**TABLE OF CONTENTS**       **Page**   Basic Lease Information  1   Table of Contents  21.  Premises  12.  Possession and Lease Commencement  13.  Term  14.  Use  15.  Rules and Regulations  16.  Rent  17.  Operating Expenses  28.  Insurance and Indemnification  49.  Waiver of Subrogation  510.  Landlord’s Repairs and Maintenance  511.  Tenant’s Repairs and Maintenance  512.  Alterations  513.  Signs  614.  Inspection/Posting Notices  615.  Services and Utilities  616.  Subordination  717.  Financial Statements  718.  Estoppel Certificate  719.  Security Deposit  720.  Limitation of Tenant’s Remedies  721.  Assignment and Subletting  822.  Authority of Tenant  823.  Condemnation  824.  Casualty Damage  925.  Holding Over  926.  Default  1027.  Liens  1128.  Substitution  1129.  Transfers by Landlord  1130.  Right of Landlord to Perform Tenant’s Covenants  1131.  Waiver  1132.  Notices  1133.  Attorney’s Fees  1234.  Successors and Assigns  1235.  Force Majeure  1236.  Surrender of Premises  1237.  Hazardous Materials  1238.  Miscellaneous  1339.  Additional Provisions  1440.  Jury Trial Waiver  15   Signatures  15 Exhibits:          Exhibit A  Rules and Regulations   Exhibit B  Site Plan, Property Description   Exhibit C  Lease Improvement Agreement   Exhibit D  Hazardous Materials Questionnaire   Exhibit E  Form of Letter of Credit          Additional Exhibits as Requiredi 
**LEASE** **THIS LEASE** is made as of the 7th day of June, 2002, by and between **EOP-INDUSTRIAL PORTFOLIO, L.L.C., a Delaware limited liability company** (hereinafter called “**Landlord**”), and **KOSANBIOSCIENCES INCORPORATED, a Delaware corporation** (hereinafter called “**Tenant**”).  **1.    PREMISES** Landlord leases to Tenant and Tenant leases fromLandlord, upon the terms and conditions hereinafter set forth, those premises (the “**Premises**”) cross-hatched in red on ***Exhibit B*** and described in the Basic Lease Information. The Premises shall be all or part of abuilding (the “**Building**”) and of a project (the “**Project**”), which may consist of more than one building and additional facilities, as described in the Basic Lease Information. The Building and Project are outlinedin blue and green respectively on ***Exhibit B***.  **2.    POSSESSION AND LEASE COMMENCEMENT** This Lease shall commence August 1, 2003.  **3.    TERM** Theterm of this Lease (the “**Term**”) shall commence on the Term Commencement Date and continue in full force and effect for the number of months specified as the Length of Term in the Basic Lease Information or until this Lease isterminated as otherwise provided herein. If the Term Commencement Date is a date other than the first day of the calendar month, the Term shall be the number of months of the Length of Term in addition to the remainder of the calendar monthfollowing the Term Commencement Date.  **4.    USE** **A.  General.    **Tenant shall use the Premises for the permitted use specified in the Basic LeaseInformation (“**Permitted Use**”) and for no other use or purpose. Tenant shall control Tenant’s employees, agents, customers, visitors, invitees, licensees, contractors, assignees and subtenants (collectively,“**Tenant’s Parties**”) in such a manner that Tenant and Tenant’s Parties cumulatively do not exceed the parking density specified in the Basic Lease Information (the “**Parking Density**”) at any time. So long asTenant is occupying the Premises, Tenant and Tenant’s Parties shall have the nonexclusive right to use, in common with other parties occupying the Building or Project, the parking areas, driveways and other common areas of the Building andProject, including without limitation the non-exclusive use of four (4) parking stalls per 1,000 square feet occupied hereunder, subject to the terms of this Lease and such rules and regulations as Landlord may from time to time prescribe. Landlordreserves the right, without notice or liability to Tenant, and without the same constituting an actual or constructive eviction, to alter or modify the common areas from time to time, including the location and configuration thereof, and theamenities and facilities which Landlord may determine to provide from time to time. **** **B.  Limitations.**    Tenant shall not permit any odors, smoke, dust, gas, substances, noise or vibrations to emanate from the Premises or from any portion of the common areas as a result ofTenant’s or any Tenant’s Party’s use thereof, nor take any action which would constitute a nuisance or would disturb, obstruct or endanger any other tenants or occupants of the Building or Project or elsewhere, or unreasonablyinterfere with their use of their respective premises or common areas. Storage outside the Premises of materials, vehicles or any other items is prohibited. Tenant shall not use or allow the Premises to be used for any immoral, improper or unlawfulpurpose, nor shall Tenant cause or maintain or permit any nuisance in, on or about the Premises. Tenant shall not commit or suffer the commission of any waste in, on or about the Premises. Tenant shall not allow any sale by auction upon thePremises, or place any loads upon the floors, walls or ceilings which could endanger the structure Tenant shall not place any harmful substances in the drainage system of the Building or Project except to the extent permitted in accordance withapplicable Laws. No waste, materials or refuse shall be dumped upon or permitted to remain outside the Premises except in trash containers placed inside exterior enclosures designated for that purpose by Landlord. Landlord shall not be responsibleto Tenant for the non-compliance by any other tenant or occupant of the Building or Project with any of the above-referenced rules or any other terms or provisions of such tenant’s or occupant’s lease or other contract.**** **        C.  Compliance with Regulations.    **Byentering the Premises, Tenant accepts the Premises in the condition existing as of the date of such entry. Tenant shall at its sole cost and expense strictly comply with all existing or future applicable municipal, state and federal and othergovernmental statutes, rules, requirements, regulations, laws and ordinances, including zoning ordinances and regulations, and covenants, easements and restrictions of record governing and relating to the use, occupancy or possession of thePremises, to Tenant’s use of the common areas, or to the use, storage, generation or disposal of Hazardous Materials (hereinafter defined) (collectively “**Regulations**”). Tenant shall at its sole cost and expense obtain any andall licenses or permits necessary for Tenant’s use of the Premises. Tenant shall at its sole cost and expense promptly comply with the requirements of any board of fire underwriters or other similar body now or hereafter constituted. Tenantshall not do or permit anything to be done in, on, under or about the Project or bring or keep anything which will in any way increase the rate of any insurance upon the Premises, Building or Project or upon any contents therein or cause acancellation of said insurance. Tenant shall indemnify, defend (by counsel reasonably acceptable to Landlord), protect and hold Landlord harmless from and against any loss, cost, expense, damage, attorneys’ fees or liability arising out of thefailure of Tenant to comply with any Regulation accruing during the Term or any extension of the Lease. Tenant’s obligations pursuant to the foregoing indemnity shall survive the expiration or earlier termination of this Lease.  **5.    RULES AND REGULATIONS** Tenant shall faithfully observe and comply with the building rules and regulations attached hereto as ***Exhibit A***and any other reasonable rules and regulationsand any modifications or additions thereto which Landlord may from time to time prescribe in writing for the purpose of maintaining the proper care, cleanliness, safety, traffic flow and general order of the Premises or the Building or Project.Tenant shall cause Tenant’s Parties to comply with such rules and regulations. Landlord shall not be responsible to Tenant for the non-compliance by any other tenant or occupant of the Building or Project with any of such rules and regulations,any other tenant’s or occupant’s lease or any Regulations.  **6.    RENT** **A.  Base Rent.    **Tenant shall pay to Landlord and Landlord shall receive, without noticeor demand throughout the Term, Base Rent as specified in the Basic Lease Information, payable in monthly installments in advance on or before the first day of each calendar month, in lawful money of the United States, without deduction or offsetwhatsoever except as specifically allowed hereunder, at the Remittance Address specified in the Basic Lease Information or to such other place as Landlord may from time to time designate in writing. Base Rent for the first full month of the Termshall be paid by Tenant upon Tenant’s execution of this Lease. If the obligation for payment of Base ****1 
Rent commences on a day other than the first day of a month, then Base Rent shall be prorated and the prorated installment shall be paid on thefirst day of the calendar month next succeeding the Term Commencement Date. The Base Rent payable by Tenant hereunder is subject to adjustment as provided elsewhere in this Lease, as applicable. As used herein, the term “Base Rent” shallmean the Base Rent specified in the Basic Lease Information as it may be so adjusted from time to time.  **B.  Additional Rent.    **All monies other than Base Rent required to be paid by Tenant hereunder, including, but not limited to, Tenant’s Proportionate Share of Operating Expenses, asspecified in Paragraph 7 of this Lease, charges to be paid by Tenant under Paragraph 15, the interest and late charge described in Paragraphs 26.D. and E., and any monies spent by Landlord pursuant to Paragraph 30, shall be considered additionalrent (“**Additional Rent**”). “Rent” shall mean Base Rent and Additional Rent.  **7.    OPERATING EXPENSES** **A.  OperatingExpenses.**    In addition to the Base Rent required to be paid hereunder, Tenant shall pay as Additional Rent, Tenant’s Proportionate Share of the Building and/or Project (as applicable), as defined in the Basic LeaseInformation, of Operating Expenses (defined below) in the manner set forth below. Tenant shall pay the applicable Tenant’s Proportionate Share of each such Operating Expenses. “**Operating Expenses**” shall mean all expenses andcosts of every kind and nature which Landlord shall pay or become obligated to pay, because of or in connection with the ownership, management, maintenance, repair, preservation, replacement and operation of the Building or Project and itssupporting facilities (as determined in accordance with generally accepted accounting principles) other than those expenses and costs which are specifically attributable to Tenant or which are expressly made the financial responsibility of Landlordor specific tenants of the Building or Project pursuant to this Lease. Operating Expenses shall include, but are not limited to, the following:  **(1)  Taxes.**    All real property taxes and assessments, possessory interest taxes, sales taxes, personal property taxes, business or license taxes or fees, grossreceipts taxes, service payments in lieu of such taxes or fees, annual or periodic license or use fees, excises, transit charges, and other impositions, general and special, ordinary and extraordinary, unforeseen as well as foreseen, of any kind(including fees “in-lieu” of any such tax or assessment) which are now or hereafter assessed, levied, charged, confirmed, or imposed by any public authority upon the Building or Project, its operations or the Rent (or any portion orcomponent thereof), or any tax, assessment or fee imposed in substitution, partially or totally, of any of the above. Operating Expenses shall also include any taxes, assessments, reassessments, or other fees or impositions with respect to thedevelopment, leasing, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, Building or Project or any portion thereof, including, without limitation, by or for Tenant, and all increases therein or reassessmentsthereof whether the increases or reassessments result from increased rate and/or valuation (whether upon a transfer of the Building or Project or any portion thereof or any interest therein or for any other reason). Operating Expenses shall notinclude inheritance or estate taxes imposed upon or assessed against the interest of any person in the Project, or taxes computed upon the basis of the net income of any owners of any interest in the Project. If it shall not be lawful for Tenant toreimburse Landlord for all or any part of such taxes, the monthly rental payable to Landlord under this Lease shall be revised to net Landlord the same net rental after imposition of any such taxes by Landlord as would have been payable to Landlordprior to the payment of any such taxes.  **(2)  Insurance.**    All insurance premiums and costs, including, but not limited to, any deductible amounts, premiums and other costs of insurance incurred by Landlord, including for the insurancecoverage set forth in Paragraph 8.A. herein, but excluding earthquake insurance obtained without Tenant’s prior consent.  **(3)  Common Area Maintenance.** **(a)**  Repairs, replacements, and general maintenance of and for the Building and Project and public and common areas and facilities of and comprising the Building and Project, including, but not limited to, the roofand roof membrane, elevators, mechanical rooms, alarm systems, pest extermination, landscaped areas, parking and service areas, driveways, sidewalks, truck staging areas, rail spur areas, fire sprinkler systems, sanitary and storm sewer lines,utility services, heating/ventilation/air conditioning systems, electrical, mechanical or other systems, telephone equipment and wiring servicing, plumbing, lighting, and any other items or areas which affect the operation or appearance of theBuilding or Project, which determination shall be at Landlord’s discretion, except for: those items to the extent paid for by the proceeds of insurance; and those items attributable solely or jointly to specific tenants of the Building orProject.  **(b)**  Repairs, replacements, and general maintenance shall include thecost of any improvements made to or assets acquired for the Project or Building that in Landlord’s discretion may reduce any other Operating Expenses, including present or future repair work, are reasonably necessary for the health and safetyof the occupants of the Building or Project, or for the operation of the Building systems, services and equipment, or are required to comply with any Regulation, such costs or allocable portions thereof to be amortized in accordance with generallyaccepted accounting principles, together with interest on the unamortized balance at the rate of 10% per annum.  **(c)**  Payment under or for any easement, license, permit, operating agreement, declaration, restrictive covenant or instrument relating to the Building or Project.  **(d)**  All expenses and rental related to services and costs of supplies, materials and equipment used in operating, managing andmaintaining the Premises, Building and Project, the equipment therein and the adjacent sidewalks, driveways, parking and service areas, including, without limitation, expenses related to service agreements regarding security, fire and other alarmsystems, janitorial services to the extent not addressed in Paragraph 11 hereof, window cleaning, elevator maintenance, Building exterior maintenance, landscaping and expenses related to the administration, management and operation of the Project. **(e)**  The cost of supplying any services and utilities which benefit all or aportion of the Premises, Building or Project to the extent not addressed in Paragraph 15 hereof.  **(f)**  Legal expenses and the cost of audits by certified public accountants; provided, however, that legal expenses chargeable as Operating Expenses shall not include the cost of negotiating leases, collecting rents,evicting tenants, sale of the Building or Premises, nor shall it include costs incurred in legal proceedings with or against any tenant or buyer or to enforce the provisions of any lease or purchase agreement.  **(g)**  A management and accounting cost recovery fee equal to ten percent (10%) of the sum of the OperatingExpenses.  If the rentable area of the Building and/or Project is not fully occupied during any fiscal year of theTerm as determined by Landlord, an adjustment shall be made in Landlord’s discretion in computing the Operating Expenses for such year so that Tenant pays an equitable portion of all variable items (e.g., utilities, janitorial services andother component expenses that are affected by variations in occupancy 2 
