Exhibit 10.10


 


TRIPLE NET
SPACE LEASE


 


between


 


PACIFIC
SHORES INVESTORS LLC,


 


as


 


LESSOR


 


and


 


PDL
BIOPHARMA, INC.,


a Delaware
corporation


 


as


 


LESSEE


 


for


 


PREMISES


 


at


 


Pacific
Shores Center


 


BUILDING 9


1400 SEAPORT BOULEVARD


REDWOOD CITY, CALIFORNIA 94063


 

















 


TABLE OF CONTENTS


 


 


	
  ARTICLE I PARTIES  1

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 1.01  Parties

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II PREMISES

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.01  Demise
  of Premises

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.02  Common
  Area

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.03  Parking

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.04  Athletic
  Facility

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III TERM

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.01  Lease
  Term

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.02  Acceleration
  of Commencement Date

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.03  Option
  to Extend

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV RENT: TRIPLE NET LEASE

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.01  Base
  Rent

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.02  Rent
  Adjustment

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.03  [Intentionally
  Deleted]

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.04  Absolute
  Triple Net Lease

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.05  Additional
  Rent

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.06  Letter
  of Credit

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.07  Operating
  Expenses

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.08  Lessee’s
  Right to Review Supporting Data

  	
  13

  



 


i

















 


	
  ARTICLE V USE

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.01  Permitted
  Use and Limitations on Use

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.02  Compliance
  with Laws

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.03  Condition
  of Premises at Commencement Date

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.04  [Intentionally
  Deleted]

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.05  Building
  Security

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.06  Rules and
  Regulations

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI MAINTENANCE, REPAIRS AND ALTERATIONS

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.01  Maintenance
  of Premises and Building

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.02  Maintenance
  of Project Common Areas

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.03  Alterations,
  Additions and Improvements

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.04  Covenant
  Against Liens

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII INSURANCE

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.01  Property/Rental
  Insurance for Premises

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.02  Property
  Insurance for Fixtures and Inventory

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.03  Lessor’s
  Liability Insurance

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.04  Liability
  Insurance Carried by Lessee

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.05  Proof
  of Insurance

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.06  Mutual
  Waiver of Claims and Subrogation Rights

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.07  Indemnification
  and Exculpation

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.08  Lessor
  as Party Defendant

  	
  23

  



 


ii

















 


	
  ARTICLE VIII DAMAGE OR DESTRUCTION

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.01  Destruction
  of the Premises

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.02  Waiver
  of Civil Code Remedies

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.03  Damages
  Incurred during Repair

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

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

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX REAL PROPERTY TAXES

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.01  Payment
  of Taxes

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.02  Pro
  Ration for Partial Years

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.03  Personal
  Property Taxes

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.04  Right
  to Contest Real Property Taxes

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X UTILITIES

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 10.01  Lessee to Pay

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI ASSIGNMENT AND SUBLETTING

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.01  Lessor’s Consent Required

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.02  Lessee Affiliates

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.03  No Release of Lessee

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.04  Excess Rent

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.05  Information to be Provided

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.06  Lessor’s Recapture Rights

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII DEFAULTS; REMEDIES

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 12.01  Defaults

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 12.02  Remedies

  	
  32

  



 


iii

















 


	
   

  	
  Section 12.03  Default by Lessor

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 12.04  Late Charges

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

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

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII CONDEMNATION OF PREMISES

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.01  Total Condemnation

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.02  Partial Condemnation

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.03  Award to Lessee

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIV ENTRY BY LESSOR

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 14.01  Entry by Lessor Permitted

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XV ESTOPPEL CERTIFICATE

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 15.01  Estoppel Certificate

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVI LESSOR’S LIABILITY

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 16.01  Limitations on Lessor’s Liability

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVII GENERAL PROVISIONS

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.01  Severability

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.02  Agreed Rate Interest on Past Due Obligations

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.03  Time of Essence

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.04  Additional Rent

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.05  Incorporation of Prior Agreements, Amendments and Exhibits

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.06  Notices

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.07  Waivers

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.08  Recording

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.09  Surrender of Possession; Holding Over

  	
  39

  



 


iv

















 


	
   

  	
  Section 17.10 Cumulative Remedies

  	
   

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.11 Covenants and Conditions

  	
   

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.12 Binding Effect; Choice of Law

  	
   

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.13 Lease to be Subordinate

  	
   

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.14 Attorneys’ Fees

  	
   

