**Exhibit 10.24****LEASE**   Landlord: Britannia Hacienda VIII LLC   Tenant: Alexza Pharmaceuticals, Inc.   Date: August 25, 2006TABLE OF CONTENTS         1. PROPERTY  1   1.1 Lease of Premises  1   1.2 Landlord’s Reserved Rights  2   1.3 First Refusal Right to Lease  2   1.4 Right of First Offer to Lease  4 2. TERM  5   2.1 Term  5   2.2 Early Possession  5   2.3 Condition of Premises  5   2.4 Acknowledgment of Rent Commencement Date  8   2.5 Holding Over  8   2.6 Option to Extend Term  8 3. RENTAL  9   3.1 Minimum Rental  9     (a)     Rental Amounts  9     (b)     Rental Amounts During Extended Term(s)  10     (c)     Square Footage of Premises  10   3.2 Late Charge  10 4. TAXES  11   4.1 Personal Property  11   4.2 Real Property  11 5. OPERATING EXPENSES  12   5.1 Payment of Operating Expenses  12   5.2 Definition of Operating Expenses  12   5.3 Determination of Operating Expenses  14   5.4 Final Accounting for Expense Year  14   5.5 Proration  15 6. UTILITIES  15   6.1 Payment  15   6.2 Interruption  16 7. ALTERATIONS; SIGNS  16   7.1 Right to Make Alterations  16   7.2 Title to Alterations  17   7.3 Tenant Trade Fixtures  18   7.4 No Liens  18   7.5 Signs  18 

 
         8. MAINTENANCE AND REPAIRS  18   8.1 Landlord’s Obligation for Maintenance  18   8.2 Tenant’s Obligation for Maintenance  19     (a)     GoodOrder, Condition and Repair  19     (b)     Landlord’s Remedy  19     (c)     Condition upon Surrender  20 9. USE OF PROPERTY  20   9.1 Permitted Use  20   9.2 [Intentionally Omitted.]  20   9.3 No Nuisance  20   9.4 Compliance with Laws  21   9.5 Liquidation Sales  21   9.6 Environmental Matters  21 10. INSURANCE AND INDEMNITY  27   10.1 Insurance  27   10.2 Quality of Policies and Certificates  30   10.3 Workers’ Compensation; Employees  30   10.4 Waiver of Subrogation  30   10.5 Increase in Premiums  31   10.6 Indemnification  31   10.7 Blanket Policy  32 11. SUBLEASE AND ASSIGNMENT  32   11.1 Assignment and Sublease of Building  32   11.2 Rights of Landlord  33 12. RIGHT OF ENTRY AND QUIET ENJOYMENT  34   12.1 Right of Entry  34   12.2 Quiet Enjoyment  34 13. CASUALTY AND TAKING  34   13.1 Damage or Destruction  34   13.2 Condemnation  36   13.3 Reservation of Compensation  37   13.4 Restoration of Improvements  37 14. DEFAULT  37   14.1 Events of Default  37     (a)     Abandonment  37     (b)     Nonpayment  38     (c)     Other Obligations  38     (d)     General Assignment  38     (e)     Bankruptcy  38     (f)     Receivership  38     (g)     Attachment  38     (h)     Insolvency  39   14.2 Remedies upon Tenant’s Default  39   14.3 Remedies Cumulative  40 15. SUBORDINATION, ATTORNMENT AND SALE  40   15.1 Subordination to Mortgage  40 
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           15.2 Sale of Landlord’s Interest  41   15.3 Estoppel Certificates  41   15.4 Subordination to CC&R’s  41   15.5 Mortgagee Protection  42 16. SECURITY  43   16.1 Deposit  43     (a)     Cash Security Deposit  43     (b)     Letter of Credit  43     (c)     Adjustment of Security Deposit  45 17. MISCELLANEOUS  45   17.1 Notices  45   17.2 Successors and Assigns  47   17.8 No Waiver  47   17.4 Severability  47   17.5 Litigation Between Parties  47   17.6 Surrender  47   17.7 Interpretation  47   17.8 Entire Agreement  48   17.9 Governing Law  48   17.10 No Partnership  48   17.11 Financial Information  48   17.12 Costs  49   17.13 Time  49   17.14 Rules and Regulations  49   17.15 Brokers  49   17.16 Memorandum of Lease  49   17.17 Corporate Authority  49   17.18 Execution and Delivery  50   17.19 Survival  50   17.20 Parking  50      EXHIBITS    EXHIBIT A- 1 Site Plan (The Center)EXHIBIT A-2 Building PlanEXHIBIT B WorkletterEXHIBIT C Form of Acknowledgment of Rent Commencement DateEXHIBIT D Existing Tenant Rights
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**LEASE**     THIS LEASE (**“Lease”**) is made and entered into as of August 25, 2006 (the**“Lease Commencement Date”**) by and between BRITANNIA HACIENDA VIII LLC, a Delawarelimited liability company (**“Landlord”**), and ALEXZA PHARMACEUTICALS, INC., a Delawarecorporation (**“Tenant”**).THE PARTIES AGREE AS FOLLOWS:1. PROPERTY      1.1 Lease of Premises.          (a) Landlord leases to Tenant and Tenant hires and leases from Landlord, on the terms,covenants and conditions hereinafter set forth, the premises (the **“Premises”**) consisting ofapproximately 65,604 square feet of space constituting the building commonly known as 2091 StierlinCourt (the **“Building”**) located in the Britannia Shoreline Technology Park (referred tointerchangeably herein as the **“Center”** or the **“Property”**) in the City of MountainView, County of Santa Clara, State of California. The location of the Premises within the Center isdepicted on the site plan attached hereto as **Exhibit A-l** and incorporated herein by thisreference (the **“Site Plan”**). The outline or footprint of the Building is depicted on thebuilding plan attached hereto as **Exhibit A-2** and incorporated herein by this reference (the**“Building Plan”**). The parking areas, driveways, sidewalks, landscaped areas and otherportions of the Center that lie outside the exterior walls of the buildings now or hereafterexisting from time to time in the Center, as depicted in the Site Plan and as hereafter modified byLandlord from time to time in accordance with the provisions of this Lease, are sometimes referredto herein as the **“Common Areas”**. Such Common Areas include, but are not limited to, the“recreational area” which is currently maintained by Landlord in the area between the buildings at2023 Stierlin Court and 2025 Stierlin Court, provided that the right of Tenant and otheroccupants of the Center to use such “recreational area” is subject to the right of the City ofMountain View to require that a portion of the recreational area be paved and converted to parkinguse at a time to be determined at the discretion of the City and/or the potential development ofthe area by Landlord or any subsequent owner of the Center.          (b) As an appurtenance to Tenant’s leasing of the Premises pursuant to Section 1.1(a),Landlord hereby grants to Tenant, for the benefit of Tenant and its employees, suppliers, shippers,customers and invitees, during the term of this Lease, the non-exclusive right to use, in commonwith others entitled to such use, (i) those portions of the Common Areas improved from time to timefor use as parking areas, driveways, sidewalks, landscaped areas, or for other common purposes, and(ii) all access easements and similar rights and privileges relating to or appurtenant to theCenter and created or existing from time to time under any access easement agreements, declarationsof covenants, conditions and restrictions, or other written agreements now or hereafter of recordwith respect to the Center, subject however to any
 

 
limitations applicable to such rights and privileges under applicable law, under this Lease and/orunder the written agreements creating such rights and privileges.     1.2 Landlord’s Reserved Rights. To the extent reasonably necessary to permit Landlordto exercise any rights of Landlord and discharge any obligations of Landlord under this Lease,Landlord shall have, in addition to the right of entry set forth in Section 12.1 hereof, thefollowing rights: (i) to make changes to the Common Areas, including, without limitation, changesin the location, size or shape of any portion of the Common Areas, and to construct and/or relocateparking structures and/or parking spaces in the Center; (ii) to close temporarily any of the CommonAreas for maintenance or other reasonable purposes; (iii) to construct, alter or add to otherbuildings and Common Area improvements in the Center; (iv) to use the Common Areas while engaged inmaking additional improvements, repairs or alterations to the Center or any portion thereof; and(v) to do and perform such other acts with respect to the Common Areas and the Center as may benecessary or appropriate. Landlord shall not exercise rights reserved to it pursuant to thisSection 1.2 in such a manner as to cause any material diminution of Tenant’s rights, or anymaterial increase of Tenant’s obligations, under this Lease, or in such a manner as to leave Tenantwithout reasonable parking or reasonable access to the Premises or otherwise to materially impairTenant’s ability to conduct its activities in the normal manner; provided, however, thatthe foregoing shall not limit or restrict Landlord’s right to undertake reasonable constructionactivity and Tenant’s use of the Premises shall be subject to reasonable temporary disruptionincidental to such activity diligently prosecuted.     1.3 First Refusal Right to Lease.          (a) The four buildings in the Center (collectively referred to herein as the **“FirstRefusal Buildings”** and each designated as a “First Refusal Building” on the Site Plan) whichare commonly known as 2021 Stierlin Court, 2023 Stierlin Court, 2071 Stierlin Court and 2081Stierlin Court are each presently leased (or, in the case of the building at 2023 Stierlin Court,partially leased) to existing tenants (collectively, the **“Existing Tenants”** andindividually, each an **“Existing Tenant”**) pursuant to written lease agreements (as suchexisting lease agreements now exist and as they may be amended from time to time, the **“Existing Leases”**). Landlord shall not lease all or any portion of any of the First Refusal Buildings atany time during the term of this Lease (including any extended terms, if applicable), except incompliance with this Section 1.3; provided, however, that the foregoing restriction shallnot apply during any period in which Tenant is in default under this Lease, beyond any applicablenotice and cure periods, and provided further, however, that Tenant’s rights pursuant to thisSection 1.3 are subordinate to the rights of the Existing Tenants and their respective successorsin interest (if any) pursuant to the Existing Leases and are further subordinate to the existingrights of all other tenants of the Center as of the Lease Commencement Date and their respectivesuccessors in interest, including (without limitation) any renewal, first refusal, first offer andother similar rights existing in favor of any other tenant or occupant of the Center as of the dateof this Lease. (The rights of the Existing Tenants and other tenants [if any] in the Center withrespect to the First Refusal Buildings and the ROFO Building [as defined below], to the extentmaterial with respect to Tenant’s rights under Sections 1.3 and/or 1.4 hereof, are summarized in**Exhibit D** attached hereto and incorporated herein by this reference and are hereinaftercollectively referred to as **“Existing Tenant Rights”**).
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          (b) If, at any time during the term of this Lease (including any extendedterms, if applicable), Landlord receives and wishes to accept a bona fide writtenoffer from a person or entity (an **“Offeror,”**provided, however, that the term“Offeror” shall not include any tenant with Existing Tenant Rights, nor shall it include theExisting Tenants with respect to any rights or negotiations under the Existing Leases) to leaseall or any portion of any First Refusal Building and if Tenant is not then in default under thisLease (beyond any applicable notice and cure periods), then Landlord shall give written notice ofsuch bona fide written offer to Tenant (the **“First Refusal Notice”**), specifyingthe material terms on which the Offeror proposes to lease the applicable First Refusal Building orapplicable portion thereof (the **“First Refusal Space”**), and shall offer to Tenant theopportunity to lease the First Refusal Space on the terms specified in the First Refusal Notice.For purposes of this Section 1.3(b), an offer shall be considered bona fide if it iscontained in a letter of intent or other writing signed by the Offeror and specifies the materialterms of the proposed lease. Tenant shall have ten (10) business days after the date of giving ofthe First Refusal Notice in which to accept such offer by written notice to Landlord. Upon suchacceptance by Tenant, the First Refusal Space shall be leased to Tenant on the terms set forth inthe First Refusal Notice and on the additional terms and provisions set forth in this Lease(except to the extent inconsistent with the terms set forth in the First Refusal Notice), and theparties shall promptly (and in all events within twenty (20) business days after delivery ofTenant’s acceptance) execute a lease amendment or other written agreement containing the terms ofthe First Refusal Notice and all other terms and provisions of this Lease not inconsistent withthe terms of said First Refusal Notice, except as the parties may otherwise mutually agree. IfTenant does not accept Landlord’s offer within the allotted time or if the parties fail to enterinto such a lease amendment or other written agreement within the required time (notwithstandingLandlord’s and Tenant’s good faith and diligent efforts to enter into such a lease amendment orother written agreement, provided that neither party shall be entitled to invoke its ownlack of good faith, diligent efforts, if applicable, as a basis for invoking this parentheticalqualification), Landlord shall thereafter have the right to lease the First Refusal Space to theOfferor or to any other third party, at any time within one hundred eighty (180) days after theexpiration of Landlord’s offer under the First Refusal Notice, at a minimum rental and on otherterms and conditions not materially more favorable to the lessee than the minimum rental and otherterms offered to Tenant in the First Refusal Notice. If, in the course of negotiations with theOfferor or another third party during the 180-day period described in the preceding sentence,Landlord wishes to modify the minimum rental or other terms set forth in the First Refusal Noticein a manner materially more favorable to the Offeror or other third party than the minimum rentalor other terms set forth in the First Refusal Notice, then Landlord shall be required to re-offerthe First Refusal Space to Tenant on such more favorable terms pursuant to a new First RefusalNotice, but Tenant’s time to respond to such new First Refusal Notice shall be limited to five (5)business days. If Landlord does not lease the First Refusal Space to the Offeror or another thirdparty during the 180-day period described above, or if Landlord leases the First Refusal Space tothe Offeror or another third party and Landlord later, upon expiration or termination of suchlease, again wishes to lease the First Refusal Space or any portion thereof during the term ofthis Lease (including any extended terms, if applicable), then in either such event this FirstRefusal Right shall reattach to the First Refusal Space on all of the same terms set forth above.