 levels) of Operating Expenses, as reasonably determined by Landlord; provided, however, that in no eventshall Landlord be entitled to collect in excess of one hundred percent (100%) of the total Operating Expenses from all of the tenants in the Building or Project, as the case may be.  To the extent commercially reasonable, Landlord will use third party contractors to perform maintenance, repairs, and other functions under this Paragraph. Landlord willnegotiate at arms length with these contractors, suppliers and/or vendors to obtain competitive prices and Landlord will use its efforts during this Lease to obtain competitive pricing for services and products for which tenant is financiallyresponsible under this Paragraph 7.  Notwithstanding the foregoing, Operating Expenses shall not include (i)depreciation on the Building, (ii) real estate brokers’ commissions, (iii) ground lease payments, principal, interest, loan fees and other carrying costs relating to any mortgage or deed of trust on the Building or Project, (iv) costs, fines orpenalties for violations by Landlord of any governmental rule, (v) any obligations of Landlord with respect to Hazardous Materials, (vi) any amounts for services paid to entities related to Landlord to the extent said amounts exceed the amounts thatwould have been paid to unaffiliated entities for the same services; (vii) any costs incurred to remedy any defects in construction of the Building, (viii) any amounts for the acquisition or maintenance of art work located in the Building or Projector the cost of insurance thereon, (ix) costs of repairs expressly the responsibility of Landlord, (x) those repairs paid for by proceeds of insurance or by Tenant or other third parties, and (xi) alterations attributable solely to tenants of theProject other than Tenant, other than ordinary repair and maintenance. If any capital expense borne under Paragraph 7 is above Ten Thousand Dollars ($10,000.00), then the expense will be amortized over the useful life together with interest on theunamortized balance at the rate of ten percent (10%) per annum.  Operating Expenses shall not include the cost ofproviding tenant improvements or other specific costs incurred for the account of, separately billed to and paid by specific tenants of the Building or Project, the initial construction cost of the Building, or debt service on any mortgage or deedof trust recorded with respect to the Project other than pursuant to Paragraph 7.A.(3)(b) above. Notwithstanding anything herein to the contrary, in any instance wherein Landlord, in Landlord’s reasonable discretion, deems Tenant to beresponsible for any amounts greater than Tenant’s Proportionate Share, Landlord shall have the right to allocate costs in any manner Landlord deems reasonably appropriate.  The above enumeration of services and facilities shall not be deemed to impose an obligation on Landlord to make available or provide such services or facilities except tothe extent if any that Landlord has specifically agreed elsewhere in this Lease to make the same available or provide the same. Without limiting the generality of the foregoing, Tenant acknowledges and agrees that it shall be responsible forproviding adequate security for its use of the Premises, the Building and the Project and that Landlord shall have no obligation or liability with respect thereto, except to the extent if any that Landlord has specifically agreed elsewhere in thisLease to provide the same.  **B.  Payment of Estimated OperatingExpenses.**    “**Estimated Operating Expenses**” for any particular year shall mean Landlord’s estimate of the Operating Expenses for such fiscal year made with respect to such fiscal year as hereinafterprovided. Landlord shall have the right from time to time to revise its fiscal year and interim accounting periods so long as the periods as so revised are reconciled with prior periods in a reasonable manner. During the last month of each fiscalyear during the Term, or as soon thereafter as practicable, Landlord shall give Tenant written notice of the Estimated Operating Expenses for the ensuing fiscal year. Tenant shall pay Tenant’s Proportionate Share of the Estimated OperatingExpenses with installments of Base Rent for the fiscal year to which the Estimated Operating Expenses applies in monthly installments on the first day of each calendar month during such year, in advance. Such payment shall be construed to beAdditional Rent for all purposes hereunder. If at any time during the course of the fiscal year, Landlord determines that Operating Expenses are projected to vary from the then Estimated Operating Expenses by more than ten percent (10%), Landlordmay, by written notice to Tenant, revise the Estimated Operating Expenses for the balance of such fiscal year, and Tenant’s monthly installments for the remainder of such year shall be adjusted so that by the end of such fiscal year Tenant haspaid to Landlord Tenant’s Proportionate Share of the revised Estimated Operating Expenses for such year, such revised installment amounts to be Additional Rent for all purposes hereunder.  **        C.  Computation of Operating Expense Adjustment.**    “**Operating Expense Adjustment**” shallmean the difference between Estimated Operating Expenses and actual Operating Expenses for any fiscal year determined as hereinafter provided. Within ninety (90) days after the end of each fiscal year, or as soon thereafter as practicable, Landlordshall deliver to Tenant a statement of actual Operating Expenses for the fiscal year just ended, accompanied by a computation of Operating Expense Adjustment. If such statement shows that Tenant’s payment based upon Estimated Operating Expensesis less than Tenant’s Proportionate Share of Operating Expenses, then Tenant shall pay to Landlord the difference within twenty (20) days after receipt of such statement, such payment to constitute Additional Rent for all purposes hereunder. Ifsuch statement shows that Tenant’s payments of Estimated Operating Expenses exceed Tenant’s Proportionate Share of Operating Expenses, then (provided that Tenant is not in default under this Lease) Landlord shall pay to Tenant thedifference within twenty (20) days after delivery of such statement to Tenant. If this Lease has been terminated or the Term hereof has expired prior to the date of such statement, then the Operating Expense Adjustment shall be paid by theappropriate party within twenty (20) days after the date of delivery of the statement. Should this Lease commence or terminate at any time other than the first day of the fiscal year, Tenant’s Proportionate Share of the Operating ExpenseAdjustment shall be prorated based on the exact number of calendar days and the number of calendar months during such fiscal year that this Lease is in effect. Notwithstanding anything to the contrary contained in Paragraph 7.A or 7.B,Landlord’s failure to provide any notices or statements within the time periods specified in those paragraphs shall in no way excuse Tenant from its obligation to pay Tenant’s Proportionate Share of Operating Expenses.  **D.  Net Lease.**    This shall be a triple net Lease and Base Rent shall be paid to Landlordabsolutely net of all costs and expenses, except as specifically provided to the contrary in this Lease. The provisions for payment of Operating Expenses and the Operating Expense Adjustment are intended to pass on to Tenant and reimburse Landlordfor all costs and expenses of the nature described in Paragraph 7.A. incurred in connection with the ownership, management, maintenance, repair, preservation, replacement and operation of the Building and/or Project and its supporting facilities andsuch additional facilities now and in subsequent years as may be determined by Landlord to be necessary or desirable to the Building and/or Project.  **E.  Tenant Audit.**    If Tenant shall dispute the amount set forth in any statement provided by Landlord under Paragraph 7.B. or 7.C. above, Tenant shall have theright, not later than twenty (20) days following receipt of such statement and upon the condition that Tenant shall first deposit with Landlord the full amount in dispute, to cause Landlord’s books and records with respect to Operating Expensesfor such fiscal year to be audited by certified public accountants selected by Tenant and subject to Landlord’s reasonable right of approval. The Operating Expense Adjustment shall be appropriately adjusted on the basis of such audit. If suchaudit discloses a liability for a refund in excess of ten percent (10%) of Tenant’s Proportionate Share of the Operating Expenses previously reported, the cost of such audit shall be borne by Landlord; otherwise the cost of such audit shall bepaid by Tenant. If Tenant shall not request an audit in accordance with the provisions of this Paragraph 7.E. within twenty (20) days after receipt of Landlord’s statement provided pursuant to Paragraph 7.B. or 7.C., such statement shall befinal and binding for all purposes hereof. Tenant acknowledges and agrees that any information revealed in the above described audit may contain proprietary and sensitive information and that significant damage could result to Landlord if suchinformation were disclosed to any party other than Tenant’s auditors. Tenant shall not in any manner disclose, provide or make available any information revealed by the audit to any person or entity without Landlord’s prior writtenconsent, which consent may be withheld by Landlord in its sole and absolute discretion. The information disclosed by the audit will be used by Tenant solely for the purpose of evaluating Landlord’s books and records in connection with thisParagraph 7.E. 3 
 **8.    INSURANCE AND INDEMNIFICATION** **A.  Landlord’s Insurance.**    All insurance maintained by Landlord shall be for the sole benefitof Landlord and under Landlord’s sole control.  **(1)  PropertyInsurance.    **Landlord agrees to maintain property insurance insuring the Building against damage or destruction due to risk including fire, vandalism, and malicious mischief in an amount not less than eighty percent (80%) ofthe replacement cost thereof, in the form and with deductibles and endorsements as selected by Landlord. At its election, Landlord may instead (but shall have no obligation to) obtain “All Risk” coverage, and may also obtain earthquake,pollution, and/or flood insurance in amounts selected by Landlord.  **(2)  OptionalInsurance.    **Landlord, at Landlord’s option, may also (but shall have no obligation to) carry (i) insurance against loss of rent, in an amount equal to the amount of Base Rent and Additional Rent that Landlord could berequired to abate to all Building tenants in the event of condemnation or casualty damage for a period of twelve (12) months; and (ii) liability insurance and such other insurance as Landlord may deem prudent or advisable, including, withoutlimitation, liability insurance in such amounts and on such terms as Landlord shall determine. Landlord shall not be obligated to insure, and shall have no responsibility whatsoever for any damage to, any furniture, machinery, goods, inventory orsupplies, or other personal property or fixtures which Tenant may keep or maintain in the Premises, or any leasehold improvements, additions or alterations within the Premises.  **B.  Tenant’s Insurance.**    Tenant shall procure at Tenant’s sole cost and expense and keep in effect from the date of thisLease and at all times until the end of the Term the following:  **(1)  PropertyInsurance.**    Insurance on all personal property and fixtures of Tenant and all improvements, additions or alterations made by or for Tenant to the Premises on an “special form” basis, insuring such property for thefull replacement value of such property.  **(2)  LiabilityInsurance.**    Commercial General Liability insurance covering bodily injury and property damage liability occurring in or about the Premises or arising out of the use and occupancy of the Premises and the Project, and anypart of either, and any areas adjacent thereto, and the business operated by Tenant or by any other occupant of the Premises. Such insurance shall include contractual liability coverage. Such coverage shall have a minimum combined single limit ofliability of at least Two Million Dollars ($2,000,000.00), and a minimum general aggregate limit of Three Million Dollars ($3,000,000.00), with an “Additional Insured—Managers or Lessors of Premises Endorsement” and the“Amendment of the Pollution Exclusion Endorsement.” All such policies shall be written to apply to bodily injury (including death), property damage or loss, personal and advertising injury and other covered loss, however occasioned,occurring during the policy term, shall be endorsed to add Landlord and any party holding an interest to which this Lease may be subordinated as an additional insured, and shall provide that such coverage shall be “**primary**” andnon-contributing with any insurance maintained by Landlord, which shall be excess insurance only. Such coverage shall also contain endorsements including employees as additional insureds if not covered by Tenant’s Commercial General LiabilityInsurance. All such insurance shall provide for the severability of interests of insureds; and shall be written on an “**occurrence**” basis, which shall afford coverage for all claims based on acts, omissions, injury and damage, whichoccurred or arose (or the onset of which occurred or arose) in whole or in part during the policy period.  **(3)  Workers’ Compensation and Employers’ Liability Insurance.**    Workers’ Compensation Insurance as required by any Regulation, and Employers’ Liability Insurance in amountsnot less than One Million Dollars ($1,000,000) each accident for bodily injury by accident; One Million Dollars ($1,000,000) policy limit for bodily injury by disease; and One Million Dollars ($1,000,000) each employee for bodily injury by disease. **(4)  Alterations Requirements.**    In the event Tenant shalldesire to perform any Alterations, Tenant shall deliver to Landlord, prior to commencing such Alterations (i) evidence satisfactory to Landlord that Tenant carries “Builder’s Risk” insurance covering construction of such Alterationsin an amount and form approved by Landlord, and (ii) such other insurance as Landlord shall nondiscriminatorily require.          **(5)  General Insurance Requirements.**    All coverages described in this Paragraph 8.B shall be endorsed to (i) provide Landlord with thirty (30)days’ notice of cancellation or change in terms; and (ii) waive all rights of subrogation by the insurance carrier against Landlord. If at any time during the Term the amount or coverage of insurance which Tenant is required to carry under thisParagraph 8.B is, in Landlord’s reasonable judgment, materially less than the amount or type of insurance coverage typically carried by owners or tenants of properties located in the general area in which the Premises are located which aresimilar to and operated for similar purposes as the Premises or if Tenant’s use of the Premises should change with or without Landlord’s consent, Landlord shall have the right to require Tenant to increase the amount or change the types ofinsurance coverage required under this Paragraph 8.B. All insurance policies required to be carried by Tenant under this Lease shall be written by companies rated A X or better in “Best’s Insurance Guide” and authorized to do businessin the State of California. Tenant shall deliver to Landlord on or before the Term Commencement Date, and thereafter at least thirty (30) days before the expiration dates of the expired policies, certified copies of Tenant’s insurance policies,or a certificate evidencing the same issued by the insurer thereunder; and, if Tenant shall fail to procure such insurance, or to deliver such policies or certificates, Landlord may, at Landlord’s option and in addition to Landlord’s otherremedies in the event of a default by Tenant hereunder, procure the same for the account of Tenant, and the cost thereof shall be paid to Landlord as Additional Rent.  **C.  Indemnification.**    Tenant shall indemnify, defend by counsel reasonably acceptable to Landlord, protect and hold Landlord (or anysuccessor), Equity Office Properties Trust, a Maryland real estate investment trust, EOP Operating Limited Partnership, a Delaware limited partnership, Equity Office Properties Management Corp., a Delaware corporation, and each of their respectivedirectors, shareholders, partners, lenders, members, managers, contractors, affiliates, and employees (collectively, “**Landlord Indemnities**”) harmless from and against any and all claims, liabilities, losses, costs, loss of rents,liens, damages, injuries or expenses, including reasonable attorneys’ and consultants’ fees and court costs, demands, causes of action, or judgments, directly or indirectly arising out of or related to: (1) claims of injury to or death ofpersons or damage to property occurring or resulting directly or indirectly from the use or occupancy of the Premises, Building or Project by Tenant or Tenant’s Parties, or from activities or failures to act of Tenant or Tenant’s Parties;(2) claims arising from work or labor performed, or for materials or supplies furnished to or at the request of Tenant in connection with performance of any work done for the account of Tenant within the Premises or Project; and (3) claims arisingfrom any breach or default on the part of Tenant in the performance of any covenant contained in this Lease. The foregoing indemnity by Tenant shall not be applicable to claims to the extent arising from the active negligence or willful misconductof Landlord. Landlord shall not be liable to Tenant and Tenant hereby waives all claims against Landlord for any injury to or death of or damage to any person or property or business loss in or about the Premises, Building or Project by or from anycause whatsoever (other than Landlord’s negligence or willful misconduct) and, without limiting the generality of the foregoing, whether caused by water leakage of any character from the roof, walls, basement or other portion of the Premises,Building or Project, or caused by gas, fire, oil or electricity in, on or about the Premises, Building or Project, acts of God or of third parties, or any matter outside of the reasonable control of Landlord. Landlord shall defend, indemnify andhold harmless Tenant, its agents, and any and all affiliates of Tenant including, without limitation, any corporations or other 4 
entities controlling, controlled by or under common control with Tenant, from and against any and all claims or liabilities arising from (i) thenegligence or willful misconduct of Landlord, its officers, employees, agents, visitors, invitees or licensees, or (ii) any breach or default in any material warranty or material representation of Landlord hereunder or the performance of anymaterial covenant on Landlord’s part to be performed hereunder. The provisions of this Paragraph shall survive the expiration or earlier termination of this Lease with respect to claims or liability arising in connection with the period priorto such expiration or termination.  **9.    WAIVER OF SUBROGATION** Subject to the approval of each insurance carrier affected thereby, Landlord and Tenant each waives any claim, loss or cost it might haveagainst the other for any injury to or death of any person or persons, or damage to or theft, destruction, loss, or loss of use of any property (a “**Loss**”), to the extent the same is insured against (or is required to be insuredagainst under the terms hereof) under any property damage insurance policy covering the Building, the Premises, Landlord’s or Tenant’s fixtures, personal property, leasehold improvements, or business, regardless of whether the negligenceof the other party caused such Loss.  **10.    LANDLORD’S REPAIRS AND MAINTENANCE** Landlord shall maintain in good repair, reasonable wear and tear excepted, at Landlord’s expense and notas an Operating Expense except to the extent provided in Article 7 above, the structural soundness of the roof, foundations, and exterior walls of the Building. The term “exterior walls” as used herein shall not include windows, glass orplate glass, doors, dock bumpers or dock plates, special store fronts or office entries. Landlord shall perform on behalf of Tenant and other tenants of the Project the maintenance of the public and common areas of the Project, including, but notlimited to, the landscaped areas, parking areas, driveways, the truck staging area, rail spur areas, fire sprinkler systems, sanitary and storm sewer lines, utility services, electric and telephone equipment servicing the Building(s), exteriorlighting, and anything that affects the operation and exterior appearance of the Project. Any damage caused by or repairs necessitated by any negligence or act of Tenant or Tenant’s Parties may be repaired by Landlord at Landlord’s optionand Tenant’s expense. Tenant shall immediately give Landlord written notice of any defect or need of repairs in such components of the Building for which Landlord is responsible, after which Landlord shall have a reasonable opportunity and theright to enter the Premises at all reasonable times to repair same. Landlord, in the course of its maintenance and repairs, shall use its best efforts to minimize any interference with Tenant’s operations. Landlord’s liability with respectto any defects, repairs, or maintenance for which Landlord is responsible under any of the provisions of this Lease shall be limited to the cost of such repairs or maintenance, and there shall be no abatement of rent and no liability of Landlord byreason of any injury to or interference with Tenant’s business arising from the making of repairs, alterations or improvements in or to any portion of the Premises, the Building or the Project or to fixtures, appurtenances or equipment in theBuilding, except as provided in Paragraph 24. Landlord, in the course of its maintenance and repairs shall use its best efforts to minimize any interference with Tenant’s operations. If Landlord fails to timely perform its maintenance andrepair obligations hereunder and, as a consequence, Tenant’s use of the Premises is substantially impaired, Tenant, in addition to all other remedies available hereunder or by law shall have the right to cause such repair or maintenance to beperformed by Landlord. By taking possession of the Premises, Tenant accepts them “as is,” as being in good order, condition and repair and the condition in which Landlord is obligated to deliver them and suitable for the Permitted Use andTenant’s intended operations in the Premises, whether or not any notice of acceptance is given.  **11.    TENANT’S REPAIRS AND MAINTENANCE** Tenant shall at all timesduring the Term at Tenant’s expense maintain all parts of the Premises and such portions of the Building as are within the exclusive control of Tenant in a good, clean and secure condition and promptly make all necessary repairs andreplacements, including but not limited to, all windows, glass, doors, walls, including demising walls, and wall finishes, floors and floor covering, heating, ventilating and air conditioning systems, ceiling insulation, truck doors, hardware, dockbumpers, dock plates and levelers, plumbing work and fixtures, downspouts, entries, skylights, smoke hatches, roof vents, electrical and lighting systems, and fire sprinklers, with materials and workmanship of the same character, kind and quality asthe original. Tenant shall at Tenant’s expense also perform regular removal of trash and debris. Tenant shall, at Tenant’s own expense, enter into a regularly scheduled preventative maintenance/service contract with a maintenancecontractor for servicing all hot water, heating and air conditioning systems and equipment within or serving the Premises. The maintenance contractor and the contract must be approved by Landlord. The service contract must include all servicessuggested by the equipment manufacturer within the operation/maintenance manual and must become effective and a copy thereof delivered to Landlord within thirty (30) days after the Term Commencement Date. Nothing herein shall expressly or byimplication render Tenant Landlord’s agent or contractor to effect any repairs or maintenance required of Tenant under this Paragraph 11, as to all of which Tenant shall be solely responsible.  **12.    ALTERATIONS**         **A.  **Except with respect to the initial tenant improvements described in **Exhibit C** attached hereto, which improvements Landlord by execution hereof herebyapproves, Tenant shall not make, or allow to be made, any alterations, physical additions, improvements or partitions, including without limitation the attachment of any fixtures or equipment, in, about or to the Premises(“**Alterations**”) costing more than Ten Thousand Dollars ($10,000.00) in each instance and cumulatively no more than Twenty Five Thousand Dollars ($25,000.00) each year without obtaining the prior written consent of Landlord, whichconsent shall not be unreasonably withheld with respect to proposed Alterations which: (a) comply with all applicable Regulations; (b) are, in Landlord’s reasonable opinion, compatible with the Building or the Project and its mechanical,plumbing, electrical, heating/ventilation/air conditioning systems; and (c) in Landlord’s reasonable opinion will not interfere with the use and occupancy of any other portion of the Building or Project by any other tenant or its invitees.Specifically, but without limiting the generality of the foregoing, Landlord shall have the right of written consent for all plans and specifications for Alterations subject to this Section 12, construction means and methods, and any contractor orsubcontractor to be employed on the work of Alterations. Tenant shall also supply to Landlord any documents and information reasonably requested by Landlord in connection with Landlord’s consideration of a request for approval hereunder. Tenantshall cause all Alterations to be accomplished in a good and workmanlike manner, and to comply with all applicable Regulations and Paragraph 27 hereof. Tenant shall at Tenant’s sole expense, perform any additional work required under applicableRegulations due to the Alterations hereunder. No review or consent by Landlord of or to any proposed Alteration or additional work shall constitute a waiver of Tenant’s obligations under this Paragraph 12. Tenant shall reimburse Landlord forall costs which Landlord may incur in connection with granting approval to Tenant for any such Alterations, including any costs or expenses which Landlord may incur in electing to have outside architects and engineers review said plans andspecifications, provided the cost to Tenant of any such review shall not exceed Five Hundred Dollars ($500.00). All such Alterations shall remain the property of Tenant until the expiration or earlier termination of this Lease, at which time theyshall be and become the property of Landlord; provided, however, that Landlord may, at Landlord’s option, by written notice at the time it approves any such Alterations, require that Tenant, at Tenant’s expense, remove any or allAlterations made by Tenant and restore the Premises by the expiration or earlier termination of this Lease, to their condition existing prior to the construction of any such Alterations provided Tenant shall have no obligation to remove the initialtenant improvements described in **Exhibit C** hereto. All such removals and restoration shall be accomplished in a good and workmanlike manner so as not to cause damage to the Premises or Project. If Tenant fails to remove such Alterations orTenant’s trade fixtures or furniture or other personal property, Landlord may keep and use them or remove any of them and cause them to be stored or sold in accordance with applicable law, at Tenant’s sole expense. In addition to andwholly apart from Tenant’s obligation to pay Tenant’s Proportionate Share of Operating Expenses, Tenant shall be responsible for and shall pay prior to delinquency any taxes or governmental service fees, possessory interest taxes, fees orcharges in lieu of any such taxes, capital levies, or other charges imposed upon, levied with respect to or assessed against its fixtures or personal property, on the value of Alterations within the Premises, 5 
and on Tenant’s interest pursuant to this Lease, or any increase in any of the foregoing based on such Alterations. To the extent that anysuch taxes are not separately assessed or billed to Tenant, Tenant shall pay the amount thereof as invoiced to Tenant by Landlord.  **B.**  In compliance with Paragraph 27 hereof, at least ten (10) business days before beginning construction of any Alteration, Tenant shall give Landlord written notice of the expected commencement date ofthat construction to permit Landlord to post and record a notice of non-responsibility. Upon substantial completion of construction, if the law so provides, Tenant shall cause a timely notice of completion to be recorded in the office of therecorder of the county in which the Building is located.  **13.    SIGNS** Tenant shall not place, install, affix, paint or maintain any signs, notices, graphics or banners whatsoever or any window decor which isvisible in or from public view, the common areas or the exterior of the Premises or the Building, in or on any exterior window or window fronting upon any common areas or service area or upon any truck doors or man doors without Landlord’sprior written approval which Landlord shall have the right to withhold in its absolute and sole discretion; provided that Tenant’s name shall be included in any Building-standard door and directory signage, if any, in accordance withLandlord’s Building signage program, including without limitation, payment by Tenant of any fee charged by Landlord for maintaining such signage, which fee shall constitute Additional Rent hereunder. Any installation of signs, notices, graphicsor banners on or about the Premises or Project approved by Landlord shall be subject to any Regulations and to any other requirements imposed by Landlord. Tenant shall remove all such signs or graphics by the expiration or any earlier termination ofthis Lease. Such installations and removals shall be made in such manner as to avoid injury to or defacement of the Premises, Building or Project and any other improvements contained therein, and Tenant shall repair any injury or defacementincluding without limitation discoloration caused by such installation or removal.  **14.    INSPECTION/POSTING NOTICES** After reasonable notice, except inemergencies where no such notice shall be required, Landlord and Landlord’s agents and representatives, shall have the right to enter the Premises to inspect the same, to clean, to perform such work as may be permitted or required hereunder, tomake repairs, improvements or alterations to the Premises, Building or Project or to other tenant spaces therein, to deal with emergencies, to post such notices as may be permitted or required by law to prevent the perfection of liens againstLandlord’s interest in the Project or to exhibit the Premises to prospective tenants, purchasers, encumbrancers or to others, or for any other purpose as Landlord may deem necessary or desirable; provided, however, that Landlord shall usereasonable efforts not to unreasonably interfere with Tenant’s business operations, and further provided that Tenant shall be entitled to have an employee of Tenant accompany the person(s) entering the Premises provided that Tenant makes suchemployee available at the time Landlord or such other party desires to enter the Premises. Tenant shall not be entitled to any abatement of Rent by reason of the exercise of any such right of entry. Tenant waives any claim for damages for any injuryor inconvenience to or interference with Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby. Landlord shall have the right to use any and all means which Landlord may deemnecessary or proper to open said doors in an emergency, in order to obtain entry to any portion of the Premises, and any entry to the Premises or portions thereof obtained by Landlord by any of said means, or otherwise, shall not be construed to bea forcible or unlawful entry into, or a detainer of, the Premises, or an eviction, actual or constructive, of Tenant from the Premises or any portions thereof. At any time within six (6) months prior to the expiration of the Term or following anyearlier termination of this Lease or agreement to terminate this Lease, Landlord shall have the right to erect on the Premises, Building and/or Project a suitable sign indicating that the Premises are available for lease.  **15.    SERVICES AND UTILITIES** **A.**  Tenant shall (where practicable) contract for and pay directly when due, for all water, gas, heat, air conditioning, light, power, telephone, sewer, sprinkler charges, cleaning,waste disposal and other utilities and services used on or from the Premises, together with any taxes, penalties, surcharges or the like pertaining thereto, and maintenance charges for utilities and shall furnish all electric light bulbs, ballastsand tubes used within the Premises. If any such services are not separately billed or metered to Tenant, Tenant shall pay an equitable proportion, as determined in good faith by Landlord, of all charges billed or metered with other premises. Allsums payable under this Paragraph 15 shall constitute Additional Rent hereunder.  **B.**  Tenantacknowledges that Tenant has inspected and accepts the water, electricity, heat and air conditioning and other utilities and services being supplied or furnished to the Premises as of the date Tenant takes possession of the Premises, if any, asbeing sufficient in their present condition, “as is,” for the Permitted Use, and for Tenant’s intended operations in the Premises.          **C.**  If Tenant shall require water or electric current or any other resource in excess of that being furnished or supplied for the use of the Premises as of the dateTenant takes possession of the Premises, if any, as determined by Landlord, Tenant shall first procure the written consent of Landlord which Landlord may refuse, to the use thereof, and Landlord may cause a special meter to be installed in thePremises so as to measure the amount of water, electric current or other resource consumed for any such other use. Tenant shall pay directly to Landlord upon demand as an addition to and separate from payment of Operating Expenses the cost of allsuch additional resources, energy, utility service and meters (and of installation, maintenance and repair thereof and of any additional circuits or other equipment necessary to furnish such additional resources, energy, utility or service).Landlord may add to the separate or metered charge a recovery of additional expense incurred in keeping account of the excess water, electric current or other resource so consumed. Landlord shall in no case be liable for any damages directly orindirectly resulting from nor shall the Rent or any monies owed Landlord under this Lease herein reserved be abated by reason of: (a) the installation, use or interruption of use of any equipment used in connection with the furnishing of any suchutilities or services, or any change in the character or means of supplying or providing any such utilities or services or any supplier thereof; (b) the failure to furnish or delay in furnishing any such utilities or services when such failure ordelay is caused by acts of God or the elements, labor disturbances of any character, or otherwise, or because of any interruption of service due to Tenant’s use of water, electric current or other resource in excess of that being supplied orfurnished for the use of the Premises as of the date Tenant takes possession of the Premises; or (c) the inadequacy, limitation, curtailment, rationing or restriction on use of water, electricity, gas or any other form of energy or any other serviceor utility whatsoever serving the Premises or Project otherwise; or (d) the partial or total unavailability of any such utilities or services to the Premises or the Building or the diminution in the quality or quantity thereof, whether by Regulationor otherwise; or (e) any interruption in Tenant’s business operations as a result of any such occurrence; nor shall any such occurrence constitute an actual or constructive eviction of Tenant or a breach of an implied warranty by Landlord.Landlord shall further have no obligation to protect or preserve any apparatus, equipment or device installed by Tenant in the Premises, including without limitation by providing additional or after-hours heating or air conditioning. Landlord shallbe entitled to cooperate voluntarily and in a reasonable manner with the efforts of national, state or local governmental agencies or utility suppliers in reducing energy or other resource consumption. The obligation to make services availablehereunder shall be subject to the limitations of any such voluntary, reasonable program. In addition, Landlord reserves the right to change the supplier or provider of any such utility or service from time to time. Landlord may, but shall not beobligated to, upon notice to Tenant, contract with or otherwise obtain any electrical or other such service for or with respect to the Premises or Tenant’s operations therein from any supplier or provider of any such service. Tenant shallcooperate with Landlord and any supplier or provider of such services designated by Landlord from time to time to facilitate the delivery of such services to Tenant at the Premises and to the Building and Project, including without limitationallowing Landlord and Landlord’s suppliers or providers, and their respective agents and contractors, reasonable access to the Premises for the purpose of installing, maintaining, repairing, replacing or upgrading such service or any equipmentor machinery associated therewith. 6 
 **16.    SUBORDINATION** Without the necessity of any additional document being executed by Tenant for the purpose of effecting a subordination, this Lease shallbe and is hereby declared to be subject and subordinate at all times to: (a) all ground leases or underlying leases which may now exist or hereafter be executed affecting the Premises and/or the land upon which the Premises and Project are situated,or both; and (b) any mortgage or deed of trust which may now exist or be placed upon the Building, the Project and/or the land upon which the Premises or the Project are situated, or said ground leases or underlying leases, or Landlord’sinterest or estate in any of said items which is specified as security. Notwithstanding the foregoing, Landlord shall have the right to subordinate or cause to be subordinated any such ground leases or underlying leases or any such liens to thisLease. If any ground lease or underlying lease terminates for any reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any subordination, attorn to andbecome the Tenant of the successor in interest to Landlord provided that Tenant shall not be disturbed in its possession under this Lease by such successor in interest so long as Tenant is not in default under this Lease. Within ten (10) days afterrequest by Landlord, Tenant shall execute and deliver any additional documents evidencing Tenant’s attornment or the subordination of this Lease with respect to any such ground leases or underlying leases or any such mortgage or deed of trust,in any reasonable form requested by Landlord or by any ground landlord, mortgagee, or beneficiary under a deed of trust, subject to such nondisturbance requirement. If requested in writing by Tenant, Landlord shall use commercially reasonableefforts to obtain a subordination, nondisturbance and attornment agreement for the benefit of Tenant reflecting the foregoing from any ground landlord, mortgagee or beneficiary, at Tenant’s expense, subject to such other terms and conditions asthe ground landlord, mortgagee or beneficiary may require. Landlord will attempt to get a non-disturbance agreement from any subsequent mortgagor on the property.  **17.    FINANCIAL STATEMENTS** At therequest of Landlord from time to time, but not more than twice in any twelve (12) month period, Tenant shall provide to Landlord Tenant’s and any guarantor’s current financial statements or other information discussing financial worth ofTenant and any guarantor, which Landlord shall use solely for purposes of this Lease and in connection with the ownership, management, financing and disposition of the Project.  **18.     ESTOPPEL CERTIFICATE** Tenant agrees from time to time, within ten (10) days after request of Landlord, to deliver to Landlord, or Landlord’s designee, an estoppel certificate stating that this Lease is in full force and effect, that this Lease hasnot been modified (or stating all modifications, written or oral, to this Lease), the date to which Rent has been paid, the unexpired portion of this Lease, that there are no current defaults by Landlord or Tenant under this Lease (or specifying anysuch defaults), that the leasehold estate granted by this Lease is the sole interest of Tenant in the Premises and/or the land at which the Premises are situated, and such other matters pertaining to this Lease as may be reasonably requested byLandlord or any mortgagee, beneficiary, purchaser or prospective purchaser of the Building or Project or any interest therein. Failure by Tenant to execute and deliver such certificate shall constitute an acceptance of the Premises andacknowledgment by Tenant that the statements included are true and correct without exception. Landlord and Tenant intend that any statement delivered pursuant to this Paragraph may be relied upon by any mortgagee, beneficiary, purchaser orprospective purchaser of the Building or Project or any interest therein. The parties agree that Tenant’s obligation to furnish such estoppel certificates in a timely fashion is a material inducement for Landlord’s execution of this Lease. **19.    