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.15 Signs

  	
   

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.16 Merger

  	
   

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.17 Quiet Possession

  	
   

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.18 Easements

  	
   

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.19 Authority

  	
   

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.20 Force Majeure Delays

  	
   

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.21 Hazardous Materials

  	
   

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.22 Modifications Required by Lessor’s Lender

  	
   

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.23 Brokers

  	
   

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.24 Acknowledgment of Notices

  	
   

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.25 Right of First Offer

  	
   

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.26 Right of First Refusal

  	
   

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.27 Lessee’s Expansion Right

  	
   

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.28 Notification of Intention to Market

  	
   

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.29 List of Lease Expiration Dates

  	
   

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.30 [Intentionally omitted.]

  	
   

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.31 Condition Subsequent

  	
   

  	
   

  	
  52 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.32 List of Exhibits

  	
   

  	
   

  	
  53

  



 


v














 


ARTICLE I


PARTIES


 


Section 1.01  Parties


 


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


 


ARTICLE II


PREMISES


 


Section 2.01  Demise of Premises


 


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


 


Section 2.02  Common Area


 


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


 


1

















 


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


 


Section 2.03  Parking


 


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


 


Section 2.04  Athletic Facility


 


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


 


2

















 


ARTICLE III


TERM


 


Section 3.01  Lease Term


 


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


 


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


 


	
  Time Period

  	
   

  	
  Monthly Base Rent

  	
   

  
	
  1/1/07-12/31/07

  	
   

  	
  $

  	
  466,974.75

  	
   

  
	
  1/1/08-12/31/08

  	
   

  	
  $

  	
  483,318.86

  	
   

  
	
  1/1/09-12/31/09

  	
   

  	
  $

  	
  500,235.02

  	
   

  
	
  1/1/10-12/31/10

  	
   

  	
  $

  	
  517,743.24

  	
   

  
	
  1/1/11-12/31/11

  	
   

  	
  $

  	
  535,864.25

  	
   

  
	
  1/1/12-12/31/12

  	
   

  	
  $

  	
  554,619.49

  	
   

  
	
  1/1/13-4/29/13

  	
   

  	
  $

  	
  574,031.17

  	
   

  



 


Section 3.03. Option to
Extend.


 


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


 


3

















 


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


 


(c) Determination of
Fair Market Rent.


 


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


 


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


 


4

















 


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


 


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


 


ARTICLE IV


RENT: TRIPLE NET LEASE


 


Section 4.01  Base Rent


 


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


 


Section 4.02  Rent Adjustment


 


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


 


5

















 


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


 


Section 4.03  Intentionally Deleted


 


Section 4.04  Absolute Triple Net Lease


 


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


 


Section 4.05  Additional Rent


 


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


 


Section 4.06  Letter of Credit


 


(a) Deposit of
Letter of Credit Security


 


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


 


6

















 


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


 


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


 


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


 


7














 


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


 


(c) Replacement
Letter of Credit Security


 


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


 


(d) Transfer of
Beneficiary


 


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


 


(e) Return of the
Letter of Credit Security


 


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


 


8

















 


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


 


(f) Acknowledgment
of Parties


 


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


 


(g) Scheduled
Reduction in Letter of Credit Security.


 


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


 


9

















 


Section 4.07  Operating Expenses


 


(a) Definition


 


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


 


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


 


10

















 


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


 


(b) Payment


 


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


 


(c) Lessee’s Share


 


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


 


(d) Exclusions


 


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


 


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


 


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


 


11

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(x) any interest or
late fee resulting from any failure of Lessor to pay any item of Operating
Expense when it would have been due without such interest or late fee,
provided, however, that nothing herein shall be deemed from precluding Lessor
from passing through to Lessee as an Operating


 


Expense any cost associated with
paying Operating Expenses on any permitted installment or other periodic basis,
even if such payment basis results in an increase in the Operating Expense in
question,


 


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


 


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


 


12

















 


Section 4.08  Lessee’s Right to Review Supporting Data


 


(a) Exercise of
Right by Lessee


 


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


 


(b) Procedures for
Review


 


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


 


(c) Finding of Error


 


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


 


13














 


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


 


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


 


ARTICLE V


USE


 


Section 5.01  Permitted Use and Limitations on Use


 


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


 


14

















 


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


 


Section 5.02  Compliance with Laws


 


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


 


15

















 