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     1.4 Right of First Offer to Lease.          (a) The building commonly known as 2011 Stierlin Court and designated as “ROFO Building” onthe Site Plan (the **“ROFO Building”**) is presently leased and occupied by an existing tenant(the **“Existing ROFO Tenant”**) pursuant to a written lease agreement (as it now exists and asit may be amended from time to time). Landlord shall not lease all or any portion of the ROFOBuilding at any time during the term of this Lease (including any extended terms, if applicable),except in compliance with this Section 1.4; provided, however, that the foregoingrestriction shall not apply during any period in which Tenant is in default under this Lease,beyond any applicable notice and cure periods, and provided further, however, that Tenant’srights pursuant to this Section 1.4 are subordinate to the Existing Tenant Rights.          (b) If, at any time during the term of this Lease (including any extended terms, ifapplicable), Landlord intends to lease all or any portion of the ROFO Building (other than pursuantto the exercise of any Existing Tenant Rights) and if Tenant is not then in default under thisLease (beyond any applicable notice and cure periods), then Landlord shall give written notice ofsuch intention to Tenant (the **“First Offer Notice”**), specifying the rent and other materialterms on which Landlord proposes to lease the ROFO Building or applicable portion thereof (the**“Offered Space”**), and shall offer to Tenant the opportunity to lease the Offered Space onthe terms specified in the First Offer Notice. Tenant shall have ten (10) business days after thedate of giving of the First Offer Notice in which to accept such offer by written notice toLandlord. Upon such acceptance by Tenant, the Offered Space shall be leased to Tenant on the termsset forth the First Offer Notice and on the additional terms and provisions set forth in this Lease(except to the extent inconsistent with the terms set forth in the First Offer Notice), and theparties shall promptly (and in all events within twenty (20) business days after delivery ofTenant’s acceptance) execute a lease amendment or other written agreement containing the terms ofthe First Offer Notice and all other terms and provisions of this Lease not inconsistent with theterms of said First Offer Notice, except as the parties may otherwise mutually agree. If Tenantdoes not accept Landlord’s offer within the allotted time or if the parties fail to enter into sucha lease amendment or other written agreement within the required time (notwithstanding Landlord’sand Tenant’s good faith and diligent efforts to enter into such a lease amendment or other writtenagreement, provided that neither party shall be entitled to invoke its own lack of goodfaith, diligent efforts, if applicable, as a basis for invoking this parenthetical qualification),Landlord shall thereafter have the right to lease the Offered Space to any third party, at any timewithin one hundred eighty (180) days after the expiration of Tenant’s acceptance period under theFirst Offer Notice, at a minimum rental and on other terms and conditions not materially morefavorable to the lessee than the minimum rental and other terms offered to Tenant in the FirstOffer Notice. If, in the course of negotiations with a third party during the 180-day perioddescribed in the preceding sentence, Landlord wishes to modify the minimum rental or other termsset forth in the First Offer Notice in a manner materially more favorable to the third party thanthe minimum rental or other terms set forth in the First Offer Notice, then Landlord shall berequired to re-offer the Offered Space to Tenant on such more favorable terms pursuant to a newFirst Offer Notice, but Tenant’s time to respond to such new First Offer Notice shall be limited tofive (5) business days. If Landlord does not lease the Offered Space to a third party during the180-day period described above, or if Landlord leases
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the Offered Space to third party and Landlord later, upon expiration or termination of such lease,again wishes to lease the Offered Space or any portion thereof during the term of this Lease(including any extended terms, if applicable), then in either such event this first offer rightshall reattach to the Offered Space on all of the same terms set forth above.2. TERM     2.1 Term. The term of this Lease shall commence on the Lease Commencement Dateas defined above. Tenant’s obligation to pay minimum rental and Operating Expenses underthis Lease shall commence on April 1, 2007 (the **“Rent Commencement Date”**), exceptas otherwise expressly provided in Section 2.2 below (if applicable). The term of thisLease shall end on the day immediately preceding the eleventh (11th) anniversary of theRent Commencement Date (the **“Termination Date”**), unless sooner terminated orextended as hereinafter provided.     2.2 Early Possession. Tenant shall have the nonexclusive right to enter and usethe Premises for the purpose of conducting preliminary inspections and measurements,preparing drawings, constructing improvements in the Premises (subject to all the termsand conditions of Article 7 below and of the Workletter as defined below), installingfixtures and furniture, laboratory equipment, computer equipment, telephone equipment,low-voltage data wiring and personal property and performing other similar workpreparatory to the commencement of Tenant’s business in the Premises, beginning on thefirst (1st) business day following the Lease Commencement Date (the **“EarlyAccess Date”**). Such early occupancy and possession by Tenant shall be subject to andupon all of the terms and conditions of this Lease (including, but not limited to,conditions relating to the payment of utilities and maintenance of required insurance byTenant), except that (i) Tenant shall have no obligation to pay minimum rental orOperating Expenses for any period prior to the Rent Commencement Date, and (ii) suchearly possession shall not advance or otherwise affect the Rent Commencement Date orTermination Date determined under Section 2.1, except to the extent (if any) expresslyprovided above in this Section 2.2. To the extent Landlord and/or its contractors orconsultants are also performing work in the Premises prior to the Rent Commencement Date,Tenant shall not unreasonably interfere with or delay Landlord’s contractors orconsultants by any early access, occupancy or possession under this Section 2.2, shallcoordinate and cooperate with Landlord and its contractors and consultants (who shallsimilarly coordinate and cooperate with Tenant and its contractors) to minimize anyinterference or delay by either party with respect to the other party’s work followingthe Early Access Date, and shall indemnify Landlord and its agents and employees to theextent provided in Section 10.6(a) below and in Paragraph 5(c) of the Workletter inconnection with Tenant’s early entry upon the Premises hereunder.     2.3 Condition of Premises. Tenant has had an opportunity to inspect the conditionof the Premises and agrees to accept the Premises “as is” in their condition existing asof the Lease Commencement Date, without any obligation on the part of Landlord toimprove, alter, repair or clean the Premises in any way for Tenant’s occupancy hereunder,except as otherwise expressly provided herein. Notwithstanding the foregoing:
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          (a) Landlord shall deliver the Premises and all Building systems and existingimprovements in “as is” condition, except that Landlord shall, at Landlord’s sole expense,perform all work necessary to cause the following (collectively, **“Landlord’s Work”**) to betrue as soon as practicable after the Early Access Date (and in all events prior to the RentCommencement Date): (i) the Building roof shall be in good and watertight condition; (ii) allexisting Building systems (including, but not limited to, mechanical, electrical, plumbing and lifesafety systems), utilities serving the Premises, Building glazing, Building roll-up doors and otherexisting improvements in the Premises shall be in good working condition and operable in theircurrent locations, prior to modifications (or damage, if any) as a result of Tenant’s improvementsor use, and shall remain so for a period of nine (9) months after the Rent Commencement Date(subject to the qualification set forth below in this paragraph regarding corrective workattributable to modifications or damage, if any, in the course of Tenant’s improvements to or useof the Premises); (iii) the walkways, parking lots, driveways and landscaping in the Common Areasshall be in good working condition; and (iv) the Premises and existing improvements therein, asdelivered to Tenant prior to modifications (or damage, if any) as a result of Tenant’s improvementsor use, and the Common Areas of the Center shall comply with all applicable laws, ordinances,regulations and building codes (including, but not limited to, the Americans with Disabilities Act(**“ADA”**), subject to the allocation of ADA compliance responsibilities under Section 2.3(c)below). Landlord shall proceed diligently and with reasonable efforts to complete Landlord’s Workas promptly as practicable after the Early Access Date, and Landlord and Tenant shall cooperatereasonably and in good faith with one another (and cause their respective consultants andcontractors to cooperate reasonably and in good faith with one another) in the manner described inSection 2.2 above in connection with the concurrent performance of their respective work in theBuilding. Following Landlord’s written notice to Tenant that Landlord has completed Landlord’s Workand is delivering the Premises and the existing Building systems and improvements in the conditionrequired above in this paragraph (**“Landlord’s Completion Notice”**), Tenant shall thereafterduring the term of this Lease be responsible (subject, however, to any corrective obligations ofLandlord as expressly set forth in this Section 2.3) for maintenance, repair and/or replacement ofall such systems and improvements to the extent required in accordance with Article 8 hereof.Notwithstanding the preceding sentence, if Landlord’s obligations with respect to Landlord’s Workunder this paragraph are violated in any respect, then it shall be the obligation of Landlord,after receipt of written notice from Tenant setting forth with specificity the nature of theviolation, to correct promptly and diligently, at Landlord’s sole cost, the condition(s)constituting such violation, except that Tenant shall be responsible for any such corrective workto the extent the condition(s) constituting the violation are attributable to modifications (ordamage, if any) in the course of Tenant’s improvements to or use of the Premises; provided,however, that Tenant’s failure to give such written notice to Landlord regarding any allegedviolation within nine (9) months after the Rent Commencement Date shall give rise to a conclusiveand irrebuttable presumption that Landlord has complied with all Landlord’s obligations under thisparagraph. TENANT ACKNOWLEDGES THAT THE WARRANTIES AND/OR OBLIGATIONS CONTAINED IN THIS SECTION 2.3ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PHYSICAL CONDITION OFTHE PREMISES, BUILDING SYSTEMS AND EXISTING IMPROVEMENTS IN THE
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PREMISES, AND THAT LANDLORD MAKES NO OTHER WARRANTIES EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION2.3.          (b) As set forth in the Workletter attached hereto as **Exhibit B** and incorporatedherein by this reference (the **“Workletter”**), Landlord shall provide Tenant with a tenantimprovement allowance in the amount of up to Eight Million Three Hundred Thirty-One Thousand SevenHundred Eight and no/100 Dollars ($8,331,708.00) (the **“Tenant Improvement Allowance”**)towards the construction of Tenant Improvements by Tenant in the Premises. Tenant’s construction ofsuch Tenant Improvements shall be governed by the provisions of Article 7 hereof and of theWorkletter, and such Tenant Improvements shall be constructed in compliance with all of theprovisions thereof (including, without limitation, all conditions relating to Landlord’s approvalof plans and specifications), as well as the provisions of this Section 2.3. The TenantImprovement Allowance shall not be used or useable by Tenant for any moving or relocation expensesof Tenant, or for any cost or expense associated with any moveable furniture, trade fixtures,personal property or any other item or element which, under the applicable provisions of thisLease, will not become Landlord’s property and remain with the Building upon expiration ortermination of this Lease, unless (and only to the extent) otherwise expressly agreed in writing byLandlord in its sole discretion. Any portion of the Tenant Improvement Allowance which has not beenclaimed or drawn by Tenant as of the date that is one year after the Rent Commencement Date shallexpire and shall no longer be available to Tenant thereafter. Additional conditions and proceduresrelating to the disbursement of the Tenant Improvement Allowance shall be as set forth in theWorkletter or as otherwise reasonably prescribed in writing by Landlord. The Tenant ImprovementAllowance is provided as part of the basic consideration to Tenant under this Lease and will notresult in any rental adjustment or additional rent beyond the rental amounts expressly provided inSection 3.1 hereof.          (c) Landlord warrants to Tenant that the Premises as they exist on the date of Landlord’sCompletion Notice, but without regard to Tenant’s improvements therein or to the particular use forwhich Tenant will occupy the Premises, shall not violate any covenants or restrictions of record orany applicable law, building code, regulation or ordinance in effect on the date of Landlord’sCompletion Notice. Tenant warrants to Landlord that the Tenant Improvements and any otherimprovements constructed by Tenant from time to time shall not violate any applicable law, buildingcode, regulation or ordinance in effect at the time such improvements are placed in service. Withoutlimiting the generality of the foregoing, the parties intend and acknowledge that Landlord shall beresponsible for ADA and building code compliance for all improvements in the Building shell andCommon Areas (including, but not limited to. existing Building access points, doors, entrances andramps) as they exist on the date of Landlord’s Completion Notice (except to the extent, if any,that such improvements in the Building and/or Common Areas consist of or are materially affected byimprovements constructed by Tenant, such as [but not limited to] any construction of additionalBuilding doors or access points as part of the Tenant Improvements), subject to the expressassignment of certain areas of responsibility to Tenant as set forth below, and that Tenant shallbe responsible for ADA and building code compliance with respect to the restroom cores and otherinterior spaces in the Building and any other ADA and building code compliance required inconnection with or as a result of improvements constructed by Tenant (provided, however,that nothing in
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this sentence is intended to make Tenant responsible for the cost of ADA compliance with respect toany existing improvements in the Building to the extent such compliance is required solely becauseof the dollar value or overall scope of the improvements constructed by Tenant as opposed to theparticular nature of such improvements), subject to the express assignment of certain areas ofresponsibility to Landlord as set forth above. If it is determined that any of these warranties hasbeen violated, then it shall be the obligation of the warranting party, after written notice fromthe other party, to correct the condition (s) constituting such violation promptly, at thewarranting party’s sole cost and expense. TENANT ACKNOWLEDGES THAT EXCEPT AS EXPRESSLY SET FORTH INTHIS LEASE, NEITHER LANDLORD NOR ANY AGENT OF LANDLORD HAS MADE ANY REPRESENTATION OR WARRANTY ASTO THE PRESENT OR FUTURE SUITABILITY OF THE CENTER OR THE PREMISES FOR THE CONDUCT OF TENANT’SBUSINESS OR PROPOSED BUSINESS THEREIN.     2.4 Acknowledgment of Rent Commencement Date. Promptly following the Rent CommencementDate, Landlord and Tenant shall execute a written acknowledgment of the Rent Commencement Date,Termination Date and related matters, substantially in the form attached hereto as **ExhibitC** (with appropriate insertions), which acknowledgment shall be deemed to be incorporated hereinby this reference. Notwithstanding the foregoing requirement, the failure of either party toexecute such a written acknowledgment shall not affect the determination of the Rent CommencementDate, Termination Date and related matters in accordance with the provisions of this Lease.     2.5 Holding Over. If Tenant holds possession of the Premises or any portionthereof after the term of this Lease with Landlord’s written consent, then except as otherwisespecified in such consent, Tenant shall become a tenant from month to month at one hundredtwenty-five percent (125%) of the minimum rental and otherwise upon the terms herein specified forthe period immediately prior to such holding over and shall continue in such status until thetenancy is terminated by either party upon not less than thirty (30) days prior written notice. IfTenant holds possession of the Premises or any portion thereof after the term of this Leasewithout Landlord’s written consent, then Landlord in its sole discretion may elect (bywritten notice to Tenant) to have Tenant become a tenant either from month to month or at will, atone hundred fifty percent (150%) of the minimum rental (prorated on a daily basis for an at-willtenancy, if applicable) and otherwise upon the terms herein specified for the period immediatelyprior to such holding over, or may elect to pursue any and all legal remedies available to Landlordunder applicable law with respect to such unconsented holding over by Tenant. Tenant shallIndemnify and hold Landlord harmless from any loss, damage, claim, liability, cost or expense(Including reasonable attorneys’ fees) resulting from any delay by Tenant in surrendering thePremises or any portion thereof, including but not limited to any claims made by a succeedingtenant by reason of such delay. Acceptance of rent by Landlord following expiration or terminationof this Lease shall not constitute a renewal of this Lease.     2.6 Option to Extend Term. Tenant shall have the option to extend the term of thisLease, at the minimum rental set forth in Section 3.1 (b) below and otherwise upon all the termsand provisions set forth herein with respect to the initial term of this Lease, for up to two (2)additional periods of five (5) years each, the first commencing upon the expiration of the initialterm hereof and the second commencing upon the expiration of the first extended term hereof.
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Exercise of such option with respect to the first extended term shall be by written notice toLandlord at least nine (9) months and not more than fifteen (15) months prior to the expiration ofthe initial term hereof. Exercise of such option with respect to the second extended term shall beby written notice to Landlord at least nine (9) months and not more than fifteen (15) months priorto the expiration of the first extended term hereof. If Tenant is in default hereunder, beyond anyapplicable notice and cure periods, on the date of such notice or on the date the applicableextended term is to commence, then the exercise of the applicable option shall be of no force oreffect, the extended term shall not commence and this Lease shall expire at the end of the thencurrent term hereof (or at such earlier time as Landlord may elect pursuant to the defaultprovisions of this Lease). If Tenant properly exercises one or both extension options under thisSection, then all references in this Lease (other than in this Section 2.6) to the “term” of thisLease shall be construed to include the extension term(s) thus elected by Tenant. Except asexpressly set forth in this Section 2.6, Tenant shall have no right to extend the term of thisLease beyond its prescribed term.3. RENTAL     3.1 Minimum Rental.          (a) Rental Amounts. Tenant shall pay to Landlord as minimum rental for thePremises, in advance, without deduction, offset, notice or demand, on or before the RentCommencement Date and on or before the first day of each subsequent calendar month of the initialterm of this Lease, the following amounts per month (subject to adjustment under Section 3.1(c)below, if applicable):                       MonthlyMonths Sq Ft PSF/PM Minimum Rental  01 —   12  35,000  $3,000  $105,000.00   13 —   24  50,000  $3,000  $150,000.00   25 —   36  65,604  $3,070  $201,404.28   37 —   48  65,604  $3,162  $207,446.41   49 —   60  65,604  $3,257  $213,669.80   61 —   72  65,604  $3,355  $220,079.89   73 —   84  65,604  $3,455  $226,682.29   85 —   96  65,604  $3,559  $233,482.76   97 — 108  65,604  $3,666  $240,487.24 109 — 120  65,604  $3,776  $247,701.86 121 — 132  65,604  $3,889  $255,132.92      If the obligation to pay minimum rental hereunder for the initial term or for anyrenewal term commences on other than the first day of a calendar month or if the initial term orany renewal term of this Lease terminates on other than the last day of a calendar month, theminimum rental for such first or last month of the applicable initial or renewal term of thisLease, as the case may be, shall be prorated based on the number of days the applicable term ofthis Lease is in effect during such month. If an increase in minimum rental becomes effective on a
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day other than the first day of a calendar month, the minimum rental for that month shall be thesum of the two applicable rates, each prorated for the portion of the month during which such rateis in effect.          (b) Rental Amounts During Extended Term (s). If Tenant properly exercisesits right to extend the term of this Lease pursuant to Section 2.6 hereof, then (i) the monthlyminimum rental during the first twenty-four (24) months of each extended term shall be equal to onehundred percent (100%) of the monthly minimum rental payable for the last full calendar monthpreceding the commencement of such extended term, and (ii) the monthly minimum rental during eachsubsequent year of the applicable extended term shall be equal to one hundred three percent (103%)of the monthly minimum rental payable during the immediately preceding year of the extended term.          (c) Square Footage of Premises. The Building and Premises were fully constructed priorto the date of this Lease, have been measured by Landlord’s Architect and, applying the measurementformula customarily used by Landlord to measure square footage of buildings in the Center, havebeen determined to contain 65,604 square feet, which measurement is final and binding on theparties, is hereby accepted by the parties for all purposes under this Lease and is not subject toremeasurement or adjustment. The square footages used in Section 3.1 (a) in calculating the monthlyminimum rental for Months 1 through 24, in being less than the entire square footage of thePremises, are not meant to imply any limitation on Tenant’s right or ability to have access to andto use the entire Premises during such months and during the period from the Early Access Datethrough the Rent Commencement Date, and shall not affect in any way the calculation of Tenant’sOperating Cost Share under Article 5 below (which shall be based on the entire square footage ofthe Premises throughout the term of this Lease, beginning on the Rent Commencement Date); suchreduced square footages in Section 3.1(a) merely represent a method of implementing an economicagreement between the parties with respect to the calculation of Tenant’s minimum monthly rentalobligation during Months 1 through 24. If and to the extent the Tenant Improvements constructedpursuant to the Workletter (subject to Landlord’s approval, compliance with applicable laws and allother applicable conditions as set forth in the Workletter) include an exterior fenced (but notcompletely enclosed) area for emergency generator or other equipment-related purposes, Landlordagrees that the square footage of such exterior area shall not be considered part of the squarefootage of the Premises for purposes of any calculations of minimum rent or of Tenant’s OperatingCost Share under this Lease.     3.2 Late Charge. If Tenant fails to pay when due rental or other amounts dueLandlord hereunder, such unpaid amounts shall bear interest for the benefit of Landlord at a rateequal to the lesser of fifteen percent (15%) per annum or the maximum rate permitted by law, fromthe date due to the date of actual payment. In addition to such interest, Tenant shall pay toLandlord a late charge in an amount equal to six percent (6%) of any installment of minimum rentaland any other amounts due Landlord if not paid in full on or before the fifth (5th) dayafter such rental or other amount is due; provided, however, that for the first instance of latepayment during any period of twelve (12) consecutive calendar months during the term of thisLease, Tenant shall not be required to pay such late charge unless Tenant has failed to pay thepast-due amount within three (3) business days after Landlord has given Tenant written notice thatsuch
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amount is past due. Tenant acknowledges that late payment by Tenant to Landlord of rental of otheramounts due hereunder will cause Landlord to incur costs not contemplated by this Lease,including, without limitation, processing and accounting charges and late charges which may beimposed on Landlord by the terms of any loan relating to the Center. Tenant further acknowledgesthat it is extremely difficult and impractical to fix the exact amount of such costs and that thelate charge set forth in this Section 3.2 represents a fair and reasonable estimate thereof.Acceptance of any late charge by Landlord shall not constitute a waiver of Tenant’s default withrespect to overdue rental or other amounts, nor shall such acceptance prevent Landlord fromexercising any other rights and remedies available to it. Acceptance of rent or other payments byLandlord shall not constitute a waiver of late charges or interest accrued with respect to suchrent or other payments or any prior installments thereof, nor of any other defaults by Tenant,whether monetary or non-monetary in nature, remaining uncured at the time of such acceptance ofrent or other payments.4. TAXES     4.1 Personal Property. From and after the Rent Commencement Date (or, in thecase of items brought onto the Property by Tenant prior to the Rent Commencement Date, from andafter the date such items are brought onto the Property by Tenant), Tenant shall be responsiblefor and shall pay prior to delinquency all taxes and assessments levied against or by reason ofany and all alterations, additions and items existing on or in the Premises from time to timeduring the term of this Lease and taxed as personal property rather than as real property,including (but not limited to) all personal property, trade fixtures and other property placed byTenant on or about the Premises. Upon request by Landlord, Tenant shall furnish Landlord withsatisfactory evidence of Tenant’s payment thereof. If at any time during the term of this Leaseany of said alterations, additions or personal property, whether or not belonging to Tenant, shallbe taxed or assessed as part of the Center, then such tax or assessment shall be paid by Tenant toLandlord within fifteen (15) days after presentation by Landlord of copies of the tax bills inwhich such taxes and assessments are included (provided, however, that in the case oftaxes or assessments for which Tenant is being asked to make a lump-sum payment or reimbursementunder this Section 4.1 rather than monthly estimated payments as part of Operating Expenses underArticle 5 hereof, Tenant shall not be required to make such lump-sum payment or reimbursement morethan thirty (30) days in advance of the date on which the applicable tax bill becomes delinquent)and shall, for the purposes of this Lease, be deemed to be personal property taxes or assessmentsunder this Section 4.1.     4.2 Real Property. To the extent any real property taxes and assessments on thePremises are assessed directly to Tenant, Tenant shall be responsible for and shall pay prior todelinquency all such taxes and assessments levied against the Premises. Upon request by Landlord,Tenant shall furnish Landlord with satisfactory evidence of Tenant’s payment thereof. To theextent the Premises are taxed or assessed to Landlord following the Rent Commencement Date, suchreal property taxes and assessments shall constitute Operating Expenses (as that term is defined inSection 5.2 of this Lease) and shall be paid in accordance with the provisions of Article 5 ofthis Lease.