SECURITY DEPOSIT**         Tenant agrees to deposit with Landlord upon execution of this Lease, a security deposit as stated in the Basic Lease Information (the “**SecurityDeposit**”), which sum shall be held and owned by Landlord, without obligation to pay interest, as security for the performance of Tenant’s covenants and obligations under this Lease. The Security Deposit is not an advance rental depositor a measure of damages incurred by Landlord in case of Tenant’s default. Upon the occurrence of any event of default by Tenant, Landlord may from time to time, without prejudice to any other remedy provided herein or by law, use such fund tothe extent necessary to credit against any arrears of Rent or other payments due to Landlord hereunder, and any other damage, injury, expense or liability caused by such event of default, and Tenant shall pay to Landlord, on demand, the amount soapplied in order to restore the Security Deposit to its original amount. Although the Security Deposit shall be deemed the property of Landlord, any remaining balance of such deposit shall be returned by Landlord to Tenant at such time aftertermination of this Lease that all of Tenant’s obligations under this Lease have been fulfilled, reduced by such amounts as may be required by Landlord to remedy defaults on the part of Tenant in the payment of Rent or other obligations ofTenant under this Lease, including any obligation to repair damage to the Premises, Building or Project caused by Tenant or any Tenant’s Parties as required pursuant to this Lease. Landlord is hereby granted a security interest in the SecurityDeposit in accordance with applicable provisions of the California Commercial Code. Landlord may use and commingle the Security Deposit with other funds of Landlord. Tenant hereby waives the provisions of Section 1950.7 of the California Civil Code,and all other provisions of any Regulations, now or hereinafter in force, which restricts the amount or types of claim that a landlord may make upon a security deposit or imposes upon a landlord (or its successors) any obligation with respect to thehandling or return of security deposits.  All of the Security Deposit shall be in the form of an irrevocableletter of credit (the “Letter of Credit”), which Letter of Credit shall: (a) be in the amount of $903,312.00; (b) be issued on the form attached hereto as **Exhibit E**; (c) name Landlord as its beneficiary; and (d) be drawn on an FDICinsured financial institution satisfactory to the Landlord. The Letter of Credit (and any renewals or replacements thereof) shall be for a term of not less than one (1) year. Tenant agrees that it shall from time to time, as necessary, whether as aresult of a draw on the Letter of Credit by Landlord pursuant to the terms hereof or as a result of the expiration of the Letter of Credit then in effect, renew or replace the original and any subsequent Letter of Credit so that a Letter of Credit,in the amount required hereunder, is in effect until a date which is at least thirty (30) days after the Termination Date of the Lease. If Tenant fails to furnish such renewal or replacement at least forty five (45) days prior to the statedexpiration date of the Letter of Credit then held by Landlord, Landlord may draw upon such Letter of Credit and hold the proceeds thereof (and such proceeds need not be segregated) as a Security Deposit pursuant to the terms of this Section 19. Anyrenewal or replacement of the original or any subsequent Letter of Credit shall meet the requirements for the original Letter of Credit as set forth above, except that such replacement or renewal shall be issued by an FDIC insured financialinstitution satisfactory to the Landlord at the time of the issuance thereof.  If Landlord draws on the Letter ofCredit as permitted in this Lease or the Letter of Credit, then, upon demand of Landlord, Tenant shall restore the amount available under the Letter of Credit to its original amount by providing Landlord with an amendment to the Letter of Creditevidencing that the amount available under the Letter of Credit has been restored to its original amount.  **20.    LIMITATION OF TENANT’S REMEDIES** The obligations andliability of Landlord to Tenant for any default by Landlord under the terms of this Lease are not personal obligations of Landlord or of the individual or other partners of Landlord or its or their partners, directors, officers, or shareholders, andTenant agrees to look solely to Landlord’s interest in the Project for the recovery of any amount from Landlord, and shall not look to other assets of Landlord nor seek recourse against the assets of the individual or other partners of Landlordor its or their partners, directors, officers or shareholders. Any lien obtained to enforce any such judgment and any levy of execution thereon shall be subject and subordinate to any 7 
lien, mortgage or deed of trust on the Project. Under no circumstances shall Tenant have the right to offset against or recoup Rent or otherpayments due and to become due to Landlord hereunder except as expressly provided in this Lease, which Rent and other payments shall be absolutely due and payable hereunder in accordance with the terms hereof.  **21.    ASSIGNMENT AND SUBLETTING** **A.  (1)  General.    **Tenant shall not assign this Lease or sublet the Premises or any part thereof without Landlord’sprior written consent except as provided herein. If Tenant desires to assign this Lease or sublet any or all of the Premises, Tenant shall give Landlord written notice (the “**Transfer Notice**”) at least sixty (60) days prior to theanticipated effective date of the proposed assignment or sublease, which shall contain all of the information reasonably requested by Landlord to address Landlord’s decision criteria specified hereinafter. Landlord shall then have a period ofthirty (30) days following receipt of the Transfer Notice to notify Tenant in writing whether Landlord elects to consent to the proposed assignment or sublease, subject, however, to Landlord’s prior written consent of the proposed assignee orsubtenant and of any related documents or agreements associated with the assignment or sublease. If Landlord should fail to notify Tenant in writing of such election within said period, Landlord shall be deemed to have approved the proposed assigneeor subtenant. Landlord’s consent to a proposed assignment or sublease shall not be unreasonably withheld. Consent to any assignment or subletting shall not constitute consent to any subsequent transaction to which this Paragraph 21 applies. **(2)  Conditions of Landlord’s Consent.**    Without limiting the otherinstances in which it may be reasonable for Landlord to withhold Landlord’s consent to an assignment or subletting, Landlord and Tenant acknowledge that it shall be reasonable for Landlord to withhold Landlord’s consent in the followinginstances: if the proposed assignee does not agree to be bound by and assume the obligations of Tenant under this Lease in form reasonably satisfactory to Landlord; the use of the Premises by such proposed assignee or subtenant would not be aPermitted Use; the proposed assignee or subtenant is not of sound financial condition as determined by Landlord in Landlord’s reasonable discretion. Failure by or refusal of Landlord to consent to a proposed assignee or subtenant shall notcause a termination of this Lease. At the option of Landlord, a surrender and termination of this Lease shall operate as an assignment to Landlord of some or all subleases or subtenancies. Landlord shall exercise this option by giving notice of thatassignment to such subtenants on or before the effective date of the surrender and termination.  **B.  Bonus Rent.**    Any Rent or other consideration realized by Tenant under any such sublease or assignment in excess of the Rent payable hereunder, after amortization of (1) the reasonable costof any improvements which Tenant has made to the Premises in connection with such sublease or assignment, and (2) reasonable subletting and assignment costs, shall be divided and paid, fifty percent (50%) to Tenant, fifty percent (50%) to Landlord.In any subletting or assignment undertaken by Tenant, Tenant shall diligently seek to obtain the maximum rental amount available in the marketplace for comparable space available for primary leasing.  **C.**  For purposes of this Lease, an assignment or subletting shall not include any assignment or sublease of all or anyportion of the Premises made to any entity which controls, is controlled by, or is under common control with Tenant; to any entity which results from a merger or consolidation with Tenant (including any successor corporation); to any entity engagedin a joint venture with Tenant; or to any entity which acquires substantially all of the stock or assets of Tenant, as a going concern, with respect to the business that is being conducted in the Premises (hereinafter each a “PermittedTransfer”). In addition, a sale or transfer of capital stock of Tenant shall be deemed a Permitted Transfer if (1) such sale or transfer occurs in connection with any bona fide financing or capitalization for the benefit of Tenant, or (2)Tenant is a publicly traded corporation, provided Landlord is in no worse position with respect to Landlord’s economic security under this Lease. Notwithstanding anything to the contrary contained in this Lease, Landlord shall have no right ofapproval or consent with respect to any Permitted Transfer, nor shall Landlord have any right to any sums or other economic consideration resulting from any Permitted Transfer.  Notwithstanding the foregoing, a transfer shall be a “Permitted Transfer” only if Landlord is in no worse a position with respect to Landlord’s economicsecurity under this Lease (including payment of rent).  **D.  Liability.**    Noassignment or subletting by Tenant, permitted or otherwise, shall relieve Tenant of any obligation under this Lease or any guarantor of this Lease of any liability under its guaranty or alter the primary liability of the Tenant named herein for thepayment of Rent or for the performance of any other obligations to be performed by Tenant, including obligations contained in Paragraph 25 with respect to any assignee or subtenant. Landlord may collect rent or other amounts or any portion thereoffrom any assignee, subtenant, or other occupant of the Premises, permitted or otherwise, and apply the net rent collected to the Rent payable hereunder, but no such collection shall be deemed to be a waiver of this Paragraph 21, or the acceptance ofthe assignee, subtenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of the obligations of Tenant under this Lease or any guarantor of this Lease of any liability under its guaranty. Any assignment orsubletting which conflicts with the provisions hereof shall be void.  **22.    AUTHORITY**         Landlord represents and warrants that it has full right and authority to enter intothis Lease and to perform all of Landlord’s obligations hereunder and that all persons signing this Lease on its behalf are authorized to do. Tenant represents and warrants that Tenant has full right and authority to enter into this Lease, andto perform all of Tenant’s obligations hereunder, and that all persons signing this Lease on its behalf are authorized to do so.  **23.    CONDEMNATION** **A.  Condemnation Resulting inTermination.**    If the whole or any substantial part of the Premises should be taken or condemned for any public use under any Regulation, or by right of eminent domain, or by private purchase in lieu thereof, and the takingwould prevent or materially interfere with the Permitted Use of the Premises, either party shall have the right to terminate this Lease at its option. If any material portion of the Building or Project is taken or condemned for any public use underany Regulation, or by right of eminent domain, or by private purchase in lieu thereof, Landlord may terminate this Lease at its option. In either of such events, the Rent shall be abated during the unexpired portion of this Lease, effective when thephysical taking of said Premises shall have occurred.  **B.  Condemnation Not Resulting inTermination.**    If a portion of the Project of which the Premises are a part should be taken or condemned for any public use under any Regulation, or by right of eminent domain, or by private purchase in lieu thereof, andthis Lease is not terminated as provided in Paragraph 23.A. above, the Rent payable hereunder during the unexpired portion of this Lease shall be reduced, beginning on the date when the physical taking shall have occurred, to such amount as may befair and reasonable under all of the circumstances.  **C.  Award.**    Landlordshall be entitled to (and Tenant shall assign to Landlord) any and all payment, income, rent, award or any interest therein whatsoever which may be paid or made in connection with such taking or conveyance and Tenant shall have no claim againstLandlord or otherwise for any sums paid by virtue of such proceedings, whether or not attributable to the value of any unexpired portion of this Lease, except as expressly provided in this Lease. Notwithstanding the foregoing, any compensationspecifically and 8 
separately awarded Tenant for loss of business, Tenant’s personal property, the unamortized cost of any tenant improvements or alterations and moving costs, or loss of good will, shall beand remain the property of Tenant.  **D.  Waiver of CCP§1265.130**.    Eachparty waives the provisions of California Civil Code Procedure Section 1265.130 allowing either party to petition the superior court to terminate this Lease as a result of a partial taking.  **24.    CASUALTY DAMAGE** **A.**  If the Premises should be damaged or destroyed by fire, tornado or other casualty, Tenant shall give immediate written notice thereof to Landlord. Within thirty (30) days of such notice, Landlord shall notifyTenant whether in Landlord’s opinion such repairs can be made either (i) within ninety (90) days, (ii) in more than ninety (90) days but in no less than one hundred eighty (180) days, or (iii) in more than one hundred eighty (180) days from thedate of such notice. Landlord’s determination shall be binding on Tenant. If Landlord fails to complete the repairs within one hundred eighty (180) days after the date upon which Landlord is notified of such damage, such period of time to beextended for delays caused by the fault or neglect of Tenant or because of acts of God, acts of public agencies, labor disputes, strikes, fires, freight embargoes, rainy or stormy weather, inability to obtain materials, supplies or fuels, or delayof the contractors or subcontractors due to such causes or other contingencies beyond the control of Landlord, Tenant may at its option terminate this Lease by delivering written notice of termination to Landlord whereupon this Lease shall terminatethirty (30) days thereafter.  **B.**  If the Premises should be damaged by fire, tornado or othercasualty but only to such extent that rebuilding or repairs can in Landlord’s estimation be completed within ninety (90) days after the date upon which Landlord is notified by Tenant of such damage, this Lease shall not terminate, and Landlordshall at its sole cost and expense thereupon proceed with reasonable diligence to rebuild and repair the Premises to substantially the condition in which they existed prior to such damage, except that Landlord shall not be required to rebuild,repair or replace any part of the partitions, fixtures, additions and other improvements which may have been placed in, on or about the Premises by Tenant. If the Premises are untenantable in whole or in part following such damage, the Rent payablehereunder during the period in which they are untenantable shall be reduced to such extent as may be fair and reasonable under all of the circumstances.  **C.**  If the Premises or Building should be damaged by fire, tornado or other casualty but only to such extent that rebuilding or repairs can in Landlord’s estimation be completedin more than ninety (90) days but in less than one hundred eighty (180) days, then Landlord shall have the option of either (i) terminating this Lease by written notice given to Tenant within thirty (30) days after the date upon which Landlord isnotified by Tenant of such damage, effective upon the date of the occurrence of such damage, in which event the Rent shall be abated during the unexpired portion of the Lease, or (ii) electing to rebuild or repair the Premises to substantially thecondition in which they existed prior to such damage except that Landlord shall not be required to rebuild, repair or replace any part of the partitions, fixtures, additions and other improvements which may have been placed in, on or about thePremises by Tenant. If the Premises are untenantable in whole or in part following such damage, the Rent payable hereunder during the period in which they are untenantable shall be reduced to such extent as may be fair and reasonable under all ofthe circumstances. In the event that Landlord should fail to complete such repairs and rebuilding within one hundred eighty (180) days after the date upon which Landlord is notified of such damage, such period of time to be extended for delayscaused by the fault or neglect of Tenant or because of acts of God, acts of public agencies, labor disputes, strikes, fires, freight embargoes, rainy or stormy weather, inability to obtain materials, supplies or fuels, or delay of the contractors orsubcontractors due to such causes or other contingencies beyond the reasonable control of Landlord, Tenant may at its option terminate this Lease by delivering thirty (30) days prior written notice of termination to Landlord as Tenant’sexclusive remedy, whereupon all rights and obligations hereunder shall cease and terminate.  **D.**  If the Premises should be so damaged by fire, tornado or other casualty that rebuilding or repairs cannot in Landlord’s estimation be completed within one hundred eighty (180) days after the date upon whichLandlord is notified by Tenant of such damage, this Lease shall terminate and the Rent shall be abated during the unexpired portion of this Lease, effective upon the date of the occurrence of such damage.  **E.**  **Tenant’s Fault.**    Notwithstanding anything herein to the contrary, if the Premisesor any other portion of the Building are damaged by Casualty resulting from the fault, negligence, or breach of this Lease by Tenant or any of Tenant’s Parties, Tenant shall be liable to Landlord for the cost and expense of the repair andrestoration of the Building caused thereby to the extent such cost and expense is not covered by insurance proceeds.  **F.****  Insurance Proceeds**.    Notwithstanding anything herein to the contrary, if the Premises or Building are damaged or destroyed and are not substantially covered by the insurance proceedsreceived by Landlord such that a reasonable landlord would not fund the difference, or if the holder of any indebtedness secured by a mortgage or deed of trust covering the Premises requires that the insurance proceeds be applied to suchindebtedness, then in either case Landlord shall have the right to terminate this Lease by delivering written notice of termination to Tenant within fifteen (15) days after the date of notice to Landlord that said damage or destruction is not fullycovered by insurance or such requirement is made by any such holder, as the case may be, whereupon this Lease shall terminate.  **G.**  **Waiver**.    This Paragraph 24 shall be Tenant’s sole and exclusive remedy in the event of damage or destruction to the Premises or the Building. As a material inducement to Landlordentering into this Lease, Tenant hereby waives any rights it may have under Sections 1932, 1933(4), 1941 or 1942 of the Civil Code of California with respect to any destruction of the Premises, Landlord’s obligation for tenantability of thePremises and Tenant’s right to make repairs and deduct the expenses of such repairs, or under any similar law, statute or ordinance now or hereafter in effect.  **H.  Tenant’s Personal Property**.    In the event of any damage or destruction of the Premises or the Building, under nocircumstances shall Landlord be required to repair any injury or damage to, or make any repairs to or replacements of, Tenant’s personal property.  **I.**  In the event Landlord chooses to rebuild under this Paragraph 24, Landlord agrees to do so without delay and complete such rebuilding in as expeditious a manner as is commerciallyreasonable given the circumstances.  **25.    HOLDING OVER** Unless Landlord expressly consents in writing to Tenant’s holding over, Tenant shall be unlawfully and illegally in possession of thePremises, whether or not Landlord accepts any rent from Tenant or any other person while Tenant remains in possession of the Premises without Landlord’s written consent. If Tenant shall retain possession of the Premises or any portion thereofwithout Landlord’s consent following the expiration of this Lease or sooner termination for any reason, then Tenant shall pay to Landlord for each day of such retention one hundred fifty percent (150%) of the amount of daily rental as of thelast month prior to the date of expiration or earlier termination. Tenant shall also indemnify, defend, protect and hold Landlord harmless from any loss, liability or cost, including consequential and incidental damages and reasonableattorneys’ fees, incurred by Landlord resulting from delay by Tenant in surrendering the Premises. Acceptance of Rent by Landlord following expiration or earlier termination of this Lease, or following demand by Landlord for possession of thePremises, shall not constitute a renewal of this Lease, and nothing contained in this Paragraph 25 shall waive Landlord’s right of reentry or any other right. Additionally, if upon expiration or earlier termination of this Lease, or followingdemand by Landlord for possession of the Premises, Tenant has not fulfilled its obligation with respect to repairs and cleanup of the Premises or any other Tenant obligations as set forth in this Lease, then Landlord shall have the right to performany such obligations as it deems necessary 9 
