Document:

exv10w68

Exhibit 10.68

Operating Agreement

of

HSRE-Campus
Crest IV, LLC

(a Delaware limited liability company)

DATED: AS OF JANUARY 20, 2011

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE	 	Page
	ARTICLE 1 ORGANIZATION
	 	 	1	 
	 
	1.1 Definitions and Construction
	 	 	1	 
	1.2 Formation
	 	 	2	 
	1.3 Name
	 	 	2	 
	1.4 Members
	 	 	2	 
	1.5 Registered Office and Agent
	 	 	2	 
	1.6 Principal Office
	 	 	2	 
	1.7 Term
	 	 	2	 
	1.8 Foreign Qualification
	 	 	2	 
	 
	ARTICLE 2 PURPOSE AND POWER
	 	 	3	 
	 
	2.1 Principal Purpose
	 	 	3	 
	2.2 Other Purposes
	 	 	3	 
	2.3 Pool One Properties; Additional Properties
	 	 	3	 
	2.4 Non-Competition and Right of First Opportunity
	 	 	3	 
	2.5 Powers
	 	 	4	 
	 
	ARTICLE 3 CONTRIBUTIONS BY MEMBERS; FINANCING
	 	 	4	 
	 
	3.1 Initial Capital Contributions
	 	 	4	 
	3.2 Capital Contributions for Acquisition and/or Development of Pool One Properties and Additional Properties
	 	 	4	 
	3.3 Pre-Construction Funding for Development Projects, and Pre-Development Costs; Pre-Acquisition Costs for Acquisition Properties
	 	 	4	 
	3.4 Funding for a Development Project
	 	 	6	 
	3.5 Construction Loans/Acquisition Loans for Additional Properties
	 	 	10	 
	3.6 Failure to Fund Required Amount
	 	 	11	 
	3.7 Operating Deficits; Necessary Cost Loans and Necessary Cost Capital Contributions
	 	 	13	 
	3.8 Obligations of Campus Crest Guarantor
	 	 	15	 
	3.9 Organizational Legal Expenses
	 	 	15	 
	3.10 Guaranty Loans
	 	 	16	 
	 
	ARTICLE 4 DISTRIBUTIONS TO MEMBERS
	 	 	16	 
	 
	4.1 Distribution of Net Cash Flow
	 	 	16	 
	4.2 Timing of Distributions/Prohibition against Reinvesting Proceeds
	 	 	18	 
	4.3 Withholding
	 	 	18	 
	4.4 Clawback
	 	 	18	 
	4.5 Other Compensation
	 	 	19	 

- i -

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	ARTICLE	 	Page
	ARTICLE 5 MANAGEMENT
	 	 	19	 
	 
	5.1 Management of Company Affairs
	 	 	19	 
	5.2 Major Decisions
	 	 	22	 
	5.3 Property Management Agreement
	 	 	26	 
	5.4 Notice of Certain Developments
	 	 	26	 
	5.5 Annual Business Plan and Operating Budget
	 	 	26	 
	5.6 Development of Project
	 	 	27	 
	5.7 Rights of HSRE
	 	 	28	 
	5.8 Meetings of the Members
	 	 	28	 
	5.9 REIT Related Provisions
	 	 	28	 
	5.10 ERISA REOC Related Provisions
	 	 	29	 
	 
	ARTICLE 6 TRIGGERING EVENTS; REMEDIES
	 	 	30	 
	 
	6.1 Campus Crest Triggering Event
	 	 	30	 
	6.2 Remedies for Campus Crest Triggering Event
	 	 	31	 
	6.3 HSRE Triggering Event
	 	 	32	 
	6.4 Remedies for HSRE Triggering Event
	 	 	32	 
	6.5 Replacement of Campus Crest as Day-to-Day Manager; Executive Committee Changes upon
	 	 	33	 
	6.6 Other Remedies for Breach
	 	 	34	 
	 
	ARTICLE 7 INDEMNIFICATION
	 	 	34	 
	 
	7.1 General
	 	 	34	 
	7.2 Insurance
	 	 	35	 
	7.3 Approval of Payments
	 	 	35	 
	7.4 Indemnification by Member
	 	 	35	 
	 
	ARTICLE 8 ACCOUNTING; REPORTING
	 	 	36	 
	 
	8.1 Fiscal Year
	 	 	36	 
	8.2 Accounting Method
	 	 	36	 
	8.3 Determination and Allocation of Profits and Losses
	 	 	36	 
	8.4 Returns
	 	 	36	 
	8.5 Financial Statements and Reports to Members
	 	 	36	 
	8.6 Books and Records
	 	 	37	 
	8.7 Information; Cooperation with HSRE
	 	 	37	 
	8.8 Banking
	 	 	38	 
	 
	ARTICLE 9 SALE OF PROPERTIES; PURCHASE OPTION
	 	 	38	 
	 
	9.1 Right to Initiate Sale of Properties
	 	 	38	 
	9.2 Initiation and Elections
	 	 	39	 

- ii -

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	ARTICLE	 	Page
	9.3 Failure of Non-Initiating Member to Exercise Purchase Option; Marketing of Properties
	 	 	40	 
	9.4 Releases; Consents
	 	 	40	 
	9.5 Liabilities; Indemnity
	 	 	41	 
	9.6 Purchase of Initiating Member Interest; Closing
	 	 	42	 
	9.7 Purchase of Loans
	 	 	42	 
	9.8 Remedies for Noncompliance
	 	 	42	 
	9.9 Assignees
	 	 	43	 
	9.10 Limitation on Competing Options
	 	 	43	 
	9.11 Expenses/Fees
	 	 	43	 
	 
	ARTICLE 10 TRANSFER OF MEMBERSHIP INTERESTS
	 	 	43	 
	 
	10.1 General Prohibition
	 	 	43	 
	10.2 Permitted Transfers
	 	 	43	 
	10.3 Involuntary Transfers
	 	 	44	 
	10.4 Dissolution or Termination of Members
	 	 	44	 
	10.5 Status of Assignor and Assignee
	 	 	44	 
	10.6 Admission Requirements
	 	 	45	 
	10.7 Effective Assignment
	 	 	45	 
	10.8 Cost of Admission
	 	 	46	 
	 
	ARTICLE 11 DISSOLUTION
	 	 	46	 
	 
	11.1 Dissolution
	 	 	46	 
	11.2 Events of Withdrawal
	 	 	46	 
	11.3 No Voluntary Withdrawal
	 	 	47	 
	 
	ARTICLE 12 LIQUIDATION
	 	 	47	 
	 
	12.1 Liquidation
	 	 	47	 
	12.2 Priority of Payment
	 	 	48	 
	12.3 Liquidating Distributions
	 	 	48	 
	12.4 No Restoration Obligation
	 	 	48	 
	12.5 Timing
	 	 	48	 
	12.6 Liquidating Reports
	 	 	49	 
	12.7 Certificate of Dissolution
	 	 	49	 
	 
	ARTICLE 13 GENERAL PROVISIONS
	 	 	49	 
	 
	13.1 Amendment
	 	 	49	 
	13.2 Authorized Representatives
	 	 	49	 
	13.3 Arbitration
	 	 	49	 
	13.4 Unregistered Interests
	 	 	50	 
	13.5 Waiver of Dissolution Rights
	 	 	51	 

- iii -

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	ARTICLE	 	Page
	13.6 Waiver of Partition Right
	 	 	51	 
	13.7 Waivers Generally
	 	 	51	 
	13.8 Notice
	 	 	51	 
	13.9 Other Business of Members
	 	 	52	 
	13.10 Partial Invalidity
	 	 	52	 
	13.11 Entire Agreement
	 	 	52	 
	13.12 Benefit
	 	 	52	 
	13.13 Binding Effect
	 	 	52	 
	13.14 Further Assurances
	 	 	53	 
	13.15 Headings
	 	 	53	 
	13.16 Governing Law
	 	 	53	 
	13.17 Limited Liability of Member
	 	 	53	 
	13.18 Counterparts
	 	 	53	 
	13.19 Confidential Information
	 	 	53	 

EXHIBITS:

A. DEFINITIONS

B. UNITED STATES INCOME TAX MATTERS

C. LIST OF REVIEW ITEMS

D. INITIAL CAPITAL CONTRIBUTIONS

E. FUNDING CONDITIONS

F. FORM OF DEVELOPMENT AGREEMENT

G. FORM OF PROPERTY MANAGEMENT AGREEMENT

H. NON-COMPETITION AND RIGHT OF FIRST OPPORTUNITY AGREEMENT

I. FORM OF FINANCIAL STATEMENTS

J. FORM OF CONSTRUCTION STATUS REPORTS

K. FORM OF ACQUISITION BUDGET AND DEVELOPMENT BUDGET

L. FORM OF COMPLETION AND COST OVERRUN GUARANTY

M. FORM OF ADDITIONAL PROJECT SCHEDULE

N. FORM OF SERVICES AGREEMENT

O. FORM CONSTRUCTION AGREEMENT

SCHEDULES:

1. SCHEDULE OF POOL ONE PROPERTIES

2. CONTENTS OF REPORTS FOR DEVELOPMENT PROJECTS DURING CONSTRUCTION PERIOD

3. CONTENTS OF REPORTS FOR POST-CONSTRUCTION PERIOD DEVELOPMENT PROJECTS AND ACQUISITION PROJECTS

4. EXPECTED COMPLETION DATES AND MINIMUM ANNUAL REVENUES

- iv -

 

OPERATING AGREEMENT

OF

HSRE-CAMPUS CREST IV, LLC

     This OPERATING AGREEMENT (this “Agreement”) of HSRE-CAMPUS CREST IV, LLC, a Delaware limited
liability company (the “Company”) is made as of the 20th day of January, 2011, by and
between, HSRE-CAMPUS CREST IVA, LLC, a Delaware limited liability company (“HSRE”), and CAMPUS
CREST PROPERTIES, LLC, a North Carolina limited liability company (“CAMPUS CREST”).

R E C I T A L S:

     WHEREAS, the Company is being formed to, directly or indirectly, acquire and develop,
redevelop/reposition, operate, manage, lease and sell or otherwise dispose of student housing
properties as set forth herein;

     WHEREAS, subject to the satisfaction of the conditions contained herein, the Company intends
to acquire, develop, redevelop/reposition, operate, manage, lease and sell or otherwise dispose of
the Development Projects set forth on Schedule 1 attached hereto; and

     WHEREAS, the parties hereto desire to enter into this Agreement in order to set forth the
rights and obligations of the parties hereto with respect to the Company.

     NOW THEREFORE, in consideration of the foregoing, of the mutual promises contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties intending to be legally bound hereby agree as follows:

ARTICLE 1

ORGANIZATION

     1.1 Definitions and Construction. Terms used in this Agreement with initial capital
letters have the meanings specified in the Recitals to this Agreement, and in Exhibit A attached
hereto. Unless the context of this Agreement otherwise clearly requires, (a) references to the
plural include the singular, and references to the singular include the plural, (b) references to
any gender include the other genders, (c) the words “include”, “includes” and “including” do not
limit the preceding terms or words and shall be deemed to be followed by the words “without
limitation”, (d) the term “or” has the inclusive meaning represented by the phrase “and/or”, (e)
the terms “hereof”, “herein”, “hereunder”, “hereto” and similar terms in this Agreement refer to
this Agreement as a whole and not to any particular provision of this Agreement, (f) the terms
“day” and “days” mean and refer to calendar day(s) and (g) the terms “year” and “years” mean and
refer to calendar year(s). Unless otherwise set forth herein, references in this Agreement to (i)
any document, instrument or agreement (including this Agreement) (A) includes and incorporates all
exhibits, schedules and other attachments thereto, (B) includes all documents,

 

 

instruments or agreements issued or executed in replacement thereof and (C) means such
document, instrument or agreement, or replacement or predecessor thereto, as amended, modified or
supplemented from time to time in accordance with its terms and in effect at any given time, (ii) a
particular Law (as hereinafter defined) means such Law as amended, modified, supplemented or
succeeded, from time to time and in effect at any given time, and (iii) a specific Section of a Law
shall be deemed to refer also to the corresponding provision(s) of succeeding Law. All Section and
Exhibit references herein are to Sections and Exhibits of this Agreement, unless otherwise
specified. This Agreement shall not be construed as if prepared by one of the parties hereto, but
rather according to its fair meaning as a whole, as if all parties hereto had prepared it.

     1.2 Formation. The Company was formed on November 4, 2010, by filing the Certificate
with the Delaware Secretary of State pursuant to the Act. The rights and obligations of the
Members shall be as provided in the Act except as otherwise expressly provided in this Agreement.
The Members agree to execute such certificates or documents and to do such filings and recordings
and all other acts, including the filing or recording of any amendments to the Certificate and any
assumed name filings in the appropriate offices in the States of Delaware and any other applicable
jurisdictions as may be required to comply with applicable law.

     1.3 Name. The name of the Company is “HSRE-Campus Crest IV, LLC”. The business of
the Company will be conducted under such name, as well as any other name or names as the Members
may from time to time determine.

     1.4 Members. The initial Members of the Company are HSRE and Campus Crest. No
Additional Member shall be admitted except as otherwise permitted herein.

     1.5 Registered Office and Agent. The Company’s initial registered agent and office in
the State of Delaware shall be The Corporation Trust Company, Corporation Trust Center, 1209 Orange
Street, Wilmington, Delaware 19801. The Company may subsequently change its registered office or
registered agent in Delaware in accordance with the Act.

     1.6 Principal Office. The Company’s principal office shall initially be at the
offices of Campus Crest located at c/o Campus Crest Group, LLC, 2100 Rexford Road, Suite 414,
Charlotte, North Carolina, 28211. The Company’s principal office may be relocated from time to
time as the Members may determine.

     1.7 Term. The Company will be effective from the date the Certificate was filed with
the Delaware Secretary of State and will continue until its Dissolution as provided herein.

     1.8 Foreign Qualification. The Company shall make all filings and take such other
action to the extent required from time to time to do business or to have any Subsidiaries do
business in the jurisdictions where the Properties are located.

2

 

ARTICLE 2

PURPOSE AND POWER

     2.1 Principal Purpose. The business and principal purpose of the Company is to,
directly or indirectly, develop, redevelop, own, operate, manage, lease, finance and sell or
otherwise dispose of the Properties, subject to and in accordance with the terms and conditions set
forth in this Agreement.

     2.2 Other Purposes. The Company may engage in activities related or incidental to its
principal purpose. In addition, as provided in the Act, the Company is subject to other applicable
Laws which govern or limit the conduct of a particular business or activity.

     2.3 Pool One Properties; Additional Properties. The Members intend, subject to
satisfaction of the Funding Conditions, to acquire, develop, redevelop/reposition, operate, manage,
lease and sell or otherwise dispose of student housing properties in separate pools comprised of
student housing properties that are expected to be completed in the same school year (each, a
“Pool”), each of which shall be held, directly or indirectly, in a separate limited liability
company (each such limited liability company of which the Company is the first, being referred to
herein as a “Portfolio Company”). The Members hereby agree that subject to satisfaction of the
Funding Conditions for each Property (including, without limitation, the Approval by HSRE of the
construction schedule for such Property), the initial pool of Properties to be held by the Company
shall consist of those Properties set forth on Schedule 1 attached hereto (the “Pool One
Properties”). The Members may agree to form subsequent Portfolio Companies, which shall continue to
acquire, develop, redevelop/reposition, operate, manage, lease and sell or otherwise dispose of
student housing properties pursuant to the terms of an operating agreement in the form of this
Agreement. Each individual Property acquired by the Company, or by any subsequent Portfolio
Company, shall be acquired in each case by a special purpose entity that shall in turn be wholly
owned by the Company or subsequent Portfolio Company, unless otherwise agreed to by the Members.
Each special purpose entity shall be a limited liability company or limited partnership (i)
organized under the laws of the State of Delaware and qualified to transact business in the state
in which the particular property is located or (ii) organized under the laws of the state in which
the particular property is located, unless the use of an entity formed in another jurisdiction
would avoid taxes that would otherwise be incurred by the Company or the subsequent Portfolio
Company.

     2.4 Non-Competition and Right of First Opportunity. Concurrently with the execution
of this Agreement, Campus Crest and/or its Affiliates and HSRE and/or its Affiliates shall enter
into an Amended and Restated Non-Competition and Right of First Opportunity Agreement in the form
attached hereto as Exhibit H (the “Non-Competition and Right of First Opportunity
Agreement”), under which, among other things, HSRE and/or its Affiliates shall have the right to
provide the equity capital for certain projects proposed to be acquired or developed by Campus
Crest and its Affiliates.

3

 

     2.5 Powers. The Company has all of the powers granted to a limited liability company
under the Act, as well as all powers necessary or convenient to achieve its purposes and to further
its business.