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5. OPERATING EXPENSES     5.1  Payment of Operating Expenses.          (a) Tenant shall pay to Landlord, at the time and in the manner hereinafter setforth, as additional rental, Tenant’s Operating Cost Share of the Operating Expenses definedin Section 5.2, subject to adjustment pursuant to Section 5.1(b) when applicable. Forpurposes of this Section 5.1, **“****Tenant’s Operating Cost Share****”** shall be (i) inthe case of Operating Expenses that are reasonably allocable solely to the Building,one hundred percent (100%); and (ii) in the case of Operating Expenses that aredetermined and allocated on a Center-wide basis. nine and three-hundredths percent(9.03%).          (b) Tenant’s Operating Cost Share as specified in Section 5.1(a) with respect tomatters allocable to the entire Center is based upon an area of 65,604 square feet for thePremises and upon an aggregate area of 726,508 square feet for all of the buildingspresently located in the Center. If the actual area of the Premises or of any of thebuildings existing from time to time in the Center changes for any reason (including, butnot limited to, modification of existing buildings, construction of new buildings in theCenter, or construction of new buildings on any adjacent property owned by Landlord andoperated, for common area purposes, on an integrated basis with the Center), thenTenant’s Operating Cost Share shall be adjusted proportionately to reflect the new actualareas of the Premises and/or such other buildings, as applicable, as determined in goodfaith by Landlord’s architect on the same basis of measurement as applied in determiningthe existing square footage of the Building.     5.2 Definition of Operating Expenses.          (a) Subject to the exclusions and provisions hereinafter contained and the allocationprinciples set forth in Section 5.1, the term “**Operating Expenses**” shall mean the totalcosts and expenses incurred by Landlord for management, operation and maintenance of the Buildingand the Center, including, without limitation, costs and expenses of (i) insurance (which mayinclude, at Landlord’s option, environmental and seismic insurance as part of or in addition to anycasualty or property insurance policy), property management landscaping, and the operation, repairand maintenance of buildings and Common Areas; (ii) all utilities and services; (iii) real andpersonal property taxes and assessments or substitutes therefor levied or assessed against theCenter or any part thereof, including (but not limited to) any possessory interest, use, business,license or other taxes or fees, any taxes imposed directly on gross rents or services, anyassessments or charges for police or fire protection, housing, transit, open space, street orsidewalk construction or maintenance or other similar services from time to time by anygovernmental or quasi-governmental entity, and any other new taxes on landlords in addition totaxes now in effect (excluding, however, any tax based on net income); (iv) supplies, equipment,utilities and tools used in management, operation and maintenance of the Center; (v) capitalimprovements to the Center or the improvements therein, amortized over the useful life of suchcapital improvement as reasonably determined by Landlord or its accountants, (aa) which reduce orwill cause future reduction of other items of Operating Expenses for which Tenant is otherwiserequired to contribute or (bb) which are required by law, ordinance, regulation or order of anygovernmental authority (excluding, however, any such expenses incurred by Landlord in
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complying with Landlord’s obligations under Section 2.3 above) or (cc) of which Tenant has use orwhich benefit Tenant, and which in either event are reasonably consistent with the nature andquality of the Center as a first-class life science, office and research and development campus;and (vi) any other costs (including, but not limited to, any parking or utilities fees orsurcharges not otherwise specifically addressed elsewhere in this Lease) allocable to or paid byLandlord, as owner of the Center, pursuant to any applicable laws, ordinances, regulations ororders of any governmental or quasi-governmental authority or pursuant to the terms of theDeclaration (as hereinafter defined) or of any other declarations of covenants, conditions andrestrictions now or hereafter affecting the Center or any other property over which Tenant hasnon-exclusive usage rights as contemplated in Section 1.1 (b) hereof. Operating Expenses shall notinclude (x) any costs attributable to the initial construction of buildings or Common Areaimprovements in the Center, nor (y) any costs attributable to buildings the square footage ofwhich is not taken into account in determining Tenant’s Operating Cost Share under Section 5.1 forthe applicable period, nor (z) costs incurred by Landlord in complying with Landlord’s obligationsunder Section 2.3 above. The distinction between items of ordinary operating maintenance andrepair and items of a capital nature shall be made in accordance with generally acceptedaccounting principles applied on a consistent basis or in accordance with tax accountingprinciples, as determined in good faith by Landlord’s accountants.          (b) Notwithstanding any other provisions of this Section 5.2, the following shall notbe included within Operating Expenses: (i) rent paid to anyground lessor; (ii) the cost ofconstructing tenant improvements for any tenant of the Center; (iii) the costs of specialservices, goods or materials provided to any other tenant of the Center and not offered or madeavailable to Tenant; (iv) repairs covered by proceeds of insurance or from funds provided byTenant or any other tenant of the Center, or as to which any other tenant of the Center isobligated to make such repairs or to pay the cost thereof; (v) legal fees, advertising costs orother related expenses incurred by Landlord in connection with the leasing of space to individualtenants of the Center; (vi) repairs, alterations, additions, improvements or replacements neededto rectify or correct any defects in the design, materials or workmanship of the Building, theCenter or the Common Areas; (vii) damage and repairs necessitated by the negligence or willfulmisconduct of Landlord or of Landlord’s employees, contractors or agents; (viii) executivesalaries or salaries of service personnel to the extent that such personnel perform services otherthan in connection with the management, operation, repair or maintenance of the Building or theCenter: (ix) Landlord’s general overhead expenses not related to the Building or the Center; (x)legal fees, accountants’ fees and other expenses incurred in connection with disputes with tenantsor other occupants of the Center, or in connection with the enforcement of the terms of any leaseswith tenants or the defense of Landlord’s title to or interest in the Center or any part thereof;(xi) costs incurred due to a violation by Landlord or any other tenant of the Center of the termsand conditions of any lease; (xii) costs of any service provided to Tenant or to other occupantsof the Center for which Landlord is reimbursed other than through recovery of Operating Expenses; (xiii) personal property taxes due and payable by any other tenant of the Center; and (xiv) costsincurred by Landlord pursuant to Article 13 of this Lease in connection with an event of casualtyor condemnation (including, but not limited to, any applicable deductible and/or co-insuranceamounts under applicable insurance policies with respect to any seismic event).
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     5.3 Determination of Operating Expenses. On or before theRent Commencement Date and during the last month of each calendar year of the term of this Lease(“**Expense Year**”), or as soon thereafter as practical, Landlord shall provide Tenant noticeof Landlord’s estimate of the Operating Expenses for the ensuing Expense Year or applicable portionthereof. On or before the first day of each month during the ensuing Expense Year or applicableportion thereof, beginning on the Rent Commencement Date, Tenant shall pay to Landlord Tenant’sOperating Cost Share of the portion of such estimated Operating Expenses allocable (on a proratabasis) to such month; provided, however, that if such notice is not given in the last monthof an Expense Year, Tenant shall continue to pay on the basis of the prior year’s estimate, if any,until the month after such notice is given. If at any time or times it appears to Landlord that theactual Operating Expenses for an Expense Year will vary from Landlord’s previous estimate by morethan five percent (5%), Landlord may, by notice to Tenant, revise its estimate for the applicableExpense Year and subsequent payments by Tenant for such Expense Year shall be based upon suchrevised estimate.     5.4 Final Accounting for Expense Year.          (a) Within ninety (90) days after the close of each Expense Year, or as soon after such 90-dayperiod as practicable, Landlord shall deliver to Tenant a statement of Tenant’s Operating CostShare of the Operating Expenses for such Expense Year prepared by Landlord from Landlord’s booksand records. If on the basis of such statement Tenant owes an amount that is more or less than theestimated payments for such Expense Year previously made by Tenant, Tenant or Landlord, as the casemaybe, shall pay the deficiency to the other party within thirty (30) days after delivery of thestatement. Failure or inability of Landlord to deliver the annual statement within such ninety (90)day period shall not impair or constitute a waiver of Tenant’s obligation to pay OperatingExpenses, or cause Landlord to incur any liability for damages.          (b) At any time within three (3) months after receipt of Landlord’s annual statement ofOperating Expenses as contemplated in Section 5.4(a), Tenant shall be entitled, upon reasonablewritten notice to Landlord and during normal business hours at Landlord’s office or such otherplaces as Landlord shall designate, to inspect and examine those books and records of Landlordrelating to the determination of Operating Expenses for the immediately preceding Expense Yearcovered by such annual statement or, if Tenant so elects by written notice to Landlord, to requestan independent audit of such books and records. Any such independent audit of the books and recordsshall be conducted by a certified public accountant reasonably acceptable to both Landlord andTenant or, if the parties are unable to agree, by a certified public accountant appointed by thePresiding Judge of the San Mateo County Superior Court upon the application of either Landlord orTenant (with notice to the other party). In either event, such certified public accountant shall beone who is not then employed in any capacity by Landlord or Tenant or by any of their respectiveaffiliates. The audit shall be limited to the determination of the amount of Operating Expenses forthe subject Expense Year, and shall be based on generally accepted accounting principles and taxaccounting principles, consistently applied. If it is determined, by mutual agreement of Landlordand Tenant or by independent audit, that the amount of Operating Expenses billed to orpaid by Tenant for the applicable Expense Year was incorrect, then the appropriate party shall payto the other party the deficiency
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or overpayment, as applicable, within thirty (30) days after the final determination of suchdeficiency or overpayment. All costs and expenses of the audit shall be paid by Tenant unless theaudit shows that Landlord overstated Operating Expenses for the subject Expense Year by more thanfive percent (5%), in which case Landlord shall pay all costs and expenses of the audit. Tenantshall be deemed to have approved Landlord’s annual statement of Operating Expenses, and shall bebarred from raising any claims regarding Operating Expenses for the period covered by such annualstatement, except to the extent Tenant specifically identifies any objections or claims based onsuch annual statement, in reasonable detail, by written notice to Landlord within four (4) monthsafter Tenant’s receipt of the applicable annual statement. To the extent Tenant provides Landlordwith timely written notice of any such objections or claims, Landlord and Tenant shall cooperatereasonably and in good faith to try to resolve the objections or claims raised by Tenant, whichcooperation may include the use of an independent audit initiated by Tenant as contemplated above.Each party agrees to maintain the confidentiality of the findings of any audit in accordance withthe provisions of this Section 5.4.     5.5 Proration. If the date on which Tenant’s obligation for payment of Tenant’sOperating Cost Share commences falls on a day other than the first day of an Expense Year or ifthis Lease terminates on a day other than the last day of an Expense Year, then the amount ofOperating Expenses payable by Tenant with respect to such first or last partial Expense Year shallbe prorated on the basis which the number of days during such Expense Year in which this Lease isin effect bears to 365. The termination of this Lease shall not affect the obligations of Landlordand Tenant pursuant to Section 5.4 to be performed after such termination.6. UTILITIES     6.1 Payment. Commencing with the Early Access Date and thereafter throughout theterm of this Lease (including the early possession period under Section 2.2 above), Tenant shallpay, before delinquency, all charges for water, gas, heat, light, electricity, power, sewer,telephone, alarm system, janitorial and other services or utilities supplied to or consumed in orwith respect to the Premises (other than any costs for water, electricity or other services orutilities furnished with respect to the Common Areas, which costs shall be paid by Landlord andshall constitute Operating Expenses under Section 5.2 hereof), including any taxes on such servicesand utilities. It is the intention of the parties that all such services shall be separatelymetered to the Premises. In the event that any utilities or services supplied to the Premises arenot separately metered, then the amount thereof shall be allocated in a reasonable, good faith andappropriate manner by Landlord between the Premises and the other buildings, premises or areassharing such utilities or services, and the portion thereof allocable to the Building may, inLandlord’s discretion, either be included in Operating Expenses allocable to the Building underSection 5.1 hereof or be billed directly to Tenant and paid or reimbursed by Tenant within thirty(30) days after receipt of Landlord’s statement and request for payment, accompanied by reasonablesupporting documentation evidencing the calculation or determination of the amount for whichpayment or reimbursement is requested. Notwithstanding the foregoing provisions, during any portionof the period prior to the Rent Commencement Date in which Landlord is performing repairs orconstruction of improvements in the Premises, (a) if Tenant is neither operating its business inthe Premises nor performing any material construction of improvements in the Premises, Landlordshall bear all utilities charges for the Premises; and (b) if Tenant is
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operating its business in the Premises and/or performing any material construction of improvementsin the Premises, utilities charges for the Premises shall be allocated between Landlord and Tenanton the basis of a reasonable, good faith estimate of their respective usage of such utilities.     6.2 Interruption. There shall be no abatement of rent or other charges requiredto be paid hereunder and Landlord shall not be liable in damages or otherwise for interruption orfailure of any service or utility furnished to or used with respect to the Premises, the Buildingor the Center because of accident, making of repairs, alterations or improvements, severe weather,difficulty or inability in obtaining services or supplies, labor difficulties or any other cause.Notwithstanding the foregoing provisions of this Section 6.2, however, in the event of anyinterruption or failure of any service or utility to the Premises that (a) is caused in whole or inmaterial part by the active negligence or willful misconduct of Landlord or its agents, employeesor contractors and (b) continues for more than three (3) business days and (c) materially impairsTenant’s ability to use the Premises for the intended purpose hereunder, then following such three(3) business day period, Tenant’s obligations for payment of rent and other charges under thisLease shall be abated in proportion to the degree of impairment of Tenant’s use of the Premises,and such abatement shall continue until Tenant’s use of the Premises is no longer materiallyimpaired thereby. Tenant expressly waives any benefits of any applicable existing or future law(including, but not limited to, the provisions of California Civil Code Section 1932(1)) permittingthe termination of a lease due to any such interruption or failure of any service or utility, itbeing the intention of the parties that their respective rights in such circumstances shall begoverned solely by the provisions of this Section 6.2.7. ALTERATIONS; SIGNS     7.1 Right to Make Alterations. Tenant shall make no alterations, additions orimprovements to the Premises, other than interior non-structural alterations in the Premisescosting less than (i) Seventy-Five Thousand Dollars ($75,000) for any single alteration orimprovement or set of related and substantially concurrent alterations or improvements, and (ii)One Hundred Fifty Thousand Dollars ($150,000) in the aggregate during any twelve (12) month period,without the prior written consent of Landlord, which consent shall not be unreasonably withheld,conditioned or delayed. All such alterations, additions and improvements shall be completed withdue diligence in a good and workmanlike manner, in compliance with plans and specificationsapproved in writing by Landlord and in compliance with all applicable laws, ordinances, rules andregulations, and to the extent Landlord’s consent is not otherwise required hereunder for suchalterations, additions or improvements, Tenant shall give prompt written notice thereof toLandlord. Tenant shall cause any contractors engaged by Tenant for work in the Building or in theCenter to maintain public liability and property damage insurance, and other customary insurance,with such terms and in such amounts as Landlord may reasonably require, naming as additionalinsureds Landlord and any of its partners, shareholders, property managers, project managers andlenders designated by Landlord for this purpose, and shall furnish Landlord with certificates ofinsurance or other evidence that such coverage is in effect. Notwithstanding any other provisionsof this Section 7.1, under no circumstances shall Tenant make any structural alterations orimprovements, or any changes to the roof or equipment installations on the roof, or any alterationsmaterially affecting any building systems, without
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Landlord’s prior written consent (which consent shall not be unreasonably withheld, conditioned ordelayed).     7.2 Title to Alterations. All alterations, additions and improvements installedby Tenant in, on or about the Premises, the Building or the Center (including, but not limited to,lab benches, fume hoods, clean rooms, cold rooms and other similar improvements and equipment)shall become part of the Property and shall become the property of Landlord, unless Landlord electsto require Tenant to remove the same upon the termination of this Lease; provided, however,that the foregoing shall not apply to Tenant’s movable furniture, equipment and trade fixtures,except to the extent any such items are specifically described in the parenthetical in the initialportion of this sentence and are designed to be portable or removable in nature (i.e., installableand removable without any material adverse impact on the existing improvements and Building systemsin the Building), Tenant shall promptly repair any damage caused by its removal of any suchfurniture, equipment or trade fixtures. Notwithstanding any other provisions of this Article 7,however, (a) under no circumstances shall Tenant have any right to remove from the Premises or theBuilding, at the expiration or termination of this Lease, any lab benches, fume hoods, clean rooms,cold rooms or other similar improvements and equipment installed in the Building, even if suchequipment and improvements were installed by Tenant (other than portable or removable clean roomsdescribed at the end of the first sentence of this Section); (b) under no circumstances shallTenant have any right to remove from the Premises or the Building, at the expiration or terminationof this Lease, any alterations, additions, improvements or equipment acquired, constructed orinstalled with the use, in whole or in part, of any funds from the Tenant Improvement Allowance;(c) if Tenant requests Landlord’s written consent to any alterations, additions or improvementsunder Section 7.1 hereof and, in requesting such consent, asks that Landlord specify whetherLandlord will require removal of such alterations, additions or improvements upon termination orexpiration of this Lease, then Landlord shall not be entitled to require such removal unlessLandlord specified its intention to do so at the time of granting of Landlord’s consent to therequested alterations, additions or improvements; and (d) in the case of Tenant Improvementsconstructed by Tenant under the Workletter, Landlord shall not be entitled to require removal upontermination or expiration of this Lease of any Tenant Improvements that Landlord has approved to beinstalled in the Premises in exercising Landlord’s reasonable approval rights under the Workletterof the plans and specifications for the applicable elements of such Tenant Improvements.Notwithstanding any other provisions of this Article 7, (x) it is the intention of the parties thatLandlord shall be entitled to claim all tax attributes associated with alterations, additions,improvements and equipment constructed or installed by Tenant or Landlord with funds provided byLandlord pursuant to the Tenant Improvement Allowance; and (y) it is the intention of the partiesthat Tenant shall be entitled to claim, during the term of this Lease, all tax attributesassociated with alterations, additions, improvements and equipment constructed or installed byTenant with Tenant’s own funds (and without any payment or reimbursement by Landlord pursuant tothe Tenant Improvement Allowance), despite the fact that the items described in this clause (y) arecharacterized in this Section 7.2 as becoming Landlord’s property upon installation, inrecognition of the fact that Tenant will have installed and paid for such items, will have theright of possession of such items during the term of this Lease and will have the obligation to pay(directly or indirectly) property taxes on such items, carry insurance on such items to the extent