at Tenant’s sole cost and expense, and any time required by Landlord to complete such obligations shall be considered a period of holding over and the terms of this Paragraph 25 shall applyprovided Landlord diligently undertakes to complete such work in a timely manner. The provisions of this Paragraph 25 shall survive any expiration or earlier termination of this Lease.  **26.    DEFAULT** **A.  Events of Default.**    The occurrence of any of the following shall constitute an event of default on the part of Tenant:  **(1)  Abandonment.**    Abandonment or vacation of the Premises for a continuous period in excess of five (5) days. Tenantwaives any right to notice Tenant may have under Section 1951.3 of the Civil Code of the State of California, the terms of this Paragraph 26.A. being deemed such notice to Tenant as required by said Section 1951.3.  **(2)  Nonpayment of Rent.**    Failure to pay any installment of Rent or any otheramount due and payable hereunder upon the date when said payment is due, such failure continuing without cure by payment of the delinquent Rent and late charges or other obligations for a period of five (5) days after written notice of such failure,provided, however, that except as otherwise expressly provided herein, Landlord shall not be required to provide such notice more than twice during any three (3)  year period of the Term, the third such non-payment in such periodconstituting default for all purposes hereof without requirement of notice, as to which time is of the essence.  **(3)  Other Obligations.**    Failure to perform any obligation, agreement or covenant under this Lease other than those matters specified in subparagraphs (1) and (2) of this Paragraph 26.A., and inParagraphs 8, 16, 18 and 25, such failure continuing for fifteen (15) days after written notice of such failure, as to which time is of the essence.  **(4)  General Assignment.**    A general assignment by Tenant for the benefit of creditors.  **(5)  Bankruptcy.**    The filing of any voluntary petition in bankruptcy by Tenant, orthe filing of an involuntary petition by Tenant’s creditors, which involuntary petition remains undischarged for a period of thirty (30) days. If under applicable law, the trustee in bankruptcy or Tenant has the right to affirm this Lease andcontinue to perform the obligations of Tenant hereunder, such trustee or Tenant shall, in such time period as may be permitted by the bankruptcy court having jurisdiction, cure all defaults of Tenant hereunder outstanding as of the date of theaffirmance of this Lease and provide to Landlord such adequate assurances as may be necessary to ensure Landlord of the continued performance of Tenant’s obligations under this Lease.  **(6)  Receivership.**    The employment of a receiver to take possession of substantially all of Tenant’s assets orthe Premises, if such appointment remains undismissed or undischarged for a period of thirty (30) days after the order therefor.  **(7)  Attachment.**    The attachment, execution or other judicial seizure of all or substantially all of Tenant’s assets or Tenant’s leasehold of thePremises, if such attachment or other seizure remains undismissed or undischarged for a period of twenty (20) days after the levy thereof.  **(8)  Insolvency.**    The admission by Tenant in writing of its inability to pay its debts as they become due.  **B.  Remedies Upon Default.** **(1)  Termination.    ** In the event of the occurrence of any event of default, Landlord shall have the right to give a written termination notice to Tenant, and onthe date specified in such notice, Tenant’s right to possession shall terminate, and this Lease shall terminate unless on or before such date all Rent in arrears and all costs and expenses incurred by or on behalf of Landlord hereunder shallhave been paid by Tenant and all other events of default of this Lease by Tenant at the time existing shall have been fully remedied to the satisfaction of Landlord. At any time after such termination, Landlord may recover possession of the Premisesor any part thereof and expel and remove therefrom Tenant and any other person occupying the same, including any subtenant or subtenants notwithstanding Landlord’s consent to any sublease, by any lawful means, and again repossess and enjoy thePremises without prejudice to any of the remedies that Landlord may have under this Lease, or at law or equity by any reason of Tenant’s default or of such termination. Landlord hereby reserves the right, but shall not have the obligation, torecognize the continued possession of any subtenant. The delivery or surrender to Landlord by or on behalf of Tenant of keys, entry codes, or other means to bypass security at the Premises shall not terminate this Lease.  **        (2)  Continuation After Default.**    Even though anevent of default may have occurred, this Lease shall continue in effect for so long as Landlord does not terminate Tenant’s right to possession under Paragraph 26.B.(1) hereof. Landlord shall have the remedy described in California Civil CodeSection 1951.4 (“Landlord may continue this ease in effect after Tenant’s breach and abandonment and recover Rent as it becomes due, if Tenant has the right to sublet or assign, subject only to reasonable limitations”), or anysuccessor code section. Accordingly, if Landlord does not elect to terminate this Lease on account of any event of default by Tenant, Landlord may enforce all of Landlord’s rights and remedies under this Lease, including the right to recoverRent as it becomes due. Acts of maintenance, preservation or efforts to lease the Premises or the appointment of a receiver under application of Landlord to protect Landlord’s interest under this Lease or other entry by Landlord upon thePremises shall not constitute an election to terminate Tenant’s right to possession.  **C.  Damages After Default.**    Should Landlord terminate this Lease pursuant to the provisions of Paragraph 26.B.(1) hereof, Landlord shall have the rights and remedies of a Landlord provided bySection 1951.2 of the Civil Code of the State of California, or any successor code sections. Upon such termination, in addition to any other rights and remedies to which Landlord may be entitled under applicable law or at equity, Landlord shall beentitled to recover from Tenant: (1) the worth at the time of award of the unpaid Rent and other amounts which had been earned at the time of termination, (2) the worth at the time of award of the amount by which the unpaid Rent and other amountsthat would have been earned after the date of termination until the time of award exceeds the amount of such Rent loss that Tenant proves could have been reasonably avoided; (3) the worth at the time of award of the amount by which the unpaid Rentand other amounts for the balance of the Term after the time of award exceeds the amount of such Rent loss that the Tenant proves could be reasonably avoided; and (4) any other amount and court costs necessary to compensate Landlord for alldetriment proximately caused by Tenant’s failure to perform Tenant’s obligations under this Lease or which, in the ordinary course of things, would be likely to result therefrom. The “worth at the time of award” as used in (1)and (2) above shall be computed at the Applicable Interest Rate (defined below). The “worth at the time of award” as used in (3) above shall be computed by discounting such amount at the Federal Discount Rate of the Federal Reserve Bank ofSan Francisco at the time of award plus one percent (1%). If this Lease provides for any periods during the Term during which Tenant is not required to pay Base Rent or if Tenant otherwise receives a Rent concession, then upon the occurrence of anevent of default, Tenant shall owe to Landlord the full amount of such Base Rent or value of such Rent concession, plus interest at the Applicable Interest Rate, calculated from the date that such Base Rent or Rent concession would have beenpayable.  **D.    Late Charge.**    In addition to its other remedies,Landlord shall have the right without notice or demand to add to the amount of any payment required to be made by Tenant hereunder, and which is not paid and received by Landlord on or before the first day of each calendar month, an amount equal tofive percent (5%) of the delinquent amount for each month or portion thereof that the delinquency 10 
remains outstanding to compensate Landlord for the loss of the use of the amount not paid and the administrative costs caused by the delinquency, the parties agreeing that Landlord’s damageby virtue of such delinquencies would be extremely difficult and impracticable to compute and the amount stated herein represents a reasonable estimate thereof. Any waiver by Landlord of any late charges or failure to claim the same shall notconstitute a waiver of other late charges or any other remedies available to Landlord.  **E.  RemediesCumulative.**    All of Landlord’s rights, privileges and elections or remedies are cumulative and not alternative, to the extent permitted by law and except as otherwise provided herein.  **27.    LIENS** Tenant shall at all times keep the Premises and the Project free from liens arising out of or related to work or services performed, materials or supplies furnished or obligations incurred by or onbehalf of Tenant or in connection with work made, suffered or done by or on behalf of Tenant in or on the Premises or Project. If Tenant shall not, within ten (10) days following the imposition of any such lien, cause the same to be released ofrecord by payment or posting of a proper bond, Landlord shall have, in addition to all other remedies provided herein and by law, the right, but not the obligation, to cause the same to be released by such means as Landlord shall deem proper,including payment of the claim giving rise to such lien. All sums paid by Landlord on behalf of Tenant and all expenses incurred by Landlord in connection therefor shall be payable to Landlord by Tenant on demand with interest at the ApplicableInterest Rate as Additional Rent. Landlord shall have the right at all times to post and keep posted on the Premises any notices permitted or required by law, or which Landlord shall deem proper, for the protection of Landlord, the Premises, theProject and any other party having an interest therein, from mechanics’ and materialmen’s liens, and Tenant shall give Landlord not less than ten (10) business days prior written notice of the commencement of any work in the Premises orProject which could lawfully give rise to a claim for mechanics’ or materialmen’s liens to permit Landlord to post and record a timely notice of non-responsibility, as Landlord may elect to proceed or as the law may from time to timeprovide, for which purpose, if Landlord shall so determine, Landlord may enter the Premises. Tenant shall not remove any such notice posted by Landlord without Landlord’s consent, and in any event not before completion of the work which couldlawfully give rise to a claim for mechanics’ or materialmen’s liens.  **28.    SUBSTITUTION** **INTENTIONALLY OMITTED** **29.    TRANSFERS BY LANDLORD** In theevent of a sale or conveyance by Landlord of the Building or a foreclosure by any creditor of Landlord, the same shall operate to release Landlord from any liability upon any of the covenants or conditions, express or implied, herein contained infavor of Tenant, to the extent required to be performed after the passing of title to Landlord’s successor-in-interest. In such event, Tenant agrees to look solely to the responsibility of the successor-in-interest of Landlord under this Leasewith respect to the performance of the covenants and duties of “Landlord” to be performed after the passing of title to Landlord’s successor-in-interest. This Lease shall not be affected by any such sale and Tenant agrees to attorn tothe purchaser or assignee. Landlord’s successor(s)-in-interest shall not have liability to Tenant with respect to the failure to perform any of the obligations of “Landlord,” to the extent required to be performed prior to the datesuch successor(s)-in-interest became the owner of the Building.  **30.    RIGHT OF LANDLORD TOPERFORM TENANT’S COVENANTS** All covenants and agreements to be performed by Tenant under any of the termsof this Lease shall be performed by Tenant at Tenant’s sole cost and expense and without any abatement of Rent. If Tenant shall fail to pay any sum of money, other than Base Rent, required to be paid by Tenant hereunder or shall fail to performany other act on Tenant’s part to be performed hereunder, including Tenant’s obligations under Paragraph 11 hereof, and such failure shall continue for fifteen (15) days after notice thereof by Landlord, in addition to the other rights andremedies of Landlord, Landlord may make any such payment and perform any such act on Tenant’s part. In the case of an emergency, no prior notification by Landlord shall be required. Landlord may take such actions without any obligation andwithout releasing Tenant from any of Tenant’s obligations. All sums so paid by Landlord and all incidental costs incurred by Landlord and interest thereon at the Applicable Interest Rate, from the date of payment by Landlord, shall be paid toLandlord on demand as Additional Rent.  **31.    WAIVER** If either Landlord or Tenant waives the performance of any term, covenant or condition contained in this Lease, such waiver shall not bedeemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition contained herein, or constitute a course of dealing contrary to the expressed terms of this Lease. The acceptance of Rent by Landlord shall notconstitute a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, regardless of Landlord’s knowledge of such preceding breach at the time Landlord accepted such Rent. Failure by either party to enforce anyof the terms, covenants or conditions of this Lease for any length of time shall not be deemed to waive or decrease the right of said party to insist thereafter upon strict performance by the other party. Waiver by either party of any term, covenantor condition contained in this Lease may only be made by a written document signed by said party, based upon full knowledge of the circumstances.  **32.    NOTICES** Each provision of this Lease or of anyapplicable governmental laws, ordinances, regulations and other requirements with reference to sending, mailing, or delivery of any notice or the making of any payment by Landlord or Tenant to the other shall be deemed to be complied with when andif the following steps are taken:  **A.  Rent.**    All Rent and other paymentsrequired to be made by Tenant to Landlord hereunder shall be payable to Landlord at Landlord’s Remittance Address set forth in the Basic Lease Information, or at such other address as Landlord may specify from time to time by written noticedelivered in accordance herewith. Tenant’s obligation to pay Rent and any other amounts to Landlord under the terms of this Lease shall not be deemed satisfied until such Rent and other amounts have been actually received by Landlord. **B.  Other.**    All notices, demands, consents and approvals which may or arerequired to be given by either party to the other hereunder shall be in writing and either personally delivered, sent by commercial overnight courier, mailed, certified or registered, postage prepaid or sent by facsimile with confirmed receipt (andwith an original sent by commercial overnight courier), and in each case addressed to the party to be notified at the Notice Address for such party as specified in the Basic Lease Information or to such other place as the party to be notified mayfrom time to time designate. Notices shall be deemed served upon receipt or refusal to accept delivery. Tenant appoints as its agent to receive the service of all default notices and notice of commencement of unlawful detainer proceedings the personin charge of or apparently in charge of occupying the Premises at the time, and, if there is no such person, then such service may be made by attaching the same on the main entrance of the Premises.  **C.  Required Notices.**    Tenant shall immediately notify Landlord in writing of any notice of aviolation or a potential or alleged violation of any Regulation that relates to the Premises or the Project, or of any inquiry, investigation, enforcement or other action that is 11 