ARTICLE 3

CONTRIBUTIONS BY MEMBERS; FINANCING

     3.1 Initial Capital Contributions. Concurrent with the execution of this Agreement,
each Member shall make (or has already made prior to the date hereof), the initial Capital
Contribution in cash, set forth opposite such Member’s name on Exhibit D. In addition to
the foregoing, subject to the satisfaction of the Funding Conditions for each Property, Campus
Crest shall assign, or cause to be assigned, to the applicable Property Owning Subsidiaries of the
Company all of its rights, title and interest in and to the lease agreement or purchase and sale
agreement for each Property and the limited liability company or limited partnership interest in
such Property Owning Subsidiary.

     3.2 Capital Contributions for Acquisition and/or Development of Pool One Properties and
Additional Properties. In the event the Funding Conditions for a Pool One Property (or an
Additional Property) have been satisfied (or waived, in writing, by each Member), then each Member
shall be obligated to make Mandatory Capital Contributions in an amount equal to (i) the Mandatory
Capital Limit with respect to such Property as set forth on Exhibit D (or such Additional
Property), multiplied by (ii) such Member’s Participating Percentage. Mandatory Capital
Contributions shall be funded, pari passu, in proportion to the Members’ respective Participating
Percentages. Capital calls for Mandatory Capital Contributions (“Capital Calls”) shall be made by
Campus Crest, in writing, pursuant to a written notice setting forth (in addition to other items
required under Section 3.4(d) for Development Projects): (i) the general purpose of the
Capital Call, (ii) the aggregate dollar amount of the Capital Call, and (iii) the date on which
payment shall be due (“Due Date”), which date shall be no less than five (5) days after the date of
receipt of notice of such Capital Call. Capital Calls for the acquisition of an Additional
Property shall be made following the satisfaction of the Funding Condition for the acquisition of
such Property at such time(s) as Campus Crest shall reasonably determine is necessary to close the
applicable transaction. Capital Calls relating to Development Projects shall be funded in
accordance with Section 3.4 below. For the purposes of confirming each Member’s respective
Capital Contribution and Capital Account balances with respect to the acquisition of an Additional
Property or the development of a Development Project, the Members hereby agree to complete and
execute an Additional Project Schedule in the form attached hereto as Exhibit M.

     3.3 Pre-Construction Funding for Development Projects, and Pre-Development Costs;
Pre-Acquisition Costs for Acquisition Properties.

     (a) Pre-Construction Funding. Prior to the satisfaction of the Funding Conditions for
a Development Project, all pre-construction costs and expenditures (“Pre-Development Costs”)
shall be funded by Campus Crest or an Affiliate thereof, and HSRE shall not be required to
contribute to the Company any portion of such costs. Such

4

 

Pre-Development Costs shall not be considered a loan or Capital Contribution to the
Company by Campus Crest or its Affiliates for any purpose hereunder, and neither Campus
Crest nor its Affiliates shall be entitled to reimbursement of such amounts unless and until
(i) HSRE has Approved such Development Project and (ii) all Funding Conditions for such
Development Project have been satisfied. In the event the Funding Conditions are met, the
Pre-Development Costs funded by HSRE and Campus Crest shall be trued up at closing of the
construction loan for the Development Project, so that HSRE and Campus Crest each fund such
Pre-Development Costs in accordance with their respective Participating Percentages. Within
ten (10) days after the Funding Conditions for the Development Project are satisfied (or
such other date Approved by HSRE and Campus Crest), Campus Crest shall transfer and assign
(or cause to be transferred and assigned) to the Company (or a Subsidiary thereof) one
hundred percent (100%) of the ownership interests with respect to the Development Project
held by Campus Crest and/or its Affiliates, including, without limitation, any contractual
rights with respect to the acquisition, design, construction, development, operation,
management and/or leasing of the Development Project (collectively, the “Contributed
Property Interests”). In connection with the acquisition of such Contributed Property
Interests, the Company or Subsidiary shall assume (or take subject to) those liabilities
encumbering the Contributed Property Interests, but only to the extent Approved by the
Executive Committee.

     (b) Pre-Acquisition Costs. With regard to proposed acquisitions of Acquisition
Properties, prior to the delivery by HSRE to Campus Crest of written notice of the approval
of its investment committee of a proposed acquisition (“IC Approval Notice”), all costs and
earnest money deposits related to such proposed acquisition (“Pre-Acquisition Costs”) shall
be borne and funded by Campus Crest or an Affiliate thereof, and neither HSRE nor the
Company shall bear any such Pre-Acquisition Costs, except as provided below. Following the
delivery of an IC Approval Notice by HSRE to Campus Crest, which notice shall include a
statement that the Pre-Acquisition Due Diligence Budget has been Approved by HSRE, all
Pre-Acquisition Costs (including those incurred prior to the delivery of the Approval Notice
and included in the Pre-Acquisition Due Diligence Budget) shall be borne fifty percent (50%)
by Campus Crest and fifty percent (50%) by HSRE. The Members hereby agree that the
expenditure of any Pre-Acquisition Costs in excess of the applicable line item set forth in
the Pre-Acquisition Due Diligence Budget shall constitute a Major Decision requiring the
Approval of the Executive Committee. In the event HSRE delivers an IC Approval Notice to
Campus Crest with respect to a proposed acquisition, and the Company closes on such proposed
acquisition, the Pre-Acquisition Costs funded by HSRE and Campus Crest shall be trued up at
the closing of such transaction, so that HSRE and Campus Crest each fund such
Pre-Acquisition Costs in accordance with their Participating Percentages. In the event HSRE
delivers an IC Approval Notice to Campus Crest with respect to a proposed acquisition, and
the Company does not close on such proposed acquisition, then the Company shall deliver
written notice to the Members that such transaction has been terminated (“Acquisition
Termination Notice”), which notice shall include (i) an itemized list of the Pre-Acquisition
Costs, and (ii) the amount required to be funded by each Member to cause the Pre-Acquisition
Costs to be trued up and borne in accordance with the applicable ratio set forth in this
Section 3.3(b) (i.e., 50/50). Each Member shall

5

 

be obligated to fund as a Mandatory Capital Contribution the amount owed, if any,
within four (4) Business Days after the receipt of such Acquisition Termination Notice. Any
amount funded in excess of a Member’s share of Pre-Acquisition Costs shall be reimbursed as
soon as practicable following delivery of the Acquisition Termination Notice.

     3.4 Funding for a Development Project.

     (a) Timing/Completion Date. The Members shall be obligated to make their respective
Mandatory Capital Contributions for a Development Project when and as called by Campus Crest
in accordance with Section 3.4(d) and Section 3.4(e).

     (b) In Balance Requirement; Cost Overrun and Completion Guaranty.

     (i) Notwithstanding anything to the contrary contained in this Agreement, HSRE
shall not be required to fund a Mandatory Capital Contribution at any time when a
Development Project is not “In Balance” (as defined under the Development Agreement)
on the Due Date of such Mandatory Capital Contribution as a result of Excess Project
Costs for which Developer is responsible to fund pursuant to the Development
Agreement. The Developer and/or the Campus Crest Guarantor shall be jointly and
severally liable to fund all Cost Overruns (as determined pursuant to and as
provided in the Development Agreement and the Completion and Cost Overrun Guaranty
Agreement). Any amounts funded by the Developer and/or the Campus Crest Guarantor
for Cost Overruns or other amounts under the Development Agreement and other amounts
required to be funded by the Developer under the Development Agreement or the
Completion and Cost Overrun Guaranty, as the case may be, shall not be reimbursed by
the Company to the payor except as provided in the Development Agreement and/or
Completion and Cost Overrun Guaranty and shall not be deemed loans to the Company or
Capital Contributions for any purpose hereunder (or under the Related Party
Agreements).

     (ii) Notwithstanding anything to the contrary contained in this Agreement, in
the event that the Developer and/or Campus Crest Guarantor fund any Cost Overruns
and the Reimbursement Conditions (as defined below) with respect to the
Reimbursement Amounts are satisfied, then Developer and/or Campus Crest Guarantor,
as applicable, shall be entitled to a reimbursement from the Company equal to the
sum of the Project Reimbursement Balances (as defined in a Development Agreement) of
all Projects in the applicable Pool (the “Pooled Reimbursement Amount”). For the
purposes hereof, the Reimbursement Conditions shall be deemed to be satisfied upon
compliance with or satisfaction of the conditions of subsections (1) and (3) of the
definition of “Reimbursement Conditions” under a Development Agreement. The payment
of the Pooled Reimbursement Amount shall be made to the Developer and/or Campus
Crest Guarantor, as applicable, as set forth in Section 3.4(b)(iii) and
Section 4.1(a)(iii).

