord will require
the Alteration, including any Tenant Improvement, or any portion thereof, to be
removed at the expiration or earlier termination of the Lease. Within ten (10)
days after receipt of Tenant’s request, Landlord shall advise Tenant in writing
as to which portions of the Alteration or other improvements Landlord will
require Tenant to remove at the expiration or earlier termination of the Lease.
In the event Landlord fails to so advise Tenant, Tenant may submit a second
request to Landlord, which request shall state in bold and capital letters that
it is Tenant’s second and final request for notification of whether Landlord
will require such Alteration to be removed at the expiration or earlier
termination of this Lease. If Landlord fails to respond to such second notice,
it shall be deemed that such proposed Alterations shall not be required to be
removed by Tenant at the expiration or earlier termination of this Lease.

 

(d) Tenant shall make any alteration, addition or change of any sort to the
Premises that is required by any Law because of or that is associated with (i)
Tenant’s particular use or change of use of the Premises; (ii) Tenant’s
application for any permit or governmental approval; or (iii) Tenant’s
construction or installation of any Tenant’s Alterations or trade fixtures.

 

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(e) Tenant shall obtain liability insurance, in form and amount and from an
insurance company acceptable to Landlord, insuring against damage and injury to
person and property arising out of the construction of any Alteration. Tenant
shall deliver to Landlord reasonably satisfactory documentary evidence that such
insurance is in force before starting any Alteration work.

 

(f) Tenant shall keep the Premises and the Project free and clear of all liens
arising out of any work performed, materials furnished or obligations incurred
by Tenant. If any such lien attaches to the Premises or the Project, and Tenant
does not cause the same to be released by payment, bonding or otherwise within
ten (10) days after notice of the attachment thereof, Landlord shall have the
right but not the obligation to cause the same to be released, and any sums
expended by Landlord (plus Landlord’s administrative costs) in connection
therewith shall be payable by Tenant on demand with interest thereon from the
date of expenditure by Landlord at the Interest Rate (as defined in Section
16.2). Tenant shall give Landlord at least ten (10) days’ notice prior to the
commencement of any Alterations and cooperate with Landlord in posting and
maintaining notices of non-responsibility in connection therewith.

 

(g) Subject to the provisions of Section 5, Tenant may install and maintain
furnishings, equipment, movable partitions, business equipment and other trade
fixtures (“Trade Fixtures”) in the Premises, provided that the Trade Fixtures do
not become an integral part of the Premises or the Building. Tenant shall
promptly repair any damage to the Premises or the Building caused by any
installation or removal of such Trade Fixtures.

 

7. MAINTENANCE AND REPAIRS

 

(a) During the Term, Tenant, at Tenant’s expense, shall repair and maintain the
Premises, including the interior walls, floor coverings, ceiling (ceiling tiles
and grid), windows, Tenant Improvements, Alterations, electrical systems
installed by Tenant, HVAC systems installed by Tenant, power exhaust systems,
locks and keys, plate glass, fire extinguishers, outlets and fixtures, and any
plumbing and appliances (including dishwashers, hot water heaters and garbage
disposers) in the Premises, in a first class condition, and keep the Premises in
a clean, safe and orderly condition.

 

(b) Landlord shall maintain or cause to be maintained in first class order,
condition and repair, the structural portions of the roof, foundations, slabs
and exterior and load-bearing walls of the Building, the Building Systems, and
the Common Areas; provided, however, that Tenant shall pay the cost of repairs
for any damage occasioned by Tenant’s use of the Premises or the Project or any
act or omission of Tenant or Tenant’s Representatives or Visitors, to the extent
(if any) not covered by insurance. Landlord shall be under no obligation or duty
to inspect the Premises, and any inspection undertaken by Landlord shall not
expose Landlord to any liability for faulty, defective, or improper maintenance,
repair, installation or construction, whether or not the same may be discovered
by Landlord in the course of any inspection. Tenant shall promptly report in
writing to Landlord any defective condition known to Tenant which Landlord is
required to repair. As a material part of the consideration for this Lease,
Tenant hereby waives any benefits of any applicable existing or future Law,
including the provisions of California Civil Code Sections 1932(1), 1941 and
1942, that allows a tenant to make repairs at its landlord’s expense.

 

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(c) Landlord hereby reserves the right, at any time and from time to time,
without liability to Tenant and without effecting an eviction, constructive or
otherwise, entitling Tenant to any abatement of rent or to terminate this Lease
or otherwise releasing Tenant from any of Tenant’s obligations under this Lease:

 

(i) To construct additional buildings or other improvements on the Land;

 

(ii) To make alterations, additions, repairs, improvements to or in or to
decrease the size of area of, all or any part of the Project, the Building, the
fixtures and equipment therein, or the Building Systems; provided, however, that
Landlord shall not alter the Premises;

 

(iii) To change the name or street address of the Project or the Building or
change the space or suite number of the Premises;

 

(iv) To install, affix and maintain any and all signs on the exterior and
interior of the Building or anywhere else in or on the Project;

 

(v) To reduce, increase, enclose or otherwise change at any time and from time
to time the size, number, location, layout and nature of the Common Areas and
other tenancies and premises in the Project and to create additional rentable
areas through use or enclosure of Common Areas; and

 

(vi) If any governmental authority promulgates or revises any Law or imposes
mandatory or voluntary controls or guidelines on Landlord or the Project
relating to the use or conservation of energy or utilities or the reduction of
automobile or other emissions or reduction or management of traffic or parking
on the Project (collectively “Controls”), to comply with such Controls, whether
mandatory or voluntary, or make any alterations to the Project related thereto.

 

8. TENANT’S TAXES

 

“Tenant’s Taxes” shall mean (a) all taxes, assessments, license fees and other
governmental charges or impositions levied or assessed against or with respect
to Tenant’s personal property or Trade Fixtures in the Premises, whether any
such imposition is levied directly against Tenant or levied against Landlord or
the Project, (b) all rental, excise, sales or transaction privilege taxes
arising out of this Lease (excluding, however, state and federal personal or
corporate income taxes measured by the income of Landlord from all sources)
imposed by any taxing authority upon Landlord or upon Landlord’s receipt of any
rent payable by Tenant pursuant to the terms of this Lease (“Rental Tax”), and
(c) any increase in Taxes attributable to inclusion of a value placed on
Tenant’s personal property, Trade Fixtures or Alterations. Tenant shall pay any
Rental Tax to Landlord in addition to and at the same time as Base Rent is
payable under this Lease, and shall pay all other Tenant’s Taxes before
delinquency (and, at Landlord’s request, shall furnish Landlord satisfactory
evidence thereof). If Landlord pays Tenant’s Taxes or any portion thereof,
Tenant shall reimburse Landlord upon demand for the amount of such payment,
together with interest at the Interest Rate from the date of Landlord’s payment
to the date of Tenant’s reimbursement.

 

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9. UTILITIES AND SERVICES

 

  9.1 Description of Services

 

Landlord shall furnish to the Premises: heat, ventilation and air-conditioning
during the Minimum HVAC Hours specified in the Basic Lease Information (“Minimum
HVAC Hours”) on weekdays (except public holidays) sufficient for comfortable use
of the Premises; reasonable amounts of electricity; and janitorial services five
days a week (except public holidays). Landlord shall also provide the Building
with normal fluorescent tube replacement, window washing, elevator service, and
common area toilet room supplies. Any additional utilities or services that
Landlord may agree to provide (including lamp or tube replacement for other than
Building standard lighting fixtures) shall be at Tenant’s sole expense.

 

  9.2 Payment for Additional Utilities and Services

 

(a) If Tenant requests that Landlord furnish HVAC service to Tenant at times
other than Minimum HVAC Hours on business days, then, upon request by Tenant in
accordance with the procedures established by Landlord from time to time for
furnishing such HVAC service, Landlord shall furnish such service to Tenant and
Tenant shall pay for such services on an hourly basis at the then prevailing
rate established for the Building by Landlord, which rate shall not include a
profit increment for Landlord.

 

(b) If the temperature otherwise maintained in any portion of the Premises by
the HVAC systems of the Building is materially affected as a result of (i) any
lights, machines or equipment used by Tenant in the Premises, or (ii) the
occupancy of the Premises by more than one person per 150 square feet of
rentable area, then Landlord shall have the right to install any machinery or
equipment reasonably necessary to restore the temperature, including
modifications to the standard air-conditioning equipment. The cost of any such
equipment and modifications, including the cost of installation and any
additional cost of operation and maintenance of the same, shall be paid by
Tenant to Landlord upon demand.

 

(c) If Tenant’s usage of electricity, water or any other utility service exceeds
amounts that are typical, normal and customary usage for the office portion of
the Project, Landlord may determine the amount of such excess use by any
reasonable means (including the installation at Landlord’s request but at
Tenant’s expense of a separate meter or other measuring device) and charge
Tenant for the cost of such excess usage. In addition, Landlord may impose a
reasonable charge for the use of any additional or unusual janitorial services
required by Tenant because of any unusual Tenant Improvements or Alterations,
the carelessness of Tenant or the nature of Tenant’s business (including hours
of operation). In addition, Tenant shall be entitled to use its proportionate
share of the electrical capacity of the Building. If Tenant’s use is in excess
of Tenant’s proportionate share of such capacity, Landlord may require Tenant to
install, at Tenant’s sole cost and expense, equipment necessary to support such
excess usage.

 

  9.3 Interruption of Services

 

Except as expressly provided below, in the event of an interruption in or
failure or inability to provide any services or utilities to the Premises or
Building for any reason (a “Service Failure”), such Service Failure shall not,
regardless of its duration, impose upon Landlord any

 

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liability whatsoever, constitute an eviction of Tenant, constructive or
otherwise, entitle Tenant to an abatement of rent or to terminate this Lease or
otherwise release Tenant from any of Tenant’s obligations under this Lease.
Without limiting the foregoing, neither the existence or continuance of any
Service Failure nor any failure or inability of Landlord to remedy the Service
Failure shall under any circumstances impose any liability on Landlord to
Tenant, including any liability for loss of or interference with Tenant’s
business or the business of any of Tenant’s Representatives or Tenant’s
Visitors. Tenant hereby waives any benefits of any applicable existing or future
Law, including the provisions of California Civil Code Section 1932(1),
permitting the termination of this Lease due to such interruption, failure or
inability. Notwithstanding the foregoing, if the Premises, or a material portion
of the Premises, are made untenantable for a period in excess of thirty (30)
consecutive days as a result of a Service Failure that is reasonably within the
control of Landlord to correct, then Tenant, as its sole remedy, shall be
entitled to receive an abatement of Base Rent and Tenants’ Share of Operating
Costs and Taxes payable hereunder during the period beginning on the 31st
consecutive day of the Service Failure and ending on the day the service has
been restored. If the entire Premises have not been rendered untenantable by the
Service Failure, the amount of abatement shall be equitably prorated.

 

10. EXCULPATION AND INDEMNIFICATION

 

  10.1 Tenant’s Indemnification of Landlord

 

Tenant shall indemnify, protect, defend and hold Landlord and Landlord’s
authorized representatives harmless from and against claims, actions,
liabilities, damages, costs or expenses, including reasonable attorneys’ fees
and costs incurred in defending against the same (“Claims”) arising from (a) the
acts or omissions of Tenant or Tenant’s Representatives or Visitors in or about
the Project, or (b) any construction or other work undertaken by Tenant on the
Premises (including any design defects), or (c) any breach or default under this
Lease by Tenant, or (d) any loss, injury or damage, howsoever and by whomsoever
caused, to any person or property, occurring in or about the Premises during the
Term, excepting only Claims described in this clause (d) to the extent they are
caused by the willful misconduct or negligent acts or omissions of Landlord or
its authorized representatives or the breach by Landlord of its obligations
under this Lease.

 

  10.2 Damage to Tenant and Tenant’s Property

 

Landlord shall not be liable to Tenant for any loss, injury or other damage to
Tenant or to Tenant’s property in or about the Premises or the Project from any
cause (including defects in the Project or in any equipment in the Project;
fire, explosion or other casualty; bursting, rupture, leakage or overflow of any
plumbing or other pipes or lines, sprinklers, tanks, drains, drinking fountains
or washstands in, above, or about the Premises or the Project; or acts of other
tenants in the Project), unless such loss, injury or other damage is caused by
the gross negligence or willful misconduct of Landlord or Landlord’s breach of
its obligations under this Lease (and provided that the foregoing clause shall
in no event apply to consequential damages and/or damages for loss of business).
Tenant hereby waives all claims against Landlord for any such loss, injury or
damage and the cost and expense of defending against claims relating thereto,
but not including any loss, injury or damage caused by Landlord’s gross
negligence, or willful misconduct or

 

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Landlord’s breach of its obligations under this Lease. Notwithstanding any other
provision of this Lease to the contrary, in no event shall Landlord be liable to
Tenant for any punitive or consequential damages or damages for loss of business
by Tenant.

 

  10.3 Survival

 

The obligations of the parties under this Section 10 shall survive the
expiration or termination of this Lease.

 

11. INSURANCE

 

  11.1 Tenant’s Insurance

 

  11.1.1 Liability Insurance

 

Tenant shall maintain in full force throughout the Term, commercial general
liability insurance providing coverage on an occurrence form basis with limits
of not less than Two Million Dollars ($2,000,000.00) each occurrence for bodily
injury and property damage combined, Two Million Dollars ($2,000,000.00) annual
general aggregate, provided that Tenant shall maintain umbrella coverage in an
amount not less than Five Million Dollars ($5,000,000.00). Tenant’s liability
insurance policy or policies shall: (i) include premises and operations
liability coverage and broad form property damage coverage including completed
operations blanket contractual liability and personal & advertising injury
liability and (ii) cover liabilities arising out of or incurred in connection
with Tenant’s use or occupancy of the Premises or the Project. Each policy of
liability insurance required by this Section shall: (i) provide that it is
primary to and not contributing with, any policy of insurance carried by
Landlord covering the same loss; and (ii) name Landlord, its partners, the
Property Manager identified in the Basic Lease Information (the “Property
Manager”), and such other parties in interest as Landlord may from time to time
reasonably designate to Tenant in writing, as additional insureds. All
endorsements effecting such additional insured status shall be at least as broad
as additional insured endorsement form number CG 20 11 11 85 promulgated by the
Insurance Services Office.

 

  11.1.2 Property Insurance

 

Tenant shall at all times maintain in effect with respect to any of Tenant’s
Work, any Alterations, and Tenant’s Trade Fixtures and personal property,
commercial property insurance providing coverage, on an “all risk” or “special
form” basis, in an amount equal to at least ninety percent (90%) of the full
replacement cost of the covered property. Tenant may carry such insurance under
a blanket policy, provided that such policy provides coverage equivalent to a
separate policy. During the Term, the proceeds from any such policies of
insurance shall be used for the repair or replacement of Tenant’s Work,
Alterations, Trade Fixtures and personal property so insured. Landlord will have
no obligation to carry insurance on any Tenant’s Work, Alterations or on
Tenant’s Trade Fixtures or personal property.

 

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  11.1.3 Business Interruption Insurance

 

Tenant shall at all times maintain in effect business interruption insurance
with limits of liability representing at least approximately six months of
income, business auto liability covering owned, non-owned and hired vehicles
with a limit of not less than One Million Dollars ($1,000,000.00) per accident,
insurance protecting against liability under workers’ compensation laws with
limits at least as required by statute.