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provided in Article 10 hereof and bear the risk of loss with respect to such items to the extentprovided in Article 13 hereof. If and to the extent it becomes necessary, in implementation of theforegoing intentions, to identify (either specifically or on a percentage basis, as may be requiredunder applicable tax laws) which alterations, additions, improvements and equipment constructed aspart of the Tenant Improvements have been funded through the Tenant Improvement Allowance and which(if any) have been constructed or installed with Tenant’s own funds, Landlord and Tenant agree tocooperate reasonably and in good faith to make such an identification by mutual agreement.     7.3 Tenant Trade Fixtures. Subject to the third sentence of Section 7.2 and toSection 7.5, Tenant may install, remove and reinstall trade fixtures without Landlord’sprior written consent, except that installation and removal of any trade fixtures whichare affixed to the Building or which affect the Building systems or the exterior orstructural portions of the Building shall require Landlord’s written approval, whichapproval shall not be unreasonably withheld, conditioned or delayed. Subject to theprovisions of Section 7.5, the foregoing shall apply to Tenant’s signs, which Tenantshall have the right to place and remove and replace (a) only with Landlord’s priorwritten consent as to location, size and composition, which consent shall not be unreasonablywithheld, conditioned or delayed, and (b) only in compliance with all restrictions and requirementsof applicable law and of any covenants, conditions and restrictions or other written agreements nowor hereafter applicable to the Center. Tenant shall immediately repair any damage caused byinstallation and removal of trade fixtures under this Section 7.3.     7.4 No Liens. Tenant shall at all times keep the Building and the Center free fromall liens and claims of any contractors, subcontractors, materialmen, suppliers or anyother parties employed either directly or indirectly by Tenant in construction work on the Building or the Center. Tenant may contest any claim of lien, but only if, prior tosuch contest, Tenant either (i) posts security in the amount of the claim, plus estimatedcosts and interest, or (ii) records a bond of a responsible corporate surety in suchamount as may be required to release the lien from the Building and the Center. Tenantshall indemnify, defend and hold Landlord harmless against any and all liability, loss,damage, cost and other expenses, including, without limitation, reasonable attorneys’fees, arising out of claims of any lien for work performed or materials or suppliesfurnished at the request of Tenant or persons claiming under Tenant.     7.5 Signs. Without limiting the generality of the provisions of Section 7.3hereof, Tenant shall have the right to install signage, subject to Landlord’s prior approval as tolocation, size, design and composition (which approval shall not be unreasonably withheld ordelayed), subject to the established sign criteria for the Center and subject to all restrictionsand requirements of applicable law and of any covenants, conditions and restrictions or otherwritten agreements now or hereafter applicable to the Center,8. MAINTENANCE AND REPAIRS     8.1 Landlord’s Obligation for Maintenance. Landlord shall repair and maintainor cause to be repaired and maintained the Common Areas of the Center and the roof, exterior wallsand other structural portions of the Building. The cost of all work performed by Landlord under
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this Section 8.1 shall be an Operating Expense hereunder, except to the extent such work (i) isrequired due to the negligence of Landlord; (ii) involves the repair or correction of a conditionor defect that Landlord is required to correct pursuant to Section 2.3 hereof; (iii) is a capitalexpense not includible as an Operating Expense under Section 5.2 hereof, or is otherwise expresslyexcluded from treatment as an Operating Expense under any other applicable provision of Section5.2 hereof; (iv) results from an event of casualty or condemnation covered by Article 13 hereof(in which event the provisions of such Article 13 shall govern the parties’ rights andobligations); or (v) is required due to the negligence or willful misconduct of Tenant or itsagents, employees or invitees (in which event Tenant shall bear the full cost of such workpursuant to the indemnification provided in Section 10.6 hereof, subject to the release set forthin Section 10.4 hereof). Tenant knowingly and voluntarily waives the right to make repairs atLandlord’s expense, or to offset the cost thereof against rent, under any law, statute, regulationor ordinance now or hereafter in effect.     8.2  Tenant’s Obligation for Maintenance.          (a) Good Order, Condition and Repair. Except as provided in Section 8.1 hereof, andsubject to the provisions of Article 13 hereof (which shall be controlling in the event of anycasualty or condemnation covered by such Article 13) and of Section 2.3 hereof (which shall becontrolling in the event of any repairs or corrective work covered by such Section 2.3), Tenant atits sole cost and expense shall keep and maintain in good and sanitary order, condition and repairthe Premises and every part thereof, wherever located, including but not limited to the signs,interior, ceiling, electrical system, plumbing system, telephone and communications systemsserving the Premises, the HVAC equipment and related mechanical systems serving the Premises (forwhich equipment and systems Tenant shall enter into a service contract with a person or entitydesignated or reasonably approved by Landlord), all doors, door checks, windows, plate glass, doorfronts, exposed plumbing and sewage and other utility facilities, fixtures, lighting, wallsurfaces, floor surfaces and ceiling surfaces of the Premises and all other interior repairs,foreseen and unforeseen, with respect to the Premises, as required. To the extent Landlord has anythird-party warranties or service contracts on any improvements or systems in the Premises whichare Tenant’s obligation to maintain during the term of this Lease, Landlord agrees to assign suchwarranties or service contracts to Tenant, to the extent practicable, and to use reasonableefforts to enforce for Tenant’s benefit (and at Tenant’s expense) any such warranties or servicecontracts which it is not practicable to assign to Tenant.          (b) Landlord’s Remedy. If Tenant fails to make or perform promptly any repairs ormaintenance which are the obligation of Tenant hereunder and such failure continues for more thanten (10) days after written notice from Landlord specifying the required repairs (except in caseof emergency, in which event no such prior notice shall be required, and except that in the caseof repairs or maintenance which cannot reasonably be performed within such 10-day period, theprovisions of this paragraph shall apply only if Tenant fails to commence performance within such10-day period and thereafter to pursue such performance diligently to completion), Landlord shallhave the right, but shall not be required, to enter the Premises and make the repairs or performthe maintenance necessary to restore the Premises to good and sanitary order, condition andrepair. Immediately on demand from Landlord, the cost of such repairs shall be due and payable byTenant to Landlord.
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          (c) Condition upon Surrender. At the expiration or sooner terminationof thisLease, Tenant shall surrender the Premises and Building and the improvements located therein,including any additions, alterations and improvements thereto (except for items which Tenant ispermitted and elects to remove, or is required to remove, pursuant to the provisions of thisLease), broom clean, in good and sanitary order, condition and repair, ordinary wear and tear andcasualty damage (the latter of which shall be governed by the provisions of Article 13 hereof)excepted, first, however, removing all goods and effects of Tenant and all and fixtures and itemsrequired to be removed or specified to be removed at Landlord’s election pursuant to this Lease(including, but not limited to, any such removal required as a result of an election duly made byLandlord to require such removal as contemplated in Section 7.2), and repairing any damage causedby such removal. Tenant shall not have the right to remove fixtures or equipment if Tenant is indefault hereunder (beyond any applicable cure period), unless Landlord specifically waives thisprovision in writing. Tenant expressly waives any and all interest in any personal property andtrade fixtures not removed from the Center by Tenant at the expiration or termination of thisLease, agrees that any such personal property and trade fixtures may, at Landlord’s election, bedeemed to have been abandoned by Tenant, and authorizes Landlord (at its election and withoutprejudice to any other remedies under this Lease or under applicable law) to remove and eitherretain, store or dispose of such property at Tenant’s cost and expense, and Tenant waives allclaims against Landlord for any damages resulting from any such removal, storage, retention ordisposal.9. USE OF PROPERTY     9.1 Permitted Use. Subject to Sections 9.3, 9.4 and 9.6 hereof, Tenant shall usethe Premises solely for a research and development, engineering, laboratory,manufacturing and assembly facility and for ancillary uses reasonably incidental to thatprimary use, including (but not limited to) among such ancillary uses clean rooms,administrative offices, warehousing and other lawful purposes reasonably related to orincidental to such specified uses (subject in each case to receipt of all necessaryapprovals from the City of Mountain View and all other governmental agencies havingjurisdiction over the Premises), and for no other purpose, unless Landlord in itsreasonable discretion otherwise consents in writing.     9.2 [Intentionally Omitted.]     9.3 No Nuisance. Tenant shall not use the Premises for or carry on or permitwithin the Center or any part thereof any offensive, noisy or dangerous trade, business,manufacture, occupation, odor or fumes, or any nuisance or anything against publicpolicy, nor interfere with the rights or business of Landlord in the Building or theCenter, nor commit or allow to be committed any waste in, on or about the Center. Forpurposes of the preceding sentence, Landlord acknowledges that the conduct of biotech,life science or manufacturing operations is not by nature inherently offensive, noisy ordangerous, but nothing in this sentence is intended to limit or impair Landlord’s rightor ability to enforce the preceding sentence to the extent Tenant’s particular manner ofconducting any such operations is offensive or is unreasonably noisy or dangerous. Tenantshall not do or permit anything to be done in or about the Center, nor bring nor keepanything therein, which will in any way cause the Center or any portion thereof to
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be uninsurable with respect to the insurance required by this Lease or with respect to standardfire and extended coverage insurance with vandalism, malicious mischief and riot endorsements.     9.4 Compliance with Laws. Tenant shall not use the Premises, the Building or theCenter or permit the Premises, the Building or the Center to be used in whole or in part for anypurpose or use that is in violation of any applicable laws, ordinances, regulations or rules of anygovernmental agency or public authority. Tenant shall keep the Premises equipped with all safetyappliances required by law, ordinance or insurance on the Center, or any order or regulation of anypublic authority, because of Tenant’s particular use of the Premises. Tenant shall procure alllicenses and permits required for use of the Premises. Tenant shall use the Premises in strictaccordance with all applicable ordinances, rules, laws and regulations and shall comply with allrequirements of all governmental authorities now in force or which may hereafter be in forcepertaining to the use of the Premises and the Center by Tenant, including, without limitation,regulations applicable to noise, water, soil and air pollution, and making such nonstructuralalterations and additions thereto as may be required from time to time by such laws, ordinances,rules, regulations and requirements of governmental authorities or insurers of the Center(collectively, “**Requirements**”) because of Tenant’s construction of improvements in or otherparticular use of the Premises or the Center. Any structural alterations or additions required fromtime to time by applicable Requirements because of Tenant’s construction of improvements in thePremises or other particular use of the Center shall, at Landlord’s election, either (i) be made byTenant, at Tenant’s sole cost and expense, in accordance with the procedures and standards setforth in Section 7.1 for alterations by Tenant or (ii) be made by Landlord at Tenant’s sole costand expense, in which event Tenant shall pay to Landlord as additional rent, within ten (10) daysafter demand by Landlord, an amount equal to all reasonable costs incurred by Landlord inconnection with such alterations or additions. The judgment of any court, or the admission byTenant in any proceeding against Tenant, that Tenant has violated any law, statute, ordinance orgovernmental rule, regulation or requirement shall be conclusive of such violation as betweenLandlord and Tenant.     9.5 Liquidation Sales. Tenant shall not conduct or permit to be conducted any auction,bankruptcy sale, liquidation sale, or going out of business sale, in, upon or about the Center,whether said auction or sale be voluntary, involuntary or pursuant to any assignment for thebenefit of creditors, or pursuant to any bankruptcy or other insolvency proceeding.     9.6 Environmental Matters.          (a) For purposes of this Section, “**hazardous substance**” shall mean (i) thesubstances included within the definitions of the term “hazardous substance” under theComprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. 42U.S.C. §§ 9601 etseq., and the regulations promulgated thereunder, as amended, (ii) thesubstances included within the definition of “hazardous substance” under the CaliforniaCarpenter-Presley-Tanner Hazardous Substance Account Act, California Health & Safety Code §§ 25300etseq., and regulations promulgated thereunder, as amended, (iii) the substancesincluded within the definition of “hazardous materials” under the Hazardous Materials ReleaseResponse Plans and Inventory Act, California Heath & Safety Code §§ 25500 etseq.,and regulations promulgated thereunder, as amended, (iv) the substances included within the
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definition of “hazardous substance” under the Underground Storage of Hazardous Substancesprovisions set forth in California Health & Safety Code §§ 25280 et seq., and (v)petroleum or any fraction thereof; “**hazardous waste**” shall mean (i) any waste listed as ormeeting the identified characteristics of a “hazardous waste” under the Resource Conservation andRecovery Act of 1976, 42 U.S.C. §§ 6901 etseq., and regulations promulgatedpursuant thereto, as amended (collectively, “**RCRA**”), (ii) any waste meeting the identifiedcharacteristics of “hazardous waste,” “extremely hazardous waste” or “restricted hazardous waste”under the California Hazardous Waste Control Law, California Health & Safety Code §§ 205100etseq., and regulations promulgated pursuant thereto, as amended (collectively,the “**CHWCL**”), and/or (iii) any waste meeting the identified characteristics of “medicalwaste” under California Health & Safety Code §§ 25015-25027.8, and regulations promulgatedthereunder, as amended; “**hazardous waste facility**” shall mean a hazardous waste facilityas defined under the CHWCL; and “**pollutant**” shall mean all substances defined as a“pollutant,” “pollution,” “waste,” “contamination” or “hazardous substance” under thePorter-Cologne Water Quality Control Act, California Water Code §§ 13000 et seq.          (b) Without limiting the generality of the obligations set forth in Section 9.4 of thisLease:          (i) Tenant shall not cause or permit any hazardous substance or hazardouswaste to be brought upon, kept, stored or used in or about the Center without the priorwritten consent of Landlord, which consent shall not be unreasonably withheld, except thatTenant, in connection with its permitted use of the Premises and the Center as provided inSection 9.1, may keep, store and use materials that constitute hazardous substances whichare customary for such permitted use, provided such hazardous substances are kept, storedand used in quantities which are customary for such permitted use and are kept, stored andused in full compliance with clauses (ii) and (iii) immediately below.          (ii)Tenant shall comply with all applicable laws, rules, regulations, orders,permits, licenses and operating plans of any governmental authority with respect to thereceipt, use, handling, generation, transportation, storage, treatment and/or disposal ofhazardous substances or wastes by Tenant or its agents or employees, and Tenant willprovide Landlord with copies of all permits, licenses, registrations and other similardocuments that authorize Tenant to conduct any such activities in connection with itsauthorized use of the Premises and the Center from time to time.          (iii) Tenant shall not (A) operate on or about the Center any facility requiredto be permitted or licensed as a hazardous waste facility or for which interim status assuch is required, nor (B) store any hazardous wastes on or about the Center for ninety(90) days or more, nor (C) conduct any other activities on or about the Center that couldresult in the Center or any portion thereof being deemed to be a “hazardous wastefacility” (including, but not limited to, any storage or treatment of hazardous substancesor hazardous wastes which could have such a result), nor (D) store any hazardous wastes onor about the Center in violation of any federal or California laws or in violation of theterms of any federal or state licenses or permits held by Tenant.
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          (iv) Tenant shall not install any underground storage tanks on the Property without theprior written consent of Landlord and prior approval by all applicable governmental authorities. Ifand to the extent that Tenant obtains all such required consents and approvals and installs anyunderground storage tanks on the Property, Tenant shall comply with all applicable laws, rules,regulations, orders and permits relating to such underground storage tanks (including anyinstallation. monitoring, maintenance, closure and/or removal of such tanks) as such tanks aredefined in California Health & Safety Code § 25281(x), including, without limitation, complyingwith California Health & Safety Code §§ 25280-25299.7 and the regulations promulgated thereunder,as amended. Tenant shall furnish to Landlord copies of all registrations and permits issued to orheld by Tenant from time to time for any and all underground storage tanks located on or under theProperty.          (v) If applicable, Tenant shall provide Landlord in writing the following informationand/or documentation within fifteen (15) days after the Rent Commencement Date, and shall updatesuch information at least annually, on or before each anniversary of the Rent Commencement Date, toreflect any change in or addition to the required information and/or documentation(provided, however, that in the case of the materials described in subparagraphs (B), (C)and (E) below, Tenant shall not be required to deliver copies of such materials to Landlord butshall maintain copies of such materials to such extent and for such periods as may be required byapplicable law and shall permit Landlord or its representatives to inspect and copy such materialsduring normal business hours at any time and from time to time upon reasonable notice to Tenant):          (A) A list of all hazardous substances, hazardous wastes and/or pollutants that Tenantreceives, uses, handles, generates, transports, stores, treats or disposes of from time totime in connection with its operations in the Center.          (B)All Material Safety Data Sheets (**“****MSDS’s”**). if any, required to becompleted with respect to operations of Tenant at the Center from time to time inaccordance with Title 26, California Code of Regulations § 8-5194 or 42 U.S.C. § 11021, orany amendments thereto, and any Hazardous Materials Inventory Sheets that detail theMSDS’s.          (C) All Hazardous Waste Manifests, if any, that Tenant is required to complete fromtime to time under California Health & Safety Code § 25160, any regulations promulgatedthereunder, any similar successor provisions and/or any amendments to any of the foregoing,in connection with its operations in the Center,          (D) Any Hazardous Materials Management Plan required from time to time with respect toTenant’s operations in the Center, pursuant to California Health & Safety Code §§ 25500etseq., any regulations promulgated thereunder, any similar successorprovisions and/or any amendments to any of the foregoing.