Section 5.03  Condition of Premises at Commencement
Date


 


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


 


Section 5.04  Intentionally Deleted


 


Section 5.05  Building Security


 


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


 


Section 5.06  Rules and Regulations


 


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


 


16

















 


ARTICLE VI


MAINTENANCE, REPAIRS AND
ALTERATIONS


 


Section 6.01  Maintenance of Premises and Building


 


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


 


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


 


17

















 


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


 


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


 


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


 


Section 6.02  Maintenance of Project Common Areas


 


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


 


18














 


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


 


Section 6.03  Alterations, Additions and Improvements


 


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


 


19

















 


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


 


Section 6.04  Covenant Against Liens


 


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


 


20

















 


ARTICLE VII


INSURANCE


 


Section 7.01  Property/Rental Insurance for Premises


 


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


 


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


 


Section 7.02  Property Insurance for Fixtures and
Inventory


 


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


 


Section 7.03  Lessor’s Liability Insurance


 


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


 


21

















 


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


 


Section 7.04  Liability Insurance Carried by Lessee


 


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


 


Section 7.05  Proof of Insurance


 


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


 


Section 7.06  Mutual Waiver of Claims and Subrogation
Rights


 


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


 


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


 


Section 7.07  Indemnification and Exculpation


 


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


 


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


 


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


 


Section 7.08  Lessor as Party Defendant


 


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


 


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ARTICLE VIII


DAMAGE OR DESTRUCTION


 


Section 8.01  Destruction of the Premises


 


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


 


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


 


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


 


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


 


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


 


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


 


Section 8.02  Waiver of Civil Code Remedies


 


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


 


Section 8.03  Damages Incurred during Repair


 


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


 


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


 


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


 


ARTICLE IX


REAL PROPERTY TAXES


 


Section 9.01  Payment of Taxes


 


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


 


25

















 


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


 


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


 


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


 


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


 


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


 


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Section 9.02  Pro Ration for Partial Years


 


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


 


Section 9.03  Personal Property Taxes


 


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


 


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


 


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


 


Section 9.04  Right to Contest Real Property Taxes


 


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


 


ARTICLE X


UTILITIES


 


Section 10.01  Lessee to Pay


 


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


 


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


 


ARTICLE XI


ASSIGNMENT AND SUBLETTING


 


Section 11.01  Lessor’s Consent Required


 


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


 


Section 11.02  Lessee Affiliates


 


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


 


28














 


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


 


Section 11.03  No Release of Lessee


 


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


 


Section 11.04  Excess Rent


 


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


 


Section 11.05  Information to be Provided


 


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


 


Section 11.06  Lessor’s Recapture Rights


 


(a) Lessor’s
Recapture Rights


 


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


 


29

















 


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


 


(b) Consequences of
Recapture


 


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


 


30

















 


ARTICLE XII


DEFAULTS; REMEDIES


 


Section 12.01  Defaults


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


Section 12.02  Remedies


 


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


 


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


 


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


 


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


 


Section 12.03  Default by Lessor


 


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


 


Section 12.04  Late Charges


 


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


 


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


 


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


 


ARTICLE XIII


CONDEMNATION OF PREMISES.


 


Section 13.01  Total Condemnation


 


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


 


Section 13.02  Partial Condemnation


 


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


 


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


 


Section 13.03  Award to Lessee


 


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


 


ARTICLE XIV


ENTRY BY LESSOR


 


Section 14.01  Entry by Lessor Permitted


 


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


 


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ARTICLE XV


ESTOPPEL CERTIFICATE


 


Section 15.01  Estoppel Certificate


 


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


 


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


 


ARTICLE XVI


LESSOR’S LIABILITY


 


Section 16.01  Limitations on Lessor’s Liability


 


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


 


36














 


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


 


ARTICLE XVII


GENERAL PROVISIONS


 


Section 17.01  Severability


 


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


 


Section 17.02  Agreed Rate Interest on Past Due
Obligations


 


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


 


Section 17.03  Time of Essence


 


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


 


Section 17.04  Additional Rent


 


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


 


Section 17.05  Incorporation of Prior Agreements,
Amendments and Exhibits


 


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


 


37

















 


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


 


Section 17.06  Notices


 


(a) Written Notice


 


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


 


(b) Methods of Delivery


 


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


 


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


 


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


 


(c) Refused,
Unclaimed or Undeliverable Notices


 


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


 


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Section 17.07  Waivers


 