 

  11.1.4 Requirements For All Policies

 

Each policy of insurance required under this Section 11.1 shall: (i) be in a
form, and written by an insurer, reasonably acceptable to Landlord; (ii) be
maintained at Tenant’s sole cost and expense; (iii) require at least thirty (30)
days’ written notice to Landlord prior to any cancellation, nonrenewal or
material decrease of insurance coverage; (iv) be primary insurance which
provides that the insurer shall be liable for the full amount of the loss up to
and including the total amount of liability set forth in the declarations
without the right of contribution from any other insurance coverage of Landlord;
(v) shall not have a “deductible” in excess of such amount as is approved by
Landlord; (vii) shall contain a cross liability endorsement; and (viii) shall
contain a “severability” clause. Insurance companies issuing such policies shall
have rating classifications of “A-” or better and financial size category
ratings of “VII” or better according to the latest edition of the A.M. Best Key
Rating Guide. All insurance companies issuing such policies shall be admitted
carriers licensed to do business in the state where the Project is located
Tenant shall provide to Landlord, upon request, evidence that the insurance
required to be carried by Tenant pursuant to this Section, including any
endorsement effecting the additional insured status, is in full force and
effect.

 

  11.1.5 Updating Coverage

 

Tenant shall increase the amounts of insurance as required by any Mortgagee,
and, not more frequently than once every three (3) years, as recommended by
Landlord’s insurance broker, if, in the opinion of either of them, the amount of
insurance then required under this Lease is not adequate. Landlord shall require
any such increase in the amount of Tenant’s insurance required pursuant to this
Section only in the event that Landlord reasonably determines that the amount of
insurance carried by Tenant hereunder is materially less than the amount or type
of insurance coverage typically carried by tenants of the Building and/or owners
or tenants of comparable buildings located in the geographical area in which the
Premises are located which are operated for general office use. Any limits set
forth in this Lease on the amount or type of coverage required by Tenant’s
insurance shall not limit the liability of Tenant under this Lease.

 

  11.1.6 Certificates of Insurance

 

Prior to occupancy of the Premises by Tenant, and not less than thirty (30) days
prior to expiration of any policy thereafter, Tenant shall furnish to Landlord a
certificate of insurance reflecting that the insurance required by this Section
11.1 is in force.

 

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  11.2 Landlord’s Insurance

 

During the Term, Landlord shall maintain in effect insurance on the Building
with responsible insurers, on an “all risk” or “special form” basis, insuring
the Building and the Tenant Improvements that have been installed by Landlord
pursuant to the Work Letter (Exhibit B), but not any Tenant’s Work or any
Alterations constructed or installed by Tenant (which shall be insured by Tenant
as provided in Section 11.1.2 above), in an amount equal to at least ninety
percent (90%) of the replacement cost thereof, excluding land, foundations,
footings and underground installations. Landlord may, but shall not be obligated
to, carry insurance against additional perils and/or in greater amounts.

 

  11.3 Mutual Waiver of Right of Recovery & Waiver of Subrogation

 

Landlord and Tenant each hereby waive any right of recovery against the other
and the partners, managers, members, shareholders, officers, directors and
authorized representatives of the other for any loss or damage that is covered
by any policy of property insurance maintained by either party (or required by
this Lease to be maintained) with respect to the Premises or the Project or any
operation therein.

 

12. DAMAGE OR DESTRUCTION

 

  12.1 Landlord’s Duty to Repair

 

(a) If all or a substantial part of the Premises are rendered untenantable or
inaccessible by damage to all or any part of the Project from fire or other
casualty then, unless either party is entitled to and elects to terminate this
Lease pursuant to Sections 12.2 and 12.3, Landlord shall, at its expense, use
reasonable efforts to repair and restore the Premises and/or the Project, as the
case may be, to substantially their former condition to the extent permitted by
then applicable Laws; provided, however, that in no event shall Landlord have
any obligation for repair or restoration beyond the extent of insurance proceeds
received by Landlord for such repair or restoration and not required to be paid
over to any Mortgagee, or for any of Tenant’s personal property, Trade Fixtures
or Alterations, or for any Tenant’s Work or other Tenant Improvements except
only those constructed and paid for by Landlord in accordance with the Work
Letter. If Landlord is required to repair and restore the Premises and/or the
Project pursuant to the terms of this Section 12, Landlord shall use
commercially reasonable efforts to diligently and promptly repair and restore
such Premises and/or the Project.

 

(b) If Landlord is required or elects to repair damage to the Premises and/or
the Project, this Lease shall continue in effect, but Tenant’s Base Rent and
Additional Rent shall be abated with regard to any portion of the Premises that
Tenant is prevented from using by reason of such damage or its repair from the
date of the casualty until substantial completion of Landlord’s repair of the
affected portion of the Premises as required under this Lease. In no event shall
Landlord be liable to Tenant by reason of any injury to or interference with
Tenant’s business or property arising from fire or other casualty or by reason
of any repairs to any part of the Project necessitated by such casualty.

 

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  12.2 Landlord’s Right to Terminate

 

Landlord may elect to terminate this Lease following damage to the Premises
and/or the Project by fire or other casualty under the following circumstances:

 

(a) If, in the reasonable judgment of Landlord, the Premises and the Project
cannot be substantially repaired and restored under applicable Laws within one
hundred eighty (180) days from the date of the casualty;

 

(b) If, in the reasonable judgment of Landlord, adequate proceeds are not, for
any reason, made available to Landlord from Landlord’s insurance policies
(and/or from Landlord’s funds made available for such purpose, at Landlord’s
sole option) to make the required repairs;

 

(c) If the Building or the Project is damaged or destroyed to the extent that,
in the reasonable judgment of Landlord, the cost to repair and restore the
Building or the Project would exceed twenty-five percent (25%) of the full
replacement cost of the Building or the Project, whether or not the Premises are
at all damaged or destroyed; or

 

(d) If the fire or other casualty occurs during the last year of the Term.

 

If any of the circumstances described in subparagraphs (a), (b), (c) or (d) of
this Section 12.2 occur or arise, Landlord shall give Tenant notice within
ninety (90) days after the date of the casualty, specifying whether Landlord
elects to terminate this Lease as provided above and, if not, Landlord’s
estimate of the time required to complete Landlord’s repair obligations under
this Lease.

 

  12.3 Tenant’s Right to Terminate

 

If all or a substantial part of the Premises are rendered untenantable or
inaccessible by damage to all or any part of the Project from fire or other
casualty, then Tenant may elect to terminate this Lease if Landlord’s estimate
of the time required to complete Landlord’s repair obligations under this Lease
is greater than one hundred eighty (180) days, in which event Tenant may elect
to terminate this Lease by giving Landlord notice of such election to terminate
within thirty (30) days after Landlord’s notice to Tenant pursuant to Section
12.2; provided, however, that Tenant shall not be entitled to terminate this
Lease pursuant to the foregoing provisions in the event that the damage to the
Premises has been caused by the gross negligence or willful misconduct of
Tenant, Tenant’s Representatives, or Tenant’s Visitors in or about the Project.
In addition, Tenant shall have the right to terminate this Lease if there is
less than one (1) year of the Term remaining on the date of such casualty and if
Tenant provides Landlord with written notice of its intent to terminate within
thirty (30) days after the date of the fire or other casualty.

 

  12.4 Waiver

 

Landlord and Tenant each hereby waive the provisions of California Civil Code
Sections 1932(2), 1933(4) and any other applicable existing or future Law
permitting the termination of a lease agreement in the event of damage or
destruction under any circumstances other than as provided in Sections 12.2 and
12.3.

 

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13. CONDEMNATION

 

  13.1 Definitions

 

(a) “Award” shall mean all compensation, sums, or anything of value awarded,
paid or received on a total or partial Condemnation.

 

(b) “Condemnation” shall mean (i) a permanent taking (or a temporary taking for
a period extending beyond the end of the Term) pursuant to the exercise of the
power of condemnation or eminent domain by any public or quasi-public authority,
private corporation or individual having such power (“Condemnor”), whether by
legal proceedings or otherwise, or (ii) a voluntary sale or transfer by Landlord
to any such authority, either under threat of condemnation or while legal
proceedings for condemnation are pending.

 

(c) “Date of Condemnation” shall mean the earlier of the date that title to the
property taken is vested in the Condemnor or the date the Condemnor has the
right to possession of the property being condemned.

 

  13.2 Effect on Lease

 

(a) If the Premises are totally taken by Condemnation, this Lease shall
terminate as of the Date of Condemnation. If a portion but not all of the
Premises is taken by Condemnation, this Lease shall remain in effect; provided,
however, that if the portion of the Premises remaining after the Condemnation
will be unsuitable for Tenant’s continued use, then upon notice to Landlord
within thirty (30) days after Landlord notifies Tenant of the Condemnation,
Tenant may terminate this Lease effective as of the Date of Condemnation.

 

(b) If twenty-five percent (25%) or more of the Project or of the parcel(s) of
land on which the Building is situated or of the Parking Area or of the floor
area in the Building is taken by Condemnation, or if as a result of any
Condemnation the office portion, if any, of the Building is no longer reasonably
suitable for use for office purposes or the retail portion, if any, of the
Building is no longer reasonably suitable for use for retail purposes, whether
or not any portion of the Premises is taken, Landlord may elect to terminate
this Lease, effective as of the Date of Condemnation, by notice to Tenant within
thirty (30) days after the Date of Condemnation.

 

(c) If all or a portion of the Premises is temporarily taken by a Condemnor for
a period not extending beyond the end of the Term, this Lease shall remain in
full force and effect.

 

  13.3 Restoration

 

If this Lease is not terminated as provided in Section 13.2, Landlord, at its
expense, shall diligently proceed to repair and restore the Premises to
substantially its former condition (to the extent permitted by then applicable
Laws) and/or repair and restore the Building to an architecturally complete form
suitable to its former use (whether office, retail or mixed use office/retail);
provided, however, that Landlord’s obligations to so repair and restore shall be
limited to the amount of any Award received by Landlord and not required to be
paid to any Mortgagee (as defined in Section 20.2 below). In no event shall
Landlord have any obligation to repair or replace any Tenant Improvements or
other improvements in the Premises beyond the

 

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amount of any Award received by Landlord for such repair, which is not required
to be paid over to any Mortgagee, or to repair or replace any of Tenant’s
personal property, Trade Fixtures, or Alterations.

 

  13.4 Abatement and Reduction of Rent

 

If any portion of the Premises is taken in a Condemnation or is rendered
permanently untenantable by repairs necessitated by the Condemnation, and this
Lease is not terminated, the Base Rent and Additional Rent payable under this
Lease shall be proportionally reduced as of the Date of Condemnation based upon
the percentage of rentable square feet in the Premises so taken or rendered
permanently untenantable. In addition, if this Lease remains in effect following
a Condemnation and Landlord proceeds to repair and restore the Premises, the
Base Rent and Additional Rent payable under this Lease shall be abated during
the period of such repair or restoration to the extent such repairs prevent
Tenant’s use of the Premises.

 

  13.5 Awards

 

Any Award made shall be paid to Landlord, and Tenant hereby assigns to Landlord,
and waives all interest in or claim to, any such Award, including any claim for
the value of the unexpired Term; provided, however, that Tenant shall be
entitled to receive, or to prosecute a separate claim for, an Award for a
temporary taking of the Premises or a portion thereof by a Condemnor where this
Lease is not terminated (to the extent such Award relates to the unexpired
Term), or an Award or portion thereof separately designated for relocation
expenses or the interruption of or damage to Tenant’s business or as
compensation for Tenant’s personal property, Trade Fixtures or Alterations.

 

  13.6 Waiver

 

Landlord and Tenant each hereby waive the provisions of California Code of Civil
Procedure Section 1265.130 and any other applicable existing or future Law
allowing either party to petition for a termination of this Lease upon a partial
taking of the Premises and/or the Project.

 

14. ASSIGNMENT AND SUBLETTING

 

  14.1 Landlord’s Consent Required

 

Tenant shall not assign, mortgage, pledge, hypothecate or encumber this Lease or
any interest therein, or sublet or license or permit the use or occupancy of the
Premises or any part thereof by or for the benefit of anyone other than Tenant,
or in any other manner transfer all or any part of Tenant’s interest under this
Lease (each and all a “Transfer”), without the prior written consent of
Landlord, which consent (subject to the other provisions of this Section 14)
shall not be unreasonably withheld. If Tenant is a business entity (other than a
corporation whose stock is publicly traded), any direct or indirect transfer of
fifty percent (50%) or more of the ownership interest of the entity (whether in
a single transaction or in the aggregate through more than one transaction) (a
“Change of Control”) shall not be deemed a Transfer. However, Tenant shall
provide Landlord with reasonable prior written notice of such Change of Control
(or, if prior written notice is not possible, within a reasonable time period
following such Change

 

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of Control). Notwithstanding any provision in this Lease to the contrary, Tenant
shall not mortgage, pledge, hypothecate or otherwise encumber this Lease or all
or any part of Tenant’s interest under this Lease.

 

  14.2 Reasonable Consent

 

(a) Prior to any proposed Transfer, Tenant shall submit in writing to Landlord:
(i) the name and legal composition of the proposed assignee, subtenant, user or
other transferee (each a “Proposed Transferee”); (ii) the nature of the business
proposed to be carried on in the Premises; (iii) a current balance sheet, income
statements for the last two years and/or such other reasonable financial and
other information concerning the Proposed Transferee as Landlord may request
(provided, however, that if the Proposed Transferee is a publicly traded
company, such financial information shall not be required to be delivered to
Landlord provided that the Proposed Transferee’s financial information is
publicly available); and (iv) a copy of the proposed assignment, sublease or
other agreement governing the proposed Transfer. Within fifteen (15) business
days after Landlord receives all such information it shall notify Tenant whether
it approves or disapproves such Transfer or if it elects to proceed under
Section 14.7. Landlord agrees that such approval shall not be unreasonably
withheld or conditioned. Landlord shall not disclose any confidential
information concerning the financial condition of any Proposed Transferee to any
person, firm or entity other than Landlord’s directors, auditors, accountants,
financial advisors, attorneys, bona fide investors and bona fide prospective
investors (collectively, “Landlord’s Advisors”); provided that any such
disclosure to any Landlord’s Advisors shall be made on a confidential and
need-to-know basis.

 

(b) 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 consent where (i) Landlord reasonably
disapproves of the Proposed Transferee’s business operating ability or history,
reputation or creditworthiness or the character of the business to be conducted
by the Proposed Transferee at the Premises, (ii) the Proposed Transferee is an
existing tenant in the Project, (iii) the proposed Transfer would violate any
“exclusive” rights of any tenants in the Project, or (iv) Landlord otherwise
determines, in it reasonable discretion, that the proposed Transfer would have
the effect of decreasing the value of the Project or increasing the expenses
associated with operating, maintaining and repairing the Project.

 

  14.3 Excess Consideration

 

If Landlord consents to the Transfer, Tenant shall pay to Landlord (except in
the case of a Permitted Transfer or a Transfer to an Affiliated Party (as
defined below) or any other transfer to a successor to Tenant by merger,
purchase, consolidation or reorganization that is consented to by Landlord) as
additional rent, within ten (10) days after receipt by Tenant, fifty percent
(50%) of any consideration paid by any transferee (the “Transferee”) for the
Transfer, including, in the case of a sublease, the excess of the rent and other
consideration payable by the subtenant over the amount of Base Rent and
Additional Rent payable hereunder applicable to the subleased space. Tenant may
deduct from the excess, on a straight-line basis, all reasonable and customary
expenses directly incurred by Tenant attributable to the Transfer, including the
reasonable costs

 

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of brokerage commissions, legal fees and construction costs paid to separately
demise or improve the space that is subject to such Transfer.

 

  14.4 No Release of Tenant

 

No consent by Landlord to any Transfer shall relieve Tenant of any obligation to
be performed by Tenant under this Lease, whether occurring before or after such
consent, assignment, subletting or other Transfer. Each Transferee shall be
jointly and severally liable with Tenant (and Tenant shall be jointly and
severally liable with each Transferee) for the payment of rent (or, in the case
of a sublease, rent in the amount set forth in the sublease) and for the
performance of all other terms and provisions of this Lease. The consent by
Landlord to any Transfer shall not relieve Tenant or any such Transferee from
the obligation to obtain Landlord’s express prior written consent to any
subsequent Transfer by Tenant or any Transferee. The acceptance of 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.