6

 

     (iii) Any amounts funded by (A) a Construction Lender (as defined in the
Development Agreement), (B) a lender refinancing a Construction Loan or (C) a
General Contractor (as defined in a Development Agreement) that would otherwise be
used to reimburse any Final Savings (as defined in a Development Agreement) achieved
with respect to a Development Project shall be held in a separate account (the
“Excess Savings Account”) to be maintained by the applicable Property Owning
Subsidiary which owns such Development Project until the completion of the last
Development Project in the applicable Pool. To the extent that any such amounts
remain in the Excess Savings Account upon completion of all Development Projects in
such Pool and Developer is not obligated to fund any remaining Cost Overruns
(including, without limitation, Operating Deficit Overruns (as defined in a
Development Agreement)), such amounts shall be distributed (x) first, to HSRE, in
repayment of any Member Loans made by HSRE to Campus Crest to fund Cost Overruns not
otherwise funded by Campus Crest, (y) second, to Developer and/or Campus Crest
Guarantor, as applicable, to the extent of any Pooled Reimbursement Amount that has
not been previously reimbursed, whether pursuant to Section 3.4(b)(ii) above
or otherwise, and (z), thereafter, fifty percent (50%) to HSRE and fifty percent
(50%) to Campus Crest.

     (c) Application of Capital Contributions for Development Projects. Each Member
authorizes Campus Crest to apply its Mandatory Capital Contribution to the payment of all
charges, costs and expenses incurred by the Company in connection with the construction of a
Development Project, and the payment of any fees pursuant to the Development Agreement all
subject to and in accordance with the Development Budget. Notwithstanding the foregoing, any
funding for Cost Overruns shall be applied only to the Cost Overrun which gave rise to the
need for such funds.

     (d) Funding Procedures for Development Projects. Subject to Section 3.4(e),
which requires a shorter notice and contribution period with respect to emergency
situations, not less than five (5) days prior to the Due Date for any Capital Calls for a
Development Project, as a condition of the obligation of the Members to fund their
respective Mandatory Capital Contributions, Cost Overruns and any Required Amount (as
defined herein), Campus Crest shall have delivered to the Members the following documents
and materials relating to such disbursements:

     (i) A disbursement request executed by Campus Crest (“Request for Advance”)
specifying each Member’s Required Amount. Each Request for Advance shall include:
(i) a breakdown of any unfunded Budgeted Project Costs to which said Required Amount
relates, (ii) a breakdown of any concurrent application (i.e., any application made
within the same construction draw cycle) of net cash receipts of the Company, or of
proceeds of the Required Amount to the payment of unfunded Budgeted Project Costs,
(iii) a good faith determination of whether the Development Project is on schedule
or if not, an estimate of any delays in the schedule, (iv) a good faith projection,
based on information then available to Campus Crest, of future Unfunded Excess
Project Costs and future

7

 

unfunded Budgeted Project Costs, as applicable, and (v) a statement by Campus
Crest as to whether or not the Development Project is In Balance, including
appropriate detail and analysis, and (if the Development Project is not In Balance)
setting forth the category and amount of any amount that would need to be made to
cause the Development Project to be In Balance.

     (ii) A certification to the Members, as of the date of the applicable request
for disbursement, that: (1) the payment which is the subject of the Request for
Advance is not inconsistent with, and will be applied in accordance with, the
requirements of the Construction Loan; and (2) to the knowledge of Campus Crest, no
Event of Default, or condition or event which, with the giving of notice or passage
of time, or both, would constitute an Event of Default, exists under the terms of
this Agreement concerning the Development Project in question or the Construction
Loan (except any default thereunder that would be cured by the application of all or
any portion of the funds which are the subject of the Request for Advance in
question); and

     (iii) All relevant back-up materials to evidence the expenditures set forth in
such draw request, as reasonably requested by the Member, in writing, including,
without limitation, timesheets, invoices, disbursements, and any and all other
documents required to be delivered to the lender under the Construction Loan as
conditions to draws thereunder simultaneously with the delivery of such documents to
said lender.

     (e) Emergency Funding. Notwithstanding Section 3.2 which provides that the Due
Date for a Capital Call shall not be less than five (5) days after the date of receipt of
notice of such Capital Call, if a Request for Advance is for the purpose of funding any
amount necessary to prevent or ameliorate an emergency that will result in substantial
damage to the Development Project or bodily injury to any Person at or about the Development
Project as reasonably determined by Campus Crest, then each Member will be required to fund
its Required Amount immediately upon receipt of the applicable disbursement request or
Capital Call notice.

     (f) Re-balancing Contributions. The Members hereby acknowledge and agree that the
expected Completion Date (the “Expected Completion Date”) and the minimum annual revenue
threshold (the “Minimum Annual Revenue”) for the Denton Property and the Columbia Property
(each, a “Tested Property”) are as set forth on Schedule 4 attached hereto. A Tested
Property shall be deemed a “Re-balancing Property” unless and until (i) the Completion Date
for such Tested Property has occurred by the Expected Completion Date for such Tested
Property and (ii) the Tested Property has generated the Minimum Annual Revenue for such
Tested Property in any one of the three Revenue Testing School Years.

     (i) If any of the Re-balancing Properties have not met the Minimum Annual
Revenue during any of the three Revenue Testing School Years, HSRE shall have the
right, between the time period commencing September 15, 2011

8

 

and ending November 30, 2014 (the “Re-balancing Contribution Period”), to
require Campus Crest to make a Capital Contribution to the Company with respect to
each Re-balancing Property (a “Re-balancing Contribution”) such that, upon such
Capital Contribution by Campus Crest, Campus Crest shall have contributed 49.9% of
the total Capital Contributions invested by the Members with respect to such
Re-balancing Property. Notwithstanding anything contained in Section 4.1
hereof to the contrary, following the date of the Re-balancing Contribution, any and
all Distributions of Net Cash Flow made to the Members with respect to the
Re-balancing Property after the repayment of any Campus Crest Guaranty Loans and
Necessary Costs Loans pursuant to Section 4.1(a) or Section 4.1(b),
as applicable, shall be distributed 49.9% to Campus Crest and 50.1% to HSRE. The
Re-balancing Contribution shall be applied by the Company to pay down the loan
encumbering the Re-balancing Property; provided, however, that in the event (x) the
Re-balancing Property is encumbered by a permanent loan and (y) HSRE, in its sole
and absolute discretion, determines that a pay down of such loan (1) is prohibited
under the applicable loan documents with respect to loan encumbering the
Re-balancing Property or (2) would be cost prohibitive due to yield maintenance or
otherwise, then HSRE shall provide notice of such determination to Campus Crest, and
instead of making a Re-balancing Contribution with respect to such Re-balancing
Property in the amount set forth above, Campus Crest shall be obligated to make a
Re-balancing Contribution, which amount shall be immediately distributed by the
Company to HSRE, in an amount equal to the amount which is necessary to cause the
Participating Percentages of the Campus Crest and HSRE to be adjusted to equal 49.9%
and 50.1%, respectively, after such amount is distributed to HSRE.

     (ii) In the event HSRE requires Campus Crest to make a Re-balancing
Contribution in accordance with Section 3.4(f)(i) above, Campus Crest shall
have the option (the “Re-balancing Purchase Option”) to purchase HSRE’s interest
with respect to such Re-balancing Property by paying HSRE the amount required to
provide HSRE with a 13% Internal Rate of Return with respect to such Re-balancing
Property. The Re-balancing Purchase Option shall be exercisable until the earlier
of (x) the initiation by either Member of the provisions of Article 9 with
respect to the Re-balancing Property or (y) the decision by the Executive Committee
to market the Re-balancing Property for sale. In the event (A) any such
Re-balancing Property, with respect to which Campus Crest has exercised the
Re-balancing Purchase Option and purchased HSRE’s interest therein, is thereafter
sold or otherwise disposed of by Campus Crest or any of its Affiliates within one
(1) year of the closing of the purchase of HSRE’s interest in such Re-balancing
Property and (B) the proceeds received by Campus Crest (or its Affiliate, as
applicable) from the sale of the Re-balancing Property as described in clause (A)
above exceed the amount of proceeds that, if received by the Company in connection
with the sale of such Re-balancing Property, would be sufficient to provide HSRE
with a 13% Internal Rate of Return with respect to such Re-balancing Property, then
Campus Crest shall (or shall cause its Affiliate to) pay to HSRE an amount equal to
the excess of: (X) the amount HSRE would be

9

 

distributed if such Re-balancing Property was sold by the Company for the
purchase price received by Campus Crest or its Affiliate, less (Y) the amount paid
to HSRE by Campus Crest in connection with the exercise of the Re-balancing Purchase
Option and buying HSRE’s interest in such Re-balancing Property.