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


 


Section 17.08  Recording


 


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


 


Section 17.09  Surrender of Possession; Holding Over


 


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


 


39

















 


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


 


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


 


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


 


40

















 


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


 


Section 17.10  Cumulative Remedies


 


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


 


Section 17.11  Covenants and Conditions


 


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


 


Section 17.12  Binding Effect; Choice of Law


 


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


 


Section 17.13  Lease to be Subordinate


 


Lessee agrees that this
Lease is and shall be, at all times, subject and subordinate to the lien of any
mortgage, deed of trust or other encumbrances which Lessor may create against


 


41

















 


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


 


Section 17.14  Attorneys’ Fees


 


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


 


Section 17.15  Signs


 


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


 


42

















 


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


 


Section 17.16  Merger


 


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


 


Section 17.17  Quiet Possession


 


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


 


Section 17.18  Easements


 


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


 


Section 17.19  Authority


 


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


 


Section 17.20  Force Majeure Delays


 


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


 


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Section 17.21  Hazardous Materials


 


(a) Definition of
Hazardous Materials and Environmental Laws


 


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


 


(b) Lessor’s
Representations and Disclosures


 


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


 


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


 


44

















 


(c) Use of Hazardous
Materials


 


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


 


(d) Lessee’s
Environmental Indemnity


 


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


 


(e) Lessee’s
Obligation to Promptly Remediate


 


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


 


(f) Notification


 


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


 


45

















 


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


 


(g) Testing.


 


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


 


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


 


46














 


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


 


(i) Survival.


 


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


 


Section 17.22  Modifications Required by Lessor’s Lender


 


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


 


Section 17.23  Brokers


 


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


 


47

















 


Section 17.24  Acknowledgment of Notices


 


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


 


Section 17.25  Right of First Offer.


 


(a) Grant.


 


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


 


(b) Term.


 


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


 


(c) Covenants of
Lessor.


 


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


 


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


 


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


 


48

















 


(e) Conditions to
Right of First Offer.


 


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


 


(f) Terms for Right
of First Offer.


 


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


 


(g) New Lease.


 


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


 


49

















 


Section 17.26 Right of
First Refusal.


 


(a) Grant.


 


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


 


(b) Covenants of
Lessor.


 


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


 


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


 


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


 


(d) Conditions to
Right of First Refusal.


 


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


 


50

















 


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


 


(e) Terms for Right
of First Refusal.


 


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


 


(f) New Lease.


 


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


 


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


 


51

















 


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


 


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


 


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


 


Section 17.30
[Intentionally omitted.]


 


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


 


52

















 


Section 17.32  List of Exhibits


 


	
  EXHIBIT A:

  	
  Premises

  
	
   

  	
   

  
	
  EXHIBIT B:

  	
  Memorandum of Commencement of Lease Term and Schedule of Base Rent

  
	
   

  	
   

  
	
  EXHIBIT C

  	
  SNDA

  
	
   

  	
   

  
	
  EXHIBIT D

  	
  Signage Exhibit

  
	
   

  	
   

  
	
  EXHIBIT E

  	
  Intentionally Deleted

  
	
   

  	
   

  
	
  EXHIBIT F

  	
  Hazardous Materials Disclosure

  
	
   

  	
   

  
	
  EXHIBIT G:

  	
  Notice to Tenants

  
	
   

  	
   

  
	
  EXHIBIT H:

  	
  Notice to Tenants

  
	
   

  	
   

  
	
  EXHIBIT I:

  	
  Rules and Regulations

  
	
   

  	
   

  
	
  SCHEDULE 1

  	
  License Agreement

  
	
   

  	
   

  
	
  SCHEDULE 2

  	
  Intentionally Deleted

  
	
   

  	
   

  
	
  SCHEDULE 3

  	
  Removal Obligations Standard

  
	
   

  	
   

  
	
  SCHEDULE 4

  	
  Permitted Hazardous Materials

  
	
   

  	
   

  
	
  SCHEDULE 5

  	
  Plans, Licenses and Permits

  
	
   

  	
   

  
	
  SCHEDULE 6

  	
  Financial Tests

  



 


53

















 


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


 


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


 


(Signatures continued on
next page)


 


54

















 


	
  LESSOR:

  	
  ADDRESS:

  
	
   

  	
   

  
	