 

  14.5 Expenses and Attorneys’ Fees

 

Tenant shall pay to Landlord on demand all costs and expenses (including
reasonable attorneys’ fees) incurred by Landlord in connection with reviewing or
consenting to any proposed Transfer (including any request for consent to, or
any waiver of Landlord’s rights in connection with, any security interest in any
of Tenant’s property at the Premises); provided, however, that in no event shall
such costs and expenses exceed Two Thousand Dollars ($2,000.00) with respect to
each proposed Transfer. Such fee may be deducted from the excess consideration,
if any, described in Section 14.3 above.

 

  14.6 Effectiveness of Transfer

 

Prior to the date on which any permitted Transfer (whether or not requiring
Landlord’s consent) becomes effective, Tenant shall deliver to Landlord a
counterpart of the fully executed Transfer document and, if required hereunder,
a reasonable form of Consent to Assignment or Consent to Sublease 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 instrument shall not release or discharge the Transferee from
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.

 

  14.7 Landlord’s Right to Space

 

Notwithstanding any of the above provisions of this Section to the contrary, if
Tenant notifies Landlord that it desires to enter into a Transfer (except in the
case of a Permitted Transfer or a Transfer to an Affiliated Party or any other
transfer to a successor to Tenant by merger, purchase, consolidation or
reorganization that is consented to by Landlord), Landlord, in lieu of
consenting to such Transfer, may elect in the case of an assignment or a
sublease of that would result in fifty percent (50%) or more of the Premises
being subject to the sublease for a

 

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sublease term of more than fifty percent (50%) of the then-remaining Term of
this Lease, to terminate this Lease. In such event, this Lease will terminate
(or the space proposed to be subleased will be removed from the Premises subject
to this Lease and the Base Rent and Tenant’s Share under this Lease shall be
proportionately reduced) on the date the Transfer was proposed to be effective,
and Landlord may lease such space to any party, including the prospective
Transferee identified by Tenant. Notwithstanding the foregoing, upon receipt of
Landlord’s notice that it has elected to terminate the Lease and recapture the
portion of the Premises proposed to be subleased or assigned, Tenant may, in its
discretion, elect to rescind its election to enter into a Transfer by delivering
notice of the same to Landlord within five (5) business days of Landlord’s
notice, in which case, this Lease shall continue in effect as if no such notice
were given by Tenant.

 

  14.8 Assignment of Sublease Rents

 

Tenant hereby absolutely and irrevocably assigns to Landlord any and all rights
to receive rent and other consideration from any sublease and agrees that
Landlord, as assignee or as attorney-in-fact for Tenant for purposes hereof, or
a receiver for Tenant appointed on Landlord’s application may (but shall not be
obligated to) collect such rents and other consideration and apply the same
toward Tenant’s obligations to Landlord under this Lease; provided, however,
that Landlord grants to Tenant at all times prior to occurrence of any breach or
default by Tenant a revocable license to collect such rents (which license shall
automatically and without notice be and be deemed to have been revoked and
terminated immediately upon any Event of Default). Notwithstanding the
foregoing, such assignment to Landlord of the rights to receive rent and other
consideration from any sublease and to collect the same shall not be deemed to
create any privity of contract or estate as between Landlord and any subtenant,
or be construed as an assumption by Landlord of any liability or obligation of
Tenant to any subtenant or as an agreement by Landlord to recognize any sublease
or the rights or interests of any subtenant thereunder in the event of the
expiration or any earlier termination of this Lease from any cause whatsoever,
nor shall any action taken by Landlord to enforce such assignment or to collect
any rent or other consideration payable by any subtenant be deemed to create or
impose any liability on Landlord to any such subtenant.

 

  14.9 Permitted Transfers

 

So long as Tenant is not entering into the Permitted Transfer (as defined below)
for the purpose of avoiding or otherwise circumventing the remaining terms of
this Section 14, Tenant may assign its entire interest under this Lease, without
the consent of Landlord, to (a) an affiliate, subsidiary, or parent of Tenant,
or a corporation, partnership or other legal entity wholly owned by Tenant
(collectively, an “Affiliated Party”), or (b) a successor to Tenant by purchase,
merger, consolidation or reorganization, provided that all of the following
conditions are satisfied (each such transfer a “Permitted Transfer” and any such
assignee or sublessee of a Permitted Transfer, a “Permitted Transferee”): (i)
Tenant is not in default under this Lease; (ii) the Permitted Transfer will not
result in a change in the use of the Premises; (iii) Tenant shall give Landlord
written notice at least fifteen (15) days prior to the effective date of the
proposed Permitted Transfer (or as soon thereafter as reasonably possible if
such notice is prohibited by confidentiality restrictions applicable to the
Permitted Transfer); (iv) with respect to a proposed Permitted Transfer to an
Affiliated Party, Tenant continues to have a net worth equal to or greater than

 

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Tenant’s net worth at the date of this Lease; and (v) with respect to a
purchase, merger, consolidation or reorganization or any Permitted Transfer
which results in Tenant ceasing to exist as a separate legal entity, (A)
Tenant’s successor shall own all or substantially all of the assets of Tenant,
and (B) Tenant’s successor shall have a net worth which is at least equal to the
greater of Tenant’s net worth at the date of this Lease or Tenant’s net worth as
of the day prior to the proposed purchase, merger, consolidation or
reorganization. Tenant’s notice to Landlord shall include information and
documentation showing that each of the above conditions has been satisfied. If
requested by Landlord, Tenant’s successor shall sign a commercially reasonable
form of assumption agreement. As used herein, (1) “parent” shall mean a company
which owns a majority of Tenant’s voting equity; (2) “subsidiary” shall mean an
entity wholly owned by Tenant or at least fifty-one percent (51%) of whose
voting equity is owned by Tenant; and (3) “affiliate” shall mean an entity
controlled, controlling or under common control with Tenant.

 

15. DEFAULT AND REMEDIES

 

  15.1 Events of Default

 

The occurrence of any of the following shall constitute an “Event of Default” by
Tenant:

 

(a) Tenant fails to make any payment of rent within five (5) days after the
delivery by Landlord of written notice to Tenant that such payment is past due,
or any amount required to replenish the security deposit as provided in Section
4 above, within five (5) days after delivery by Landlord of written notice to
Tenant that such replenishment is past due.

 

(b) Tenant abandons the Premises.

 

(c) Tenant fails timely to deliver any subordination document, estoppel
certificate or financial statement requested by Landlord within the applicable
time period specified in Sections 20.1, 21.1 and 21.2.

 

(d) Tenant violates the restrictions on Transfer set forth in Section 14.

 

(e) Tenant ceases doing business as a going concern; Tenant makes an assignment
for the benefit of creditors; is adjudicated an insolvent, files a petition {or
files an answer admitting the material allegations of a petition) seeking relief
under any state or federal bankruptcy or other statute, law or regulation
affecting creditors’ rights; all or substantially all of Tenant’s assets are
subject to judicial seizure or attachment and are not released within thirty
(30) days, or Tenant consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for Tenant or for all or any substantial part of Tenant’s
assets.

 

(f) Tenant fails, within ninety (90) days after the commencement of any
proceedings against Tenant seeking relief under any state or federal bankruptcy
or other statute, law or regulation affecting creditors’ rights, to have such
proceedings dismissed, or Tenant fails, within ninety (90) days after an
appointment, without Tenant’s consent or acquiescence, of any trustee, receiver
or liquidator for Tenant or for all or any substantial part of Tenant’s assets,
to have such appointment vacated.

 

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(g) Tenant fails to perform or comply with any provision of this Lease other
than those described in subparagraphs (a) through (f) above, and does not fully
cure such failure within thirty (30) days after notice to Tenant. However, if
Tenant’s failure to comply cannot reasonably be cured within 30 days, Tenant
shall be allowed additional time as is reasonably necessary to cure the failure
so long as: (1) Tenant commences to cure the failure within 30 days, and (2)
Tenant diligently pursues a course of action that will cure the failure and
bring Tenant back into compliance with the Lease. However, if Tenant’s failure
to comply creates a hazardous condition, Tenant shall immediate consult with
Landlord and Landlord may elect, at Tenant’s sole cost and expense, to (i)
require Tenant to perform whatever remediation, safety procedures or other work
that is necessary to protect persons and property from harm as a result of such
hazardous condition as determined by Landlord, or (ii) Landlord shall perform
such work. Tenant shall reimburse Landlord for all costs and expenses associated
with the foregoing within 30 days following demand by Landlord.

 

  15.2 Remedies

 

  15.2.1 Termination

 

Upon the occurrence of an Event of 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:

 

(a) 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

 

(b) 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

 

(c) 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 after the time of
award exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided; plus

 

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, (A) any costs or expenses incurred by Landlord
(provided, however, that with respect to the foregoing, Landlord shall not be
entitled to recover more than 100% of the costs and expenses actually incurred
by Landlord) (1) in retaking possession of the Premises; (2) in maintaining,
repairing, preserving, restoring, replacing, cleaning, altering, remodeling or
rehabilitating the Premises or any affected portions of the Building or the
Project, including such actions undertaken in connection with the reletting or
attempted reletting of the Premises to a new tenant or tenants; (3) for leasing
commissions, advertising costs and other expenses of reletting the Premises; or
(4) in carrying the Premises, including taxes, insurance premiums, utilities and
security precautions; (B) any unearned brokerage commissions paid in connection
with this Lease; (C) reimbursement of the portion of

 

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any previously waived or abated unamortized Base Rent or Additional Rent or any
free rent or reduced rental rate granted hereunder (i.e. based upon the
amortization of the Abated Rent in equal monthly amounts, without interest,
during the period commencing on the Commencement Date and ending on the original
Expiration Date); and (D) any concession made or paid by Landlord to the benefit
of Tenant in consideration of this Lease including, but not limited to, any
moving allowances, contributions, payments or loans by Landlord for tenant
improvements or build-out allowances (including, without limitation, any
unamortized portion of the Tenant Allowance (as defined in the Work Letter)
(such Tenant Allowance to be amortized over the Term in the manner reasonably
determined by Landlord), if any, and any outstanding balance (principal and
accrued interest) of the tenant improvements loan, if any), or assumptions by
Landlord of any of Tenant’s previous lease obligations; plus

 

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

 

(e) 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 (a) and (b) 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 (c) 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 pertinent present or future law, in the event
Tenant is evicted or Landlord takes possession of the Premises by reason of any
Event of Default of Tenant hereunder.

 

  15.2.2 Continuation of Lease

 

Upon the occurrence of any Event of 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 an Event of Default and
abandonment and recover Rent as it becomes due, provided that Tenant has the
right to sublet or assign, subject only to reasonable limitations). In addition,
Landlord shall not be liable in any way whatsoever for its failure or refusal to
relet the Premises. For purposes of this Section 15.2.2, the following acts by
Landlord will not constitute the termination of Tenant’s right to possession of
the Premises:

 

(a) Acts of maintenance or preservation or efforts to relet the Premises,
including, but not limited to, alterations, remodeling, redecorating, repairs,
replacements and/or painting as Landlord shall consider advisable for the
purpose of reletting the Premises or any part thereof; or

 

(b) The appointment of a receiver upon the initiative of Landlord to protect
Landlord’s interest under this Lease or in the Premises.

 

  15.2.3 Re-Entry

 

Upon the occurrence of any Event of Default by Tenant, Landlord shall also have
the right, with or without terminating this Lease, in compliance with applicable
law, to re-enter the

 

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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.

 

  15.2.4 Termination

 

No re-entry or taking of possession of the Premises by Landlord pursuant to this
Section 15.2 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 Event of Default by
Tenant, Landlord may at any time after such reletting elect to terminate this
Lease for any such Event of Default.

 

  15.2.5 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.

 

  15.2.6 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.

 

16. LATE CHARGE AND INTEREST

 

  16.1 Late Charge

 

If any payment of rent is not received by Landlord when due, Tenant shall pay to
Landlord on demand as a late charge an additional amount equal to ten percent
(10%) of the overdue payment. A late charge shall not be imposed more than once
on any particular installment not paid when due, but imposition of a late charge
on any payment not made when due does not eliminate or supersede late charges
imposed on other (prior) payments not made when due or preclude imposition of a
late charge on other installments or payments not made when due.

 

  16.2 Interest

 

In addition to the late charges referred to above, which are intended to defray
Landlord’s costs resulting from late payments, any payment from Tenant to
Landlord not paid when due shall at Landlord’s option bear interest from the
date due until paid to Landlord by Tenant at the rate of twelve percent (12%)
per annum or the maximum lawful rate that Landlord may charge to

 

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Tenant under applicable laws, whichever is less (the “Interest Rate”).
Acceptance of any late charge and/or interest shall not constitute a waiver of
Tenant’s default with respect to the overdue sum or prevent Landlord from
exercising any of its other rights and remedies under this Lease.

 

17. WAIVER

 

No provisions of this Lease shall be deemed waived by Landlord unless such
waiver is in a writing signed by Landlord. The waiver by Landlord of any breach
of any provision of this Lease shall not be deemed a waiver of such provision or
of any subsequent breach of the same or any other provision of this Lease. No
delay or omission in the exercise of any right or remedy of Landlord upon any
default by Tenant shall impair such right or remedy or be construed as a waiver.
Landlord’s acceptance of any payments of rent due under this Lease shall not be
deemed a waiver of any default by Tenant under this Lease (including Tenant’s
recurrent failure to timely pay rent) other than Tenant’s nonpayment of the
accepted sums, and no endorsement or statement on any check or payment or in any
letter or document accompanying any check or payment shall be deemed an accord
and satisfaction. Landlord’s consent to or approval of any act by Tenant
requiring Landlord’s consent or approval shall not be deemed to waive or render
unnecessary Landlord’s consent to or approval of any subsequent act by Tenant.

 

18. ENTRY, INSPECTION AND CLOSURE

 

Upon reasonable oral or written notice to Tenant (and without notice in
emergencies), Landlord and its authorized representatives may enter the Premises
at all reasonable times to: (a) determine whether the Premises are in the
condition required by this Lease, (b) determine whether Tenant is complying with
its obligations under this Lease, (c) perform any maintenance or repair of the
Premises or the Building that Landlord has the right or obligation to perform,
(d) install or repair improvements for other tenants where access to the
Premises is required for such installation or repair, (e) serve, post or keep
posted any notices required or allowed under the provisions of this Lease, (f)
show the Premises to prospective brokers, agents, buyers, transferees,
Mortgagees or tenants, or (g) do any other act or thing necessary for the safety
or preservation of the Premises or the Building. When entering the Premises,
Landlord shall cooperate with Tenant’s reasonable security measures, including,
without limitation, accompaniment by a representative of Tenant. When reasonably
necessary Landlord may temporarily close entrances, doors, corridors, elevators
or other facilities in the Building, including, without limitation, the Common
Areas, without liability to Tenant by reason of such closure. Landlord shall use
commercially reasonable efforts to conduct its activities under this Section in
a manner that will minimize inconvenience to Tenant, including, if necessary in
order for Tenant to continue to use the Premises for the conduct of its normal
business operations, performing work at hours other than normal business hours.
In no event shall Tenant be entitled to an abatement of rent on account of any
entry by Landlord, and Landlord shall not be liable in any manner for any
inconvenience, loss of business or other damage to Tenant or other persons
arising out of Landlord’s entry on the Premises in accordance with this Section.
No action by Landlord pursuant to this Section 18 shall constitute an eviction
of Tenant, constructive or otherwise, entitle Tenant to an abatement of rent or
to terminate this Lease or otherwise release Tenant from any of Tenant’s
obligations under this Lease.