     3.5 Construction Loans/Acquisition Loans for Additional Properties. Campus Crest
shall be responsible for obtaining, on behalf of the Company and/or the applicable Subsidiary, a
Construction Loan for each Development Project or an Acquisition Loan for each Additional Property
to be acquired by the Company for a minimum amount (the “Minimum Loan Amount”) of sixty-five
percent (65%) of the total construction costs (including hard and soft costs, acquisition costs and
due diligence expenses) in the case of a Development Project or sixty-five percent (65%) of the
total acquisition costs (including due diligence expenses) in the case of an Acquisition Property
to be acquired by the Company, as the case may be. In the event Campus Crest is unable to obtain a
Construction Loan or Acquisition Loan, as the case may be, in an amount at least equal to the
Minimum Loan Amount, then Campus Crest shall be responsible for making a preferred equity
investment in the applicable Property Owning Subsidiary that will own the Development Project or
Additional Property, as the case may be, in an amount at least equal to the difference between the
amount of the Construction Loan or Acquisition Loan, as the case may be, obtained by Campus Crest
and the Minimum Loan Amount. Any such preferred equity investment made by Campus Crest shall earn a
preferred return at a rate equal to nine percent (9%) per annum or such other rate as agreed upon
by the Members. Each Construction Loan or Acquisition Loan and any agreements and documents
pertaining thereto shall be subject to the Approval of HSRE. In the event Campus Crest is unable
to obtain a non-recourse Construction Loan or Acquisition Loan with the foregoing terms, Campus
Crest shall, subject to the Approval of HSRE (which consent may not be unreasonably conditioned,
delayed or withheld), cause Campus Crest to guaranty repayment of such loan and/or any other
obligations imposed by the lender. HSRE hereby agrees that in the event a lender to one or more of
the Subsidiaries requests Campus Crest or one or more of its Affiliates to (i) guaranty the
obligations of such Subsidiary under any hazardous substance or environmental indemnification
agreement Approved by HSRE (“Hazardous Substance Indemnification Agreement”), (ii) guaranty
non-recourse carve outs (“Non-Recourse Carve Out Guaranty”) and/or (iii) guaranty the completion of
a Development Project or payment or performance of the applicable Construction Loan (“Payment and
Performance Guaranty”), the indemnification provisions of Article 7 shall apply in the case
of any loss suffered by Campus Crest or any Affiliate thereof under (A) such Hazardous Substance
Indemnification Agreement, (B) such Non-Recourse Carve Out Guaranty and (C) to the extent not
arising as a result of a Cost Overrun, the Payment and Performance Guaranty; unless, with respect
to clauses (A) and (B), such loss was suffered through the unilateral acts or omissions of Campus
Crest or its Affiliates, without the consent or concurrence of HSRE and with respect to clause (C),
such loss was suffered through a material breach of the Development Agreement or any other
Triggering Event of Campus Crest, in which case the indemnification provisions of Article 7
shall not apply. Notwithstanding anything to the contrary herein, with respect to the
indemnification contemplated in the immediately preceding sentence, the Company shall only be
obligated to indemnify Campus Crest from the assets of the Company and the applicable Property
Owning Subsidiary that specifically relate to the Property giving rise to the resulting loss, and
Campus Crest shall not be entitled to indemnification from any other assets or Property

10

 

Owning Subsidiaries of the Company, nor are the Members obligated to make any Capital
Contributions to fund any such indemnification. HSRE will not be personally liable for any portion
of any such Acquisition Loan or Construction Loan (or any subsequent takeout financing).

     3.6 Failure to Fund Required Amount.

     (a) Failure to Fund. If any Member (a “Defaulting Member”) fails to fund, in full, any
amount required to be funded pursuant to Sections 3.2, 3.3,
3.4(a) and 4.4 hereof (each, a “Required Amount”), by the required Due Date,
any Member that has fully funded its Required Amount (the “Contributing Member”) by the
required Due Date shall have the right, but shall not be obligated, to fund the Defaulting
Member’s Required Amount that was not funded (the “Default Amount”), and shall have the
right to exercise remedies, as set forth below.

     (b) Member Loans. The Contributing Member may fund all or any portion of the Default
Amount as a “Member Loan,” which shall be treated as loaned by the Contributing Member to
the Defaulting Member, and in turn, contributed by the Defaulting Member to the Company.
Any such Member Loan shall bear interest at an annual rate of which is the higher of (i)
fourteen percent (14%) per annum or (ii) five hundred (500) basis points over the Prime
Rate, adjusting when and as the Prime Rate adjusts. Until such time as a Member Loan has
been repaid in full by the Defaulting Member, all Distributions pursuant to this Agreement
that would otherwise be paid to the Defaulting Member shall instead be paid directly to the
Contributing Member. The amount paid to the Contributing Member pursuant to the preceding
sentence shall be deemed to have first been distributed by the Company to the Defaulting
Member pursuant to this Agreement, and then paid by the Defaulting Member to the
Contributing Member, and shall be applied first against accrued but unpaid interest owing
with respect to the Member Loan and then in reduction of the principal balance thereof.
Each Member Loan shall be due and payable in full upon the earlier of one (1) year from the
date advanced or the dissolution of the Company.

     (c) Security for Member Loan. Until such time as a Member Loan has been repaid in full
by the Defaulting Member, all Distributions pursuant to this Agreement that would otherwise
be paid to the Defaulting Member shall instead be paid directly to the Contributing Member.
Such amounts shall be deemed distributed by the Company to the Defaulting Member pursuant to
this Agreement and then paid by the Defaulting Member to the Contributing Member and shall
be applied first against accrued but unpaid interest owing with respect to the Member Loan
and then in reduction of the principal balance thereof. In order to secure the repayment of
any and all Member Loans made on behalf of a Defaulting Member, the Defaulting Member hereby
grants a security interest in favor of the Contributing Member in and to all Distributions
(including, without limitation, liquidation proceeds and any other cash proceeds and
interest and principal on any loans made to the Company by the Defaulting Member) to which
the Defaulting Member may be entitled under this Agreement, and hereby irrevocably appoints
the Contributing Member, and any of the Contributing Member’s representatives, agents,
officers or

11

 

employees, as such Defaulting Member’s attorney(s)-in-fact, with full power to prepare,
execute, acknowledge, and deliver, as applicable, all documents, instruments, and/or
agreements memorializing and/or securing such Member Loan(s), including, without limitation,
such Uniform Commercial Code financing and continuation statements, mortgages, pledge
agreements and other security instruments as may be reasonably appropriate to perfect and
continue the security interest in favor of such Contributing Member. Upon repayment in full
of the Member Loan, any and all documents evidencing such security interest may be
discharged or terminated without any action on the part of such Contributing Member or such
Contributing Member’s representatives, agents, officers or employees.

     (d) Maturity of Member Loan. If, upon the maturity of a Member Loan (taking into
account any agreed upon extensions thereof), any principal thereof and/or accrued interest
thereon remains outstanding, then the Contributing Member may elect any one (1) of the
following options: (A) to renew such Member Loan pursuant to the terms and provisions of
Section 3.6(b), (B) to institute legal (or other) proceedings against the Defaulting
Member for repayment of such loan which may include, without limitation, foreclosing against
the security interest granted above, or (C) to contribute all or any portion of such
outstanding principal of, and accrued interest on, such Member Loan (or portion thereof) to
the capital of the Company in the manner described in Section 3.6(e) below in
satisfaction of such Member Loan. If (C) is elected, (i) the Defaulting Member shall be
deemed to have received a Distribution equal to the amount of the outstanding principal
amount of the Member Loan so contributed (plus the accrued and unpaid interest thereon),
(ii) the Capital Account and the unreturned Capital Contributions of the Defaulting Member
shall be reduced by such amount, (iii) the Defaulting Member shall then be deemed to have
repaid the outstanding principal of such Member Loan (plus the accrued and unpaid interest
thereon), and (iv) the Capital Account and the Capital Contributions of the Contributing
Member shall be increased by the amount of the Member Loan (plus the accrued and unpaid
interest thereon). Failure of the Contributing Member to give written notice to the
Non-Contributing Member within thirty (30) days after maturity shall be deemed to constitute
an election to renew such Member Loan for an additional term of one hundred eighty (180)
days on the terms set forth herein.