  PACIFIC SHORES INVESTORS, LLC,

  	
  c/o Jay Paul Company

  
	
  a Delaware limited liability company

  	
  350 California Street, Suite 1905

  
	
   

  	
   

  	
  San Francisco, CA 94104-1432

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Pacific Shores Mezzanine, LLC,

  
	
   

  	
  a Delaware limited liability company,

  
	
   

  	
  its sole member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Pacific Shores Junior Mezz, LLC,

  
	
   

  	
   

  	
  a Delaware limited liability company  

  
	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Pacific Shores Junior Mezz Managers, LLC,

  
	
   

  	
   

  	
   

  	
  a Delaware limited liability company,

  
	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Pacific Shores Development, LLC,

  
	
   

  	
   

  	
   

  	
   

  	
  a Delaware limited liability company,  

  
	
   

  	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  TECHNOLOGY LAND LLC,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  a California limited liability company,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Operating Member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Jay Paul

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jay Paul, Sole Managing Member

  
									



 


 


	
  LESSEE:

  	
   

  	
  ADDRESS:

  
	
   

  	
   

  	
   

  
	
  PDL BIOPHARMA, INC.,

  	
   

  	
  (Before Commencement Date)

  
	
  a Delaware corporation

  	
   

  	
   

  
	
   

  	
   

  	
  34801 Campus Drive

  
	
  By:

  	
  /s/ Mark McDade

  	
   

  	
  Freemont, California 94555

  
	
   

  	
  Mark McDade

  	
   

  	
  Attention: Ms. Laurie Torres, VP Human Resources

  
	
   

  	
  (Type or Print Name)

  	
   

  	
   

  
	
  Its:

  	
  Chief Executive Officer

  	
   

  	
  (After Commencement Date)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Pacific Shores Center

  
	
   

  	
   

  	
  Building 9

  
	
   

  	
   

  	
  1400 Seaport Boulevard

  
	
   

  	
   

  	
  Redwood City, CA 94063

  



 


55

















 


	
   

  	
   

  	
  With a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Silicon Valley Law Group

  
	
   

  	
   

  	
  25 Metro Drive, Suite 600

  
	
   

  	
   

  	
  San Jose, California 95110

  
	
   

  	
   

  	
  Attn: Lucy A. Lofrumento, Esq.

  



 


56

















 


EXHIBIT A


to


PACIFIC
SHORES INVESTORS, LLC


LEASE


to


PDL BIOPHARMA, INC.,


a Delaware corporation


LESSEE


for


PREMISES


at


Pacific Shores Center


Building 9


Redwood City, California
94063


 


REAL PROPERTY LEGAL
DESCRIPTION,


SITE PLAN AND PREMISES FLOOR
PLAN


 


(See Building Description
and Depiction of Property attached)


 


A-1

















 


EXHIBIT A


 


LEGAL DESCRIPTION


 


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


 


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


 


A-2

















 


Site Plan


 





 














 


EXHIBIT B


to


PACIFIC
SHORES INVESTORS, LLC


LEASE


to


PDL BIOPHARMA, INC.,


a Delaware corporation


as


LESSEE


for


PREMISES


at


Pacific Shores Center


Building 9


Redwood City, California
94063


 


MEMORANDUM OF


COMMENCEMENT OF LEASE TERM


 


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


 


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


 


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


 


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


 


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


 


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


 


B-1

















 


	
  “Lessor”

  	
   

  
	
   

  	
   

  
	
  PACIFIC SHORES INVESTORS, LLC

  	
   

  
	
  a Delaware limited liability company

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Pacific Shores Mezzanine, LLC,

  
	
   

  	
  a Delaware limited liability company,

  
	
   

  	
  its sole member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Pacific Shores Junior Mezz, LLC,

  
	
   

  	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Pacific Shores Junior Mezz Managers, LLC,

  
	
   

  	
   

  	
   

  	
  a Delaware limited liability company,

  
	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Pacific Shores Development, LLC,

  
	
   

  	
   

  	
   

  	
   

  	
  a Delaware limited liability company,

  
	
   

  	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  TECHNOLOGY LAND LLC,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  a California limited liability company,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Operating Member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jay Paul, Sole Managing Member

  
									



 


	
  “Lessee”

  	
   

  
	
   

  	
   

  
	
  PDL BIOPHARMA, INC.,

  	
   

  
	
  a Delaware corporation  

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  (Type or Print Name)

  	
   

  
	
   

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  



 


B-2

















 


EXHIBIT C


to


PACIFIC
SHORES INVESTORS, LLC


LEASE


to


PDL BIOPHARMA, INC.,


a Delaware corporation


as


LESSEE


for


PREMISES


at


Pacific Shores Center


Building 9


Redwood City, California
94063


 


SUBORDINATION,
NONDISTURBANCE


AND
ATTORNMENT AGREEMENT


 


 


	
  NOTICE:

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

  



 


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


 


RECITALS


 


	
  A.