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          (E) Any Air Toxics Emissions Inventory Plan required from time to time withrespect to Tenant’s operations in the Center, pursuant to California Health &Safety Code §§ 44340 etseq., any regulations promulgated thereunder, anysimilar successor provisions and/or any amendments to any of the foregoing.          (F) Any biennial Hazardous Waste Generator reports or notificationsfurnished by Tenant to the California Department of Toxic Substances Control orother applicable governmental authorities from time to time pursuant toCalifornia Code of Regulations Title 22. § 66262.41, any similar successorprovisions and/or any amendments to any of the foregoing, in connection withTenant’s operations in the Center.          (G) Any Hazardous Waste Generator Reports regarding source reductions, asrequired from time to time pursuant to California Health & Safety Code §§25244.20 et seq., any regulations promulgated thereunder, any similarsuccessor provisions and/or any amendments to any of the foregoing, inconnection with Tenant’s operations in the Center.          (H) Any Hazardous Waste Generator Reports or notifications not otherwisedescribed in the preceding subparagraphs and required from time to time pursuant toCalifornia Health & Safety Code § 25153.6, California Code of Regulations Title 22.Division 4.5, Chapter 12, §§66262.10 etseq. (“Standards Applicable toGenerators of Hazardous Waste”), any other regulations promulgated thereunder, any similarsuccessor provisions and/or any amendments to any of the foregoing, in connection withTenant’s operations in the Center.          (I) All industrial wastewater discharge permits issued to or held by Tenantfrom time to time in connection with its operations in the Center, and all air qualitymanagement district permits issued to or held by Tenant from time to time in connectionwith its operations in the Center.          (J) Copies of any other lists or inventories of hazardous substances, hazardouswastes and/or pollutants on or about the Center that Tenant is otherwise required toprepare and file from time to time with any governmental or regulatory authority.          (vi) Tenant shall secure Landlord’s prior written approval for any proposed receipt,storage, possession, use, transfer or disposal of “radioactive materials” or “radiation,” as suchmaterials are defined in Title 26, California Code of Regulations § 17-30100, and/or any othermaterials possessing the characteristics of the materials so defined, which approval Landlord maywithhold in its sole and absolute discretion; provided, that such approval shall not berequired for any radioactive materials (x) for which Tenant has secured prior written approval ofthe Nuclear Regulatory Commission and delivered to Landlord a copy of such approval (ifapplicable), or (y) which Tenant is authorized to use pursuant to the terms of any radioactivematerials license issued by the
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State of California. Tenant, in connection with any such authorized receipt storage,possession, use, transfer or disposal of radioactive materials or radiation, shall:          (A) Comply with all federal, state and local laws, rules, regulations, orders,licenses and permits issued to or applicable to Tenant with respect to its operations inthe Center;          (B) Maintain, to such extent and for such periods as may be required by applicablelaw, and permit Landlord and its representatives to inspect during normal business hours atany time and from time to time upon reasonable notice to Tenant, a list of all radioactivematerials or radiation received, stored, possessed, used, transferred or disposed of byTenant or in connection with Tenant’s operations in the Center from time to time, to theextent not already disclosed through delivery of a copy of a Nuclear Regulatory Commissionapproval with respect thereto as contemplated above; and          (C) Maintain, to such extent and for such periods as may be required by applicablelaw, and permit Landlord or its representatives to inspect during normal business hours atany time and from time to time upon reasonable notice to Tenant, all licenses, registrationmaterials, inspection reports, governmental orders and permits in connection with thereceipt, storage, possession, use, transfer or disposal of radioactive materials orradiation by Tenant or in connection with Tenant’s operations in the Center from time totime.          (vii) Tenant shall comply with any and all applicable laws, rules, regulations and ordersof any governmental authority with respect to the release into the environment of any hazardouswastes, hazardous substances, pollutants, radiation or radioactive materials by Tenant or itsagents or employees. Tenant shall give Landlord immediate verbal notice of any unauthorized releaseof any such hazardous wastes, hazardous substances, pollutants, radiation or radioactive materialsinto the environment, and shall follow such verbal notice with written notice to Landlord of suchrelease within twenty-four (24) hours of the time at which Tenant became aware of such release.          (viii) Tenant shall indemnify, defend and hold Landlord harmless from and against any andall claims, losses (including, but not limited to, loss of rental income), damages, liabilities,costs, legal fees and expenses of any sort arising out of or relating to (A) any failure by Tenantto comply with any provisions of this Section 9.6(b), or (B) any receipt, use handling, generation,transportation, storage, treatment, release and/or disposal of any hazardous substance, hazardouswaste, pollutant, radioactive material or radiation on or about the Center as a proximate result ofTenant’s use of the Center or as a result of any intentional or negligent acts or omissions ofTenant or of any agent, employee or invitee of Tenant.          (ix) Tenant shall cooperate with Landlord in furnishing Landlord with completeinformation regarding Tenant’s receipt, handling, use, storage, transportation. generation,treatment and/or disposal of any hazardous substances, hazardous wastes,
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pollutants, radiation or radioactive materials in or about the Center. Upon request, butsubject to Tenant’s reasonable operating and security procedures, Tenant shall grant Landlordreasonable access at reasonable times to the Premises to inspect Tenant’s receipt, handling, use,storage, transportation, generation, treatment and/or disposal of hazardous substances, hazardouswastes, pollutants, radiation and radioactive materials, without Landlord thereby being deemedguilty of any disturbance of Tenant’s use or possession or being liable to Tenant in any manner.          (x) Notwithstanding Landlord’s rights of inspection and review under this Section9.6(b), Landlord shall have no obligation or duty to so inspect or review, and no third party shallbe entitled to rely on Landlord to conduct any sort of inspection or review by reason of theprovisions of this Section 9.6(b).          (xi) Landlord has made available for review by Tenant, prior to execution of this Lease,copies of all third-party studies and reports in Landlord’s possession regarding environmentalconditions in the Building and/or the Property. Landlord has also engaged an environmentalconsultant, at Landlord’s sole expense, to conduct a further environmental study of the Building,evaluating the presence or absence of hazardous substances, hazardous wastes, pollutants, radiationand radioactive materials in and under the Building, and Landlord shall provide a copy of suchstudy to Tenant when it becomes available. The purpose of this study is to provide evidence of the“baseline” condition of the Building prior to Tenant’s occupancy and use thereof, although suchevidence is not intended to be conclusive or irrebuttable. Tenant shall also have the right (butnot the obligation), if it so elects and at its sole expense, to conduct its own environmentalstudy of the Building and surrounding areas of the Center prior to or at the time of Tenant’soccupancy of the Building, in which event Tenant shall provide a copy of such study to Landlord;provided that prior to any drilling, excavation or other physically invasive testing on theBuilding or Property in connection with any such study, Tenant or its consultant shall provideLandlord with a detailed scope of work and such work shall be subject to Landlord’s prior writtenapproval (which approval shall not be unreasonably withheld or delayed, but may be conditioned uponcompliance by Tenant and its consultant with reasonable insurance requirements, upon noticerequirements prior to actual entry on the Property, and upon other reasonable and customaryrequirements).          (xii) If Tenant or its employees, agents, contractors, vendors, customers or guestsreceive, handle, use, store, transport, generate, treat and/or dispose of any hazardous substancesor wastes or radiation or radioactive materials on or about the Center at any time during the termof this Lease, then within thirty (30) days after the termination or expiration of this Lease, then(A) Tenant shall be solely responsible for obtaining, at Tenant’s sole expense, (I) anyenvironmental tests, studies or reports required by any governmental authority for site or permitclosure purposes or other similar purposes, and (II) to the extent not fully covered by any tests,studies or reports obtained under the immediately preceding clause, a further environmental study,performed by an expert reasonably satisfactory to Landlord, evaluating the presence or absence ofhazardous substances, hazardous wastes, pollutants, radiation and radioactive materials on andabout those portions of the Center affected by Tenant’s operations in the
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Center. Such study shall be based on a reasonable and prudent level of tests andinvestigations of the Center (if appropriate), which tests shall be conducted no earlier thanthe date of termination or expiration of this Lease. Liability for any remedial actions required orrecommended on the basis of such study shall be allocated in accordance with Sections 9.4, 9.6,10.6 and other applicable provisions of this Lease.          (c) Landlord shall indemnify, defend and hold Tenant harmless from and against any and allclaims, losses, damages, liabilities, costs, legal fees and expenses of any sort arising out of orrelating to (i) the presence on the Center of any hazardous substances, hazardous wastes,pollutants, radiation or radioactive materials present on the Center as of the Rent CommencementDate (other than as a result of any intentional or negligent acts or omissions of Tenant or of anyagent, employee or invitee of Tenant), and/or (ii) any unauthorized release into the environment(including, but not limited to. the Center) of any hazardoussubstances, hazardous wastes,pollutants, radiation or radioactive materials to the extent such release results from thenegligence of or willful misconduct or omission by Landlord or its agents or employees.          (d) The provisions of this Section 9.6 shall survive the termination of this Lease.10. INSURANCE AND INDEMNITY      10.1 Insurance.          (a) Tenant shall procure and maintain in full force and effect at all times duringthe term of this Lease, from and after the Early Access Date, at Tenant’s cost andexpense, commercial general liability insurance to protect against liability to the public, orto any invitee of Tenant or Landlord, arising out of or related to the use of orresulting from any accident occurring in, upon or about the Premises, with limits ofliability of not less than(i) Three Million Dollars ($3,000,000.00) per occurrence for bodily injury, personal injury anddeath, and Five Hundred Thousand Dollars ($500,000.00) per occurrence for property damage, or (ii)a combined single limit of liability of not less than Five Million Dollars ($5,000,000.00) peroccurrence for bodily injury (including personal injury and death) and property damage. Suchinsurance shall name Landlord, its general partners, its property manager and any lender holding adeed of trust on the Center from time to time (as designated in writing by Landlord to Tenant fromtime to time) as additional insureds thereunder. The amount of such insurance shall not beconstrued to limit any liability or obligation of Tenant under this Lease. Tenant shall alsoprocure and maintain in full force and effect at all times during the term of this Lease, atTenant’s cost and expense, products/completed operations coverage on terms and in amounts (A)customary in Tenant’s industry for companies engaged in the marketing of products on a scalecomparable to that in which Tenant is engaged from time to time and (B) mutually satisfactory toLandlord and Tenant in their respective reasonable discretion.          (b) Landlord shall procure and maintain in full force and effect at all times duringthe term of this Lease, at Landlord’s cost and expense (but reimbursable as an OperatingExpense under Section 5.2 hereof), commercial general liability insurance to protectagainst liability arising out of or related to the use of or resulting from any accidentoccurring in, upon or
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about the Center, with a combined single limit of liability of not less than Five MillionDollars ($5,000,000.00) per occurrence for bodily injury (including personal injury and death) andproperty damage.          (c) Landlord shall procure and maintain in full force and effect at all times during the termof this Lease, at Landlord’s cost and expense (but reimbursable as an Operating Expense underSection 5.2 hereof), policies of property insurance providing protection against “all risk ofdirect physical loss” (as defined by and detailed in the Insurance Service Office’s CommercialProperty Program “Cause of Loss—Special Form [CP1030]” or its equivalent) for the shell of theBuilding and for the improvements in the Common Areas of the Center, on a full replacement costbasis (with no co-insurance or, if coverage without co-insurance is not reasonably available, thenon an “agreed amount” basis or with a commercially reasonable margin clause). Such insurance mayinclude earthquake and/or environmental coverage, as part of the same policy or as a separatepolicy or policies, to the extent Landlord in its sole discretion elects to carry such coverage,and shall have such commercially reasonable deductibles and other terms as Landlord in itsdiscretion determines to be appropriate. Landlord shall have no obligation to carry property damageinsurance for any alterations, additions or improvements installed by Tenant in the Building or onor about the Center.          (d) Landlord shall procure and maintain in full force and effect at all times during the termof this Lease, at Tenant’s cost and expense (chargeable, in Landlord’s discretion, either as anOperating Expense allocable 100% to Tenant or as a direct pass-through to Tenant), policies ofproperty insurance providing protection against “all risk of direct physical loss” (as defined byand detailed in the Insurance Service Office’s Commercial Property Program “Cause of Loss—SpecialForm [CP1030]” or its equivalent) (i) for the tenant improvements existing in the Premises on theEarly Access Date and (ii) in the case of earthquake or seismic insurance only, for TenantImprovements constructed pursuant to the Workletter, eligible for expenditure of funds from theTenant improvement Allowance pursuant to Section 2.3(b) above, having an aggregate initial Cost ofImprovements (as defined in the Workletter) of not less than the total Tenant Improvement Allowancepaid by Landlord pursuant to this Lease in connection with the construction of the TenantImprovements, and listed on a written schedule jointly prepared and mutually approved in writing byTenant and Landlord as provided below (but excluding in each instance Tenant’s Property as definedin paragraph (e) below, which it shall be Tenant’s responsibility to insure pursuant to suchparagraph), in each instance on a full replacement cost basis (with no co-insurance or, if coveragewithout co-insurance is not reasonably available, then on an “agreed amount” basis or with acommercially reasonable margin clause). Such insurance may have such commercially reasonabledeductibles and other terms as Landlord in its reasonable discretion determines to be appropriate.The coverage required to be maintained under this paragraph (d) may, in Landlord’s discretion, beadded to or combined with Landlord’s master policy carried under paragraph (c) above. Tenant shallcooperate with Landlord in the preparation of a mutually approved initial list or scheduleidentifying in reasonable detail the Tenant Improvements to be insured (for earthquake or seismicpurposes only) by Landlord pursuant to clause (ii) above, and Tenant shall thereafter provide toLandlord from time to time, upon request by Landlord annually or at other reasonable intervals, (x)an updated schedule of values for the existing tenant improvements described in clause (i) aboveand (y) an updated
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schedule of values for the Tenant Improvements to be insured by Landlord (for earthquake or seismicpurposes only) pursuant to clause (ii) above (the intended purpose of such updating being in eachinstance to reflect any modification or removal of any such items that would have the effect ofeliminating them from the scope of Landlord’s insurance obligation under clause (i) or (ii) above,as applicable, and to identify current full replacement cost values for such items), and Landlordshall have no obligation or liability to Tenant with respect to any underinsurance of existingtenant improvements or of Tenant Improvements (for earthquake or seismic purposes only), asapplicable, that results from Tenant’s failure to keep Landlord informed from time to time, on acurrent basis, of the insurable value of such items (on a full replacement cost basis) pursuant tothis paragraph. In addition, Tenant shall provide Landlord with final construction cost figures forthe Tenant Improvements (or for each phase thereof, if constructed in phases), for Landlord’s use indetermining appropriate insurance coverage for the Tenant Improvements to be insured by Landlordunder clause (ii) above. Landlord, in its discretion, may elect from time to time to obtainappraisals, at Landlord’s sole cost and expense, of any or all alterations, additions, improvementsand tenant improvements (if any) which Landlord is required to insure hereunder, but no suchordering or receipt of appraisals by Landlord shall constitute a waiver or release of Tenant’sobligations under the immediately preceding sentence.          (e) Tenant shall procure and maintain in full force and effect at all times during the term ofthis Lease, from and after the Early Access Date, at Tenant’s cost and expense, policies ofproperty insurance providing protection against “all risk of direct physical loss” (as defined byand detailed in the Insurance Service Office’s Commercial Property Program “Cause of Loss-SpecialForm [CP1030]” or its equivalent) for Tenant’s movable personal property, office furniture, movableequipment and trade fixtures, for the Tenant Improvements constructed by Tenant pursuant to theWorkletter (except, in the case of earthquake or seismic insurance only, to the extent suchinsurance responsibility is allocated to Landlord pursuant to paragraph (d) above), and for allother alterations, additions and improvements placed or installed by Tenant from time to time in orabout the Premises (collectively, **“****Tenant’sProperty****,”** which term is not intended to implyany conclusion regarding ultimate ownership of alterations, additions and improvements that areotherwise covered by Article 7 above, but is used solely as a defined term for purposes of thespecific contexts in which it is used as such in this Lease), on a full replacement cost basis(with no co-insurance or, if coverage without co-insurance is not reasonably available, then on an“agreed amount” basis or with a commercially reasonable margin clause). Such insurance may havesuch commercially reasonable deductibles and other terms as Tenant in its discretion determines tobe appropriate, and shall name both Tenant and Landlord as insureds as their interests may appear.          (f) Duringthe construction of the Tenant Improvements, Tenant shall also procure and maintainin full force and effect, at its sole cost and expense, a policy of builder’s risk insurance on theTenant Improvements, in such amounts and with such commercially reasonable deductibles as Landlordand Tenant may mutually and reasonably determine to be appropriate with respect to such insurance.Without limiting the generality of the foregoing provisions, Tenant’s builder’s risk insurance withrespect to the Tenant Improvements shall in all events include earthquake insurance in an amount atleast equal to the cumulative amount of the Tenant Improvement Allowance paid by Landlord from timeto time in connection with the
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construction of such Tenant Improvements. Upon written request by Tenant, Landlord will cooperatewith Tenant in using commercially reasonable efforts to cause the builder’s risk earthquakecoverage required under the preceding sentence to be provided under Landlord’s applicable insurancepolicy or policies, at Tenant’s sole expense (payable by Tenant to Landlord within ten (10) daysafter demand therefor by Landlord, accompanied by invoices or calculations reasonably evidencingthe amount of the allocable earthquake insurance premium for which payment or reimbursement isbeing requested), in a manner similar to Landlord’s provision of earthquake insurance on certaincompleted Tenant Improvements pursuant to paragraph (d) above, but to the extent it is not feasiblefor such coverage to be provided under Landlord’s applicable insurance policy or policies, Tenantshall remain responsible for the provision of such coverage as required under this paragraph.     10.2 Quality of Policies and Certificates. All policies of insurance requiredhereunder shall be issued by responsible insurers and, in the case of policies carried or requiredto be carried by Tenant, shall be written as primary policies not contributing with and not inexcess of any coverage that Landlord may carry. Tenant shall deliver to Landlord copies of policiesor certificates of insurance showing that said policies are in effect. The coverage provided by suchpolicies shall include the clause or endorsement referred to in Section 10.4. If Tenant fails toacquire, maintain or renew any insurance required to be maintained by it under this Article 10 orto pay the premium therefor, then Landlord, at its option and in addition to its other remedies,but without obligation so to do, may procure such insurance, and any sums expended by it to procureany such insurance on behalf of or in place of Tenant shall be repaid upon demand, with interest asprovided in Section 3.2 hereof. Tenant shall give Landlord at least thirty (30) days prior writtennotice of any cancellation or nonrenewal of insurance required to be maintained under this Article10, and shall obtain written undertakings from each insurer under policies required to bemaintained by it to endeavor to notify all insureds thereunder at least thirty (30) days prior tocancellation of coverage.     10.3 Workers’ Compensation; Employees. Tenant shall maintain in full force and effectduring the term of this Lease workers’ compensation insurance in at least the minimum amountsrequired by law, covering all of Tenant’s employees working at or about the Premises. In addition,Tenant shall maintain in full force and effect during the term of this Lease employer’s liabilitycoverage with limits of liability of not less than One Hundred Thousand Dollars ($100,000) peraccident, One Hundred Thousand Dollars ($100,000) per employee for disease, and Five HundredThousand Dollars ($500,000) policy limit for disease.     10.4 Waiver of Subrogation. Notwithstanding anything to the contrary contained in thisLease, to the extent permitted by law and without affecting the coverage provided by insurancerequired to be maintained hereunder, Landlord and Tenant each waive any right to recover againstthe other with respect to (i) damage to property, (ii) damage to the Center or any part thereof, or(iii) claims arising by reason of any of the foregoing, but only to the extent that any of theforegoing damages and claims under clauses (i)-(iii) hereof are covered, and only to the extent ofsuch coverage, by property insurance actually carried or required to be carried hereunder by eitherLandlord or Tenant. This provision is intended to waive fully, and for the benefit of each party,any rights and claims which might give rise to a right of subrogation in any insurance carrier.Each party shall procure a clause or endorsement on any property insurance