instituted or threatened by any governmental or regulatory agency against Tenant or any other occupant of the Premises, or any claim that is instituted or threatened by any third party thatrelates to the Premises or the Project.  **33.    ATTORNEYS’ FEES** If either party places the enforcement of this Lease, or any part thereof, or the collection of any Rent due, or to become due hereunder,or recovery of possession of the Premises in the hands of an attorney or files suit upon the same, the prevailing party shall recover its reasonable attorneys’ fees and court costs, whether incurred at trial, appeal or review.  **34.    SUCCESSORS AND ASSIGNS** This Lease shall be binding upon and inure to the benefit of Landlord, its successors and assigns, and shall be binding upon and inure to the benefit of Tenant, itssuccessors, and to the extent assignment is permitted hereunder, Tenant’s assigns.  **35.    FORCE MAJEURE** If performance by a party of any portion of thisLease is made impossible by any prevention, delay, or stoppage caused by strikes, lockouts, labor disputes, acts of God, inability to obtain services, labor, or materials or reasonable substitutes for those items, government actions, civilcommotions, fire or other casualty, or other causes beyond the reasonable control of the party obligated to perform, performance by that party for a period equal to the period of that prevention, delay, or stoppage is excused. Tenant’sobligation to pay Rent, however, is not excused by this Paragraph 35. Whenever a period of time is herein prescribed for action as to non-monetary obligations to be taken by Tenant, Tenant shall not be liable or responsible for, and there shall beexcluded from the computation for any such period of time, any delays due to strike, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions or any other causes of any kind whatsoever which are beyondthe control of Tenant.  **36.    SURRENDER OF PREMISES** Tenant shall, upon expiration or sooner termination of this Lease, surrender the Premises to Landlord in the same condition as existed onthe date Tenant originally took possession thereof, normal wear and tear excepted, with all HVAC equipment in operating order and in good repair. Tenant shall remove all of its debris from the Project. At or before the time of surrender, Tenantshall comply with the terms of Paragraph 12.A. hereof with respect to Alterations to the Premises and all other matters addressed in such Paragraph. If the Premises are not so surrendered at the expiration or sooner termination of this Lease, theprovisions of Paragraph 25 hereof shall apply. All keys to the Premises or any part thereof shall be surrendered to Landlord upon expiration or sooner termination of the Term. Tenant shall give written notice to Landlord at least thirty (30) daysprior to vacating the Premises and shall meet with Landlord for a joint inspection of the Premises at the time of vacating, but nothing contained herein shall be construed as an extension of the Term or as a consent by Landlord to any holding overby Tenant.  **37.    HAZARDOUS MATERIALS** **A.  General Restrictions.**    Tenant shall conduct its business and shall cause each Tenant Party to act in such a manner as to (a)not release or permit the release of any Hazardous Material in, under, on or about the Premises or Project, or (b) not use, store, generate, treat, discharge, disperse, handle, manufacture, transport or dispose of (collectively, “Handle”)any Hazardous Materials (other than incidental amounts of customary cleaning and office supplies) in or about the Premises or Project except in each case in compliance with all applicable laws. “Hazardous Material” means any hazardous,explosive, radioactive or toxic substance, material or waste which is or becomes regulated by any local, state or federal governmental authority or agency, including, without limitation, any material or substance which is (i) defined or listed as a“hazardous waste,” “extremely hazardous waste,” “restricted hazardous waste,” “hazardous substance,” “hazardous material,” “pollutant” or “contaminant” under any Regulation, (ii)petroleum or petroleum derivative, (iii) a flammable explosive, (iv) a radioactive material or waste, (v) a polychlorinated biphenyl, (vi) asbestos or asbestos containing material, (vii) infectious waste, or (viii) a carcinogen.  **B.  Required Disclosures.    **Prior to Tenant (and at least five (5) days prior to anyassignee or any subtenant of Tenant) taking possession of any part of the Premises, Tenant (or such subtenant or assignee, as the case may be) shall deliver to Landlord a completed “Hazardous Materials Questionnaire”, in the form attachedhereto as *******Exhibit D*******. Tenant (and any subtenant or assignee of Tenant) shall provided Landlord with copies of (i) its Hazardous Materials Management Plan (“HMPP”) for its operations at the Premises, which shallinclude a description of the types and quantities of Hazardous Materials used and/or stored on the Premises; and (ii) copies of all other similar documents related to Hazardous Materials which Tenant (or any subtenant or assignee of Tenant) hassubmitted or may submit to the City of Hayward, California, or any other regulatory agencies in connection with its use of the Premises, including any revisions or updated to its HMPP. Tenant represents that its HMPP currently complies with allapplicable laws.  **        C.  Additional Obligations.**    Ifany Hazardous Materials shall be released into the environment comprising or surrounding the Project as the result of the acts, omissions or operations of Tenant or any Tenant Party, Tenant shall at its sole expense promptly prepare a remediationplan therefor consistent with applicable Regulations and recommended industry practices (and approved by Landlord and all governmental agencies having jurisdiction) to fully remediate such release, and thereafter shall prosecute the remediation planso approved to completion with all reasonable diligence and to the satisfaction of applicable governmental agencies. If Landlord determines in good faith that any release of any Hazardous Material or violation of Hazardous Materials Regulations mayhave occurred in, on, under or about the Premises during the Term, Landlord may require Tenant to at Tenant’s sole expense, (i) retain a qualified environmental consultant reasonably satisfactory to Landlord to conduct a reasonableinvestigation (an “Environmental Assessment”) of a nature and scope reasonably approved in writing in advance by Landlord with respect to the existence of any Hazardous Materials in, on, under or about the Premises and providing a reviewof all Hazardous Materials activities of Tenant and the Tenant Parties, and (ii) provide to Landlord a reasonably detailed, written report, prepared in accordance with the institutional real estate standards, of the Environmental Assessment. **D.  Indemnity.**    Tenant shall indemnify, defend (by counsel reasonablyacceptable to Landlord), protect and hold Landlord harmless from and against any and all claims, liabilities, losses, costs, loss of rents, liens, damages, injuries or expenses (including attorneys’ and consultants’ fees and court costs),demands, causes of action, or judgments directly or indirectly arising out of or related to the use, generation, storage, release, or disposal of Hazardous Materials by Tenant or any of Tenant’s Parties in, on, under or about the Premises, theBuilding or the Project or surrounding land or environment, which indemnity shall include, without limitation, damages for personal or bodily injury, property damage, damage to the environment or natural resources occurring on or off the Premises,losses attributable to diminution in value or adverse effects on marketability, the cost of any investigation, monitoring, government oversight, repair, removal, remediation, restoration, abatement, and disposal, and the preparation of any closureor other required plans, whether such action is required or necessary prior to or following the expiration or earlier termination of this Lease. Neither the consent by Landlord to the use, generation, storage, release or disposal of HazardousMaterials nor the strict compliance by Tenant with all laws pertaining to Hazardous Materials shall excuse Tenant from Tenant’s obligation of indemnification pursuant to this Paragraph 37.D. Tenant’s obligations pursuant to the foregoingindemnity shall survive the expiration or earlier termination of this Lease. 12 
 **38 MISCELLANEOUS** **A.  General.**    The term “Tenant” or any pronoun used in place thereof shall indicate and include the masculine or feminine,the singular or plural number, individuals, firms or corporations, and their respective successors, executors, administrators and permitted assigns, according to the context hereof.  **B.  Time.**    Time is of the essence regarding this Lease and all of its provisions. C. Choice of Law. This Lease shall in all respectsbe governed by the laws of the State of California.  **C.  Choice ofLaw.    **This lease shall in all respects be governed by the laws of the State of California. **** **D.  Entire Agreement.**    This Lease, together with its Exhibits, addenda and attachments and the Basic Lease Information, contains all the agreements of the parties hereto and supersedes anyprevious negotiations. There have been no representations made by the Landlord or understandings made between the parties other than those set forth in this Lease and its Exhibits, addenda and attachments and the Basic Lease Information. **E.  Modification.**    This Lease may not be modified except by a writteninstrument signed by the parties hereto. Both parties accept the area of the Premises as specified in the Basic Lease Information as the approximate area of the Premises for all purposes under this Lease, and acknowledges and agrees that no otherdefinition of the area (rentable, usable or otherwise) of the Premises shall apply. Neither party shall in any event be entitled to a recalculation of the square footage of the Premises, rentable, usable or otherwise.  **F.  Severability.**    If, for any reason whatsoever, any of the provisions hereof shall beunenforceable or ineffective, all of the other provisions shall be and remain in full force and effect.  **G.  Recordation.**    Tenant shall not record this Lease or a short form memorandum hereof.  **H.  Examination of Lease.**    Submission of this Lease to Tenant does not constitute an option or offer to lease and this Lease is not effective otherwise untilexecution and delivery by both Landlord and Tenant.  **I.  Accord andSatisfaction.**    No payment by Tenant of a lesser amount than the total Rent due nor any endorsement on any check or letter accompanying any check or payment of Rent shall be deemed an accord and satisfaction of full paymentof Rent, and Landlord may accept such payment without prejudice to Landlord’s right to recover the balance of such Rent or to pursue other remedies. All offers by or on behalf of Tenant of accord and satisfaction are hereby rejected in advance. **J.  Easements.**    Landlord may grant easements on the Project and dedicatefor public use portions of the Project without Tenant’s consent; provided that no such grant or dedication shall materially interfere with Tenant’s Permitted Use of the Premises. Upon Landlord’s request, Tenant shall execute,acknowledge and deliver to Landlord documents, instruments, maps and plats necessary to effectuate Tenant’s covenants hereunder.  **K.  Drafting and Determination Presumption.**    The parties acknowledge that this Lease has been agreed to by both the parties, that both Landlord and Tenant have consulted with attorneyswith respect to the terms of this Lease and that no presumption shall be created against Landlord because Landlord drafted this Lease. Except as otherwise specifically set forth in this Lease, with respect to any consent, determination or estimationof Landlord required or allowed in this Lease or requested of Landlord, Landlord’s consent, determination or estimation shall be given or made solely by Landlord in Landlord’s good faith opinion, and not unreasonably withheld or delayed.If Landlord fails to respond to any request for its consent within the time period, if any, specified in this Lease, Landlord shall be deemed to have disapproved such request, unless this Lease provides otherwise.  **L.  Exhibits.**    The Basic Lease Information, and the Exhibits, addenda and attachments attachedhereto are hereby incorporated herein by this reference and made a part of this Lease as though fully set forth herein.  **M.  No Light, Air or View Easement.**    Any diminution or shutting off of light, air or view by any structure which may be erected on lands adjacent to or in the vicinity of the Building shall inno way affect this Lease or impose any liability on Landlord.  **N.  No Third PartyBenefit.**    This Lease is a contract between Landlord and Tenant and nothing herein is intended to create any third party benefit.  **O.  Quiet Enjoyment.**    Upon payment by Tenant of the Rent, and upon the observance and performance of all of the other covenants, terms and conditions onTenant’s part to be observed and performed, Tenant shall peaceably and quietly hold and enjoy the Premises for the term hereby demised without hindrance or interruption by Landlord or any other person or persons lawfully or equitably claimingby, through or under Landlord, subject, nevertheless, to all of the other terms and conditions of this Lease.  **P.  Counterparts.**    This Lease may be executed in any number of counterparts, each of which shall be deemed an original.  **Q.  Multiple Parties.**    If more than one person or entity is named herein as Tenant, such multiple parties shall have joint andseveral responsibility to comply with the terms of this Lease.  **R.  Prorations.**    Any Rent or other amounts payable to Landlord by Tenant hereunder for any fractional month shall be prorated based on a calendar month. As used herein, the term “fiscalyear” shall mean the calendar year or such other fiscal year as Landlord may deem appropriate.  **S.  Brokerage Disclosure.**    Tenant shall indemnify and hold Landlord, its trustees, members, principals, beneficiaries, partners, officers, directors, employees, and agents harmless from allclaims of any other brokers claiming to have represented Tenant in connection with this Lease other than CRESA Partners (“Broker”). Landlord agrees to indemnify and hold Tenant harmless from all claims of any brokers claiming to haverepresented Landlord in connection with this Lease. Equity Office Properties Management Corp. (“EOPMC”) is an affiliate of Landlord and represents only the Landlord in this transaction. Any assistance rendered by any agent or employee ofEOPMC in connection with this Lease or any subsequent amendment or modification hereto has been or will be made as an accommodation to Tenant solely in furtherance of consummating the transaction on behalf of Landlord, and not as agent for Tenant.Landlord agrees to pay a brokerage commission to Broker in accordance with the terms of a separate written commission agreement to be entered into between Landlord and Broker, provided that in no event shall Landlord be obligated to pay a commissionto Broker in connection with any extension of the Term or in connection with any additional space that is leased by Tenant pursuant to the terms of this Lease except as may be specifically provided otherwise in such written agreement or futurewritten agreement between Landlord and Broker. 13 
 **39.    ADDITIONAL PROVISIONS** **A.    Renewal Option.** 1.  *Grant of Option; Conditions.    *Tenant shall have the right to extend the Term (the “Renewal Option”) for one additional period of 5 years commencing on the day followingthe Termination Date of the initial Term and ending on the 5th anniversary of the Termination Date (the “Renewal Term”), if:  a.  Landlord receives notice of exercise (“Initial Renewal Notice”) not less than 12 full calendar months prior to the expiration of the initial Term and not more than 24 fullcalendar months prior to the expiration of the initial Term; and  b.  Tenant is not indefault under the Lease beyond any applicable cure periods at the time that Tenant delivers its Initial Renewal Notice or at the time Tenant delivers its Binding Notice (as defined below); and  c.  The Lease has not been assigned (other than pursuant to a Permitted Transfer, as defined in Article 21 of the Lease) prior to the datethat Tenant delivers its Initial Renewal Notice or prior to the date Tenant delivers its Binding Notice.  2.  *Terms Applicable to Premises During Renewal Term.* a.  The initial Base Rent rate per rentable square foot for the Premises during the Renewal Term shall equal the Prevailing Market (hereinafter defined) rate per rentable square foot for the Premises. Base Rent during theRenewal Term shall increase, if at all, in accordance with the increases assumed in the determination of Prevailing Market rate. Base Rent attributable to the Premises shall be payable in monthly installments in accordance with the terms andconditions of Article 6 of the Lease.  3.  Tenant shall pay Additional Rent (i.e. Operating Expenses)for the Premises during the Renewal Term in accordance with Article 6 of the Lease, and the manner and method in which Tenant reimburses Landlord for Tenant’s Proportionate Share of Operating Expenses applicable to such matter, shall be some ofthe factors considered in determining the Prevailing Market rate for the Renewal Term.  4.  *Procedurefor Determining Prevailing Market.    *Within 30 days after receipt of Tenant’s Initial Renewal Notice, Landlord shall advise Tenant of the applicable Base Rent rate for the Premises for the Renewal Term. Tenant, within15 days after the date on which Landlord advises Tenant of the applicable Base Rent rate for the Renewal Term, shall either (i) give Landlord final binding written notice (“Binding Notice”) of Tenant’s exercise of its Renewal Option,or (ii) if Tenant disagrees with Landlord’s determination, provide Landlord with written notice of rejection (the “Rejection Notice”). If Tenant fails to provide Landlord with either a Binding Notice or Rejection Notice within such 15day period, Tenant’s Renewal Option shall be null and void and of no further force and effect. If Tenant provides Landlord with a Binding Notice, Landlord and Tenant shall enter into the Renewal Amendment (as defined below) upon the terms andconditions set forth herein. If Tenant provides Landlord with a Rejection Notice, Landlord and Tenant shall work together in good faith to agree upon the Prevailing Market rate for the Premises during the Renewal Term. When Landlord and Tenant haveagreed upon the Prevailing Market rate for the Premises, such agreement shall be reflected in a written agreement between Landlord and Tenant, whether in a letter or otherwise, and Landlord and Tenant shall enter into the Renewal Amendment inaccordance with the terms and conditions hereof. Notwithstanding the foregoing, if Landlord and Tenant are unable to agree upon the Prevailing Market rate for the Premises within 30 days after the date Tenant provides Landlord with the RejectionNotice, Tenant’s Renewal Option shall be deemed to be null and void and of no force and effect.  If Tenantand Landlord are unable to agree on a mutually acceptable rental rate for any such increase period within thirty (30) days after notification by Landlord to Tenant of Landlord’s determination of the new Base Rent for the applicable increaseperiod, but in any event no later than the date which is ninety (90) days prior to the expiration of the 115th month of the Term, then on or before such date Landlord and Tenant shall each appoint a licensed real estate broker with at least ten (10)year’s experience in leasing industrial space in the area in which the Building is located to act as arbitrators. The two (2) arbitrators so appointed shall determine the fair market rental value for the Premises for the applicable increaseperiod based on the above criteria and each shall submit his or her determination of such fair market rental value to Landlord and Tenant in writing, within sixty (60) days after their appointment.  