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

  
	
   

  	
   

  
	
  B.

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

  
	
   

  	
   

  
	
  C.

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

  



 


C-1

















 


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


 


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


 


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


 


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


 


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


 


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


 


C-2

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 




	
  If to Mortgagee:

  	
   

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

  c/o Wachovia Securities, Commercial Real Estate Services

  8739 Research Drive-URP4

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

  Attn: Alex Aguilar Fax: 704-715-0036

  






 


C-3

















 




	
  with a copy to:

  	
   

  	
  Alston & Bird LLP

  101 South Tryon Street, Suite 4000

  Charlotte, NC 28280-4000

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

  Fax: 704-444-1776

  
	
   

  	
   

  	
   

  
	
  If to Lessee:

  	
   

  	
  PDL BioPharma, Inc.

  34801 Campus Drive

  Fremont, California 94555

  Attention: Laurie Torres, VP Human Resources

  Facsimile: (510) 574-1661

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Silicon Valley Law Group

  25 Metro Drive, Suite 600

  San Jose, California 95110

  Attention: Lucy Lofrumento, Esq.

  Facsimile: (408) 573-5701

  






 


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


 


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


 


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


 


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


 


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


 


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


 


C-4














 


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


 


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


 


	
   

  	
  PDL BIOPHARMA, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  By:

  	
  WACHOVIA BANK NATIONAL  ASSOCIATION, solely in its capacity as  Master Servicer

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					



 


C-5

















 


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


 


LESSOR:


 


PACIFIC SHORES INVESTORS,
LLC,


a Delaware limited
liability company


 


 


	
  By:

  	
  Pacific Shores
  Mezzanine, LLC,

  
	
   

  	
  a Delaware
  limited liability company,

  
	
   

  	
  its sole member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Pacific Shores
  Junior Mezz, LLC,

  
	
   

  	
   

  	
  a Delaware
  limited liability company

  
	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Pacific Shores
  Junior Mezz Managers, LLC,

  
	
   

  	
   

  	
   

  	
  a Delaware
  limited liability company,

  
	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Pacific Shores
  Development, LLC,

  
	
   

  	
   

  	
   

  	
   

  	
  a Delaware
  limited liability company,

  
	
   

  	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  TECHNOLOGY LAND
  LLC,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  a California
  limited liability company,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Operating Member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jay Paul, Sole
  Managing Member

  



 


C-6

















 


ACKNOWLEDGMENTS


 


	
  STATE OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  ) ss.:

  	
   

  
	
  COUNTY OF
                      

  	
  )

  	
   

  



 


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


 


WITNESS my hand and official seal.


 


Notary Public


 


	
  STATE OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  ) ss.:

  	
   

  
	
  COUNTY OF
                      

  	
  )

  	
   

  



 


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


 


WITNESS my hand and official seal.


 


Notary Public


 


C-7

















 


	
  STATE OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  ) ss.:

  	
   

  
	
  COUNTY OF
                      

  	
  )

  	
   

  



 


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


 


WITNESS my hand and official seal.


 


Notary Public


 


	
  STATE OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  ) ss.:

  	
   

  
	
  COUNTY OF
                      

  	
  )

  	
   

  



 


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


 


WITNESS my hand and official seal.


 


Notary Public


 


C-8

















 


EXHIBIT D


TO


PACIFIC SHORES INVESTORS, LLC


LEASE


TO


PDL BIOPHARMA, INC.


as


LESSEE


For


Pacific Shores Center


Building 9


1400 Seaport Boulevard


Redwood City, California 94063


 


SIGNAGE EXHIBIT


 


SINGLE TENANT BUILDINGS


 


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


 


D-1

















 


EXHIBIT E


 


To


 


PACIFIC SHORES INVESTORS, LLC.