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policy denying to the insurer rights of subrogation against the other party to the extent rightshave been waived by the insured prior to the occurrence of injury or loss. Coverage provided byinsurance maintained by Landlord or Tenant shall not be limited, reduced or diminished by virtueof the subrogation waiver herein contained.     10.5 Increase in Premiums. Tenant shall do all acts and pay all expenses necessary toensure that the Premises are not used for purposes prohibited by any applicable fire insurance,and that Tenant’s use of the Premises, Building and Center complies with all requirementsnecessary to obtain any such insurance. If Tenant uses or permits the Premises, Building or Centerto be used in a manner which increases the existing rate of any insurance carried by Landlord onthe Center and such use continues for longer than a reasonable period specified in any writtennotice from Landlord to Tenant identifying the rate increase and the factors causing the same,then Tenant shall pay the amount of the increase in premium caused thereby, and Landlord’s costsof obtaining other replacement insurance policies, including any increase in premium, withinthirty (30) days after demand therefor by Landlord.     10.6 Indemnification.          (a) Exceptas otherwise expressly provided for in this Lease, Tenant shall indemnify, defendand hold Landlord and its members, partners, shareholders, officers, directors, agents, employeesand contractors harmless from any and all liability for injury to or death of any person, or lossof or damage to the property of any person, and all actions, claims, demands, costs (including,without limitation, reasonable attorneys’ fees), damages or expenses of any kind arising therefromwhich may be brought or made against Landlord or which Landlord may pay or incur by reason of theuse, occupancy and enjoyment of the Center by Tenant or any invitees, sublessees, licensees,assignees, employees, agents or contractors of Tenant or holding under Tenant (including, but notlimited to, any such matters arising out of or in connection with any early entry upon the Centerby Tenant pursuant to Section 2.2 hereof) from any cause whatsoever other than negligence orwillful misconduct or omission by Landlord or its agents, employees or contractors. Except asotherwise expressly provided for in this Lease, Landlord and its members, partners, shareholders,officers, directors, agents, employees and contractors shall not be liable for, and Tenant herebywaives all claims against such persons for, damages to goods, wares and merchandise in or upon theCenter, or for injuries to Tenant, its agents or third persons in or upon the Center, from anycause whatsoever other than negligence or willful misconduct or omission by Landlord or itsagents, employees or contractors. Tenant shall give prompt notice to Landlord of any casualty oraccident in, on or about the Center.          (b) Except as otherwise expressly provided for in this Lease, Landlord shall indemnify,defend and hold Tenant and its partners, shareholders, officers, directors, agents, employees andcontractors harmless from any and all liability for injury to or death of any person, or loss ofor damage to the property of any person, and all actions, claims, demands, costs (including,without limitation, reasonable attorneys’ fees), damages or expenses of any kind arising therefromwhich may be brought or made against Tenant or which Tenant may pay or incur, to the extent suchliabilities or other matters arise in, on or about the Center by reason of any negligence orwillful misconduct or omission by Landlord or its agents (including,
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without limitation, Landlord’s Project Manager as defined in the Workletter), employees orcontractors.     10.7 Blanket Policy. Any policy required to be maintained hereunder may bemaintained under a so-called “blanket policy” insuring other parties and other locations so longas the amount of insurance required to be provided hereunder is not thereby diminished. Withoutlimiting the generality of the requirement set forth at the end of the preceding sentence,property insurance provided under a blanket policy shall provide full replacement cost coverageand liability insurance provided under a blanket policy shall include per location aggregatelimits meeting or exceeding the limits required under this Article 10.11. SUBLEASE AND ASSIGNMENT     11.1 Assignment and Sublease of Building. Except in the case of a PermittedTransfer,Tenant shall not have the right or power to assign its interest in this Lease, or make anysublease of the Premises or any portion thereof, nor shall any interest of Tenant under thisLease be assignable involuntarily or by operation of law, without on each occasion obtaining theprior written consent of Landlord, which consent shall not be unreasonably withheld, conditionedor delayed. Any purported sublease or assignment of Tenant’s interest in this Lease requiring butnot having received Landlord’s consent thereto (to the extent such consent is required hereunder)shall be void. Without limiting the generality of the foregoing provisions. Landlord may withholdconsent to any proposed subletting or assignment solely on the ground, if applicable, that theuse by the proposed subtenant or assignee is reasonably likely to be incompatible with Landlord’suse of the balance of the Center, unless such proposed use is within the primary permitted usesdescribed in Section 9.1 above. Except in the case of a Permitted Transfer, any dissolution,consolidation, merger or other reorganization of Tenant, or any sale or transfer of substantiallyall of the stock or assets of Tenant in a single transaction or series of related transactions,shall be deemed to be an assignment hereunder and shall be void without the prior written consentof Landlord as required above. Notwithstanding the foregoing, (i) neither an initial publicoffering of the common stock of Tenant nor any other sale of Tenant’s capital stock through anypublic securities exchange or market nor any other issuance of Tenant’s capital stock for bonafide financing purposes shall be deemed to be an assignment, subletting or transfer hereunder;and (ii) Tenant shall have the right to assign this Lease or sublet the Premises, or any portionthereof, without Landlord’s consent (but with prior or concurrent written notice by Tenant toLandlord), to any Affiliate of Tenant, or to any entity which results from a merger orconsolidation involving Tenant, or to any entity which acquires substantially all of the stock orassets of Tenant as a going concern (each, a**“****Permitted Transfer****”**). For purposes of thepreceding sentence, an **“****Affiliate****”** of Tenant shall mean any entity in which Tenant ownsat least a fifty percent (50%) equity interest, any entity which owns at least a fifty percent(50%) equity interest in Tenant, and/or any entity which is related to Tenant by a chain ofownership interests involving at least a fifty percent (50%) equity interest at each level in thechain. Landlord shall have no right to terminate this Lease in connection with, and shall have noright to any sums or other economic consideration resulting from, any Permitted Transfer. Exceptas expressly set forth in this Section 11.1, however, the provisions of Section 11.2 shall remainapplicable to any Permitted Transfer and the transferee under such Permitted Transfer shall beand remain subject to all of the terms and provisions of this Lease.
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     11.2 Rights of Landlord.          (a) Consent by Landlord to one or more assignments of this Lease, or to one or moresublettings of the Premises or any portion thereof, or collection of rent by Landlord from anyassignee or sublessee, shall not operate to exhaust Landlord’s rights under this Article 11, norconstitute consent to any subsequent assignment or subletting. No assignment of Tenant’s interestin this Lease and no sublease shall relieve Tenant of its obligations hereunder, notwithstandingany waiver or extension of time granted by Landlord to any assignee or sublessee, or the failure ofLandlord to assert its rights against any assignee or sublessee, and regardless of whetherLandlord’s consent thereto is given or required to be given hereunder. In the event of a default byany assignee, sublessee or other successor of Tenant in the performance of any of the terms orobligations of Tenant under this Lease, Landlord may proceed directly against Tenant without thenecessity of exhausting remedies against any such assignee, sublessee or other successor. Inaddition, Tenant immediately and irrevocably assigns to Landlord, as security for Tenant’sobligations under this Lease, all rent from any subletting of all or a part of the Premises aspermitted under this Lease, and Landlord, as Tenant’s assignee and as attorney-in-fact for Tenant,or any receiver for Tenant appointed on Landlord’s application, may collect such rent and apply ittoward Tenant’s obligations under this Lease; except that until the occurrence (and then onlyduring the continuance) of an event of default by Tenant, Tenant shall have the right to collectsuch rent and to retain all sublease profits (subject to the provisions of Section 11.2(c), below).          (b) Upon any assignment of Tenant’s interest in this Lease for which Landlord’s consent isrequired under Section 11.1 hereof, Tenant shall pay to Landlord, within ten (10) days afterreceipt thereof by Tenant from time to time, one-half(1/2) of all cash sumsand other economic considerations received by Tenant in connection with or as a result of suchassignment, after first deducting therefrom (i) any costs incurred by Tenant for leaseholdimprovements (including, but not limited to, third-party architectural and space planning costs) inthe Premises in connection with such assignment, amortized over the remaining term of this Lease,and (ii) any reasonable real estate commissions and/or reasonable attorneys’ fees actually incurredby Tenant in connection with such assignment.          (c) Upon any sublease of all or any portion of the Premises for which Landlord’s consent isrequired under Section 11.1 hereof, Tenant shall pay to Landlord, within ten (10) days afterreceipt thereof by Tenant from time to time, one-half (1/2) of all cash sumsand other economic considerations received by Tenant in connection with or as a result of suchsublease, after first deducting therefrom (i) the minimum rental due hereunder for thecorresponding period, prorated (on the basis of the average per-square-foot cost paid by Tenant forthe Premises for the applicable period under this Lease) to reflect the size of the subleasedportion of the Premises, (ii) any costs incurred by Tenant for leasehold improvements in thesubleased portion of the Premises (including, but not limited to, third-party architectural andspace planning costs) for the specific benefit of the sublessee in connection with such sublease,amortized over the remaining term of this Lease, and (iii) any reasonable real estate commissionsand/or reasonable attorneys’ fees actually incurred by Tenant in connection with such sublease,amortized over the term of such sublease.
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12. RIGHT OF ENTRY AND QUIET ENJOYMENT     12.1 Right of Entry. Landlord and its authorized representatives shall have the right,subject to Tenant’s reasonable operating and security procedures, to enter the Premises at any timeduring the term of this Lease during normal business hours and upon not less than twenty-four (24)hours prior notice, except in the case of emergency (in which event no notice shall be required andentry may be made at any time), for the purpose of inspecting and determining the condition of thePremises and Building or for any other proper purpose including, without limitation, to makerepairs, replacements or improvements which Landlord may deem necessary, to show the Premises andBuilding to prospective purchasers, to show the Premises and Building to prospective tenants (butonly during the final year of the term of this Lease), and to post notices of nonresponsibility,Landlord shall not be liable for inconvenience, annoyance, disturbance, loss of business, quietenjoyment or other damage or loss to Tenant by reason of making any repairs or performing any workupon the Building or the Center or by reason of erecting or maintaining any protective barricadesin connection with any such work, and the obligations of Tenant under this Lease shall not therebybe affected in any manner whatsoever, provided, however, Landlord shall use reasonable efforts tominimize the inconvenience to Tenant’s normal business operations caused thereby.     12.2 Quiet Enjoyment. Landlord covenants that Tenant, upon paying the rent andperforming its obligations hereunder and subject to all the terms and conditions of this Lease,shall peacefully and quietly have, hold and enjoy the Premises and the Center throughout the termof this Lease, or until this Lease is terminated as provided by this Lease.13. CASUALTY AND TAKING     13.1 Damage or Destruction.          (a) If the Premises or any portion of the Building or Common Areas of the Centerreasonably necessary for Tenant’s use and occupancy of the Premises is damaged or destroyed inwhole or in any substantial part during the term of this Lease, Landlord shall obtain fromLandlord’s architect, as soon as practicable (and in all events within forty-five (45) days)following the damage or destruction, (i) the architect’s reasonable, good faith estimate of thetime within which repair and restoration of the Premises and Common Areas (if applicable) canreasonably be expected to be completed to the extent necessary to enable Tenant to resume its fullbusiness operations in the Premises without material impairment and (ii) the architect’sreasonable, good faith opinion as to whether repair and restoration to that extent will bepermitted under applicable governmental laws, regulations and building codes then in effect(collectively, the “**Architect’s Estimate**”). If the damage or destruction materially impairsTenant’s ability to conduct its business operations in the Premises, and if either (A) theestimated repair time specified in the Architect’s Estimate exceeds nine (9) months (or, in thecase of an occurrence during the final year of the term of this Lease, sixty (60) days) or (B) theArchitect’s Estimate states that repair and restoration of the affected areas to the extentnecessary to enable Tenant to resume its full business operations in the Premises without materialimpairment will not be permitted under applicable governmental laws, regulations and building codesthen in effect, then in either such event either Landlord or Tenant may terminate this Lease as ofthe date
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of the occurrence by giving written notice to the other party within thirty (30) days after thedate of the occurrence or fifteen (15) days after delivery of the Architect’s Estimate, whicheveris later. If the circumstances creating a termination right under the preceding sentence do notexist, or if such circumstances exist but neither party timely exercises its termination right,then this Lease shall remain in full force and effect and (x) Landlord, as to the Common Areas offee Center and as to the shell of the Building and the alterations, additions and improvementsthat Landlord is required to insure under Section 10.1(d) above, and (y) Tenant, as to thealterations, additions and improvements that Tenant is required to insure under Section 10.1(e)above, shall respectively commence and complete, with all due diligence and as promptly as isreasonably practicable under the conditions then existing, the repair and restoration of suchrespective portions of the Property and Premises to a condition substantially comparable to thatwhich existed immediately prior to the damage or destruction; provided, however, thatTenant in its discretion may elect not to repair, rebuild or replace any or all of the items whichwould otherwise be Tenant’s responsibility under clause (y) of this sentence to the extent suchitems were constructed or installed at Tenant’s sole expense and without any use of funds from theTenant Improvement Allowance.          (b) If this Lease is terminated pursuant to the foregoing provisions of this Section 13.1following an occurrence which is a peril actually insured or required to be insured againstpursuant to Section 10.1(c), (d) and/or (e), Landlord and Tenant agree (and any Lender shall beasked to agree) that such insurance proceeds shall be allocated between Landlord and Tenant in amanner which fairly and reasonably reflects (i) their respective ownership rights under thisLease, as of the termination or expiration of the term of this Lease, with respect to theimprovements, fixtures, equipment and other items to which such insurance proceeds areattributable and (ii) in the case of insurance proceeds allocable to improvements, equipment andother items which Tenant can demonstrate were installed or constructed by Tenant solely with itsown fends and without any use of the Tenant Improvement Allowance or of any other Landlord funds,the unamortized portion of the original cost of acquisition or construction of such items,assuming amortization on a straight-line basis over the initial term of this Lease (without regardto any renewal options).          (c) From and after the date of an occurrence resulting in damage to or destruction of thePremises or of Common Areas necessary for Tenant’s use and occupancy of the Premises, andcontinuing until repair and restoration thereof are completed to the extent necessary to enableTenant to resume operation of its business in the Premises without material impairment, thereshall be an equitable abatement of minimum rental and of Tenant’s Operating Cost Share ofOperating Expenses based upon the degree to which Tenant’s ability to conduct its business in thePremises is impaired.          (d) Eachparty expressly waives the provisions of California. Civil Code Sections 1932(2),1933(4) and any other applicable existing or future law permitting the termination of a leaseagreement in the event of damage to or destruction of the leased property, it being the intentionof the parties that their respective rights in such circumstances shall be governed solely by theprovisions of this Article 13.
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     13.2 Condemnation.          (a) If during the term of this Lease the Premises or any Common Areas of the Center thataxe necessary for Tenant’s use and occupancy of the Premises, or any substantial part of either ofthem, is taken by eminent domain or by reason of any public improvement ot condemnationproceeding, or in any manner by exercise of the right of eminent domain (including any transfer inlieu of or in avoidance of an exercise of the power of eminentdomain), or receives irreparabledamage by reason of anything lawfully done by or under color of any public authority, then (i) thisLease shall terminate as to the entire Premises at Landlord’s election by written notice given toTenant within thirty (30) days after the taking has occurred, and (ii) this Lease shall terminateas to the entire Premises at Tenant’s election, by written notice given to Landlord within thirty(30) days after the nature and extent of the taking have been finally determined, if the portion ofthe Building or Center taken is of such extent and nature as substantially to handicap, impede orpermanently impair Tenant’s use of the Premises. If Tenant elects to terminate this Lease, Tenantshall also notify Landlord of the date of termination, which date shall not be earlier than thirty(30) days nor later than ninety (90) days after Tenant has notified Landlord of Tenant’s electionto terminate, except that this Lease shall terminate on the date oftaking if such date falls onany date before the date of termination designated by Tenant. If neither party elects to terminatethis Lease as hereinabove provided, this Lease shall continue in full force and effect (exceptthat there shall be an equitable abatement of minimum rental and of Tenant’s Operating Cost Shareof Operating Expenses based upon the degree to which Tenant’s ability to conduct its business inthe Premises is impaired), Landlord shall restore the improvements for which Landlord isresponsible under clause (x) of Section 13.1(a) above to a complete architectural whole and afunctional condition and as nearly as reasonably possible to the condition existing before thetaking, and Tenant shall restore the improvements for which Tenant is responsible under clause (y)of Section 13.1(a) above to a complete architectural whole and a functional condition and as nearlyas reasonably possible to the condition existing before the taking;provided, however, that Tenantin its discretion may elect not to repair, restore or replace any or all of the items which wouldotherwise be Tenant’s responsibility to the extent such items were constructed or installed atTenant’s sole expense and without any use of funds from the Tenant Improvement Allowance. Inconnection with any such restoration, each party shall use reasonable efforts (including, withoutlimitation, any necessary negotiation or intercession with its respective lender, if any) to ensurethat any severance damages or other condemnation awards intended to provide compensation forrebuilding or restoration costs are promptly collected and made available to Landlord and Tenant inportions reasonably corresponding to the cost and scope of their respective restorationobligations, subject only to such payment controls as either party or its lender may reasonablyrequire in order to ensure the proper application of such proceeds toward the restoration of theBuilding and the Center. Each party expressly waives the provisions of California Code of CivilProcedure Section 1265.130 and of any other existing or future law allowing either party toterminate (or to petition the Superior Court to terminate) a lease in the event of a partialcondemnation or taking of the leased property, it being the intention of the parties that theirrespective rights in such circumstances shall be governed solely by the provisions of this Article13.