If the two (2) arbitrators so appointed cannot agree on the fair market rental value for the applicable increase period within such 60-dayperiod, the two (2) arbitrators shall within five (5) days thereafter appoint a third arbitrator who shall be a licensed real estate broker with at least ten (10) year’s experience in leasing industrial space in the area in which the Buildingis located. The third arbitrator so appointed shall independently determine the fair market rental value for the Premises for the applicable increase period within thirty (30) days after appointment, by selecting from the proposals submitted by eachof the first two arbitrators the one that most closely approximates the third arbitrator’s determination of such fair market rental value. The third arbitrator shall have no right to adopt a compromise or middle ground or any modification ofeither of the proposals submitted by the first two arbitrators. The proposal chosen by the third arbitrator as most closely approximating the third arbitrator’s determination of the fair market rental value for the applicable increase periodshall constitute the decision and award of the arbitrators and shall be final and binding on the parties.  Eachparty shall pay the fees and expenses of the arbitrator appointed by such party and one-half (1/2) of the fees and expenses of the third arbitrator.  If either party fails to appoint an arbitrator, or if either of the first two arbitrators fails to submit his or her proposal of fair market rental value to the other party, in each case within thetime periods set forth above, then the decision of the other party’s arbitrator shall be considered final and binding.  5.  *Renewal Amendment.    *If Tenant is entitled to and properly exercises its Renewal Option, Landlord shall prepare an amendment (the “Renewal Amendment”) to reflect changes in the BaseRent, Term, Termination Date and other appropriate terms. The Renewal Amendment shall be sent to Tenant within a reasonable time after Landlord’s receipt of the Binding Notice or other written agreement by Landlord and Tenant regarding thePrevailing Market rate, and Tenant shall execute and return the Renewal Amendment to Landlord within 15 days after Tenant’s receipt of same, but, upon final determination of the Prevailing Market rate applicable during the Renewal Term asdescribed herein, an otherwise valid exercise of the Renewal Option shall be fully effective whether or not the Renewal Amendment is 14 
executed. Within a reasonable time after Landlord’s receipt of the copies of the Renewal Amendment executed by Tenant, Landlord shallexecute the same provided Tenant has made no modifications to the Renewal Amendment which have not been agreed to by Landlord.  6.  *Definition of Prevailing Market*.    For purposes of this Renewal Option, “Prevailing Market” shall mean the arms length fair market annual rental rate per rentable square foot underrenewal leases and amendments entered into on or about the date on which the Prevailing Market is being determined hereunder for space comparable to the Premises in the Building and other buildings comparable to the Building in the Hayward,California area. The determination of Prevailing Market shall take into account any material economic differences between the terms of this Lease and any comparison lease or amendment, such as rent abatements, construction costs and otherconcessions and the manner, if any, in which the landlord under any such lease is reimbursed for operating expenses and taxes; provided, however, the value of any Alterations made to the Premises and paid for solely by Tenant shall not be consideredwhen determining the Prevailing Market rate for the Premises. The determination of Prevailing Market shall also take into consideration any reasonably anticipated changes in the Prevailing Market rate from the time such Prevailing Market rate isbeing determined and the time such Prevailing Market rate will become effective under this Lease.  **B.    MonumentSignage.** 1.  During the initial Term and any extension thereof, Tenant, at Tenant’s sole cost,but subject to governmental approval, shall have the right to maintain its existing (as of the date of this Lease) sign on the monument sign located at the main entrance to the Building (the “Existing Monument Sign”). Landlord shall havethe right to require that all names on the Existing Monument Sign be of the same size and style. Tenant’s right to place its name on the Existing Monument Sign, and the location of Tenant’s name on the Existing Monument Sign, shall besubject to the existing rights of existing tenants in the Project. Although the Existing Monument Sign will be maintained by Landlord, Tenant shall pay its proportionate share of the cost of any maintenance and repair associated with the ExistingMonument Sign.  2.  Upon expiration or earlier termination of this Lease or Tenant’s right topossession of the Premises, Landlord shall have the right to remove Tenant’s name from the Existing Monument Sign, at Tenant’s cost, payable as Additional Rent within thirty (30) days after demand therefor, or if Tenant fails to remove thesign or its name, as required, within 30 days after written request from Landlord, then Landlord may remove such signage and Tenant shall pay Landlord all costs related thereto, as Additional Rent, within 30 days after demand therefor.  **40.    JURY TRIAL WAIVER** EACH PARTY HERETO (WHICH INCLUDES ANY ASSIGNEE, SUCCESSOR HEIR OR PERSONAL REPRESENTATIVE OF A PARTY) SHALL NOT SEEK A JURY TRIAL, HEREBY WAIVES TRIAL BY JURY, AND HEREBYFURTHER WAIVES ANY OBJECTION TO VENUE IN THE COUNTY IN WHICH THE BUILDING IS LOCATED, AND AGREES AND CONSENTS TO PERSONAL JURISDICTION OF THE COURTS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IN ANY ACTION OR PROCEEDING OR COUNTERCLAIM BROUGHTBY ANY PARTY HERETO AGAINST THE OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT’S USE OR OCCUPANCY OF THE PREMISES, OR ANY CLAIM OF INJURY OR DAMAGE, OR THEENFORCEMENT OF ANY REMEDY UNDER ANY STATUTE, EMERGENCY OR OTHERWISE, WHETHER ANY OF THE FOREGOING IS BASED ON THIS LEASE OR ON TORT LAW. EACH PARTY REPRESENTS THAT IT HAS HAD THE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL CONCERNING THE EFFECT OFTHIS PARAGRAPH 40. THE PROVISIONS OF THIS PARAGRAPH 40 SHALL SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS LEASE.  **IN WITNESS WHEREOF**, the parties hereto have executed this Lease as of the day and the year first above written.  **LANDLORD**   **TENANT****EOP-INDUSTRIAL PORTFOLIO, L.L.C., a Delaware limited liability company**   **KOSAN BIOSCIENCES INCORPORATED, a Delaware corporation**By: EOP Operating Limited Partnership, a Delaware limited partnership, its sole member        By: /s/    MICHAEL S. OSTRACH              Name: **Michael S. Ostrach**      Its: **President**By: Equity Office Properties Trust, a Maryland real estate investment trust, its general partner    By: /s/    MARK GEISREITER           By: /s/    SUSAN M. KANAYA      Name: **Mark Geisreiter        **   Name **Susan M. Kanaya       **Its: **Senior Vice President**   Its: **SVP, Finance and CFO** 15 
 **EXHIBIT A** **Industrial Lease****Rules and Regulations** 1.  Driveways, sidewalks, halls, passages, exits, entrances, elevators, escalators and stairways shall not be obstructed bytenants or used by tenants for any purpose other than for ingress to and egress from their respective premises. The driveways, sidewalks, halls, passages, exits, entrances, elevators and stairways are not for the use of the general public andLandlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence, in the judgment of Landlord, shall be prejudicial to the safety, character, reputation and interests of the Building, the Project andits tenants, provided that nothing herein contained shall be construed to prevent such access to persons with whom any tenant normally deals in the ordinary course of such tenant’s business unless such persons are engaged in illegal activities.No tenant, and no employees or invitees of any tenant, shall go upon the roof of any Building, except as authorized by Landlord.  2.  All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Tenant by a person or vendor approved by Landlord and shall be removed by Tenant at the time ofvacancy at Tenant’s expense.  3.  The directory of the Building or Project will be providedexclusively for the display of the name and location of tenants only and Landlord reserves the right to charge for the use thereof and to exclude any other names therefrom.  4.  Landlord and its agents shall not be liable for damages for any error concerning the admission to, or exclusion from, the Building or the Project of anyperson.  5.  Tenant shall not alter any lock or access device or install a new or additional lock oraccess device or bolt on any door of its Premises, without the prior written consent of Landlord. If Landlord shall give its consent, Tenant shall in each case furnish Landlord with a key for any such lock. Tenant, upon the termination of itstenancy, shall deliver to Landlord the keys for all doors which have been furnished to Tenant, and in the event of loss of any keys so furnished, shall pay Landlord therefor.  6.  The restrooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and noforeign substance of any kind whatsoever shall be thrown into them. The expense of any breakage, stoppage, or damage resulting from violation of this rule shall be borne by the tenant who, or whose employees or invitees, shall have caused thebreakage, stoppage, or damage.  7.  Tenant shall not use or keep in or on the Premises, the Building orthe Project any kerosene, gasoline, or inflammable or combustible fluid or material except in strict accordance with the terms of the Lease.  8. Tenant shall not allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors and/or vibrations orinterfere in any way with other tenants or those having business therein, nor shall any animals or birds be brought or kept in or about the Premises, the Building, or the Project.  9.  Except with the prior written consent of Landlord, Tenant shall not sell, or permit the sale, at retail, of newspapers, magazines, periodicals, theatertickets or any other goods or merchandise in or on the Premises, nor shall Tenant carry on, or permit or allow any employee or other person to carry on, the business of stenography, typewriting or any similar business in or from the Premises for theservice or accommodation of occupants of any other portion of the Building, or the business of a public barber shop, beauty parlor, nor shall the Premises be used for any illegal, improper, immoral or objectionable purpose, or any business oractivity other than that specifically provided for in such Tenant’s Lease. Tenant shall not accept hairstyling, barbering, shoeshine, nail, massage or similar services in the Premises or common areas except as authorized by Landlord. 10.  Tenant shall not install any radio or television antenna, satellite dish, loudspeaker or any otherdevice on the exterior walls or the roof of the Building, without Landlord’s consent. Tenant shall not interfere with radio or television broadcasting or reception from or in the Building, the Project or elsewhere.  11.  Tenant shall not place a load upon any floor of its Premises which exceeds the load per square foot which such floor wasdesigned to carry or which is allowed by law.  12.  Each tenant shall store all its trash and garbagewithin the interior of the Premises or as otherwise directed by Landlord from time to time. Tenant shall not place in the trash boxes or receptacles any personal trash or any material that may not or cannot be disposed of in the ordinary andcustomary manner of removing and disposing of trash and garbage in the city, without violation of any law or ordinance governing such disposal.  13.  Canvassing, soliciting, distribution of handbills or any other written material and peddling in the Building and the Project are prohibited and each tenant shall cooperate to prevent thesame. No tenant shall make room-to-room solicitation of business from other tenants in the Building or the Project, without the written consent of Landlord.  14.  Landlord shall have the right, exercisable without notice and without liability to any tenant, to change the name and address of the Building and the Project.  15.  Landlord reserves the right to exclude or expel from the Project any person who, in Landlord’s judgment, is under theinfluence of alcohol or drugs or who commits any act in violation of any of these Rules and Regulations.  16.  Without the prior written consent of Landlord, Tenant shall not use the name of the Building or the Project or any photograph or other likeness of the Building or the Project in connection with, or in promoting oradvertising, Tenant’s business except that Tenant may include the Building’s or Project’s name in Tenant’s address.  17.  Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency.  18.  Tenant assumes any and all responsibility for protecting its Premises from theft, robbery and pilferage, which includes keeping doors locked and other meansof entry to the Premises closed.  19.  Landlord reserves the right to designate the use of the parkingspaces on the Project. Tenant or Tenant’s guests shall park between designated parking lines only, and shall not occupy two parking spaces with one car. No truck tractors, trailers or fifth wheel are allowed to be parked anywhere at any timewithin the Project other than in Tenant’s own truck dock well. Vehicles in violation of the above shall be subject to tow-away, at vehicle owner’s expense. No tenant of the Building shall park in visitor or reserved parking areas orloading areas. Any tenant found parking in such designated visitor or reserved parking areas or loading areas or unauthorized areas shall be subject to tow-away at vehicle owner’s expense. The parking areas shall not be used to provide carwash, oil changes, detailing, 1 
 automotive repair or other services unless otherwise approved or furnished by Landlord. Tenant will fromtime to time, upon the request of Landlord, supply Landlord with a list of license plate numbers of vehicles owned or operated by its employees or agents.  20.  No Tenant is allowed to unload, unpack, pack or in any way manipulate any products, materials or goods in the common areas of the Project including the parking and driveway areas of theProject. All products, goods and materials must be manipulated, handled, kept, and stored within the Tenant’s Premises and not in any exterior areas, including, but not limited to, exterior dock platforms, against the exterior of the Building,parking areas and driveway areas of the Project. Tenant also agrees to keep the exterior of the Premises clean and free of nails, wood, pallets, packing materials, barrels and any other debris produced from their operation. All products, materialsand goods are to enter and exit the Premises by being loaded or unloaded through dock high doors into trucks and or trailers, over dock high loading platforms into trucks and or trailers or loaded or unloaded into trucks and or trailers within thePremises through grade level door access.  21.  Tenant shall be responsible for the observance of all ofthe foregoing Rules and Regulations by Tenant’s employees, agents, clients, customers, invitees and guests.  22.  These Rules and Regulations are in addition to, and shall not be construed to in any way modify, alter or amend, in whole or in part, the terms, covenants, agreements and conditions of any lease of any premises in theProject. In the event of any conflict between these rules and the provisions of the Lease, the provisions of the Lease shall control.  23.  Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant or tenants, but no such waiver by Landlord shall be construed as a waiver of such Rules andRegulations in favor of any other tenant or tenants, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all tenants of the Building.  Landlord reserves the right to make such other and reasonable non-discriminatory rules and regulations as in its judgment may from time to time be needed for safety and security, for care andcleanliness of the Building and the Project and for the preservation of good order therein. Tenant agrees to abide by all such Rules and Regulations herein stated and any additional rules and regulations which are adopted. 2 
 **EXHIBIT B** **SITE PLAN, PROPERTY DESCRIPTION**1 
 **EXHIBIT C** **LEASE IMPROVEMENT AGREEMENT** ThisExhibit is attached to and made a part of the Lease, by and between **EOP-INDUSTRIAL PORTFOLIO, L.L.C., a Delaware limited liability company** (“Landlord”) and **KOSAN BIOSCIENCES INCORPORATED, a Delaware corporation**(“Tenant”) for space in the Building located at 3832 Bay Center Place, Hayward, California.  As used inthis Work Letter, the “Premises” shall be deemed to mean the Premises, as initially defined in the attached Lease.  **I.    Alterations and Allowance.** A.  Tenant, following thedelivery of the Premises by Landlord and the full and final execution and delivery of the Lease to which this Exhibit is attached and all prepaid rental and security deposits required under such agreement, shall have the right to perform alterationsand improvements in the Premises (the “Initial Alterations”). Notwithstanding the foregoing, Tenant and its contractors shall not have the right to perform Initial Alterations in the Premises unless and until Tenant has complied with allof the terms and conditions of Article 12 of the Lease, including, without limitation, approval by Landlord of the final plans for the Initial Alterations and the contractors to be retained by Tenant to perform such Initial Alterations. Tenant shallbe responsible for all elements of the design of Tenant’s plans (including, without limitation, compliance with law, functionality of design, the structural integrity of the design, the configuration of the premises and the placement ofTenant’s furniture, appliances and equipment), and Landlord’s approval of Tenant’s plans shall in no event relieve Tenant of the responsibility for such design. Landlord’s approval of the contractors to perform the InitialAlterations shall not be unreasonably withheld. The parties agree that Landlord’s approval of the general contractor to perform the Initial Alterations shall not be considered to be unreasonably withheld if any such general contractor (i) doesnot have trade references reasonably acceptable to Landlord, (ii) does not maintain insurance as required pursuant to the terms of this Lease, (iii) does not have the ability to be bonded for the work in an amount of no less than 150% of the totalestimated cost of the Initial Alterations, (iv) does not provide current financial statements reasonably acceptable to Landlord, or (v) is not licensed as a contractor in the state/municipality in which the Premises is located. Tenant acknowledgesthe foregoing is not intended to be an exclusive list of the reasons why Landlord may reasonably withhold its consent to a general contractor.  B.    Provided Tenant is not in default, Landlord agrees to contribute the sum of $5,000.00 (the “Allowance”) toward the cost of performing the Initial Alterations inpreparation of Tenant’s occupancy of the Premises. The Allowance may only be used for hard costs in connection with the Initial Alterations. The Allowance shall be paid to Tenant or, at Landlord’s option, to the order of the generalcontractor that performed the Initial Alterations, within 30 days following receipt by Landlord of (1) receipted bills covering all labor and materials expended and used in the Initial Alterations; (2) a sworn contractor’s affidavit from thegeneral contractor and a request to disburse from Tenant containing an approval by Tenant of the work done; (3) full and final waivers of lien; (4) as-built plans of the Initial Alterations; and (5) the certification of Tenant and its architect thatthe Initial Alterations have been installed in a good and workmanlike manner in accordance with the approved plans, and in accordance with applicable laws, codes and ordinances. The Allowance shall be disbursed in the amount reflected on thereceipted bills meeting the requirements above. Notwithstanding anything herein to the contrary, Landlord shall not be obligated to disburse any portion of the Allowance during the continuance of an uncured default under the Lease, andLandlord’s obligation to disburse shall only resume when and if such default is cured.  