     (e) Capital Contribution of Default Amount/Dilution. Instead of making a Member Loan,
the Contributing Member may fund all or any portion of the Default Amount as a Capital
Contribution. Upon any such contribution by the Contributing Member, (i) the Participating
Percentage of the Defaulting Member shall be decreased by the Dilution Percentage, and (ii)
the Participating Percentage of the Contributing Member shall be increased by the reduction
in the Dilution Percentage of the Defaulting Member. The “Dilution Percentage” shall equal
the amount expressed in percentage points calculated based upon the following formula:
Dilution Percentage = 110% x the quotient of (x) the Default Amount divided by (y) the
total unreturned Capital Contributions of all Members (including the Default Amount
contributed by the Contributing Member). The respective percentage interest of the
Defaulting Member in each level of priority distributions under Section 4.1 shall be
adjusted in the same proportion as the adjustment

12

 

made to the Member’s respective Participating Percentage. Any adjustments to the
Participating Percentages pursuant to this Section 3.6(e) shall be rounded to the
nearest one one-hundredth of one percentage point (.01%). To illustrate, if (i) the
Participating Percentages and unreturned Capital Contributions of HSRE and Campus Crest were
80% and 8,000, and 20% and $2,000, respectively, (ii) a Mandatory Contribution of $100 was
required to be made by the Members on a 80/20 basis, (iii) Campus Crest failed to fund its
$20 share, and (ii) HSRE funded its 80% share (i.e., $80) as well as Campus Crest’s 20%
share (i.e., $20), then the Dilution Percentage would be 0.22% (i.e., 110% x 20/10,100), and
the Participating Percentage of Campus Crest would be reduced from 20% to 19.78%, while the
Participating Percentage of HSRE would be increased from 80% to 80.22%. In addition, the
unreturned Capital Contributions of each Member would be deemed to be equal to its revised
Participating Percentage, multiplied by the total unreturned Capital Contributions of the
Members.

     (f) Member Default. In addition, in the event a Contributing Member elects not to fund
the Default Amount as a Member Loan, the Default Amount shall bear interest at the same rate
that would apply in the case of a Member Loan until paid, and the Company shall withhold and
offset any Distributions that would otherwise be made to the Defaulting Member against the
Default Amounts and accrued interest thereon, until the Default Amount plus all accrued and
unpaid interest thereon has been paid. The failure of Campus Crest or HSRE to fund its
required share of any Required Amount, in full, by the required Due Date shall constitute a
Campus Crest Triggering Event or HSRE Triggering Event, respectively, as provided in
Section 6.1(a) and Section 6.3(a), respectively, unless such default is
cured within the time periods provided therein, and shall be subject to the remedies set
forth in Article 6.

     (g) Enforceability of Provisions. THE MEMBERS ACKNOWLEDGE AND AGREE THAT, UNDER THE
CIRCUMSTANCES EXISTING AS OF THE DATE HEREOF, THE REMEDIES PROVIDED FOR IN THIS SECTION
3.6 ARE FAIR AND REASONABLE AND DO NOT CONSTITUTE A FORFEITURE OR PENALTY. THE MEMBERS
FURTHER ACKNOWLEDGE AND AGREE THAT THEY HAVE BEEN PROVIDED WITH THE OPPORTUNITY TO CONSULT
WITH INDEPENDENT COUNSEL WITH RESPECT TO THE PROVISIONS OF THIS SECTION 3.6 AND
AGREE AND COVENANT NOT TO CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY SUCH REMEDY AS A
PENALTY, FORFEITURE OR OTHERWISE IN ANY COURT OF LAW OR EQUITY AND/OR ARBITRATION (OR
OTHERWISE).

     3.7 Operating Deficits; Necessary Cost Loans and Necessary Cost Capital Contributions.

     (a) The Members hereby agree that notwithstanding anything in this Agreement to the
contrary, if either Campus Crest or HSRE reasonably determines that the available funds of
the Company (including unfunded Mandatory Capital Contributions) are insufficient to pay any
Necessary Costs (as hereinafter defined) and such deficiency is not caused by a Member
failing to make a Mandatory Capital

13

 

Contribution, such Member (the “Funding Member”) shall have the right, but not the
obligation, to make an Necessary Cost Capital Contribution to the Company (“Necessary Cost
Capital Contribution”) in an amount sufficient to pay such Necessary Costs without the
Approval of any other Member; provided, however, that nothing contained in this Section
3.7 shall entitle any Member or the Campus Crest Guarantor to make Necessary Cost
Capital Contributions in lieu of their respective obligations to fund any Required Amount,
including without limitations, Cost Overruns under this Agreement, the Development Agreement
or the Completion and Cost Overrun Guaranty. Any Member making a Necessary Cost Capital
Contribution shall give ten (10) days written notice (“Necessary Contribution Notice”) to
the other Member prior to each Necessary Cost Capital Contribution, unless immediate funding
is necessary to prevent or ameliorate an emergency that will result in substantial damage to
the Development Project and/or Property or bodily injury to any Person at or about the
Development Project and/or Property as reasonably determined by the Funding Member, in which
case the Funding Member shall give such notice to the other Members promptly following such
Necessary Cost Capital Contribution. Each Necessary Contribution Notice shall set forth the
amount of any Necessary Cost Capital Contribution, the due date such Necessary Cost Capital
Contribution was made (or the date made in the case of an emergency funding), and the
purpose of such Necessary Cost Capital Contribution.

     (b) Within ten (10) days after receipt of the Necessary Contribution Notice, the Member
not initiating the Necessary Cost Capital Contribution (i.e., Campus Crest or HSRE, as the
case may be) (the “Non-Funding Member”) shall have the right, but not the obligation, to
fund an amount up to its Participating Percentage of the Necessary Cost Capital
Contribution.

     (c) If the Non-Funding Member funds any portion of such amount within ten (10) days
after receipt of the Necessary Contribution Notice, then (i) such funded amount shall be
distributed to the Funding Member if the Funding Member funds more than its Participating
Percentage of the total amount funded by both Members, and (ii) the amounts funded by both
Members (reduced by any amount reimbursed to the Funding Member under Section
3.7(c)(i)) shall be treated as Capital Contributions, subject to Section 3.7(d)
below.

     (d) In the event a Non-Funding Member does not fully fund its Participating Percentage
of the Necessary Cost Capital Contribution within ten (10) days from the date of the
Necessary Contribution Notice, then that portion of the Funding Member’s Necessary Cost
Capital Contribution constituting the Excess Amount (as defined below) shall constitute a
loan to the Company (“Necessary Cost Loan”), which loan shall bear interest at an annual
rate which is the higher of (i) fourteen percent (14%) per annum and (ii) five hundred
(500) basis points over the Prime Rate, adjusting when and as the Prime Rate adjusts, and
shall be repaid prior to any Distributions under Article 4 or Article 12.
For purposes hereof, the “Excess Amount” shall mean (i) the total Necessary Cost Capital
Contribution funded by the Funding Member (reduced by any amount reimbursed to the Funding
Member under Section 3.7(c)(i)), minus (i) the Equity Portion. The Equity Portion
means (i) the quotient of (x) the amount (if any) funded by the Non-

14

 

Funding Member, divided by (y) the Participating Percentage of the Non-Funding Member,
multiplied by (ii) the Participating Percentage of the Funding Member. To illustrate, if
the Participating Percentages of HSRE and Campus Crest were eighty percent (80%) and twenty
percent (20%), respectively, and HSRE funded a Necessary Cost Capital Contribution of $100
and Campus Crest timely funded only $10, then (x) such $10 would be distributed to HSRE
under Section 3.7(c)(i), (y) the $10 funded by Campus Crest would constitute a
Necessary Cost Capital Contribution, and (z) $40 of the amount funded by HSRE would be
treated as an Necessary Cost Capital Contribution. The remaining $50 funded by HSRE would
be treated as a Necessary Cost Loan.

     (e) For purposes hereof, the term “Necessary Costs” shall mean any amount in excess of
the costs required to be funded under Sections 3.2, 3.3, and 3.4
hereof, including without limitation, an expenditure which a Member reasonably determines in
good faith to be needed to preserve the physical integrity, safety and value of a Property,
including, without limitation, an expenditure which a Member, in good faith, determines to
be necessary to (i) to address health or safety concerns of Tenants, (ii) to pay
maintenance, taxes or insurance on a Property, (iii) to pay, or discharge any liens or
encumbrances on the Project other than loans or encumbrances that are not otherwise in
default, or create a default, under a Construction Loan, and/or (iv) to cure or otherwise
avoid any default occurring under any agreement entered into by the Company or which would
otherwise be binding upon the Properties in any respect (including, without limitation, any
construction or loan documents, Leases, management agreements or other agreements binding
upon the foregoing parties); provided, however, that in no event shall the payment of any
fees to a Member or its Affiliate be deemed a Necessary Cost.

     3.8 Obligations of Campus Crest Guarantor. The Campus Crest Guarantor shall have the
obligation to guarantee the completion of a Development Project and Cost Overruns with respect to a
Development Project as set forth in the Completion and Cost Overrun Guaranty Agreement attached
hereto and incorporated herein by reference as Exhibit L.