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          (b) If this Lease is terminated pursuant to the foregoing provisions of this Section13.2, or if this Lease remains in effect but any condemnation awards or other proceeds becomeavailable as compensation for the loss or destruction of the Building and/or the Center, thenLandlord and Tenant agree (and any Lender shall be asked to agree) that such proceeds shall beallocated between Landlord and Tenant, respectively, in the respective proportions in whichLandlord and Tenant would have shared, under Section 13.1 (b), the proceeds of any applicableinsurance following damage to or destruction of the applicable improvements due to an insuredcasualty.     13.3 Reservation of Compensation. Landlord reserves, and Tenant waives and assigns toLandlord, all rights to any award or compensation for damage to the Center, the improvementslocated therein and the leasehold estate created hereby, accruing by reason of any taking in anypublic improvement, condemnation or eminent domain proceeding or in any other maimer by exercise ofthe right of eminent domain or of anything lawfully done by public authority, except that (a)Tenant shall be entitled to pursue recovery from the applicable public authority for Tenant’smoving expenses, trade fixtures and equipment and any leasehold improvements installed by Tenant inthe Premises or Building at its own sole expense, but only to the extent Tenant would have beenentitled to remove such items at the expiration of the term of this Lease and then only to theextent of the then remaining unamortized value of such improvements computed on a straight-linebasis over the term of this Lease, and (b) any condemnation awards or proceeds described in Section13.2(b) shall be allocated and disbursed in accordance with the provisions of Section 13.2(b),notwithstanding any contrary provisions of this Section 13.3.     13.4 Restoration of Improvements. In connection with any repair or restoration ofimprovements by either party following a casualty or taking as hereinabove set forth, the partyresponsible for such repair or restoration shall, to the extent possible, return such improvementsto a condition substantially equal to that which existed immediately prior to the casualty ortaking. To the extent such party wishes to make material modifications to such improvements, suchmodifications shall be subject to the prior written approval of the other party (not to beunreasonably withheld or delayed), except that no such approval shall be required for modificationsthat axe required by applicable governmental authorities as a condition of the repair orrestoration, unless such required modifications would impair or impede Tenant’s conduct of itsbusiness in the Premises (in which case any such modifications in Landlord’s work shall requireTenant’s consent, not unreasonably withheld or delayed) or would materially and adversely affectthe exterior appearance, the structural integrity or the mechanical or other operating systems ofthe Premises or Building (in which case any such modifications in Tenant’s work shall requireLandlord’s consent, not unreasonably withheld or delayed).14. DEFAULT     14.1 Events of Default. The occurrence of any of the following shall constitute anevent of default on the part of Tenant:          (a) Abandonment. Abandonment of the Premises. **“Abandonment”** is herebydefined to include, but is not limited to, any absence by Tenant from the Premises for fifteen (15)consecutive days or more while Tenant is in default under any other provision of this
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Lease. Tenant waives any right Tenant may have to notice under Section 1951.3 of theCalifornia Civil Code, the terms of this subsection (a) being deemed such notice to Tenant asrequired by said Section 1951.3;          (b) Nonpayment. Failure to pay, when due, any amount payable to Landlord hereunder,such failure continuing for a period of five (5) business days after written notice of suchfailure; provided, however, that any such notice shall be in lieu of, and not in additionto, any notice required under California Code of Civil Procedure Section 1161 et seq., asamended from time to time;          (c) Other Obligations. Failure to perform any obligation, agreement or covenant underthis Lease other than those matters specified in subsection (b) hereof (including, but not limitedto, any breach by Tenant of the Master Declaration or Association Documents as provided in Section15.4 below), such failure continuing for thirty (30) days after written notice of such failure;provided, however, that if such failure is curable in nature but cannot reasonably be curedwithin such 30-day period, then Tenant shall not be in default if, and so long as, Tenant promptly(and in all events within such 30-day period) commences such cure and thereafter diligently pursuessuch cure to completion; and provided further, however, that any such notice shall be in lieu of,and not in addition to, any notice required under California Code of Civil Procedure Section 1161et seq., as amended from time to time;          (d)General Assignment. A general assignment by Tenant, for the benefit ofcreditors;          (e)Bankruptcy. The filing of any voluntary petition in bankruptcyby Tenant, or thefiling of an involuntary petition by Tenant’s creditors, which involuntary petition remainsundischarged for a period of sixty (60) days. In the event that under applicable law the trustee inbankruptcy or Tenant has the right to affirm this Lease and continue to perform the obligations ofTenant hereunder, such trustee or Tenant shall, in such time period as may be permitted by thebankruptcy court having jurisdiction, cure all defaults of Tenant hereunder outstanding as of thedate of the affirmance of this Lease and provide to Landlord such adequate assurances as may benecessary to ensure Landlord of the continued performance ofTenant’s obligations under this Lease.Specifically, but without limiting the generality of the foregoing, such adequate assurances mustinclude assurances that the Premises continue to be operated only for the use permitted hereunder.The provisions hereof are to assure that the basic understandings between Landlord and Tenant withrespect to Tenant’s use of the Center and the benefits to Landlord therefrom are preserved,consistent with the purpose and intent of applicable bankruptcy laws;          (f)Receivership. The employment of a receiver appointed by court order to takepossession of substantially all of Tenant’s assets or the Premises, if such receivership remainsundissolved for a period of thirty (30) days;          (g) Attachment. The attachment, execution or other judicial seizure of all orsubstantially all of Tenant’s assets or the Premises, if such attachment or other seizure remainsundismissed or undischarged for a period of thirty (30) days after the levy thereof; or
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          (h) Insolvency. The admission by Tenant in writing of its inability to pay its debts asthey become due, the filing by Tenant of a petition seeking any reorganization or arrangement,composition, readjustment, liquidation, dissolution or similar relief under any present or futurestatute, law or regulation, the filing by Tenant of an answer admitting or failing timely tocontest a material allegation of a petition filed against Tenant in any such proceeding or, ifwithin thirty (30) days after the commencement of any proceeding against Tenant seeking anyreorganization or arrangement, composition, readjustment, liquidation, dissolution or similarrelief under any present or future statute, law or regulation, such proceeding shall not have beendismissed.     14.2 Remedies upon Tenant’s Default.          (a) Upon the occurrence of any event of default described in Section 14.1 hereof, Landlord, inaddition to and without prejudice to any other rights or remedies it may have, shall have theimmediate right (subject to compliance with applicable laws) to re-enter the Premises or any partthereof and repossess the same, expelling and removing therefrom all persons and property (whichproperty maybe stored in a public warehouse or elsewhere at the cost and risk of and for theaccount of Tenant), using such force as may be necessary to do so (as to which Tenant hereby waivesany claim for loss or damage that may thereby occur). In addition to such re-entry, and withoutprejudice to any other rights or remedies it may have, Landlord shall have the right to terminatethis Lease and recover from Tenant all damages incurred by Landlord as a result of Tenant’sdefault, as hereinafter provided. Alternatively, in lieu of such re-entry, and without prejudice toany other rights or remedies it may have, Landlord shall have the right to continue this Lease ineffect and recover rent and other charges and amounts as they become due.          (b) Even if Tenant has breached this Lease and abandoned the Premises, this Lease shallcontinue in effect for so long as Landlord does not terminate Tenant’s right to possession undersubsection (a) hereof and Landlord may enforce all of its rights and remedies under this Lease,including the right to recover rent as it becomes due, and Landlord, without terminating thisLease, may exercise all of the rights and remedies of a lessor under California Civil Code Section1951.4 (lessor may continue lease in effect after lessee’s breach and abandonment and recover rentas it becomes due, if lessee has right to sublet or assign, subject only to reasonablelimitations), or any successor Code section. Acts of maintenance, preservation or efforts to reletthe Premises or the appointment of a receiver upon application of Landlord to protect Landlord’sinterests under this Lease shall not constitute a termination of Tenant’s right to possession.          (c) If Landlord terminates this Lease pursuant to this Section 14.2, Landlord shall have allof the rights and remedies of a landlord provided by Section 1951.2 of the Civil Code of the Stateof California, or any successor Code section, which remedies include Landlord’s right to recoverfrom Tenant (i) the worth at the time of award of the unpaid rent and additional rent which hadbeen earned at the time of termination, (ii) the worth at the time of award of the amount by whichthe unpaid rent and additional rent which would have been earned after termination until the timeof award exceeds the amount of such rental loss that Tenant proves could have been reasonablyavoided, (iii) the worth at the time of award of the amount by
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which the unpaid rent and additional rent fox the balance of the term after the time of awardexceeds the amount of such rental loss that Tenant proves could be reasonably avoided, and (iv) anyother amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’sfailure to perform its obligations under this Lease or which in the ordinary course of things wouldbe likely to result therefrom, including, but not limited to, the cost of recovering possession ofthe Premises, expenses of reletting, including necessary repair, renovation and alteration of thePremises, reasonable attorneys’ fees, and other reasonablecosts. The **“worth at the time ofaward”** of the amounts referred to in clauses (i) and (ii) above shall be computed by allowinginterest at ten percent (10%) per annum from the date such amounts accrued to Landlord. The**“worth at the time of award”** of the amounts referred to in clause (iii) above shall becomputed by discounting such amount at one percentage point above the discount rate of the FederalReserve Bank of San Francisco at the time of award.     14.3 Remedies Cumulative. All rights, privileges and elections or remedies ofLandlord contained in this Article 14 are cumulative and not alternative to the extent permitted bylaw and except as otherwise provided herein.15.SUBORDINATION, ATTORNMENT AND SALE     15.1 Subordination to Mortgage. This Lease, and any sublease entered into byTenant under the provisions of this Lease, shall be subject andsubordinate to any ground lease,mortgage, deed of trust, sale/leaseback transaction or any other hypothecation for security now orhereafter placed upon the Premises, the Building, the Center, or any of them, and the rights of anyassignee of Landlord or of any ground lessor, mortgagee, trustee, beneficiary or leaseback lessorunder any of the foregoing, and to any and all advances made on the security thereof and to allrenewals, modifications, consolidations, replacements and extensions thereof; provided,however, that such subordination in the case of any future ground lease, mortgage, deed of trust,sale/leaseback transaction or any other hypothecation for security placed upon the Premises, theBuilding, the Center, or any of them shall be conditioned on Tenant’s receipt from the groundlessor, mortgagee, trustee, beneficiary or leaseback lessor of a Non-Disturbance Agreement in aform reasonably acceptable to Tenant (i) confirming that so long as Tenant is not in materialdefault hereunder beyond any applicable cure period (for which purpose the occurrence andcontinuance of any event of default under Section 14.1 hereof shall be deemed to be “material”),Tenant’s rights hereunder shall not be disturbed by such person or entity and (ii) agreeing thatthe benefit of such Non-Disturbance Agreement shall be transferable to any transferee under aPermitted Transfer and to any other assignee or subtenant that is acceptable to the ground lessor,mortgagee, trustee, beneficiary or leaseback lessor at the time of transfer. If any mortgagee,trustee, beneficiary, ground lessor, sale/leaseback lessor or assignee elects to have this Lease bean encumbrance upon the Center prior to the lien of its mortgage, deed of trust, ground lease orleaseback lease or other security arrangement and gives notice thereof to Tenant, this Lease shallbe deemed prior thereto, whether this Lease is dated prior or subsequent to the date thereof or thedate of recording thereof. Tenant and any sublessee, shall execute such documents as may reasonablybe requested by any mortgagee, trustee, beneficiary, ground lessor, sale/leaseback lessor orassignee to evidence the subordination herein set forth, subject to the conditions set forth above,or to make this Lease prior to the lien of any mortgage, deed of trust, ground lease, leasebacklease or other security, arrangement as the case maybe. Upon any default by Landlord
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in the performance of its obligations under any mortgage, deed of trust, ground lease, leasebacklease or assignment, Tenant (and any sublessee) shall, notwithstanding any subordinationhereunder, attorn to the mortgagee, trustee, beneficiary, ground lessor, leaseback lessor orassignee thereunder upon demand and become the tenant of the successor in interest to Landlord, atthe option of such successor in interest, and shall execute and deliver any instrument orinstruments confirming the attornment herein provided for. Landlord represents and warrants toTenant that as of the Lease Commencement Date, there is no ground lessor, mortgagee, trustee,beneficiary or leaseback lessor holding any title to or interest in the Property or any portionthereof.     15.2 Sale of Landlord’s Interest. Upon sale, transfer or assignment ofLandlord’s entire interest in the Building and the Center, Landlord shall be relieved of itsobligations hereunder with respect to liabilities accruing from and after the date of suchsale, transfer or assignment.     15.3 Estoppel Certificates. Tenant or Landlord (the **“responding party”**), asapplicable, shall at any time and from time to time, within ten (10) business days after writtenrequest by the other party (the **“requesting party”**), execute, acknowledge and deliver tothe requesting party a certificate in writing staring: (i) that this Lease is unmodified and infull force and effect, or if there have been any modifications, that this Lease is in full forceand effect as modified and stating the date and the nature of each modification; (ii) the date towhich rental and all other sums payable hereunder have been paid; (iii) that the requesting partyis not in default in the performance of any of its obligations under this Lease, that thecertifying party has given no notice of default to the requesting party and that no event hasoccurred which, but for the expiration of the applicable time period, would constitute an event ofdefault hereunder, or if the responding party alleges that any such default, notice or event hasoccurred, specifying the same in reasonable detail; and (iv) such other matters as may reasonablybe requested by the requesting party or by any institutional lender, mortgagee, trustee,beneficiary, ground lessor, sale/leaseback lessor or prospective purchaser of the Center, orprospective sublessee or assignee of this Lease. Any such certificate provided under this Section15.3 may be relied upon by any lender, mortgagee, trustee, beneficiary, assignee or successor ininterest to the requesting party, by any prospective purchaser, by any purchaser on foreclosure orsale, by any grantee under a deed in lieu of foreclosure of any mortgage or deed of trust on theProperty, by any subtenant or assignee, or by any other third party. Failure to execute and returnwithin the required time any estoppel certificate requested hereunder, if such failure continuesfor five (5) days after a second written request by the requesting party for such estoppelcertificate, shall be deemed to be an admission of the truth of the matters set forth in the formof certificate submitted to the responding party for execution.     15.4 Subordination to CC&R’s. This Lease, and any permitted sublease entered into byTenant under the provisions of this Lease, and the interests in real property conveyed hereby andthereby shall be subject and subordinate (a) to any declarations of covenants, conditions andrestrictions or other recorded restrictions affecting the Center or any portion thereof from timeto time, provided that the terms of such declarations or restrictions are reasonable (or,to the extent they are not reasonable, are mandated by applicable law), do not materially impairTenant’s ability to conduct the uses permitted hereunder on the Premises and in the Center, and donot
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discriminateagainst Tenant relative to other similarly situated tenants occupying the portion(s)of the Center covered by such declarations or restrictions, and (b) to the Declaration ofCovenants, Conditions and Restrictions of Shoreline Technology Park, Mountain View, California,dated October 24, 1986 and recorded on October 24, 1986 asInstrument No. 8997310, Book J895, Page456, Official Records of Santa Clara County, as the same may be amended from time to time (the**“Declaration”**), the provisions of which Declaration are an integral part of this Lease.Tenant agrees to execute, upon request by Landlord, any documents reasonably required from time totime to evidence the foregoing subordination. Notwithstanding the foregoing, Tenant shall not bebound by any modification to the Declaration subsequent to the Lease Commencement Date unless suchmodification satisfies the requirements of clause (a) above.     15.5 Mortgagee Protection. If, following a default by Landlord under any mortgage,deed of trust, ground lease, leaseback lease or other security arrangement covering the Building,the Center, or any portion of them, the Building and/or the Center, as applicable, is acquired bythe mortgagee, beneficiary, master lessor or other secured party, or by any other successor owner,pursuant to a foreclosure, trustee’s sale, sheriff’s sale, lease termination or other similarprocedure (or deed in lieu thereof), then any such person or entity so acquiring the Buildingand/or the Center shall not be:          (a) liable for any act or omission of a prior landlord or owner of the Center(including, but not limited to, Landlord);          (b) subject to any offsets or defenses that Tenant may have against any priorlandlord or owner of the Center (including, but not limited to, Landlord);          (c) bound by any rent or additional rent that Tenant may have paid in advance to anyprior landlord or owner of the Center (including, but not limited to, Landlord) for a periodin excess of one month, or by any security deposit, cleaning deposit or other prepaid chargethat Tenant may have paid in advance to any prior landlord or owner (including, but notlimited to, Landlord), except to the extent such deposit or prepaid amount has beenexpressly turned over to or credited to the successor owner thus acquiring the Center;          (d) liable for any warranties or representations of any nature whatsoever, whetherpursuant to this Lease or otherwise, by any prior landlord or owner of the Center(including, but not limited to, Landlord) with respect to the use, construction, zoning,compliance with laws, title, habitability, fitness for purpose or possession, or physicalcondition (including, without limitation, environmental matters) of the Building or theCenter; or          (e) liable to Tenant in any amount beyond the interest of such mortgagee,beneficiary, master lessor or other secured party or successor owner in the Center as itexists from time to time, it being the intent of this provision that Tenant shall looksolely to the interest of any such, mortgagee, beneficiary, master lessor or othersecured party or successor owner in the Center for the payment and discharge of thelandlord’s obligations under this Lease and that such mortgagee, beneficiary, masterlessor or other secured party or successor owner shall have no separate personalliability for any such obligations.