C.  In noevent shall the Allowance be used for the purchase of equipment, furniture or other items of personal property of Tenant. If Tenant does not submit a request for payment of the entire Allowance to Landlord in accordance with the provisions containedin this Exhibit by December 31, 2004, any unused amount shall accrue to the sole benefit of Landlord, it being understood that Tenant shall not be entitled to any credit, abatement or other concession in connection therewith. Tenant shall beresponsible for all applicable state sales or use taxes, if any, payable in connection with the Initial Alterations and/or Allowance  D.  Tenant agrees to accept the Premises in its “as-is” condition and configuration, it being agreed that Landlord shall not be required to perform any work or, except as provided above with respect tothe Allowance, incur any costs in connection with the construction or demolition of any improvements in the Premises.  E.  This Exhibit shall not be deemed applicable to any additional space added to the Premises at any time or from time to time, whether by any options under the Lease or otherwise, or to any portion of the original Premisesor any additions to the Premises in the event of a renewal or extension of the original Term of the Lease, whether by any options under the Lease or otherwise, unless expressly so provided in the Lease or any amendment or supplement to the Lease.1 
 **EXHIBIT D** **HAZARDOUS MATERIALS QUESTIONNAIRE** This questionnaire is designed to solicit information regarding Tenant’s proposed use, generation, treatment, storage, transfer or disposal of hazardous or toxic materials, substances or wastes. If this Questionnaire is attachedto or provided in connection with a lease, the reference herein to any such items shall include all items defined as “Hazardous Materials,” “Hazardous Substances,” “Hazardous Wastes,” “Toxic Materials,”“Toxic Substances, “Toxic Wastes,” or such similar definitions contained in the lease. Please complete the questionnaire and return it to Landlord for evaluation. If your use of materials or substances, or generation of wastes isconsidered to be significant, further information may be requested regarding your plans for hazardous and toxic materials management. Your cooperation in this matter is appreciated. If you have any questions, do not hesitate to call us forassistance.  **1.    PROPOSED TENANT** Name (Corporation, Individual, Corporate or Individual DBA, or Public Agency):                                                                                                                                                                                                                                                                                                                              Standard Industrial Classification Code (SIC):                                                                                                                                 Street Address:                                                                                                                                                                                            City, State, Zip Code:                                                                                                                                                                               Contact Person & Title:                                                                                                                                                                      Telephone Number:(        )                                            Facsimile Number: (        )                                              **2.    LOCATION AND ADDRESS OF PROPOSED LEASE** Street Address:                                                                                                                                                                                         City, State, Zip Code:                                                                                                                                                                            Bordering Streets:                                                                                                                                                                                   Streets to which Premises has Access:                                                                                                                                               **3.    DESCRIPTION OFPREMISES** Floor Area:                                                                                                                                                                                                 Number of Parking Spaces:                                                                                                                                                                  Date of Original Construction:                                                                                                                                                             Past Uses of Premises:                                                                                                                                                                            Dates and Descriptions of Significant Additions, Alterations or Improvements:                                                                                                                                                                                                                                                                                      Proposed Additions, Alterations or Improvements, ifany:                                                                                                    1 
 **4.    DESCRIPTION OF PROPOSED PREMISES USE** Describe proposed use and operation of Premises including (i) services to be performed, (ii) nature and types of manufacturing or assemblyprocesses, if any, and (iii) the materials or products to be stored at the Premises.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Will the operation of your business at thePremises involve the use, generation, treatment, storage, transfer or disposal of hazardous wastes or materials? Do they now? Yes          No          Ifthe answer is “yes,” or if your SIC code number is between 2000 to 4000, please complete Section V.  **5.    PERMIT DISCLOSURE** Does or will the operation of any facet ofyour business at the Premises require any permits, licenses or plan approvals from any of the following agencies?  U.S. Environmental Protection Agency  Yes           No         City or County Sanitation District  Yes           No         State Department of Health Services  Yes           No         U.S. Nuclear Regulator Commission  Yes           No         Air Quality Management District  Yes           No         Bureau of Alcohol, Firearms and Tobacco  Yes           No         City or County Fire Department  Yes           No         Regional Water Quality Control Board  Yes           No         Other Governmental Agencies (if yes,  Yes           No         identify:                                                    )       If the answer to any of the above is “yes,” pleaseindicate permit or license numbers, issuing agency and expiration date or renewal date, if applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     If your answer to any of the above is“yes,” please complete Sections VI and VII. 2 
 **6.     HAZARDOUS MATERIALS DISCLOSURE** Will any hazardous or toxic materials or substances be stored on the Premises? Yes         No          If the answer is “yes,” please describe the materials or substances to be stored, the quantities thereof and the proposed method of storage of the same (i.e., drums, aboveground orunderground storage tanks, cylinders, other), and whether the material is a Solid (S), Liquid (L) or Gas (G):  **Material/ Substance**  **Quantity to be****Stored on Premises**  **Storage Method**  **Amount to be Stored****on a Monthly Basis**  **Maximum Period of****Premises Storage**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      Attach additional sheets if necessary.  Is any modification of the Premises improvements required or planned to mitigate the release of toxic or hazardous materials substance orwastes into the environment? Yes          No          If the answer is “yes,” please describe the proposed Premises modifications:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     **7.     HAZARDOUS WASTE DISCLOSURE** Will any hazardous waste, including recyclable waste, be generated by the operation of your business at thePremises? Yes          No          If the answer is “yes,” please list the hazardous waste which is expected to be generated (or potentially willbe generated) at the Premises, its hazard class and volume/frequency of generation on a monthly basis.  **Waste Name** **Hazard Class** **Volume/Month**  **Maximum Period of****Premises Storage**                                                                                                                                                                                                                                                                                                                                                                                                                   Attach additional sheets if necessary.  If the answer is “yes,” please also indicate if any such wastes are to be stored within the Premises and the proposed method ofstorage (i.e., drums, aboveground or underground storage tanks, cylinders, other).  **Waste Name**  **Storage Method**                                                                                                                                                                                                                                                                                                                                                                                                                       Attach additional sheets if necessary.  If the answer is “yes,” please also describe the method(s) of disposal for each waste. Indicate where disposal will take placeincluding the methods, equipment and companies to be used to transport the waste:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    3 
 Is any treatment or processing of hazardous wastes to be conducted at thePremises? Yes          No          If the answer is “yes,” please describe proposed treatment/processing methods:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Which agencies are responsible formonitoring and evaluating compliance with respect to the storage and disposal of hazardous materials or wastes at or from the Premises? (Please list all agencies):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Have there been any agency enforcementactions regarding Tenant (or any affiliate thereof), or any existing Tenant’s (or any affiliate’s) facilities, or any past, pending or outstanding administrative orders or consent decrees with respect to Tenant or any affiliate thereof?Yes         No         If the answer is “yes,” have there been any continuing compliance obligations imposed on Tenant or its affiliates as aresult of the decrees or orders? Yes         No         If the answer is “yes,” please describe:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Has Tenant or any of its affiliates beenthe recipient of requests for information, notice and demand letters, cleanup and abatement orders, or cease and desist orders or other administrative inquiries? Yes        No         If the answer is “yes,” please describe:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    Are there any pending citizen lawsuits, orhave any notices of violations been provided to Tenant or its affiliates or with respect to any existing facilities pursuant to the citizens suit provisions of any statute? Yes        No         If the answer is “yes,” please describe:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Have there been any previous lawsuitsagainst the company regarding environmental concerns? Yes         No         If the answer is “yes,” please describe how these lawsuits wereresolved:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Has an environmental audit ever beenconducted at any of your company’s existing facilities? Yes         No         If the answer is “yes,” please describe: 4 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Does your company carry environmentalimpairment insurance? Yes           No           If the answer is “yes,” what is the name of the carrier and what are theeffective periods and monetary limits of such coverage?                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        **8.    EQUIPMENT LOCATED OR TO BELOCATED AT THE PREMISES** Is (or will there be) any electrical transformer or other equipment containingpolychlorinated biphenyls located at the Premises? Yes           No           If the answer is “yes,” please specify thesize, number and location (or proposed location):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Is (or will there be) any tank forstorage of a petroleum product located at the Premises? Yes           No           If the answer is “yes,” pleasespecify capacity and contents of tank; permits, licenses and/or approvals received or to be received therefor and any spill prevention control or conformance plan to be taken in connection therewith:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        **9.    ONGOING ACTIVITIES (APPLICABLETO TENANTS IN POSSESSION)** Has any hazardous material, substance or waste spilled, leaked, discharged,leached, escaped or otherwise been released into the environment at the Premises? Yes           No           If the answer is“yes,” please describe including (i) the date and duration of each such release, (ii) the material, substance or waste released, (iii) the extent of the spread of such release into or onto the air, soil and/or water, (iv) any action toclean up the release, (v) any reports or notifications made of filed with any federal, state, or local agency, or any quasi-governmental agency (please provide copies of such reports or notifications) and (vi) describe any legal, administrative orother action taken by any of the foregoing agencies or by any other person as a result of the release:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        This Hazardous MaterialsQuestionnaire is certified as being true and accurate and has been completed by the party whose signature appears below on behalf of Tenant as of the date set forth below.  DATED:                                                                              Signature                                                                                     PrintName                                                                                  Title                                                                                            5 
 **EXHIBIT E** **FORM OF LETTER OF CREDIT** [Name of FinancialInstitution]  Irrevocable Standby  Letter of Credit No.                                                  IssuanceDate:                             Expiration Date:                         Applicant: Kosan Biosciences Incorporated  Beneficiary  EOP-Industrial Portfolio, L.L.C. 2200 Powell Street Suite 200 Emeryville, California 94608 Attention: Leasing Director  Ladies/Gentlemen:  We hereby establish our Irrevocable Standby Letter of Credit in your favor for the account of the above referenced Applicant in the amountof Nine Hundred Three Thousand Three Hundred Twelve and 00/100 U.S. Dollars ($903,312.00) available for payment at sight by your draft drawn on us when accompanied by the following documents:   1. An original copy of this Irrevocable Standby Letter of Credit.   2. Beneficiary’s dated statement purportedly signed by an authorized signatory or agent reading: “This draw in the amount of            U.S.Dollars ($            ) under your Irrevocable Standby Letter of CreditNo.        represents funds due and owing to us pursuant to the terms of that certain lease by and between             , as landlord, and            , as tenant, and/or any amendment to the lease or any other agreement between such parties related to the lease.”  It is a condition of this Irrevocable Standby Letter of Credit that it will be considered automatically renewed for a one year period uponthe expiration date set forth above and upon each anniversary of such date, unless at least 60 days prior to such expiration date or applicable anniversary thereof, we notify you in writing, by certified mail return receipt requested or byrecognized overnight courier service, that we elect not to so renew this Irrevocable Standby Letter of Credit. A copy of any such notice shall also be sent, in the same manner, to: Equity Office Properties Trust, 2 North Riverside Plaza, Suite 2100,Chicago, Illinois 60606, Attention: Treasury Department. In addition to the foregoing, we understand and agree that you shall be entitled to draw upon this Irrevocable Standby Letter of Credit in accordance with 1 and 2 above in the event that weelect not to renew this Irrevocable Standby Letter of Credit and, in addition, you provide us with a dated statement purportedly signed by an authorized signatory or agent of Beneficiary stating that the Applicant has failed to provide you with anacceptable substitute irrevocable standby letter of credit in accordance with the terms of the above referenced lease. We further acknowledge and agree that: (a) upon receipt of the documentation required herein, we will honor your draws againstthis Irrevocable Standby Letter of Credit without inquiry into the accuracy of Beneficiary’s signed statement and regardless of whether Applicant disputes the content of such statement; (b) this Irrevocable Standby Letter of Credit shall permitpartial draws and, in the event you elect to draw upon less than the full stated amount hereof, the stated amount of this Irrevocable Standby Letter of Credit shall be automatically reduced by the amount of such partial draw; and (c) you shall beentitled to transfer your interest in this Irrevocable Standby Letter of Credit from time to time and more than one time without our approval and without charge. In the event of a transfer, we reserve the right to require reasonable evidence of suchtransfer as a condition to any draw hereunder.  This Irrevocable Standby Letter of Credit is subject to theUniform Customs and Practice for Documentary Credits (1993 revision) ICC Publication No. 500.  We hereby engagewith you to honor drafts and documents drawn under and in compliance with the terms of this Irrevocable Standby Letter of Credit.  All communications to us with respect to this Irrevocable Standby Letter of Credit must be addressed to our office located at                                 to the attention of                             .  Very truly yours,[name] [title]1