 

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19. SURRENDER AND HOLDING OVER

 

  19.1 Surrender

 

Upon the expiration or termination of this Lease, Tenant shall surrender the
Premises and all Tenant Improvements and Alterations to Landlord broom-clean and
in their original condition, except for reasonable wear and tear, damage from
casualty or condemnation and any changes resulting from approved Alterations;
provided, however, that prior to the expiration or termination of this Lease
Tenant shall remove all telephone and other cabling installed in the Building by
Tenant and remove from the Premises all Tenant’s personal property and any Trade
Fixtures and all Alterations that Landlord has elected to require Tenant to
remove as provided in Section 6, and repair any damage caused by such removal.
If such removal is not completed before the expiration or termination of the
Term, Landlord shall have the right (but no obligation) to remove the same, and
Tenant shall pay Landlord on demand for all costs of removal and storage thereof
and for the rental value of the Premises for the period from the end of the Term
through the end of the time, reasonably required for such removal. Landlord
shall also have the right to retain or dispose of all or any portion of such
property if Tenant does not pay all such costs and retrieve the property within
ten (10) days after notice from Landlord (in which event title to all such
property described in Landlord’s notice shall be transferred to and vest in
Landlord). Tenant waives all Claims against Landlord for any damage or loss to
Tenant resulting from Landlord’s removal, storage, retention, or disposition of
any such property in accordance with this Section 19.1. Upon expiration or
termination of this Lease or of Tenant’s possession, whichever is earliest,
Tenant shall surrender all keys to the Premises or any other part of the
Building and shall deliver to Landlord all keys for or make known to Landlord
the combination of locks on all safes, cabinets and vaults that may be located
in the Premises. Tenant’s obligations under this Section shall survive the
expiration or termination of this Lease.

 

  19.2 Holding Over

 

If Tenant remains in possession of the Premises after the expiration or
termination of this Lease, Tenant’s continued possession shall be on the basis
of a tenancy at the sufferance of Landlord. In such event, Tenant shall continue
to comply with or perform all the terms and obligations of Tenant under this
Lease, except that (i) during the first ninety (90) days of such holdover, the
monthly Base Rent shall be one hundred fifty percent (150%) of the Base Rent
payable in the last full month prior to the termination hereof; and (ii)
following the first ninety (90) days of such holdover, the monthly Base Rent
shall be two hundred percent (200%) of the Base Rent payable in the last full
month prior to the termination hereof. Acceptance by Landlord of rent after such
termination shall not constitute a renewal or extension of this Lease; and
nothing contained in this provision shall be deemed to waive Landlord’s right of
re-entry or any other right hereunder or at law. Tenant shall indemnify, defend
and hold Landlord harmless from and against all Claims arising or resulting
directly or indirectly from Tenant’s failure to timely surrender the Premises,
including (i) any rent payable by or any loss, cost, or damages claimed by any
prospective tenant of the Premises, and (ii) Landlord’s damages as a result of
such prospective tenant rescinding or refusing to enter into the prospective
lease of the Premises by reason of such failure to timely surrender the
Premises. Tenant’s obligations under this Section shall survive the expiration
or termination of this Lease.

 

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20. ENCUMBRANCES

 

  20.1 Subordination

 

This Lease is expressly made subject and subordinate to any mortgage, deed of
trust, ground lease, underlying lease or like encumbrance affecting any part of
the Project or any interest of Landlord therein which is now existing or
hereafter executed or recorded (“Encumbrance”); provided, however, that such
subordination shall only be effective, as to future Encumbrances, if the holder
of the Encumbrance agrees that this Lease shall survive the termination of the
Encumbrance by lapse of time, foreclosure or otherwise so long as Tenant is not
in default under this Lease. Provided that the conditions of the preceding
sentence are satisfied, Tenant shall execute and deliver to Landlord, within ten
(10) days after written request therefor by Landlord and in a form reasonably
requested by Landlord, any additional documents evidencing the subordination of
this Lease with respect to any such Encumbrance, the nondisturbance agreement of
the holder of any such Encumbrance, and the attornment obligation of Tenant to
such holder or its successors and assigns. If the interest of Landlord in the
Project is transferred pursuant to or in lieu of proceedings for enforcement of
any Encumbrance, Tenant shall immediately and automatically attorn to the new
owner, and this Lease shall continue in full force and effect as a direct lease
between the transferee and Tenant on the terms and conditions set forth in this
Lease.

 

  20.2 Mortgagee Protection

 

Tenant agrees to give any holder of any Encumbrance covering any part of the
Project (“Mortgagee”), by registered mail, a copy of any notice of default
served upon Landlord, provided that prior to such notice Tenant has been
notified in writing (by way of notice of assignment of rents and leases, or
otherwise) of the address of such Mortgagee. If Landlord shall have failed to
cure such default within thirty (30) days from the effective date of such notice
of default, then the Mortgagee shall have an additional thirty (30) days within
which to cure such default or if such default cannot be cured within that time,
then such additional time as may be necessary to cure such default (including
the time necessary to foreclose or otherwise terminate its Encumbrance, if
necessary to effect such cure), and this Lease shall not be terminated so long
as such remedies are being diligently pursued. Tenant agrees that each Mortgagee
is an express third party beneficiary hereof.

 

21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS

 

  21.1 Estoppel Certificates

 

Within ten (10) days after written request therefor, Tenant shall execute and
deliver to Landlord, in a form provided by or satisfactory to Landlord, a
certificate stating that this Lease is in full force and effect, describing any
amendments or modifications hereto, acknowledging that this Lease is subordinate
or prior, as the case may be, to any Encumbrance and stating any other
information Landlord may reasonably request, including the Term, the monthly
Base Rent, the date to which Rent has been paid, the amount of any security
deposit or prepaid rent, whether either party hereto is in default under the
terms of this Lease, and whether Landlord has completed its construction
obligations hereunder (if any). Any person or entity purchasing,

 

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acquiring an interest in or extending financing with respect to the Project
shall be entitled to rely upon any such certificate. If Tenant fails to deliver
such certificate within ten (10) days after Landlord’s second written request
therefor, Landlord or Landlord’s beneficiary or agent may rely upon, for
whatever purposes, such certificate as prepared on Tenant’s behalf, and that
such certificate shall be fully binding on Tenant.

 

  21.2 Financial Statements

 

Within ten (10) days after written request therefor, but not more than once a
year, Tenant shall deliver to Landlord a copy of Tenant’s most current financial
statements (including, to the extent available, a year end balance sheet and a
statement of profit and loss) of Tenant for each of the three most recently
completed years, prepared in accordance with generally accepted accounting
principles (and, if such is Tenant’s normal practice, audited by an independent
certified public accountant), all then available subsequent interim statements,
and such other financial information as may reasonably be requested by Landlord
or required by any Mortgagee. Notwithstanding the foregoing, Tenant shall not be
required to provide financial statements if (i) Tenant is a publicly traded
company on a national exchange, and (ii) Landlord may access Tenant’s publicly
available financial statements.

 

22. NOTICES

 

Any notice, demand, request, consent or approval that either party desires or is
required to give to the other party under this Lease shall be in writing and
shall be served personally, delivered by messenger or courier service, by
electronically-confirmed telefacsimile, or by U.S. certified mail, return
receipt requested, postage prepaid, addressed to the other party at the party’s
address for notices set forth in the Basic Lease Information. Any notice
required pursuant to any Laws may be incorporated into, given concurrently with
or given separately from any notice required under this Lease. Notices shall be
deemed to have been given and be effective on the earlier of (a) receipt (or
refusal of delivery or receipt); or (b) one (1) day after acceptance by the
independent service for delivery, if sent by independent messenger or courier
service, or three (3) days after mailing if sent by mail in accordance with this
Section. Either party may change its address for notices hereunder, effective
fifteen (15) days after notice to the other party complying with this Section.
If Tenant sublets the Premises, notices from Landlord shall be effective on the
subtenant when given to Tenant pursuant to this Section.

 

23. ATTORNEYS’ FEES

 

In the event of any dispute between Landlord and Tenant in any way related to
this Lease, and whether involving contract and/or tort claims, the
non-prevailing party shall pay to the prevailing party all reasonable attorneys’
fees and costs and expenses of any type, without restriction by statute, court
rule or otherwise, incurred by the prevailing party in connection with any
action or proceeding (including any appeal and the enforcement of any judgment
or award), whether or not the dispute is litigated or prosecuted to final
judgment (collectively, “Fees”). The “prevailing party” shall be determined
based upon an assessment of which party’s major arguments or positions taken in
the action or proceeding could fairly be said to have prevailed (whether by
compromise, settlement, abandonment by the other party of its claim or defense,
final decision, after any appeals, or otherwise) over the other party’s major
arguments or

 

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positions on major disputed issues. Any Fees incurred in enforcing a judgment
shall be recoverable separately from any other amount included in the judgment
and shall survive and not be merged in the judgment. The Fees shall be deemed an
“actual pecuniary loss” within the meaning of Bankruptcy Code Section
365(b)(1)(B), and notwithstanding the foregoing, all Fees incurred by either
party in any bankruptcy case filed by or against the other party, from and after
the order for relief until this Lease is rejected or assumed in such bankruptcy
case, will be “obligations of the debtor” as that phrase is used in Bankruptcy
Code Section 365(d)(3).

 

24. QUIET POSSESSION

 

Subject to Tenant’s full and timely performance of all of Tenant’s obligations
under this Lease, Tenant shall have the quiet possession of the Premises
throughout the Term.

 

25. SECURITY MEASURES

 

Landlord shall provide certain security services to the Building, which services
shall be consistent with a first-class office building in the vicinity of the
Building and may be provided through a security system involving any one or a
combination of cameras, monitoring devices or guards, sign-in or identification
procedures or other comparable system. Landlord may, but shall be under no
obligation to, implement additional security measures for the Project, such as
the registration or search of all persons entering or leaving the Building,
requiring identification for access to the Building, evacuation of the Building
for cause, suspected cause, or for drill purposes, the issuance of magnetic pass
cards or keys for Building or elevator access and other actions that Landlord
deems necessary or appropriate to prevent any threat of property loss or damage,
bodily injury or business interruption; provided, however, that such measures
shall be implemented in a way as not to inconvenience tenants of the Project
unreasonably. Tenant shall be responsible for any loss, theft or breakage of any
such cards, which must be returned by Tenant to Landlord upon expiration or
earlier termination of this Lease. Landlord may retain the deposit for any card
not so returned. Landlord shall at all times have the right to change, alter or
reduce any such security services or measures. Tenant shall cooperate and comply
with, and cause Tenant’s Representatives and Visitors to cooperate and comply
with, such security measures. Landlord, its agents and employees shall have no
liability to Tenant or its Representatives or Visitors for the implementation or
exercise of, or the failure to implement or exercise, any such security measures
or for any resulting disturbance of Tenant’s use or enjoyment of the Premises.

 

26. TENANT PARKING

 

At no cost to Tenant, Tenant shall be entitled to use during the Term (including
any extensions thereof) the Parking Area for parking purposes to the extent
provided in the Basic Lease Information and shall not use more than the number
of parking spaces indicated therein. Tenant shall park its cars only in the
areas designated for use by Tenant, if any such areas are so designated. Tenant
shall furnish Landlord with Tenant’s and Tenant’s employees’ license plate
numbers within thirty (30) days after receiving a written request from Landlord,
and Tenant shall thereafter notify Landlord of any changes within thirty (30)
days after any change occurs. Should Tenant use the Parking Area or any portion
thereof in violation of this Section 26, Landlord shall have the right, without
notice, in addition to such other rights and remedies that it

 

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may have, to tow away any vehicle involved and charge the cost of towing and
storage to Tenant, which cost shall be immediately payable upon demand by
Landlord. Landlord shall not be required to enforce such parking rights against
any tenant or any other party. Tenant shall abide, and cause its Representatives
and Visitors to abide, by all Project Rules relating to parking in the Parking
Area. Parking lot spaces shall be used only for parking by vehicles no larger
than normal size passenger automobiles, sports utility vehicles, or pick-up
trucks, or if so designated, for smaller vehicles. There shall be no overnight
parking in the Parking Area without Landlord’s prior written consent. Tenant or
Tenant’s employees, suppliers, shippers, customers or invitees shall not load or
unload passengers, equipment or supplies, or park in areas, other than those
designated by Landlord for such activities. Tenant agrees that Landlord assumes
no responsibility of any kind whatsoever in reference to such automobile parking
facilities or the use thereof by Tenant, its employees, agents or invitees, or
by anyone else. Landlord may, at any time, and from time to time, limit access
to the Parking Area by means of attendants and/or other devices, and make other
changes in the layout and operation of the parking facilities, including,
without limiting the generality of the foregoing, changes in locations of
entrances, exits and parking spaces. Except as specifically provided in this
Section 26, Tenant shall not have the right to use any portion of the Parking
Area for parking.

 

27. FORCE MAJEURE

 

If either party is delayed, interrupted or prevented from performing any of its
obligations under this Lease (excluding the payment of Rent or the satisfaction
of any other monetary obligations hereunder), including Landlord’s obligations
under the Work Letter (if any), and such delay, interruption or prevention is
due to fire, act of God, governmental act or failure to act, labor dispute,
unavailability of materials or any cause outside the reasonable control of such
party, then the time for performance of the affected obligations of such party
shall be extended for a period equivalent to the period of such delay,
interruption or prevention.

 

28. COMMON AREAS

 

Subject to the terms and conditions of this Lease and the Project Rules, Tenant
shall have the nonexclusive right to use the Common Areas (as defined below)
during the Term, in common with other tenants or occupants of the Project or any
real property owned by Landlord adjacent to the Land, the agents, employees,
servants, invitees, contractors, guests, customers and representatives of such
tenants or occupants, and any other users authorized by Landlord. As used
herein, “Common Areas” means those portions of the Building, Land, and all
facilities and improvements thereon designated by Landlord for the nonexclusive
use of occupants of the Project and other authorized users, including access
roads, the Parking Area, driveways, sidewalks, landscaped areas, entrances,
lobbies, halls, passages, exits, entrances, stairways, atriums, corridors,
toilets and lavatories, passenger elevators, service areas and other facilities
so designated by Landlord. Landlord reserves the right to charge Tenant for its
use of certain portions of the Common Areas, including, without limitation, any
conference room facilities. Such use shall be subject to the terms and
conditions of this Lease and such reasonable rules and regulations that Landlord
may adopt from time to time. The current charge for use of the Building’s
conference room facilities is set forth on Exhibit I hereto; provided, however,
that Landlord reserves the right to adjust such charge from time to time in
accordance with prevailing market rates for such usage.

 

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Landlord shall at all times have exclusive control of the Common Areas. Landlord
shall have the right, without the same constituting an actual or constructive
eviction and without entitling Tenant to any abatement of rent, to: (i) close or
restrict access to and/or use of any part of the Common Areas to whatever extent
required in the opinion of Landlord’s counsel to prevent a dedication thereof or
the accrual of any prescriptive rights therein; (ii) close or restrict access to
and/or use of any part of the Common Areas to perform maintenance or for any
other reason deemed sufficient by Landlord, including, without limitation,
allowing the use thereof for invitation only public or private functions or
gatherings; (iii) change the shape, size, location and extent of the Common
Areas; (iv) eliminate from or add to the Project any land or improvement,
including multi-deck parking structures; (v) make changes to the Common Areas
including, without limitation, changes in the location of driveways, entrances,
passageways, doors and doorways, elevators, stairs, restrooms, exits, parking
spaces, parking areas, sidewalks or the direction of the flow of traffic and the
site of the Common Areas; (vi) remove unauthorized persons from the Project;
and/or (vii) change the name or address of the Building or Project. Tenant shall
keep the Common Areas clear of all obstructions created or permitted by Tenant,
Tenant’s Representatives, and Tenant’s Visitors. If in the opinion of Landlord
unauthorized persons are using any of the Common Areas by reason of the presence
of Tenant in the Building, Tenant, upon demand of Landlord, shall restrain such
unauthorized use by appropriate proceedings. In exercising any such rights
regarding the Common Areas, (i) Landlord shall make a reasonable effort to
minimize any disruption to Tenant’s business, and (ii) Landlord shall not
exercise its rights to control the Common Areas in a manner that would
materially interfere with Tenant’s use of the Premises without first obtaining
Tenant’s consent. Landlord agrees to perform certain improvements to the Common
Areas, as more particularly described in Exhibit G attached hereto. Such
improvements shall be completed on or before December 31, 2005; provided,
however, that the parties acknowledge that the signage described in Exhibit G is
subject to the approval of appropriate governmental authorities and Landlord
shall not be in default of this Lease if any such signage is not completed on or
before December 31, 2005.