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16. SECURITY     16.1 Deposit.          (a) Cash Security Deposit.  Within ten (10) days after the Lease Commencement Date,Tenant shall deposit with Landlord the sum of Four Hundred Thousand and No/100 Dollars($400,000.00), which sum, subject to and including any adjustment thereto pursuant to Section16.1(c) below (as so adjusted, if applicable, the **“Security Deposit”**) shall be held byLandlord as security for the faithful performance of all of the terms, covenants and conditionsof this Lease to be kept and performed by Tenant during the term hereof. If Tenant defaults(beyond any applicable cure period) with respect to any provision of this Lease, including,without limitation, the provisions relating to the payment of rental and other sums duehereunder, Landlord shall have the right, but shall not be required, to use, apply or retain suchportion of the Security Deposit as is sufficient for the payment of rental or any other amountwhich Landlord may spend or become obligated to spend by reason of Tenant’s default or tocompensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant’sdefault. If any portion of the Security Deposit is so used or applied, Tenant shall, within ten(10) business days after written demand therefor, deposit cash with Landlord in an amountsufficient to restore the Security Deposit to its original amount and Tenant’s failure to do soshall be a material breach of this Lease. Landlord shall not be required to keep any depositunder this Section separate from Landlord’s general funds, and Tenant shall not be entitled tointerest thereon. Provided that no uncured event of default by Tenant then exists under thisLease, the Security Deposit and the Letter of Credit as defined below (if applicable), or anybalance thereof, shall be returned to Tenant or, at Landlord’s option, to the last assignee ofTenant’s interest hereunder (unless alternative instructions have been presented to Landlord in awriting signed by both Tenant and such assignee), at the expiration of the term of this Lease andafter Tenant has vacated the Property. In the event of termination of Landlord’s interest in thisLease, Landlord shall transfer all deposits then held by Landlord under this Section toLandlord’s successor in interest, whereupon Tenant agrees to release Landlord from all liabilityfor the return of such deposit or the accounting thereof.          (b) Letter of Credit. As an alternative to the cash Security Deposit described inSection 16.1(a), Tenant may instead deliver to Landlord, within ten (10) days after the LeaseCommencement Date, an irrevocable standby letter of credit (the **“**Letter of Credit**”**)issued in favor of Landlord by a federally insured commercial bank or trust company approved inwriting by Landlord (which approval shall not be unreasonably withheld, and for which purposeLandlord hereby agrees in advance that Silicon Valley Bank is an approved issuer for the Letterof Credit), in form and substance reasonably satisfactory to Landlord, to be held by Landlord assecurity for the faithful performance of all the obligations of Tenant under this Lease, subjectto the following terms and conditions:          (i) The amount of the Letter of Credit shall be Four Hundred Thousand andNo/100 Dollars ($400,000.00), subject to and including any adjustment thereto pursuant tothe provisions of Section 16.1(c) below (as so adjusted, if applicable, the **“**RequiredAmount**”**), and Tenant shall maintain the Letter of Credit in the Required Amount infull force and effect throughout the term of this Lease (including any
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extensions thereof) and until thirty (30) days after the expiration of the term of this Lease,unless Tenant elects at any time to replace the Letter of Credit with a full cash Security Depositin compliance with Section 16.1(a). The Letter of Credit may be for an initial one-year term, withautomatic renewal provisions, provided that Landlord shall be given at least thirty (30) days priorwritten notice if the Letter of Credit will not be renewed as of any otherwise applicable renewaldate and shall be entitled to draw against the expiring Letter of Credit if a replacement Letter ofCredit is not furnished to Landlord at least twenty (20) days prior to the scheduled expirationdate, as provided in Section 16.1(b)(iii)(A) below. The Letter of Credit must provide that it istransferable to any successor in interest to Landlord under this Lease, and any transfer fees andother related costs and expenses payable in connection with any such transfer shall be borne solelyby Tenant.          (ii) Landlord shall be entitled (but shall not be required) to draw against the Letterof Credit and receive and retain the proceeds thereof upon any default (beyond any applicable cureperiod) by Tenant in the payment of any rent or other amounts required to be paid by Tenant underthis Lease, or upon the occurrence of any other event of default (beyond any applicable cureperiod) under this Lease, by presenting to the issuer a written statement by Landlord that Landlordis entitled to draw the requested amount under the Letter of Credit pursuant to the terms of thisLease. The amount of the draw shall not exceed the amount of the payments (if any) as to whichTenant is then in default and/or the amount reasonably necessary to cure any non-monetary events ofdefault by Tenant, and shall be applied by Landlord to the cure of the applicable default(s).Following any partial draw under this paragraph (ii), if Tenant fully cures all outstandingdefaults and provides Landlord with a new Letter of Credit in the full Required Amount under thisSection 16.1, Landlord shall surrender and return to Tenant, within ten (10) days after Tenant’ssatisfaction of the foregoing conditions, the Letter of Credit under which the partial draw wasmade.          (iii) Landlord shall also be entitled (but shall not be required) to draw against the Letterof Credit in full and to receive the entire proceeds thereof under either of the followingcircumstances:          (A) If the Letter of Credit will expire as of a date prior to the date thirty (30)days after the expiration of the term of this Lease and Tenant fails to provide to Landlordan extension or replacement of such Letter of Credit, in at least the minimum RequiredAmount, at least twenty (20) days prior to the scheduled expiration date of the Letter ofCredit; or          (B) If, as a result of a draw against the Letter of Credit by Landlord or for anyother reason, the amount of the Letter of Credit falls below the minimum Required Amountand Tenant has failed to cause the Letter of Credit to be restored to at least the minimumRequired Amount within ten (10) business days after written demand by Landlord or, in lieuthereof, has failed to put up cash in an amount equal to the amount required to be restored(which cash,
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if put up by Tenant, shall be retained by Landlord as a cash security depositin accordance with Section 16.1(a) hereof).          (iv) If Landlord draws against the Letter of Credit in any of the circumstancesdescribed in subparagraph (iii) above, Landlord may use, apply and/or retain the amountdrawn for the cure of any then existing defaults under this Lease. Any amount drawn that isnot immediately so used or applied by Landlord shall be retained by Landlord as a cashSecurity Deposit, subject to and in accordance with the provisions of Section 16.1(a).          (v) Any actual or purported withdrawal, rescission, termination or revocation ofthe Letter of Credit by the issuer thereof prior to the expiration of the term of this Lease(except when replaced prior to the effectiveness of such withdrawal, rescission, terminationor revocation by a replacement Letter of Credit as contemplated in Section 16.1(b)(iii)(A)hereof) shall be a material breach of this Lease.          (vi) The Letter of Credit shall provide that it is governed by theInternational Standby Practices (ISP98), ICC Publication No. 590.          (c) Adjustment of Security Deposit. If on the third (3rd) anniversary of theRent Commencement Date there is no uncured event of default by Tenant under this Lease, and noevent which, if remaining uncured after notice and/or passage of time, would constitute an event ofdefault by Tenant under this Lease, then effective as of the third (3rd) anniversary of the RentCommencement Date, the required amount of the Security Deposit under Section 16.1(a) above and theRequired Amount for purposes of the Letter of Credit (if any) under Section 16.1(b) above shalleach be reduced to Two Hundred Thousand and No/100 Dollars ($200,000.00). If Landlord is holding aLetter of Credit in a larger amount at the time any such reduction becomes effective, Landlordagrees to cooperate reasonably with Tenant and the issuer in surrendering such Letter of Creditupon Landlord’s receipt of a replacement Letter of Credit in not less than the adjusted minimumamount required pursuant to this paragraph.17. MISCELLANEOUS     17.1 Notices. All notices, consents, waivers and other communications which thisLease requires or permits either party to give to the other shall be in writing and shall be deemedgiven when delivered personally (including delivery by private same-day or overnight courier orexpress delivery service) or by telecopier with mechanical confirmation of transmission, effectiveupon personal delivery to or refusal of delivery by the recipient (in the case of personaldelivery by any of the means described above) or upon telecopier transmission during normalbusiness hours at the recipient’s office (in the case of telecopier transmission, with anytransmission outside of normal business hours being effective as of the beginning of the firstbusiness day commencing after the time of actual transmission) to the parties at their respectiveaddresses as follows:
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   To Tenant: (until the Rent Commencement Date)  Alexza Pharmaceuticals, Inc.  1020 East Meadow Circle  Palo Alto, CA 94303  Attn: August J. Moretti, CFO  Telecopier: (650) 687-3999     (after the Rent Commencement Date)  Alexza Pharmaceuticals, Inc.  2091 Stierlin Court  Mountain View, CA 94043  Attn: August J. Moretti, CFO  Telecopier: (408)                     [**to be determined**]   with a copy to: K. William Neuman, Esq.  Heller Ehrman LLP  333 Bush Street, Suite 3000  San Francisco, CA 94104  Telecopier: (415) 772-2064   To Landlord: Britannia Hacienda VIII LLC  c/o Slough Estates USA Inc.  444 North Michigan Avenue, Suite 3230  Chicago, IL 60611  Attn: Randy Rohner  Telecopier: (312) 755-0717   with a copy to: Britannia Management Services, Inc.  555 Twelfth Street, Suite 1650  Oakland, CA 94607  Attn: Magdalena Shushan  Telecopier: (510) 763-6262   and a copy to: Folger Levin & Kahn llp  Embarcadero Center West  275 Battery Street, 23rd Floor  San Francisco, CA 94111  Attn: Donald E. Kelley, Jr.  Telecopier: (415) 986-2827or to such other address(es) as may be contained in a notice of address change given by eitherparty to the other pursuant to this Section, effective no earlier than fifteen (15) days afterdelivery of such notice to the receiving party. Rental payments and other sums required by thisLease to be paid by Tenant shall be delivered to Landlord in care of Britannia Management Services,Inc., 555 Twelfth Street, Suite 1650, Oakland, CA 94607, or at such other address as
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Landlord may from time to time specify in writing to Tenant, and shall be deemed to be paidonly upon actual receipt.     17.2 Successors and Assigns. The obligations of this Lease shall run with theland, and this Lease shall be binding upon and inure to the benefit of the parties hereto and theirrespective successors and assigns, except that the original Landlord named herein and eachsuccessive Landlord under this Lease shall be liable only for obligations accruing during theperiod of its ownership of the Center, and any liability for obligations accruing after terminationof such ownership shall terminate as of the date of such termination of ownership and shall pass tothe successor lessor.     17.3 No Waiver. The failure of either party to seek redress for violation, or toinsist upon the strict performance, of any covenant or condition of this Lease shall not be deemeda waiver of such violation, or prevent a subsequent act which would originally have constituted aviolation from having all the force and effect of an original violation.     17.4 Severability. If any provision of this Lease or the application thereof isheld to be invalid or unenforceable, the remainder of this Lease or the application of suchprovision to persons or circumstances other than those as to which it is invalid or unenforceableshall not be affected thereby, and each of the provisions of this Lease shall be valid andenforceable, unless enforcement of this Lease as so invalidated would be unreasonable or grosslyinequitable under all the circumstances or would materially frustrate the purposes of this Lease.     17.5 Litigation Between Parties. In the event of any litigation or other disputeresolution proceedings between the parties hereto arising out of or in connection with thisLease, the prevailing party shall be reimbursed for all reasonable costs, including, butnot limited to, reasonable accountants’ fees and attorneys’ fees, incurred inconnection with such proceedings (including, but not limited to, any appellateproceedings relating thereto) or in connection with the enforcement of any judgment oraward rendered in such proceedings. **“**Prevailing party**”** within the meaning of thisSection shall include, without limitation, a party who dismisses an action for recoveryhereunder in exchange for payment of the sums allegedly due, performance of covenantsallegedly breached or consideration substantially equal to the relief sought in theaction.     17.6 Surrender. A voluntary or other surrender of this Lease by Tenant, or amutual termination thereof between Landlord and Tenant, shall not result in a merger butshall, at the option of Landlord, operate either as an assignment to Landlord of any andall existing subleases and subtenancies, or a termination of all or any existingsubleases and subtenancies. This provision shall be contained in any and all assignmentsor subleases made pursuant to this Lease.     17.7 Interpretation. The provisions of this Lease shall be construed as a whole,according to their common meaning, and not strictly for or against Landlord or Tenant.The captions preceding the text of each Section and subsection hereof are included onlyfor convenience of reference and shall be disregarded in the construction orinterpretation of this Lease.
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     17.8 Entire Agreement. This written Lease, together with the exhibits hereto,containsall the representations and the entire understanding between the parties hereto with respect to thesubject matter hereof. Any prior correspondence, memoranda or agreements are replaced in total bythis Lease and the exhibits hereto. This Lease may be modified only by an agreement in writingsigned by each of the parties.     17.9 Governing Law. This Lease and all exhibits hereto shall be construed andinterpreted in accordance with and be governed by all the provisions of the laws of the Stateof California.     17.10 No Partnership. The relationship between Landlord and Tenant is solely that ofa lessor and lessee. Nothing contained in this Lease shall be construed as creating anytype or manner of partnership, joint venture or joint enterprise with or between Landlordand Tenant.     17.11 Financial Information. From time to time Tenant shall promptly providedirectly to prospective lenders and purchasers of the Center designated by Landlord suchfinancial information pertaining to the financial status of Tenant as Landlord mayreasonably request; provided, Tenant shall be permitted to provide such financialinformation in a manner which Tenant deems reasonably necessary to protect theconfidentiality of such information. In addition, from time to time, Tenant shall provideLandlord with such financial information pertaining to the financial status of Tenant asLandlord may reasonably request. Landlord agrees that all financial information suppliedto Landlord by Tenant shall be treated as confidential material, and shall not bedisseminated to any party or entity (including any entity affiliated with Landlord)without Tenant’s prior written consent, except that Landlord shall be entitled to providesuch information, subject to reasonable precautions to protect the confidential naturethereof, (i) to Landlord’s partners and professional advisors, solely to use in connectionwith Landlord’s execution and enforcement of this Lease, and (ii) to prospective lendersand/or purchasers of the Center, solely for use in connection with their bona fideconsideration of a proposed financing or purchase of the Center, provided thatsuch prospective lenders and/or purchasers are not then engaged in businesses directlycompetitive with the business then being conducted by Tenant. For purposes of thisSection, without limiting the generality of the obligations provided herein, it shall bedeemed reasonable for Landlord to request copies of Tenant’s most recent audited annualfinancial statements, or, if audited statements have not been prepared, unauditedfinancial statements for Tenant’s most recent fiscal year, accompanied by a certificateof Tenant’s chief financial officer that such financial statements fairly presentTenant’s financial condition as of the date(s) indicated. Notwithstanding any other provisionsof this Section 17.11, during any period in which Tenant has outstanding a class ofpublicly traded securities and is filing with the Securities and Exchange Commission, ona regular basis, Forms 10Q and 10K and any other periodic filings required under theSecurities Exchange Act of 1934, as amended, it shall constitute sufficient complianceunder this Section 17.11 for Tenant to furnish Landlord with copies of such periodicfilings substantially concurrently with the filing thereof with the Securities andExchange Commission.          Landlord and Tenant recognize the need of Tenant to maintain the confidentiality ofinformation regarding its financial status and the need of Landlord to be informed of, and toprovide to prospective lenders and purchasers of the Center financial information pertaining to,
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Tenant’s financial status. Landlord and Tenant agree to cooperate with each other in achievingthese needs within the context of the obligations set forth in this Section.     17.12 Costs. If Tenant requests the consent of Landlord under any provision of thisLease for any act that Tenant proposes to do hereunder, including, without limitation, assignmentor subletting of the Premises, Tenant shall, as a condition to doing any such act and the receiptof such consent, reimburse Landlord promptly for any and all reasonable costs and expensesincurred by Landlord in connection therewith, including, without limitation, reasonable attorneys’fees.     17.13 Time. Time is of the essence of this Lease, and of every term andcondition hereof.     17.14 Rules and Regulations. Tenant shall observe, comply with and obey, and shallcause its employees, agents and, to the best of Tenant’s ability, invitees to observe, comply withand obey such reasonable rules and regulations for the safety, care, cleanliness, order and use ofthe Building and the Center as Landlord may promulgate and deliver to Tenant from time to time,provided that such rules and regulations are reasonable (or, to the extent they are notreasonable, are mandated by applicable law), do not materially impair Tenant’s ability to conductthe uses permitted hereunder on the Premises and in the Center, and do not discriminate againstTenant relative to other similarly situated tenants occupying portions of the Center.     17.15 Brokers. Landlord agrees to pay a brokerage commission in connection withthe consummation of this Lease (a) to Landlord’s broker, CB Richard Ellis, Inc., and (b)to Tenant’s broker, CRESA Partners, each in accordance with a separate written agreement.Each party represents and warrants that no other broker participated in the consummationof this Lease and agrees to indemnify, defend and hold the other party harmless againstany liability, cost or expense, including, without limitation, reasonable attorneys’fees, arising out of any claims for brokerage commissions or other similar compensationin connection with any conversations, prior negotiations or other dealings by theindemnifying party with any other broker.     17.16 Memorandum of Lease. At any time during the term of this Lease, either party,at its sole expense, shall be entitled to record a memorandum of this Lease and, ifeither party so requests, both parties agree to cooperate in the preparation, execution,acknowledgment and recordation of such document in reasonable form. Tenant expresslyrequests that such a memorandum be prepared and recorded promptly following the LeaseCommencement Date, and Landlord agrees to cooperate in such preparation and recording. Ifsuch a memorandum of lease is recorded, then upon expiration or termination of thisLease, Tenant agrees promptly to execute, acknowledge and deliver to Landlord, uponwritten request by Landlord, a Termination of Memorandum of Lease in such form asLandlord may reasonably request, for the purpose of terminating any continuing effect ofthe previously recorded memorandum of lease as a cloud upon title to the Property.     17.17 Corporate Authority. Each party to this Lease represents and warrants thatthe person signing this Lease on behalf of such respective party is fully authorized todo so and, by so doing, to bind such party.
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     17.18 Execution and Delivery. Submission of this Lease for examination or signatureby Tenant does not constitute an agreement or reservation of or option for lease of the Premises.This instrument shall not be effective or binding upon either party, as a lease or otherwise, untilexecuted and delivered by both Landlord and Tenant. This Lease may be executed in one or morecounterparts and by separate parties on separate counterparts, but each such counterpart shallconstitute an original and all such counterparts together shall constitute one and the sameinstrument.     17.19 Survival. Without limiting survival provisions which would otherwise be impliedor construed under applicable law, the provisions of Sections 2.5, 5.4, 7.2, 7.3, 7.4, 8.2,9.6,10.6, 16.1(a), 17.5 and 17.16 hereof shall survive the termination of this Lease with respectto matters occurring prior to the expiration of this Lease.     17.20 Parking. Landlord agrees that the Common Areas, taken as a whole, shall includeparking in amounts sufficient to satisfy the minimum parking requirements of the City of MountainView applicable to the Center from time to time; that Tenant shall have the nonexclusive andnon-reserved use of approximately 3.2 automobile parking stalls per 1,000 rentable square feet ofspace in the Premises; and that there shall be no additional cost or charge to Tenant for thenonexclusive use of such parking by Tenant and its employees and invitees.*[signature page follows]*
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     IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day and year firstset forth above.               “Landlord”    “Tenant”             BRITANNIA HACIENDA VIII LLC, a