 


LEASE


 


to


 


PDL BIOPHARMA, INC.,


 


For


 


PREMISES


 


at


 


1400 Seaport Drive


Building 9


Redwood City, California


 


INTENTIONALLY DELETED


 


E-1

















 


EXHIBIT F


to


PACIFIC SHORES INVESTORS, LLC


LEASE


to


PDL BIOPHARMA, INC.,


 


as


LESSEE


for


PREMISES


at


Pacific Shores Center


Building 9


Redwood City, California 94063


 


HAZARDOUS MATERIALS DISCLOSURE


 


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


 


 


	
   

  	
  LESSEE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PDL BIOPHARMA, INC.,

  a Delaware corporation

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Type or print name)

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  (Type or print name)

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
				



 


F-1

















 


EXHIBIT G


to


PACIFIC SHORES INVESTORS, LLC


LEASE


to


PDL BIOPHARMA, INC.,


a Delaware corporation


as


LESSEE


for


PREMISES


at


Pacific Shores Center


Building 9


Redwood City, California 94063


 


NOTICE TO TENANTS AND TRANSFEREES OF


CURRENT OR FUTURE USES OF ADJACENT PORT PROPERTY


 


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


 


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


 


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


 


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


 


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


 


G-1

















 


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


 


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


 


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


 


G-2

















 


FIGURE ONE TO EXHIBIT G


to


PACIFIC SHORES INVESTORS, LLC


LEASE


to


PDL BIOPHARMA, INC.,


a Delaware corporation


as


LESSEE


for


PREMISES


at


Pacific Shores Center


Building 9


Redwood City, California 94063


 


G-3














 





 


G-4

















 


SCHEDULE ONE TO EXHIBIT G


to


PACIFIC SHORES INVESTORS, LLC


LEASE


to


PDL BIOPHARMA, INC.,


a Delaware corporation


as


LESSEE


for


PREMISES


at


Pacific Shores Center


Building 9


Redwood City, California 94063


 


G-5

















 


DEFINITION OF “BEST AVAILABLE MANAGEMENT PRACTICES”


(Exchange Parcel and New Road Access)


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


G-6

















 


EXHIBIT H


to


PACIFIC SHORES INVESTORS, LLC


LEASE


to


PDL BIOPHARMA, INC.,


a Delaware corporation


as


LESSEE


for


PREMISES


at


Pacific Shores Center


Building 9


Redwood City, California 94063


 


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


TRANSFEREES REGARDING CURRENT OR FUTURE USES OF
ADJACENT RMC


LONESTAR AND PORT PROPERTY


 


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


 


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


 


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


 


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


 


H-1














 


EXHIBIT I


to


PACIFIC SHORES INVESTORS, LLC


LEASE


to


PDL BIOPHARMA, INC.,


a Delaware corporation


as


LESSEE


for


PREMISES


at


Pacific Shores Center


Building 9


Redwood City, California 94063


 


RULES AND REGULATIONS


 


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


 


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


 


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


 


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


 


I-1

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


I-2

















 


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


 


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


 


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


 


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


 


I-3

















 


SCHEDULE 1


to


PACIFIC SHORES INVESTORS, LLC


LEASE


to


PDL BIOPHARMA, INC.,


a Delaware corporation


as


LESSEE


for


PREMISES


at


Pacific Shores Center


Building 9


Redwood City, California 94063


 


PACIFIC SHORES CENTER


COMMON AREA LICENSE AGREEMENT


 


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


 


R E C I T A L S


 


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


 


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


 


1

















 


AGREEMENT


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


2

















 


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


 


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


 


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


 


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


 


13. List
of Exhibits.


 


Exhibit A
– Event Location


 


3

















 


	
  By:

  	
  Pacific Shores
  Mezzanine, LLC,

  
	
   

  	
  a Delaware
  limited liability company,

  
	
   

  	
  its sole member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Pacific Shores
  Junior Mezz, LLC,

  
	
   

  	
   

  	
  a Delaware
  limited liability company

  
	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Pacific Shores
  Junior Mezz Managers, LLC,

  
	
   

  	
   

  	
   

  	
  a Delaware
  limited liability company,

  
	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Pacific Shores
  Development, LLC,

  
	
   

  	
   

  	
   

  	
   

  	
  a Delaware
  limited liability company,

  
	
   

  	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  TECHNOLOGY LAND
  LLC,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  a California
  limited liability company,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Operating Member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jay Paul, Sole
  Managing Member

  



 


 


	
  PDL BIOPHARMA, INC.