 

29. RULES AND REGULATIONS

 

Tenant shall be bound by and shall comply with the rules and regulations set
forth in the Project Rules Rider attached hereto as Exhibit D and made a part of
this Lease to the extent those rules and regulations are not in conflict with
the terms of this Lease, as well as any reasonable rules and regulations
hereafter adopted by Landlord for all tenants of the Project, upon notice to
Tenant thereof (collectively, the “Project Rules”). Landlord reserves the right
to amend the Project Rules from time to time with or without advance notice, as
Landlord may deem appropriate for the best interests of the occupants of the
Project and other authorized users. Any amendments to the Project Rules shall be
effective as to Tenant and binding on Tenant upon delivery of a copy thereof to
Tenant. Tenant shall observe and cause Tenant’s Representatives and Visitors to
observe the Project Rules. Landlord shall not be responsible to Tenant or to any
other person for any violation of, or failure to observe, the Project Rules by
any other tenant or other person. Landlord shall apply such Project Rules to all
tenants in a non-discriminatory manner.

 

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30. LANDLORD’S LIABILITY

 

The term “Landlord,” as used in this Lease, shall mean only the owner or owners
of the Building at the time in question. In the event of any conveyance of title
to the Building, then from and after the date of such conveyance, the transferor
Landlord shall be relieved of all liability with respect to Landlord’s
obligations to be performed under this Lease after the date of such conveyance.
Notwithstanding any other term or provision of this Lease, the liability of
Landlord for its obligations under this Lease is limited solely to Landlord’s
interest in the Building (including, without limitation, any claims or rights to
insurance proceeds) as the same may from time to time be encumbered, and no
personal liability shall at any time be asserted or enforceable against any
other assets of Landlord or against Landlord’s partners or members or its or
their respective partners, shareholders, members, directors, officers or
managers on account of any of Landlord’s obligations or actions under this
Lease. Landlord represents that, as of the date of this Lease, there is no
mortgage encumbering the Building.

 

31. CONSENTS AND APPROVALS

 

  31.1 Determination in Good Faith

 

Wherever the consent, approval, judgment or determination of landlord is
required or permitted under this Lease, Landlord may exercise its good faith
business judgment in granting or withholding such consent or approval or in
making such judgment or determination without reference to any extrinsic
standard of reasonableness, unless the specific provision contained in this
Lease providing for such consent, approval, judgment or determination specifies
that Landlord’s consent or approval is not to be unreasonably withheld, or that
such judgment or determination is to be reasonable, or otherwise specifies the
standards under which Landlord may withhold its consent.

 

  31.2 No Liability Imposed on Landlord

 

The review and/or approval by Landlord of any item or matter to be reviewed or
approved by Landlord under the terms of this Lease or any Exhibits or Addenda
hereto shall not impose upon Landlord any liability for the accuracy or
sufficiency of any such item or matter or the quality or suitability of such
item for its intended use. Any such review or approval is for the sole purpose
of protecting Landlord’s interest in the Project, and no third parties,
including Tenant or the Representatives and Visitors of Tenant or any person or
entity claiming by, through or under Tenant, shall have any rights as a
consequence thereof.

 

32. WAIVER OF RIGHT TO JURY TRIAL

 

Landlord and Tenant waive their respective rights to trial by jury of any
contract or tort claim, counterclaim, cross-complaint, or cause of action in any
action, proceeding, or hearing brought by either party against the other on any
matter arising out of or in any way connected with this Lease, the relationship
of Landlord and Tenant, or Tenant’s use or occupancy of the Premises, including
any claim of injury or damage or the enforcement of any remedy under any current
or future law, statute, regulation, code, or ordinance.

 

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33. BROKERS

 

Landlord shall pay the fee or commission of the broker identified in the Basic
Lease Information as Landlord’s Broker (“Landlord’s Broker”) and the broker
identified in the Basic Lease Information as Tenant’s Broker (“Tenant’s Broker”)
in accordance with Landlord’s separate written agreement with Landlord’s Broker
and Tenant’s Broker, respectively. Each party hereby warrants and represents to
the other that in the negotiating or making of this Lease such party, nor anyone
acting on such party’s behalf has dealt with any broker or finder who might be
entitled to a fee or commission for this Lease other than Landlord’s Broker and
Tenant’s Broker. Each party shall indemnify and hold the other harmless from any
claim or claims, including costs, expenses and attorneys’ fees incurred by the
other party based upon a breach by such party of its representations and
covenants in this Section 33.

 

34. RELOCATION OF PREMISES

 

For the purpose of maintaining an economical and proper distribution of tenants
acceptable to Landlord throughout the Project, Landlord shall have the right
from time to time during the Term to relocate the Premises within the Project,
provided that (a) the rentable and useable area of the new Premises is of
substantially equivalent size to the existing Premises, (b) Landlord shall pay
the cost of providing tenant improvements in the new Premises, which shall be
substantially comparable in layout to those in the existing Premises, (c)
Landlord shall pay reasonable costs (to the extent such costs are submitted in
writing to Landlord and approved in writing by Landlord prior to such move) of
moving Tenant’s Trade Fixtures and personal property to the new Premises, and
(d) in no event shall such relocation cause any portion of the Premises to be
located on a floor that is not contiguous to a floor on which the remainder of
the Premises, or portion thereof, is located. Landlord shall deliver to Tenant
written notice of Landlord’s election to relocate the Premises, specifying the
new location and the amount of rent payable therefor (which shall be adjusted
based solely on the rentable area thereof), at least sixty (60) days prior to
the date the relocation is to be effective.

 

35. ENTIRE AGREEMENT

 

This Lease, including the Exhibits, the Work Letter, and any Addenda attached
hereto, and the documents referred to herein, if any, constitute the entire
agreement between Landlord and Tenant with respect to the leasing of space by
Tenant in the Project, and supersede all prior or contemporaneous agreements,
understandings, proposals and other representations by or between Landlord and
Tenant, whether written or oral, all of which are merged herein. Neither
Landlord nor Landlord’s agents have made any representations or warranties with
respect to the Premises, the Building, the Project or this Lease except as
expressly set forth herein, and no rights, easements or licenses shall be
acquired by Tenant by implication or otherwise unless expressly set forth
herein. The submission of this Lease for examination does not constitute an
option for the Premises and this Lease shall become effective as a binding
agreement only upon execution and delivery thereof by Landlord to Tenant.

 

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36. MISCELLANEOUS

 

This Lease may not be amended or modified except by a writing signed by Landlord
and Tenant. Subject to Section 14, this Lease shall be binding on and shall
inure to the benefit of the parties and their respective successors, assigns and
legal representatives. The determination that any provisions hereof may be void,
invalid, illegal or unenforceable shall not impair any other provisions hereof
and all such other provisions of this Lease shall remain in full force and
effect. The unenforceability, invalidity or illegality of any provision of this
Lease under particular circumstances shall not render unenforceable, invalid or
illegal other provisions of this Lease, or the same provisions under other
circumstances. This Lease shall be construed and interpreted in accordance with
the laws (excluding conflict of laws principles) of the State in which the
Building is located. The provisions of this Lease shall be construed in
accordance with the fair meaning of the language used and shall not be strictly
construed against either party, even if such party drafted the provision in
question. When required by the context of this Lease, the singular includes the
plural. Wherever the term “including” is used in this Lease, it shall be
interpreted as meaning “including, but not limited to” the matter or matters
thereafter enumerated. The captions contained in this Lease are for purposes of
convenience only and are not to be used to interpret or construe this Lease. If
more than one person or entity is identified as Tenant hereunder, the
obligations of each and all of them under this Lease shall be joint and several.
Time is of the essence with respect to this Lease. Neither Landlord nor Tenant
shall record this Lease.

 

37. AUTHORITY

 

If Tenant is a corporation, partnership, limited liability company or other form
of business entity, Tenant warrants and represents that Tenant is a duly
organized and validly existing entity, that each of the persons executing this
Lease on behalf of Tenant has full right and authority to enter into this Lease
and that the persons signing on behalf of Tenant are authorized to do so and
have the power to bind Tenant to this Lease. Tenant shall provide Landlord upon
request with evidence reasonably satisfactory to Landlord confirming the
foregoing representations.

 

38. OPTION TO RENEW

 

(a) Provided that Tenant is not then in default, Tenant shall have a one time
option to renew this Lease (the “Renewal Option”) with respect to all, but not
less than all, of the Premises for a five (5) year extended term, commencing
upon the Expiration Date and ending five (5) years thereafter, upon the same
terms and conditions as this Lease except for Base Rent, which shall be
determined as described below, and that the Renewal Option thus exercised shall
no longer exist. The Renewal Option shall be personal to Tenant and any
transferee pursuant to a Permitted Transfer, and shall only be exercisable by
Tenant (i) with respect to the entire Premises, if Tenant is actually occupying
at least sixty percent (60%) of the Premises at the time of Tenant’s exercise of
the Renewal Option and at the commencement of the Renewal Term, or (ii) with
respect to the portion of the Premises then being occupied by Tenant, if Tenant
desires to renew only such portion of the Premises. In order to exercise any
Renewal Option, Tenant shall give written notice (the “Election Notice”) to
Landlord of Tenant’s intention to exercise such Renewal Option not more than
nine (9) months nor less than six (6) months prior to the Expiration Date, and
if such notice is not so given, the Renewal Option shall terminate. Tenant

 

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hereby expressly acknowledges and agrees that time is of the essence for
purposes of notice of exercise of any Renewal Option and that Tenant’s failure
to do so within such time period will relieve Landlord of any obligation under
this Section. Except as provided in subparagraph (b) below, if Tenant timely
delivers the Election Notice to Landlord and is not in default under this Lease
at the time the Renewal Term commences, Landlord and Tenant shall be deemed to
have entered into an extension of this Lease with respect to the entirety of the
Premises for a five (5) year extended term on the terms and conditions set forth
herein. The parties hereto acknowledge that Landlord shall be under no
obligation to expend or agree to expend funds in connection with any Renewal
Option, including, but not limited to, any funds for improvement to the
Premises.

 

(b) For purposes of determining Prevailing Market Rent in connection with the
Renewal Option, the monthly Base Rent payable during the Renewal Term pursuant
to subparagraph (a) above shall be an amount equal to the Prevailing Market Rent
(as hereinafter defined), multiplied by the number of square feet constituting
the Premises. “Prevailing Market Rent” shall mean ninety-five percent (95%) of
the prevailing rental rate per square foot then being obtained by Landlord in
the Project for space of the same type (whether office or retail) and comparable
location within the building or, if no such space has been leased by Landlord
during the six (6) months preceding Tenant’s exercise of the Renewal Option, the
prevailing rental rate per square foot then being obtained by landlords of
commercial buildings of similar location, character and stature as the Building,
for comparable improved space of similar size and comparable location within the
building and for comparable duration and otherwise upon substantially equivalent
economic terms as this Lease. The determination of Prevailing Market Rent shall
take into account any material economic differences between the terms of this
Lease and any comparison lease or amendment, such as rent abatements,
construction costs and other concessions and the manner, if any, in which the
landlord under any such lease is reimbursed for operating expenses and taxes.
The determination of Prevailing Market Rent shall also take into consideration
any reasonably anticipated changes in the Prevailing Market Rent from the time
such Prevailing Market Rent is being determined and the time such Prevailing
Market Rent will become effective under this Lease. During the Renewal Term, the
Premises are to be leased “AS IS” and Landlord shall not be obligated to provide
any tenant improvements or financing for the same. Landlord and Tenant shall
meet and attempt in good faith to mutually determine Prevailing Market Rent for
the purposes of the foregoing. If the parties have not reached agreement on
Prevailing Market Rent by the date that is sixty (60) days after Tenant’s
delivery of the Election Notice (the “Initial Rent Determination Period”) to
Landlord, then within ten (10) days following the expiration of the Initial Rent
Determination Period, Tenant may elect, by giving written notice to Landlord, to
either (i) submit to binding arbitration for a determination of the Prevailing
Market Rent, or (ii) allow the Term to expire as if Tenant had not delivered an
Election Notice. If Tenant elects alternative (ii), this Lease shall
automatically terminate at the end of the initial Term, and Tenant shall have no
further options to extend or renew this Lease. The failure of Tenant to make an
election of either alternative (i) or (ii) above within the aforesaid ten (10)
day period shall be conclusively and irrevocably deemed to be an election by
Tenant to elect alternative (i). If Tenant elects, or is deemed to have elected,
to submit to binding arbitration, then each party shall appoint an appraiser and
shall give to the other party the identity of the appraiser no later than the
date that is twenty (20) days after the expiration of the Initial Rent
Determination Period. If either party fails to appoint an appraiser by such
date, the sole appraiser appointed, if any, shall determine the Prevailing
Market Rent. If no appraiser is appointed Landlord’s determination of Prevailing
Market Rent shall be final and binding upon the parties.

 

44

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If two appraisers are appointed, they shall immediately meet and attempt to
agree upon such Prevailing Market Rent. If the appraisers cannot reach agreement
on the Prevailing Market Rent by the date that is fifteen (15) days after
appointment of the appraisers by the parties hereto, each appraiser shall submit
a determination of Prevailing Market Rent to Landlord and Tenant not later than
twenty (20) days after such appointment. If the determinations of Prevailing
Market Rent made by these two appraisers differ by five percent (5%) or less of
the higher of the two determinations, the Prevailing Market Rent shall be the
average of the two determinations. If the determinations vary by more than five
percent (5%) of the higher of the two determinations, the two appraisers shall
within ten (10) days after submission of their determinations, appoint a third
appraiser. If the two appraisers shall be unable to agree on the selection of a
third appraiser within the ten (10) day period, then either Tenant or Landlord
may request such appointment by petitioning the presiding judge of the Superior
Court in and for the County of San Francisco. Such third appraiser shall, within
thirty (30) days after appointment, make a determination of the Prevailing
Market Rent and submit such determination to Landlord and Tenant. The Prevailing
Market Rent shall be the determination of Prevailing Market Rent submitted by
the original two appraisers that is closer to the Prevailing Market Rent
determination of the third appraiser. If the third appraiser’s determination is
exactly equal to the arithmetic mean of the Prevailing Market Rent
determinations of the original two appraisers, then Prevailing Market Rent shall
be the average of the original two determinations. For purposes of this Section,
“appraiser” shall mean an MAI designated appraiser with not less than five (5)
years of full-time commercial appraisal experience in the Brisbane/South San
Francisco area having no prior business relationship with either party. Each
party shall bear the fees and costs incurred by each party’s appraiser in
connection with the determination of Prevailing Market Rent and all fees and
costs incurred by the third appraiser, if any, in connection with the
determination of Prevailing Market Rent shall be shared equally by Landlord and
Tenant. If the determination of Prevailing Market Rent has not been made by the
Applicable Expiration Date, then Tenant shall (i) continue to pay monthly Base
Rent at the rate of one hundred ten percent (110%) of the monthly Base Rent for
the last month of the Term (the “Arbitration Period Base Rent”), as well as any
Additional Rent due under this Lease and (ii) pay to Landlord, or receive as a
refund from Landlord, as applicable, on the first day of the month after the
determination of Prevailing Market Rent is made, an amount, if any, equal to the
difference between the Arbitration Period Base Rent that was paid to Landlord
and the monthly Base Rent for the Renewal Term that should have been paid to
Landlord as the monthly Base Rent for the Renewal Term as determined hereunder.