     3.9 Organizational Legal Expenses. In the event the Funding Conditions are satisfied,
the Company will pay the legal expenses incurred by HSRE and Campus Crest with respect to
negotiation and preparation of this Agreement, including, without limitation, any documents
attached as exhibits hereto up to a cap of $30,000 for the legal expenses owed to HSRE’s counsel
and $15,000 for the legal expenses owed to Campus Crest’s counsel (including local counsel retained
by Campus Crest); provided, however, that in the event either Member’s legal costs shall exceed the
cap, but the other Member’s legal fees are below its applicable cap, then the Company shall pay the
portion of the Member’s legal expenses in excess of the cap up to the aggregate of the caps of both
Members. Except as provided above, any legal expenses in excess of a Member’s respective cap shall
be borne by the Member whose counsel exceeded the cap. In the event the Funding Conditions are not
satisfied, then each Member shall be liable for its own legal expenses related to the Properties
and this Agreement. The Company shall pay any and all legal, accounting, loan, brokers and similar
fees and expenses incurred in connection with the closing of the purchase, lease and financing of
the Properties and shall allocate such costs among the Properties as determined by the Members.

15

 

     3.10 Guaranty Loans.

     (a) If, other than as a result of the gross negligence, fraud or willful misconduct of
Campus Crest or its Affiliates, a Campus Crest Triggering Event under Section 6.1(i)
has occurred and is continuing, and as a result a lender is requiring a payment of any
portion of any Construction Loan, Acquisition Loan or any other financing of the Company or
the applicable Property Owning Subsidiary in connection with a default by the Company, the
applicable Property Owning Subsidiary and/or a Campus Crest Guarantor thereunder, then, in
each such case, Campus Crest and/or any Campus Crest Guarantor, as the case may be, shall
have the right to fund all or any portion of the amount (the “Guaranty Default Pay Down”)
that the applicable lender requires in connection with such default or such other event
(including, without limitation, the full repayment of such loan, if applicable), if any, as
a “Campus Crest Guaranty Loan,” which amount shall be treated as loaned by Campus Crest
and/or a Campus Crest Guarantor to the Company. Any such Campus Crest Guaranty Loan shall
bear interest at an annual rate equal to the rate that was being charged by the applicable
lender on the applicable loan at the time that the Campus Crest Triggering Event under
Section 6.1(i). Campus Crest shall provide HSRE written notice (1) of any Guaranty
Default Pay Down being required by a lender promptly after receiving notice from the
applicable lender and (2) of an election not to fund a Campus Crest Guaranty Loan to satisfy
any Guaranty Default Pay Down as soon as reasonably practicable, but no event later than
five (5) Business Days prior to the deadline established by the applicable lender to make
any Guaranty Default Pay Down.

     (b) HSRE Guaranty Loans. If a Campus Crest Triggering Event under Section
6.1(h) has occurred and is continuing, HSRE may fund all or any portion of the
difference between the applicable Guaranty Default Pay Down and the applicable Campus Crest
Guaranty Loan as an “HSRE Guaranty Loan,” which amount shall be treated as a loan by HSRE to
Campus Crest and shall bear interest at an annual rate equal to twenty-five percent (25%).
Except as provided in this Section 3.10(b), any HSRE Guaranty Loan shall be subject
to the same terms and be administered in the same fashion as a Member Loan pursuant to
Section 3.6(b) such that the HSRE Guaranty Loan shall be treated as having been
loaned by HSRE to Campus Crest, and in turn, loaned by Campus Crest to the Company as a
Campus Crest Guaranty Loan; provided, however, that Net Cash Flow
distributed to Campus Crest under Section 4.1(a) or Section 4.2(a) in
respect of any Campus Crest Guaranty Loan shall not be treated as a distribution to Campus
Crest in its capacity as a Member of the Company that would be paid to HSRE in respect of a
HSRE Guaranty Loan. Campus Crest shall have the right to repay a Campus Crest Guaranty Loan
at anytime without the consent of HSRE.

ARTICLE 4

DISTRIBUTIONS TO MEMBERS

     4.1 Distribution of Net Cash Flow.

16

 

     (a) Operating Cash Flow, if any, shall be applied and distributed on a quarterly basis
in the following order of priority:

     (i) First, to Campus Crest to the extent of the outstanding principal amount
of, and any accrued but unpaid interest on, any Campus Crest Guaranty Loans made by
Campus Crest pursuant to Section 3.10(a) (interest on such loans being paid
prior to principal);

     (ii) Second, to the Members in proportion to and to the extent of the
outstanding principal amount of, and any accrued but unpaid interest on, any
Necessary Cost Loans made by the Members pursuant to Section 3.7 (interest
on such loans being paid prior to principal);

     (iii) Third, to the Developer and the Campus Crest Guarantor, as applicable, to
the extent of the Pooled Reimbursement Amount that has not been previously
reimbursed, if any, as set forth in Section 3.4(b)(ii);

     (iv) Fourth, to the Members, pro rata, in proportion to and in accordance with
their respective Participating Percentages, until HSRE has received cumulative
Distributions constituting an 11% Cash on Cash Return (not taking into account any
loans made by HSRE and payments received thereon);

     (v) Fifth, seventy percent (70%) to HSRE and thirty percent (30%) to Campus
Crest, until HSRE has received cumulative Distributions constituting a 15% Cash on
Cash Return (not taking into account any loans made by HSRE and payments received
thereon); and

     (vi) Thereafter, the balance, fifty percent (50%) to HSRE and fifty percent
(50%) to Campus Crest.

     (b) Capital Proceeds, if any, shall be applied and distributed in the following order
of priority:

     (i) First, to Campus Crest to the extent of the outstanding principal amount
of, and any accrued but unpaid interest on, any Campus Crest Guaranty Loans made by
Campus Crest pursuant to Section 3.10(a) (interest on such loans being paid
prior to principal);

     (ii) Second, to the Members in proportion to and to the extent of the
outstanding principal amount of, and any accrued but unpaid interest on, any
Necessary Cost Loans made by the Members pursuant to Section 3.7 (interest
on such loans being paid prior to principal);

     (iii) Third, to the Members, pro rata, in proportion to and to the extent of
the Net Invested Capital balances of such Member;

17

 

     (iv) Fourth, to the Members, pro rata, in proportion to and in accordance with
their respective Participating Percentages, until HSRE has received cumulative
Distributions constituting an eleven percent (11%) Internal Rate of Return (not
taking into account any loans made by HSRE and payments received thereon);

     (v) Fifth, seventy percent (70%) to HSRE and thirty percent (30%) to Campus
Crest, until HSRE has received cumulative Distributions constituting an eighteen
percent (18%) Internal Rate of Return (not taking into account any loans made by
HSRE and payments received thereon); and

     (vi) Thereafter, the balance, fifty percent (50%) to HSRE and fifty percent
(50%) to Campus Crest.

     4.2 Timing of Distributions/Prohibition against Reinvesting Proceeds. Operating Cash
Flow shall be distributed to the Members within fifteen (15) days following the close of each
calendar quarter, and any Capital Proceeds shall be distributed within thirty (30) days after
receipt thereof, unless otherwise Approved by the Executive Committee. Any Operating Cash Flow and
Capital Proceeds with respect to a particular Property shall not be reinvested, contributed to any
other Subsidiary, or used or reserved for payment of any costs or expenses relating to any Property
other than the Property which generated such Operating Cash Flow or Capital Proceeds without the
Approval of the Executive Committee. The foregoing priorities of application of Net Cash Flow are
for the benefit of the Members only and not for the benefit of any third party or creditor of the
Company or of any Member, and neither the Company nor any Member shall be liable or responsible to
any third party or creditor of the Company or of any Member for any deviation from such priorities.

     4.3 Withholding. If required by either (i) the Code or (ii) by the laws of any State
or local government of the United States, the Company and each of its Subsidiaries will withhold
any required amount from Distributions to a Member or Distributions to the Company or a Subsidiary,
as the case may be, for payment to the appropriate taxing authority. Any amount so withheld from
either Member will be treated as a Distribution by the Company to such Member. Each Member agrees
to timely file any agreement that is required by any taxing authority in order to avoid any
withholding obligation that would otherwise be imposed on the Company.