  
	
  a Delaware corporation

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  



 


4

















 


SCHEDULE 2


to


PACIFIC SHORES INVESTORS, LLC


LEASE


to


PDL BIOPHARMA, INC.,


a Delaware corporation


as


LESSEE


for


PREMISES


at


Pacific Shores Center


Building 9


Redwood City, California 94063


 


[Intentionally Deleted]


 

















 


SCHEDULE 3


to


PACIFIC SHORES INVESTORS, LLC


LEASE


to


PDL BIOPHARMA, INC.,


a Delaware corporation


as


LESSEE


for


PREMISES


at


Pacific Shores Center


Building 9


Redwood City, California 94063


 


REMOVAL OBLIGATIONS SCHEDULE


 

















 


SCHEDULE 4


to


PACIFIC SHORES INVESTORS, LLC


LEASE


to


PDL BIOPHARMA, INC.,


a Delaware corporation


as


LESSEE


for


PREMISES


at


Pacific Shores Center


Building 9


Redwood City, California 94063


 


PERMITTED HAZARDOUS MATERIALS


 

















 


SCHEDULE 5


to


PACIFIC SHORES INVESTORS, LLC


LEASE


to


PDL BIOPHARMA, INC.,


a Delaware corporation


as


LESSEE


for


PREMISES


at


 


Pacific Shores Center


Building 9


Redwood City, California 94063


 


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


 


	
  Plans

  	
   

  	
  Inspecting Authority

  	
   

  	
  Frequency

  	
   

  
	
  Injury Illness Prevention Plan

  	
   

  	
  Cal OSHA

  	
   

  	
  Anytime

  	
   

  
	
  Biosafety Plan

  	
   

  	
  “

  	
   

  	
  “

  	
   

  
	
  Radiation Safety Plan

  	
   

  	
  “

  	
   

  	
  “

  	
   

  
	
  Chemical Hygiene Plan

  	
   

  	
  “

  	
   

  	
  “

  	
   

  
	
  Hazard Communication Plan

  	
   

  	
  “

  	
   

  	
  “

  	
   

  
	
  Emergency Action Plan

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hazardous Materials Business Plan

  	
   

  	
  Fremont Fire

  	
   

  	
  Annual

  	
   

  
	
  AAALAC Accreditation program

  	
   

  	
  AAALAC

  	
   

  	
  Complaint

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Licenses

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CA – Business License

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DHS - Radiation Use License

  	
   

  	
  DHS

  	
   

  	
  Anytime

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Permits

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fremont City - Hazardous Materials Permits A/B/D

  	
   

  	
  Fremont Fire

  	
   

  	
  Annual

  	
   

  
	
  Alameda County - Medical waste Permits A/B/D

  	
   

  	
  Ala. County

  	
   

  	
  Annual

  	
   

  
	
  BAAQMD – Emergency Generator Permits A/B/D

  	
   

  	
  AQMD

  	
   

  	
  Complaint

  	
   

  
	
  DEA – Controlled Substances

  	
   

  	
  DEA

  	
   

  	
  Violation

  	
   

  



 

















 


SCHEDULE 6


to


PACIFIC SHORES INVESTORS, LLC


LEASE


to


PDL BIOPHARMA, INC.,


a Delaware corporation


as


LESSEE


for


PREMISES


at


Pacific Shores Center


Building 9


Redwood City, California 94063


 


FINANCIAL TESTS


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


	
   

  	
   

  	
  Level 1

  	
   

  	
  Level 2

  	
   

  	
  Level 3

  
	
  Revenue

  	
   

  	
  At least $100
  million in

  each of the last four

  quarters

  	
   

  	
  At least $150
  million in

  each of the last four

  quarters

  	
   

  	
  At least $150
  million in

  each of the last four

  quarters

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EBITDA
  ratio to Revenue

  	
   

  	
  Ratio of EBITDA
  to

  Revenue greater than 0%

  in each of the last 3

  quarters

  	
   

  	
  Ratio of EBITDA
  to

  Revenue of at least 3% in

  each of the last 3 quarters

  	
   

  	
  Ratio of EBITDA
  to

  Revenue of at least 5%

  in each of the last 3

  quarters

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash
  and Cash

  Equivalents

  	
   

  	
  At least $250
  million for

  each of the last four

  quarters.

  	
   

  	
  At least $300
  million for

  each of the last 4

  quarters.

  	
   

  	
  At least $500
  million for

  each of last 4 quarters.