 

45

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IN WITNESS WHEREOF, Landlord and Tenant have entered into this Lease as of the
date first above written.

 

    TENANT:  

TERCICA, INC.,

a Delaware corporation

            By:  

/s/ Stephen N. Rosenfield

           

Name:

 

Stephen N. Rosenfield

           

Title:

 

Senior VP Legal Affairs

General Counsel and Secretary

    LANDLORD:  

2000 SIERRA POINT, LLC,

a Delaware limited liability company

            By:  

PMP Sierra Point, LLC,

a Delaware limited liability company

its Managing Member

                By:  

/s/ Wendy Lister

               

Name:

 

Wendy Lister

               

Title:

 

Authorized Signatory

 

46

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EXHIBIT A

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF MARCH 7, 2005

BETWEEN

2000 SIERRA POINT, LLC, AS LANDLORD,

AND

TERCICA, INC., AS TENANT (“LEASE”)

 

DESCRIPTION OF PREMISES

 

[SEE ATTACHED]

 

 

 

A–1

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LOGO [g94802c_94802600.jpg]

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EXHIBIT B

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF MARCH 7, 2005

BETWEEN

2000 SIERRA POINT, LLC, AS LANDLORD,

AND

TERCICA, INC., AS TENANT (“LEASE”)

 

WORK LETTER

 

The following provisions are additional provisions of the foregoing Lease to
which this Work Letter is attached. Except as may be expressly provided herein,
no provision of this Work Letter shall be deemed to limit any other provision of
the Lease. The capitalized terms used herein have the same meanings as these
terms are given in the Lease.

 

1. Tenant Improvements and Allowance. Tenant, following the delivery of the
Premises by Landlord and the full and final execution and delivery of the Lease
to which this Work Letter is attached and all prepaid rental and security
deposits required under such agreement, shall have the right to perform
alterations and improvements in the Premises (the “Tenant Improvements”).
Notwithstanding the foregoing, Tenant and its contractors shall not have the
right to perform Tenant Improvements in the Premises unless and until Tenant has
complied with all of the terms and conditions of Section 6 of the Lease,
including, without limitation, approval by Landlord of the final plans for the
Tenant Improvements and the contractors to be retained by Tenant to perform such
Tenant Improvements; provided, however, that Landlord’s approval, which shall
not be unreasonably withheld, shall only be required for contractors and
subcontractors that perform work that affects the Building’s structure or
systems. Landlord hereby approves the following contractors as Tenant’s general
contractor for the Tenant Improvements: DPR Construction, Cody Brock
Construction or GCI Construction. Tenant shall be responsible for all elements
of the design of Tenant’s plans (including, without limitation, compliance with
law, functionality of design, the structural integrity of the design, the
configuration of the premises and the placement of Tenant’s furniture,
appliances and equipment), and Landlord’s approval of Tenant’s plans shall in no
event relieve Tenant of the responsibility for such design. Landlord’s approval
of the contractors to perform the Tenant Improvements shall not be unreasonably
withheld. The parties agree that Landlord’s approval of the general contractor
to perform the Tenant Improvements shall not be considered to be unreasonably
withheld if any such general contractor (i) does not have trade references
reasonably acceptable to Landlord, (ii) does not maintain insurance as required
pursuant to the terms of this Lease, (iii) does not have the ability to be
bonded for the work in an amount of no less than 150% of the total estimated
cost of the Tenant Improvements, (iv) does not provide current financial
statements reasonably acceptable to Landlord, or (v) is not licensed as a
contractor in the state/municipality in which the Premises is located. Tenant
acknowledges the foregoing is not intended to be an exclusive list of the
reasons why Landlord may reasonably withhold its consent to a general
contractor.

 

B–1

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2. Provided Tenant is not in default, Landlord agrees to contribute the sum of
$1,046,286.00 (representing an amount equal to Thirty Seven Dollars ($37.00) per
rentable square foot, multiplied by the rentable square footage of the Premises)
(the “Tenant Allowance”) toward the cost of performing the Tenant Improvements
in preparation of Tenant’s occupancy of the Premises. The Tenant Allowance shall
be subject to re-calculation if the Premises is remeasured pursuant to the terms
of Section 1 of the Lease.

 

The Tenant Allowance may only be used for the cost of preparing design and
construction documents and mechanical and electrical plans for the Tenant
Improvements and for hard costs in connection with the Tenant Improvements. The
Tenant Allowance, less a 10% retainage (which retainage shall be payable as part
of the final draw), shall be paid to Tenant or, at Landlord’s option, to the
order of the general contractor that performs the Tenant Improvements, in
periodic disbursements within 30 days after receipt of the following
documentation: (i) an application for payment and sworn statement of contractor
substantially in the form of AIA Document G-702 covering all work for which
disbursement is to be made to a date specified therein; (ii) a certification
from Tenant’s architect substantially in the form of the Architect’s Certificate
for Payment which is located on AIA Document G702, Application and Certificate
of Payment; (iii) Contractor’s, subcontractor’s and material supplier’s waivers
of liens which shall cover all Tenant Improvements for which disbursement is
being requested and all other statements and forms required for compliance with
the mechanics’ lien laws of the state in which the Premises is located, together
with all such invoices, contracts, or other supporting data as Landlord or
Landlord’s Mortgagee may reasonably require; (iv) a cost breakdown for each
trade or subcontractor performing the Tenant Improvements; and (v) a request to
disburse from Tenant containing an approval by Tenant of the work done and a
good faith estimate of the cost to complete the Tenant Improvements. Upon
completion of the Tenant Improvements, and prior to final disbursement of the
Tenant Allowance, Tenant shall furnish Landlord with: (1) general contractor and
architect’s completion affidavits, (2) full and final waivers of lien, (3)
receipted bills covering all labor and materials expended and used, (4) as-built
plans of the Tenant Improvements, (5) the certification of Tenant and its
architect that the Tenant Improvements have been installed in a good and
workmanlike manner in accordance with the approved plans, and in accordance with
applicable laws, codes and ordinances, and (6) copies of all construction
contracts for the Tenant Improvements, together with copies of all change
orders, if any. In no event shall Landlord be required to disburse the Tenant
Allowance more than one time per month. If the Tenant Improvements exceed the
Tenant Allowance, Tenant shall be entitled to the Tenant Allowance in accordance
with the terms hereof, but each individual disbursement of the Tenant Allowance
shall be disbursed in the proportion that the Tenant Allowance bears to the
total cost for the Tenant Improvements, less the 10% retainage referenced above.
Notwithstanding anything herein to the contrary, Landlord shall not be obligated
to disburse any portion of the Tenant Allowance during the continuance of an
uncured default under the Lease, and Landlord’s obligation to disburse shall
only resume when and if such default is cured.

 

Notwithstanding the foregoing, if the cost of the construction and installation
of the Tenant Improvements exceeds the Tenant Allowance, then upon Tenant’s
written request to Landlord delivered not later than the date of Substantial
Completion of the Tenant Improvements: (x) the Tenant Allowance shall be
increased by an amount designated by Tenant not exceeding Ten Dollars ($10.00)
per rentable square foot of the Premises (the “Additional Contribution”), and
(y) the monthly Base Rent per square foot for each month of the Term shall

 

B–2

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be increased by the Base Rent Adjustment (as defined below). Landlord and Tenant
shall memorialize any such increases in Base Rent in the Commencement Letter. As
used herein, “Base Rent Adjustment” shall mean an amount equal to the amount of
level monthly payments of principal and interest that would be required to
amortize the total amount of the Additional Contribution over the last sixty
(60) months of the initial Term of the Lease at a rate of eight percent (8%) per
annum.

 

3. In no event shall the Tenant Allowance be used for the purchase of equipment,
furniture or other items of personal property of Tenant. If Tenant does not
submit a request for payment of the entire Tenant Allowance to Landlord in
accordance with the provisions contained in this Work Letter on or before the
date that is the one year anniversary of the Commencement Date, any unused
amount shall accrue to the sole benefit of Landlord, it being understood that
Tenant shall not be entitled to any credit, abatement or other concession in
connection therewith. Tenant shall be responsible for all applicable state sales
or use taxes, if any, payable in connection with the Tenant Improvements and/or
Tenant Allowance. The foregoing sentence shall not be deemed to prohibit Tenant
from applying a portion of the Tenant Allowance to pay any sales taxes
applicable to the Tenant Improvements (excluding Tenant’s personal property,
equipment and fixtures).

 

4. Except for any specific requirements set forth in the Lease, Tenant agrees to
accept the Premises in its “as-is” condition and configuration, it being agreed
that Landlord shall not be required to perform any work or, except as provided
above with respect to the Tenant Allowance, incur any costs in connection with
the construction or demolition of any improvements in the Premises.

 

5. This Work Letter shall not be deemed applicable to any additional space added
to the Premises at any time or from time to time, whether by any options under
the Lease or otherwise, or to any portion of the original Premises or any
additions to the Premises in the event of a renewal or extension of the original
Term of the Lease, whether by any options under the Lease or otherwise, unless
expressly so provided in the Lease or any amendment or supplement to the Lease.

 

6. Notwithstanding any provision to the contrary contained in the Lease, if an
event of default by Tenant under the Lease, or a default by Tenant under this
Exhibit, has occurred at any time on or before the Substantial Completion (as
defined below) of the Tenant Improvements, then (i) in addition to all other
rights and remedies granted to Landlord pursuant to the Lease, Landlord shall
have the right to cause the construction of the Tenant Improvements to cease (in
which case, Tenant shall be responsible for any delay in the Substantial
Completion of the Tenant Improvements caused by such work stoppage), and (ii)
all other obligations of Landlord under the terms of this Exhibit shall be
suspended until such time as such default is cured pursuant to the terms of the
Lease. The Tenant Improvements shall be deemed to be “Substantially Completed”
when they have been completed in accordance with the Final Construction
Documents and any approvals necessary for the occupancy of the Premises have
been issued by appropriate governmental authorities, except for finishing
details, minor omissions, decorations and mechanical adjustments of the type
normally found on an architectural “punch list”. (The definition of
Substantially Completed shall also define the terms “Substantial Completion” and
“Substantially Complete.”)

 

B–3

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EXHIBIT C

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF MARCH 7, 2005

BETWEEN

2000 SIERRA POINT, LLC, AS LANDLORD,

AND

TERCICA, INC., AS TENANT (“LEASE”)

 

COMMENCEMENT CERTIFICATE

 

LANDLORD:

   2000 Sierra Point, LLC

TENANT:

   Tercica, Inc.

LEASE DATE:

   ___________, _____

PREMISES:

   ______________________________________________

 

Tenant hereby accepts the Premises as being in the condition required under the
Lease, with all of Landlord’s construction obligations, if any, completed
(except for minor punchlist items which Landlord agrees to complete).

 

The Commencement Date of the Lease is hereby established as ___________, _____ .

 

The Expiration Date of the Lease is hereby established as ___________, _____.

 

    TENANT:      

,

        a                     By:                    

Name:

                   

Title:

            LANDLORD:      

,

                          By:                    

Name:

                   

Title:

       

 

C–1

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EXHIBIT D

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF MARCH 7, 2005

BETWEEN

2000 SIERRA POINT, LLC, AS LANDLORD,

AND

TERCICA, INC., AS TENANT (“LEASE”)

PROJECT RULES RIDER

 

The following Project Rules are additional provisions of the foregoing Lease to
which they are attached. Except as may be expressly provided herein, no
provision of this Project Rules Rider shall be deemed to limit any other
provision of the Lease. The capitalized terms used herein have the same meanings
as these terms are given in the Lease.

 

1. Use of Common Areas. Tenant will not obstruct the Common Areas, and Tenant
will not use the Common Areas for any purpose other than ingress and egress to
and from the Premises. Without limiting the foregoing, the Common Areas shall
not be used for staging or storage. The Common Areas, except for the sidewalks,
are not open to the general public and Landlord reserves the right to control
and prevent access to the Common Areas of any person whose presence, in
Landlord’s opinion, would be prejudicial to the safety, reputation and interests
of the Project and its tenants.

 

2. No Access to Roof. Tenant has no right of access to the roof of the Building
and will not install, repair or replace any antenna, aerial, aerial wires, fan,
air-conditioner or other device on the roof of the Building, without the prior
written consent of Landlord. Any such device installed without such written
consent is subject to removal at Tenant’s expense without notice at any time. In
any event Tenant will be liable for any damages or repairs incurred or required
as a result of its installation, use, repair, maintenance or removal of such
devices on the roof and agrees to indemnify and hold harmless Landlord from any
liability, loss, damage, cost or expense, including reasonable attorneys’ fees,
arising from any activities of Tenant or of Tenant’s Representatives on the roof
of the Building.

 

3. Signage. Except as otherwise expressly provided in the Lease, no sign,
placard, picture, name, advertisement or notice visible from the exterior of the
Premises will be inscribed, painted, affixed or otherwise displayed by Tenant on
or in any part of the Building without the prior written consent of Landlord.
Landlord reserves the right to adopt and furnish Tenant with general guidelines
relating to signs in or on the Building. All approved signage will be inscribed,
painted or affixed at Tenant’s expense by a person approved by Landlord, which
approval will not be unreasonably withheld. Landlord shall provide and install,
at Landlord’s sole cost and expense, the Building directory signage for Tenant.
Such signage shall consist of Building standard materials and shall comply with
current Building specifications.

 

4. Prohibited Uses. The Premises will not be used for manufacturing, for the
storage of merchandise held for sale to the general public, for lodging or for
the sale of goods to the general

 

D–1

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public. Tenant will not permit any food preparation on the Premises except that
Tenant may use Underwriters’ Laboratory approved equipment for brewing coffee,
tea, hot chocolate and similar beverages so long as such use is in accordance
with all applicable federal, state and municipal laws, codes, ordinances, rules
and regulations.

 

5. Freight. Upon not less than twenty-four hours’ prior notice to Landlord,
which notice may be oral, an elevator will be made available for Tenant’s use
for transportation of freight, subject to such scheduling as Landlord in its
discretion deems appropriate. Tenant shall not transport freight in loads
exceeding the weight limitations of such elevator. Landlord reserves the right
to prescribe the weight, size and position of all equipment, materials,
furniture or other property brought into the Building, and no property will be
received in the Building or carried up or down the freight elevator or stairs
except during such hours and along such routes and by such persons as may be
designated by Landlord. Landlord reserves the right to require that heavy
objects will stand on wood strips of such length and thickness as is necessary
to properly distribute the weight. Landlord will not be responsible for loss of
or damage to any such property from any cause, and Tenant will be liable for all
damage or injuries caused by moving or maintaining such property.

 

6. Nuisances and Dangerous Substances. Tenant will not conduct itself or permit
Tenant’s Representatives or Visitors to conduct themselves, in the Premises or
anywhere on or in the Project in a manner which is offensive or unduly annoying
to any other Tenant or Landlord’s property managers. Tenant will not install or
operate any phonograph, radio receiver, musical instrument, or television or
other similar device in any part of the Common Areas and shall not operate any
such device installed in the Premises in such manner as to disturb or annoy
other tenants of the Project. Tenant will not use or keep in the Premises or the
Project any kerosene, gasoline or other combustible fluid or material other than
limited quantities thereof reasonably necessary for the maintenance of office
equipment, or, without Landlord’s prior written approval, use any method of
heating or air conditioning other than that supplied by Landlord. Tenant will
not use or keep any foul or noxious gas or substance in the Premises or permit
or suffer the Premises to be occupied or used in a manner offensive or
objectionable to Landlord or other occupants of the Project by reason of noise,
odors or vibrations, or interfere in any way with other tenants or those having
business therein.

 

7. Building Name and Address. Without Landlord’s prior written consent, Tenant
will not use the name of the Building in connection with or in promoting or
advertising Tenant’s business except as Tenant’s address.

 

8. Building Directory. A directory for the Building will be provided for the
display of the name and location of tenants. Landlord reserves the right to
approve any additional names Tenant desires to place in the directory and, if so
approved, Landlord may assess a reasonable charge for adding such additional
names.

 

9. Wiring and Cabling Installations. Landlord will direct Tenant’s electricians
and other vendors as to where and how data, telephone, and electrical wires and
cables are to be installed. No boring or cutting for wires or cables will be
allowed without the prior written consent of Landlord. The location of burglar
alarms, smoke detectors, telephones, call boxes and other office equipment
affixed to the Premises shall be subject to the written approval of Landlord.

 

D–2

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10. Closing Procedures. Tenant will see that the doors of the Premises are
closed and locked and all water faucets, water apparatus and utilities are shut
off before Tenant or its employees leave the Premises. Tenant will be liable for
all damage or injuries sustained by other tenants or occupants of the Project or
Landlord resulting from Tenant’s carelessness in this regard or violation of
this rule. Tenant will keep the doors to the Building corridors closed at all
times except for ingress and egress.

 

11. Plumbing Facilities. The toilet rooms, toilets, urinals, wash bowls and
other apparatus shall not be used for any purpose other than that for which they
were constructed and no foreign substance of any kind whatsoever shall be
disposed of therein. Tenant will be liable for any breakage, stoppage or damage
resulting from the violation of this rule by Tenant, its employees or invitees.

 

12. Use of Hand Trucks. Tenant will not use or permit to be used in the Premises
or in the Common Areas any hand trucks, carts or dollies except those equipped
with rubber tires and side guards or such other equipment as Landlord may
approve.

 

13. Refuse. Tenant shall store all Tenant’s trash and garbage within the
Premises or in other facilities designated by Landlord for such purpose. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of removing and disposing of
trash and garbage in the city in which the Building is located without being in
violation of any law or ordinance governing such disposal. All trash and garbage
removal shall be made in accordance with directions issued from time to time by
Landlord, only through such Common Areas provided for such purposes and at such
times as Landlord may designate. Tenant shall comply at its own expense with the
requirements of any recycling program adopted by Landlord for the Building.

 

14. Soliciting. Canvassing, peddling, soliciting and distribution of handbills
or any other written materials in the Project are prohibited, and Tenant will
cooperate to prevent the same.

 

15. Parking. Tenant will use, and cause Tenant’s Representatives and Visitors to
use, any parking spaces to which Tenant is entitled under the Lease in a manner
consistent with Landlord’s directional signs and markings in the Parking Area.
Specifically, but without limitation, Tenant will not park, or permit Tenant’s
Representatives or Visitors to park, in a manner that impedes access to and from
the Project or the Parking Area or that violates space reservations for
handicapped drivers registered as such with the California Department of Motor
Vehicles. Landlord may use such reasonable means as may be necessary to enforce
the directional signs and markings in the Parking Area, including, but not
limited to, towing services, and Landlord will not be liable for any damage to
vehicles towed as a result of non-compliance with such parking regulations.
Landlord has the right to make changes in the parking procedures and guidelines
from time to time, to benefit the Project, in Landlord’s sole discretion.

 

16. Fire, Security and Safety Regulations. Tenant will comply with all safety,
security, fire protection and evacuation measures and procedures established by
Landlord or any governmental agency.

 

D–3

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17. Responsibility for Theft. Tenant assumes any and all responsibility for
protecting the Premises from theft, robbery and pilferage, which includes
keeping doors locked and other means of entry to the Premises closed.

 

18. Sales and Auctions. Tenant will not conduct or permit to be conducted any
sale by auction in, upon or from the Premises or elsewhere in the Project,
whether said auction be voluntary, involuntary, pursuant to any assignment for
the payment of creditors or pursuant to any bankruptcy or other insolvency
proceeding.

 

19. Waiver of Rules. Landlord may waive any one or more of these Project Rules
for the benefit of any particular tenant or tenants, but no such waiver by
Landlord will be construed as a waiver of such Project Rules in favor of any
other tenant or tenants or prevent Landlord from thereafter enforcing these
Project Rules against any or all of the tenants of the Project.

 

20. Effect on Lease. These Project Rules are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of the Lease. Violation of these Project
Rules constitutes a failure to fully perform the provisions of the Lease, as
referred to in Section 15.1 of the Lease.

 

21. Non-Discriminatory Enforcement. Subject to the provisions of the Lease (and
the provisions of other leases with respect to other tenants), Landlord shall
use reasonable efforts to enforce these Project Rules in a non-discriminatory
manner, but in no event shall Landlord have any liability for any failure or
refusal to do so (and Tenant’s sole and exclusive remedy for any such failure or
refusal shall be injunctive relief preventing Landlord from enforcing any of the
Project Rules against Tenant in a manner that discriminates against Tenant).

 

22. No Animals. Tenant shall not bring into the Premises at the Project any
animals of any type or kind, except animals necessary to assist persons with
disabilities.

 

23. Safes. Landlord shall have the right to prescribe the weight, size and
position of all safes and other heavy property brought into the Project and also
the times and manner of moving the same in and out of the Project. Safes and
other heavy objects shall, if considered necessary by Landlord, stand on
supports of such thickness as is necessary to properly distribute the weight.
Without limiting the foregoing, no object shall be placed in the Premises whose
weight distribution results in pressure in excess of eighty (80) pounds per
square foot. Landlord will not be responsible for loss of or damage to any such
safe or property in any case. All damage done to any part of the Project, its
contents, occupants or visitors by moving or maintaining any such safe or other
property shall be the sole responsibility of Tenant and any expense of said
damage or injury shall be borne by Tenant.

 

24. Conduct. Tenant shall conduct its business in an orderly manner in the best
interests of the Project. No loudspeakers, televisions, phonographs, radios, or
other devices shall be used in a manner so as to be heard or seen outside of the
Premises without the prior written consent of Landlord, which may be withheld in
Landlord’s sole discretion.

 

25. Additional and Amended Rules. Landlord reserves the right to rescind or
amend these Project Rules and/or adopt any other and reasonable rules and
regulations as in its judgment may

 

D–4

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

from time to time be needed for the safety, care and cleanliness of the Project
and for the preservation of good order therein.

 

26. Janitorial Services. Tenant will not employ any person for the purpose of
cleaning the Premises or permit any person to enter the Building for such
purpose other than Landlord’s janitorial service, except with Landlord’s prior
written consent. Tenant will not necessitate, and will be liable for the cost
of, any undue amount of janitorial labor by reason of Tenant’s carelessness in
or indifference to the preservation of good order and cleanliness in the
Premises. Janitorial service will not be furnished to areas in the Premises on
nights when such areas are occupied after 9:30 p.m., unless such service is
extended by written agreement to a later hour in specifically designated areas
of the Premises.

 

27. Keys and Locks. Landlord will furnish Tenant, free of charge, two keys to
each door or lock in the Premises. Landlord may make a reasonable charge for any
additional or replacement keys. Tenant will not duplicate any keys, alter any
locks or install any new or additional lock or bolt on any door of its Premises
or on any other part of the Building without the prior written consent of
Landlord and, in any event, Tenant will provide Landlord with a key for any such
lock. On the termination of the Lease, Tenant will deliver to Landlord all keys
to any locks or doors in the Building which have been obtained by Tenant.

 

28. Window Coverings. No curtains, draperies, blinds, shutters, shades, awnings,
screens or other coverings, window ventilators, hangings, decorations or similar
equipment shall be attached to, hung or placed in, or used in or with any window
of the Building without the prior written consent of Landlord, and Landlord
shall have the right to control all lighting within the Premises that may be
visible from the exterior of the Building.

 

29. Floor Coverings. Tenant will not lay or otherwise affix linoleum, tile,
carpet or any other floor covering to the floor of the Premises in any manner
except as approved in writing by Landlord. Tenant will be liable for the cost of
repair of any damage resulting from the violation of this rule or the removal of
any floor covering by Tenant or its contractors, employees or invitees.

 

D–5

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

 

EXHIBIT E

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF MARCH 7, 2005

BETWEEN

2000 SIERRA POINT, LLC, AS LANDLORD,

AND

TERCICA, INC., AS TENANT (“LEASE”)

 

PROHIBITED USES RIDER

 

The following provisions are additional provisions of the foregoing Lease to
which this Prohibited Uses Rider is attached. Except as may be expressly
provided herein, no provision of this Prohibited Uses Rider shall be deemed to
limit any other provision of the Lease. The capitalized terms used herein have
the same meanings as these terms are given in the Lease.

 

As used in Section 5.1 of the Lease, “Prohibited Use” means any of the following
uses:

 

(a) educational activities;

 

(b) provision of social services;

 

(c) governmental use (including embassy or consulate use);

 

(d) personnel agency;

 

(e) customer service office;

 

(f) studios for radio, television or other media;

 

(g) amusement arcade, “bingo” parlor, game center, pool hall or billiard parlor;

 

(h) bowling alley or arcade;

 

(i) the sale of alcoholic beverages;

 

(j) tavern, brew pub or bar;

 

(k) health club, spa or gymnasium;

 

(l) theater, night club, dance hall or discotheque;

 

(m) second-hand or surplus store;

 

(n) any dumping, disposing, incineration or reduction of garbage (exclusive of
appropriately screened dumpster);

 

E–1

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(o) any fire sale, bankruptcy sale (unless pursuant to a court order) or auction
house operation;

 

(p) any living quarters, sleeping apartment or lodging rooms;

 

(q) any veterinary hospital, animal raising facilities or pet shop;

 

(r) mortuary;

 

(s) sale, display or showing of movies, indecent or pornographic literature,
video products or other products;

 

(t) any separately demised newsstand;

 

(u) any use which is a public nuisance;

 

(v) “head shop”;

 

(w) any theater of any kind;

 

(x) restaurant;

 

(y) amusement center, carnival, meeting hall, “disco” or other dance hall,
sporting event facility, auditorium or any other like place of public assembly;

 

(z) manufacturing operations;

 

(aa) factories;

 

(bb) any industrial usage;

 

(cc) warehouse, processing or rendering plant;

 

(dd) flea market;

 

(ee) massage parlor, tanning studio, modeling studio, or establishment where men
or women are engaged in salacious activities or sexually oriented business
including, without limitation, mud wrestling, table dancing, or topless,
bottomless or nude servers, waitresses waiters, dancers, hostesses or hosts;

 

(ff) gambling establishment, “off-track betting” operation, lotto or lottery
sales, or other similar or related businesses; and

 

(gg) any other purpose which would be considered to be inconsistent with the use
of the Project as a community-oriented office/retail project.

 

E–2

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

 

EXHIBIT F

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF MARCH 7, 2005

BETWEEN

2000 SIERRA POINT, LLC, AS LANDLORD,

AND

TERCICA, INC., AS TENANT (“LEASE”)

 

ADDITIONAL PROVISIONS RIDER

 

The following provisions are additional provisions of the foregoing Lease to
which this Additional Provisions Rider is attached. Except as may be expressly
provided herein, no provision of this Additional Provisions Rider shall be
deemed to limit any other provision of the Lease. The capitalized terms used
herein have the same meanings as these terms are given in the Lease.

 

1. SECOND FLOOR OPTION AND RIGHT OF FIRST OFFER

 

  1.1 Grant of Option and Right of First Offer; Conditions.

 

The parties acknowledge that the second (2nd) floor of the Building is currently
utilized as an executive conference center. Landlord shall have the right, in
its sole discretion, to designate certain portions of the executive conference
center to be leased for office use (the “Office Space”). Nothing contained
herein shall be deemed to limit or restrict Landlord’s ability to locate or
designate conference room area(s) on the 2nd floor of the Building.

 

Tenant shall have an option (the “Expansion Option”) to lease space on the 2nd
floor of the Building (the “Expansion Space”) during the first twenty-four (24)
months of the Term, provided that Landlord receives written notice (the
“Expansion Notice”) from Tenant of the exercise of its Expansion Option on or
before the last day of the twenty-fourth (24th) month of the Term. Landlord
agrees that, if Tenant so requests, Landlord shall make available to Tenant no
less than fifty percent (50%) of the rentable square footage of the 2nd floor of
the Building during such twenty-four month period. Within five (5) business days
following receipt of such Expansion Notice, Landlord shall deliver an Advice (as
hereinafter defined) to notify Tenant of the terms under which Landlord is
prepared to lease such Expansion Space to Tenant, which Advice shall specify a
base rental rate that reflects Prevailing Market (as defined in Section 1.5
below) and may contain other terms consistent with those terms that Landlord is
generally offering to other tenants of the Building at the time that such Advice
is delivered to Tenant. Tenant may lease such Expansion Space under such terms
by delivering a Notice of Exercise (as defined below) to Landlord within five
(5) business days after the date of the Advice. The Expansion Option shall
terminate on the last day of the twenty-fourth (24th) month of the Term.

 

Beginning on the first day of the twenty-fifth (25th) month of the Term, Tenant
shall have an ongoing right of first offer during the Term (the “Right of First
Offer”) with respect to such Office Space (the “Offering Space”). Tenant’s Right
of First Offer shall be exercised as follows: at any time after Landlord has
determined that all or a portion of the Offering Space is available for

 

F–1

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

lease (but prior to leasing such Offering Space to a third party), Landlord
shall advise Tenant (the “Advice”) of the terms under which Landlord is prepared
to lease such Offering Space to Tenant for the remainder of the Term, which
terms for such Offering Space shall reflect the Prevailing Market (as
hereinafter defined) rate for such Offering Space as reasonably determined by
Landlord. Tenant may lease such portion of the Offering Space in its entirety
only, under such terms, by delivering written notice of exercise to Landlord
(the “Notice of Exercise”) within five (5) business days after the date of the
Advice.

 

Notwithstanding anything herein to the contrary, Tenant shall have no such
Expansion Option and Right of First Offer and Landlord need not provide Tenant
with an Advice, if:

 

(a) Tenant is in default under the Lease beyond any applicable cure periods at
the time that Landlord would otherwise deliver the Advice; or

 

(b) the Premises, or any portion thereof, is sublet (other than pursuant to a
Permitted Transfer, as defined in Section 14 of the Lease or a Transfer to an
Affiliated Party or any other transfer to a successor to Tenant by merger,
purchase, consolidation or reorganization that is consented to by Landlord) at
the time Landlord would otherwise deliver the Advice; or

 

(c) the Lease has been assigned (other than pursuant to a Permitted Transfer, as
defined in Section 14 of the Lease or a Transfer to an Affiliated Party or any
other transfer to a successor to Tenant by merger, purchase, consolidation or
reorganization that is consented to by Landlord) prior to the date Landlord
would otherwise deliver the Advice; or

 

(d) Tenant is not occupying the Premises on the date Landlord would otherwise
deliver the Advice; or

 

(e) the Offering Space or Expansion Space, as applicable, is not intended for
the exclusive use of Tenant during the Term.

 

  1.2 Terms for Offering Space.

 

(a) The term for the subject portion of the Offering Space shall commence upon
the commencement date stated in the Advice and thereupon such Offering Space
shall be considered a part of the Premises, provided that all of the terms
stated in the Advice shall govern Tenant’s leasing of the subject portion of the
Offering Space and only to the extent that they do not conflict with the Advice,
the terms and conditions of this Lease shall apply to the subject portion of the
Offering Space, as applicable.

 

(b) Tenant shall pay Base Rent and Additional Rent for the subject portion of
the Offering Space in accordance with the terms and conditions of the Advice,
which terms and conditions shall reflect the Prevailing Market rate for the
subject portion of the applicable Offering Space as determined in Landlord’s
reasonable judgment.

 

(c) The Offering Space (including improvements and personalty, if any) shall be
accepted by Tenant in its condition and as-built configuration existing on the
earlier of the date Tenant takes possession of the Offering Space or as of the
date the term for such Offering Space commences (except that Landlord shall be
responsible for separately demising the applicable

 

F–2

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

Offering Space from the remainder of the floor), unless the Advice specifies any
work to be performed by Landlord in the Offering Space, in which case Landlord
shall perform such work in the Offering Space. If Landlord is delayed delivering
possession of the Offering Space due to the holdover or unlawful possession of
such space by any party, Landlord shall use reasonable efforts to obtain
possession of the space, and the commencement of the term for the Offering Space
shall be postponed until the date Landlord delivers possession of the Offering
Space to Tenant free from occupancy by any party.

 

  1.3 Termination of Right of First Offer.

 

The rights of Tenant hereunder with respect to the Offering Space shall
terminate on the earlier to occur of (i) initial Expiration Date of the Lease;
(ii) with respect to any particular portion of the Offering Space, Tenant’s
failure to exercise its Right of First Offer with respect to such portion within
the five (5) business day period provided in Section 3.1 above; and (iii) with
respect to any particular portion of the Offering Space, the date Landlord would
have provided Tenant an Advice with respect to such portion if Tenant had not
been in violation of one or more of the conditions set forth in Section 1.1
above. Notwithstanding the foregoing, in the event that Landlord provides to
Tenant an Advice and Tenant fails to subsequently exercise its Right of First
Offer in accordance with the terms of this Section 1, and Landlord fails to
enter into a lease with a third party for such portion of the Offering Space
within one hundred eighty (180) days following the expiration of Tenant’s Right
of First Offer with respect to such Offering Space, Tenant’s Right of First
Offer with respect to such Offering Space shall be reinstated, subject to the
terms of this Section 1.3. in addition, in the event that Tenant fails to
exercise its Right of First Offer as to any particular portion of the Offering
Space and Landlord and a third party enter into a lease for such portion of the
Offering Space and such lease expires prior to the date of expiration or earlier
termination of this Lease (as the same may be extended), Tenant’s Right of First
Offer with respect to such Offering Space shall be reinstated, subject to the
terms of this Section 1.3; provided however, that Tenant shall not have the
Right of First Offer with respect to such Offering Space reinstated in the event
that the existing tenant in such portion of the Offering Space enters into an
agreement with Landlord extending or renewing its lease for such portion of the
Offering Space or enters into a new lease for such portion of the Offering Space
whether or not any such renewal or new agreement is based upon an express option
right.

 

  1.4 Offering Amendment.

 

If Tenant exercises its Right of First Offer or Expansion Option, Landlord shall
prepare an amendment (the “Offering Amendment”) adding the Expansion Space or
Offering Space, as applicable, to the Premises on the terms set forth in the
Advice and reflecting the changes in the Base Rent, rentable square footage of
the Premises, Tenant’s Share and other appropriate terms. A copy of the Offering
Amendment shall be sent to Tenant within a reasonable time after Landlord’s
receipt of the Notice of Exercise executed by Tenant, and Tenant shall execute
and return the Offering Amendment to Landlord within a reasonable time
thereafter, but an otherwise valid exercise of the Right of First Offer or
Expansion Option shall be fully effective whether or not the Offering Amendment
is executed.

 

F–3

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

  1.5 Prevailing Market.

 

For purposes of this Additional Provisions Rider, “Prevailing Market” shall mean
the annual rental rate per square foot for space comparable to the Expansion
Space, Offering Space, or the Third Floor Space (as defined below), as
applicable, in the Building and office buildings comparable to the Building in
the Brisbane/South San Francisco area under leases and renewal and expansion
amendments being entered into at or about the time that Prevailing Market is
being determined, giving appropriate consideration to tenant concessions,
brokerage commissions, tenant improvement allowances, existing improvements in
the space in question, and the method of allocating operating expenses and
taxes. Notwithstanding the foregoing, space leased under any of the following
circumstances shall not be considered to be comparable for purposes hereof: (i)
the lease term is for less than the lease term of the Offering Space, as
applicable, (ii) the space is encumbered by the option rights of another tenant,
or (iii) the space has a lack of windows and/or an awkward or unusual shape or
configuration. The foregoing is not intended to be an exclusive list of space
that will not be considered to be comparable.

 

2. THIRD FLOOR OPTION AND RIGHT OF FIRST OFFER

 

  2.1 Grant of Third Floor Option and First Offer Right; Conditions.

 

Tenant shall have an option (the “3rd Floor Expansion Option”) to lease the
space located on the third (3rd) floor of the Building and more particularly
described on Exhibit H attached to the Lease (the “3rd Floor Space”) for a
period commencing on July 1, 2006 and ending on the Expiration Date, provided
that Landlord receives written notice (the “3rd Floor Notice”) from Tenant of
the exercise of its 3rd Floor Expansion Option no earlier than October 1, 2005
and no later than January 31, 2006. Within five (5) business days following
receipt of such 3rd Floor Notice, Landlord shall deliver an Advice to notify
Tenant of the terms under which Landlord is prepared to lease such 3rd Floor
Expansion Space to Tenant, which terms shall reflect the Prevailing Market (as
defined in Section 1 above). Tenant may lease such 3rd Floor Space, in its
entirety only, under such terms by delivering a Notice of Exercise to Landlord
within five (5) business days after the date of the Advice.

 

Beginning on February 1, 2006, if Tenant has not exercised its 3rd Floor
Expansion Option, Tenant shall have an ongoing right of first offer during the
Term (the “3rd Floor First Offer Right”) with respect to such 3rd Floor Space.
Tenant’s 3rd Floor First Offer Right shall be exercised as follows: at any time
after Landlord has determined that all or a portion of the 3rd Floor Space is
available for lease (but prior to leasing such 3rd Floor Space to a third
party), Landlord shall provide an Advice to Tenant setting forth the terms under
which Landlord is prepared to lease such 3rd Floor Space to Tenant for the
remainder of the Term, which terms shall reflect the Prevailing Market rate for
such 3rd Floor Space as reasonably determined by Landlord. Tenant may lease the
3rd Floor Space in its entirety only, under such terms, by delivering written
Notice of Exercise to Landlord within five (5) business days after the date of
the Advice, except that Tenant shall have no such 3rd Floor First Offer Right
and Landlord need not provide Tenant with an Advice, if:

 

(a) Tenant is in default under the Lease beyond any applicable cure periods at
the time that Landlord would otherwise deliver the Advice; or

 

F–4

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

(b) the Premises, or any portion thereof, is sublet (other than pursuant to a
Permitted Transfer, as defined in Section 14 of the Lease or a Transfer to an
Affiliated Party or any other transfer to a successor to Tenant by merger,
purchase, consolidation or reorganization that is consented to by Landlord) at
the time Landlord would otherwise deliver the Advice; or

 

(c) the Lease has been assigned (other than pursuant to a Permitted Transfer, as
defined in Section 14 of the Lease or a Transfer to an Affiliated Party or any
other transfer to a successor to Tenant by merger, purchase, consolidation or
reorganization that is consented to by Landlord) prior to the date Landlord
would otherwise deliver the Advice; or

 

(d) Tenant is not occupying the Premises on the date Landlord would otherwise
deliver the Advice; or

 

(e) the Offering Space is not intended for the exclusive use of Tenant during
the Term.

 

  2.2 Terms for 3rd Floor Space.

 

(a) The term for the 3rd Floor Space shall commence upon the commencement date
stated in the Advice and thereupon such 3rd Floor Space shall be considered a
part of the Premises, provided that all of the terms stated in the Advice shall
govern Tenant’s leasing of the 3rd Floor Space and only to the extent that they
do not conflict with the Advice, the terms and conditions of this Lease shall
apply to the 3rd Floor Space.

 

(b) Tenant shall pay Base Rent and Additional Rent for the 3rd Floor Space in
accordance with the terms and conditions of the Advice, which terms and
conditions shall reflect the Prevailing Market rate for the 3rd Floor Space as
determined in Landlord’s reasonable judgment.

 

(c) The 3rd Floor Space (including improvements and personalty, if any) shall be
accepted by Tenant in its condition and as-built configuration existing on the
earlier of the date Tenant takes possession of the 3rd Floor Space or as of the
date the term for such 3rd Floor Space commences, unless the Advice specifies
any work to be performed by Landlord in the 3rd Floor Space, in which case
Landlord shall perform such work in the 3rd Floor Space. If Landlord is delayed
delivering possession of the 3rd Floor Space due to the holdover or unlawful
possession of such space by any party, Landlord shall use reasonable efforts to
obtain possession of the space, and the commencement of the term for the 3rd
Floor Space shall be postponed until the date Landlord delivers possession of
the 3rd Floor Space to Tenant free from occupancy by any party.

 

  2.3 Termination of 3rd Floor First Offer Right

 

(a) The rights of Tenant hereunder with respect to the 3rd Floor Space shall
terminate on the earlier to occur of (i) initial Expiration Date of the Lease;
(ii) with respect to the 3rd Floor Space, Tenant’s failure to exercise its 3rd
Floor First Offer Right within the five (5) business day period provided in
Section 2.1 above; and (iii) the date Landlord would have provided Tenant an
Advice if Tenant had not been in violation of one or more of the conditions set
forth in Section 2.1 above. Notwithstanding the foregoing, in the event that
Landlord provides to Tenant an Advice and Tenant fails to subsequently exercise
its 3rd Floor First Offer Right in accordance with the terms of this Section 2,
and Landlord fails to enter into a lease with a third party for

 

F–5

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

such 3rd Floor Space within one hundred eighty (180) days following the
expiration of Tenant’s 3rd Floor First Offer Right with respect to such 3rd
Floor Space, Tenant’s 3rd Floor First Offer Right with respect to such 3rd Floor
Space shall be reinstated, subject to the terms of this Section 2.3. In
addition, in the event that Tenant fails to exercise its 3rd Floor First Offer
Right and Landlord and a third party enter into a lease for the 3rd Floor Space
and such lease expires prior to the date of expiration or earlier termination of
this Lease (as the same may be extended), Tenant’s 3rd Floor First Offer Right
with respect to such 3rd Floor Space shall be reinstated, subject to the terms
of this Section 2.3; provided however, that Tenant shall not have the 3rd Floor
First Offer Right with respect to such 3rd Floor Space reinstated in the event
that the existing tenant in such 3rd Floor Space enters into an agreement with
Landlord extending or renewing its lease for such 3rd Floor Space or enters into
a new lease for such 3rd Floor Space whether or not any such renewal or new
agreement is based upon an express option right.

 

  2.4 3rd Floor Amendment.

 

If Tenant exercises its 3rd Floor First Offer Right, Landlord shall prepare an
amendment (the “3rd Floor Amendment”) adding the 3rd Floor Space to the Premises
on the terms set forth in the Advice and reflecting the changes in the Base
Rent, rentable square footage of the Premises, Tenant’s Share and other
appropriate terms. A copy of the 3rd Floor Amendment shall be sent to Tenant
within a reasonable time after Landlord’s receipt of the Notice of Exercise
executed by Tenant, and Tenant shall execute and return the 3rd Floor Amendment
to Landlord within a reasonable time thereafter, but an otherwise valid exercise
of the 3rd Floor First Offer Right shall be fully effective whether or not the
3rd Floor Amendment is executed.

 

3. MONUMENT SIGNAGE

 

During the initial Term and any extension thereof and provided that Tenant
leases and occupies at least 28,278 rentable square feet (or the original
Premises leased hereunder, if such original Premises is remeasured pursuant to
Section 1 of the Lease) in the Building, Landlord, at Landlord’s sole cost, but
subject to governmental approval, shall place Tenant’s name on a Building
monument sign that Landlord will be constructing at the Project (the “Monument
Sign”). The design, size and color of the signage with Tenant’s name to be
included on the Monument Sign shall be subject to the reasonable approval of
Landlord and all applicable governmental authorities, and Landlord shall have
the right to require that all names on the Monument Sign be of the same size and
style. Tenant’s name on such Monument Sign shall be consistent in size and
prominence with other names installed on such Monument Sign. Tenant’s right to
place its name on the Monument Sign, and the location of Tenant’s name on the
Monument Sign, shall be subject to the existing rights of existing tenants in
the Building/Project, and the location of Tenant’s name on the Monument Sign
shall be further subject to Landlord’s reasonable approval. Although the
Monument Sign will be maintained by Landlord, Tenant shall pay its proportionate
share (based upon the number of tenants represented on the Monument Sign) of the
cost of any maintenance and repair associated with the Monument Sign.

 

Upon expiration or earlier termination of the Lease or Tenant’s right to
possession of the Premises, or if Tenant leases and occupies less than 28,278
rentable square feet (or the original Premises leased hereunder, if such
original Premises is remeasured pursuant to Section 1 of the Lease) in the
Building, Landlord, at Tenant’s cost, payable as Rent within thirty (30) days
after

 

F–6

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

demand therefor, shall have the right to remove Tenant’s signage from the
Monument Sign and restore the Monument Sign to the condition it was in prior to
installation of Tenant’s signage thereon, ordinary wear and tear excepted.

 

The rights provided in this Section 4 shall be non-transferable (except in
connection with a Permitted Transfer or a Transfer to an Affiliated Party or any
other transfer to a successor to Tenant by merger, purchase, consolidation or
reorganization that is consented to by Landlord) unless otherwise agreed by
Landlord in writing.

 

F–7

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EXHIBIT G

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF MARCH 7, 2005

BETWEEN

2000 SIERRA POINT, LLC, AS LANDLORD,

AND

TERCICA, INC., AS TENANT (“LEASE”)

 

COMMON AREA WORK

 

(1) Installation of new artwork in lobby of Building;

 

(2) Installation of new carpeting in seating area and lobby area of Building;

 

(3) Repainting of ceilings in elevator lobby and touch up paint throughout
lobby;

 

(4) Installation of new pots and plants in lobby; and

 

(5) New signage program for building and site.

 

G–1

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EXHIBIT H

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF MARCH 7, 2005

BETWEEN

2000 SIERRA POINT, LLC, AS LANDLORD,

AND

TERCICA, INC., AS TENANT (“LEASE”)

 

3RD FLOOR SPACE

 

[SEE ATTACHED]

 

LOGO [g94802b_94802600.jpg]

 

H–1

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EXHIBIT I

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF MARCH 7, 2005

BETWEEN

2000 SIERRA POINT, LLC, AS LANDLORD,

AND

TERCICA, INC., AS TENANT (“LEASE”)

 

CURRENT CONFERENCE ROOM RATES

 

Rental Rate for Conference Rooms on the Second floor:

 

Conference Room

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

   Cost

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

  

Capacity

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

Pacific Room

   $300 a day   

120 Theatre

100 Classroom

60 Banquet

Sierra Room

   $200 a day    24

Peninsula Room

   $200 a day    16

Harbor Room

   $200 a day    16

Marina Room

   $100 a day    10

Bay Room

   $100 a day    10

 

H–1

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EXHIBIT J

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF MARCH 7, 2005

BETWEEN

2000 SIERRA POINT, LLC, AS LANDLORD,

AND

TERCICA, INC., AS TENANT (“LEASE”)

 

OCCUPIED FOURTH FLOOR PREMISES

 

[SEE ATTACHED]

 

LOGO [g9480269_500.jpg]

 

I–2