     4.4 Clawback.

     (a) If upon liquidation of the Company, the Members have not received Distributions in
an amount which results in each Member receiving an 11% Internal Rate of Return (not taking
into account any Incentive Distributions, loans made to the Company or either Member by HSRE
or Campus Crest and interest and principal payments received by the Member thereon,
including, without limitation, Necessary Cost Loans (the amount of the shortfall shall be
referred to herein as the “Distribution Shortfall”)), then Campus Crest shall be obligated
to contribute to the Company the lesser of: (i) the amount of Incentive Distributions
received by Campus Crest, and (ii) the Distribution Shortfall. Any such payment required by
Campus Crest shall be made

18

 

within ten (10) days after the final Distribution of liquidating proceeds is made to
the Members, and such payment obligation of Campus Crest shall be added to the Campus Crest
Required Amount for all purposes hereunder. Any amount contributed to the Company by Campus
Crest under this Section 4.4(a) shall be immediately distributed to the Members in
accordance with Section 4.1(b) and shall not be treated as a Capital Contribution or
loan by Campus Crest hereunder.

     (b) If upon the sale or other disposition of any Property (or upon the disposition of
HSRE’s interest in any Re-balancing Property, pursuant to Article 9 hereof or otherwise),
HSRE has not received Distributions in an amount which results in HSRE receiving a thirteen
percent (13%) Internal Rate of Return with respect to HSRE’s Capital Contributions made with
respect to (i) all previously sold or disposed of Re-balancing Properties and (ii) such
Property, in the event such Property is a Re-balancing Property (not taking into account any
loans made to the Company or either Member by HSRE or Campus Crest and interest and
principal payments received by the Member thereon, including, without limitation, Necessary
Cost Loans (the amount of the shortfall shall be referred to herein as the “Re-balancing
Distribution Shortfall”)), then Campus Crest shall be obligated to contribute to the Company
the lesser of: (i) the aggregate amount of Distributions received by Campus Crest at any
time, and (ii) the Re-balancing Distribution Shortfall. Any such payment required by Campus
Crest shall be made promptly with three (3) business days following the applicable
Distribution (including, Operating Cash Flow, if necessary) and such payment obligation of
Campus Crest shall be added to the Campus Crest Required Amount for all purposes hereunder.
Any amount contributed to the Company by Campus Crest under this Section 4.4(b)
shall be immediately distributed to HSRE and shall not be treated as a Capital Contribution
or loan by Campus Crest hereunder; provided however, HSRE shall have the right to cause the
Company to (A) offset the amount of such required payment by Campus Crest against the
Distribution which would otherwise be made to Campus Crest and (B) distribute directly such
amount to HSRE.

     4.5 Other Compensation. Except as otherwise expressly provided in this Agreement and
in the Property Management Agreement, the Construction Agreement or the Development Agreement, or
with the written Approval of all Members, no Member or Affiliate of a Member will be entitled to
any salary or other form of compensation for services rendered to the Company.

ARTICLE 5

MANAGEMENT

     5.1 Management of Company Affairs.

     (a) General. Subject to the provisions of this Agreement, the Members shall be
responsible for the management of the Company’s business and affairs. Except as otherwise
provided herein, any action taken by HSRE or Campus Crest in accordance with the terms of
this Agreement shall constitute the act of and serve to bind the

19

 

Company. Subject to the limitations set forth herein, Campus Crest shall be
responsible for the day-to-day management of the Company’s business and affairs, shall be
entitled to execute agreements on behalf of the Company that will serve to bind the Company
and shall devote such time and effort to the Company as is appropriate in light of all facts
and circumstances; provided, however, that notwithstanding any other provision hereof, all
decisions and actions described in Section 5.2 shall require the Approval of the
Executive Committee. In addition, notwithstanding Section 5.5 and the limitations
of the Annual Business Plan and Annual Operating Budget for the Properties, Campus Crest
shall have the authority at any time or from time to time in an emergency situation to take
any action on behalf of the Company without obtaining the prior Approval of any Member if
such action is, in Campus Crest’s reasonable judgment, necessary or advisable to preserve or
protect the assets of the Company from imminent physical damage or to prevent injury to any
Person. Neither Campus Crest nor HSRE shall be liable to the Company or any Member for any
act or omission performed or omitted pursuant to authority granted by this Agreement;
provided that such limitation of liability shall not apply to the extent the
act or omission was attributable to fraud, gross negligence, or willful misconduct or
knowing violation of law and further provided that such limitation of liability as between
the Members shall not apply to the extent the act or omission constitutes a Campus Crest
Triggering Event with respect to Campus Crest and a HSRE Triggering Event with respect to
HSRE.

     (b) Responsibilities of Campus Crest. Without limiting the generality of
Section 5.1(a) above, the responsibilities of Campus Crest shall include, but are
not limited to, all of the following:

     (i) oversee the performance of the TRS, Developer, General Contractor and the
Property Manager in the performance of their respective responsibilities under the
Development Agreements, Construction Agreements and Property Management Agreements;

     (ii) use reasonable efforts to satisfy the Funding Conditions for the
acquisition and development of each Property;

     (iii) sourcing and securing the potential acquisition of Properties and
Development Projects;

     (iv) oversee the development of a Development Project and negotiate and
administer, on behalf of the Company, all contracts of the Company and its
Subsidiaries;

     (v) liase with local authorities on matters relating to the Properties;

     (vi) implement all Major Decisions Approved by the Executive Committee;

20

 

     (vii) supervise the operation of the Properties in a prudent manner and
establish appropriate marketing programs for the Properties, subject to the Annual
Business Plan and Operating Budget;

     (viii) establish and maintain a sound financial accounting system for the
Company and each of its Subsidiaries;

     (ix) institute and maintain adequate internal fiscal controls for the Company,
its Subsidiaries and each Property through commonly accepted budgeting, accounting
procedures and timely financial reporting in a manner consistent with the Annual
Business Plan and Annual Operating Budget;

     (x) cause the TRS and Property Manager to conform the operations of each
Property to and comply with all applicable Laws (including those pertaining to
licensing and customs); and take all steps necessary to ensure that all licenses and
certificates necessary to operate each Property is maintained at all times, without
interruption;

     (xi) cause the Property Manager to, consistent with the terms of the Leases and
prudent practices, endeavor to maintain the Properties as a reasonably safe and
secure environment, promptly notify the Company and HSRE of any security risks or
issues related to any Property that become known to Campus Crest, and attempt to
rectify or remedy promptly such risks or issues to the extent Company funds are
available for such purpose; and

     (xii) with respect to each Development Project, during the final thirty (30)
days of each construction warranty, whether or not falling within the term of the
Development Agreement and notwithstanding the expiration of the term of the
Development Agreement, use commercially reasonable efforts to cause the General
Contractor (and if appropriate, the Architect or another consultant) to conduct an
inspection of all systems, components and other work covered by such construction
warranty period, so as to identify and file any and all potential claims thereunder.

     (c) Material Change in Control. If a Campus Crest Material Change in Control
(as defined below) occurs, Campus Crest shall send Notice thereof to HSRE within ten (10)
days after such occurrence (the failure to send such Notice being a material breach of this
Agreement). In the event of a Campus Crest Material Change in Control, HSRE shall have the
right as of the date which is thirty (30) days after the date of the Campus Crest Material
Change in Control (the “Campus Crest Change in Control Effective Date”) to pursue any of the
remedies set forth in Section 6.2; provided, however, if a Campus Crest Material
Change in Control occurs under clause (B) below and HSRE Approves such Campus Crest Material
Change in Control prior to the Campus Crest Change in Control Effective Date, no Campus
Crest Triggering Event shall be deemed to have occurred. For purposes of this Agreement, a
Campus Crest Material Change in Control shall be deemed to have occurred only if there is a
change in

21

 

Control of any one or more of the following entities: (A) Campus Crest, (B) Campus
Crest Group, LLC, a North Carolina limited liability company and/or (C) the Campus Crest
Guarantor.

     (d) Related Party Matters. Campus Crest shall not employ, or permit any other
Person to employ any funds or assets of the Company in any manner other than for the
exclusive benefit of the Company. Except as Approved by the Executive Committee, the
Company shall not pay fees or any other amounts to Campus Crest or any Affiliate as
consideration for the performance of its duties as such. Campus Crest may designate one or
more of its Affiliates, agents or employees to carry out its duties and responsibilities,
provided, however, such delegation shall in no manner diminish (or be deemed to diminish),
or relieve (or be deemed to relieve) Campus Crest of any obligations of Campus Crest
hereunder. Each Member shall have the right to submit a proposal to the Company and the
other Members to provide services that would otherwise be provided for the Company by a
third party. However, except for the Property Management Agreement, Construction Agreement
and the Development Agreement, no Member (or its Affiliates) shall receive any fees or
compensation from the Company (or any Subsidiary) (including, without limitation, for the
performance of any services relating to the development, operation, renovation, maintenance,
sale, financing, or refinancing of the Properties), unless the terms and documentation with
respect to such services have been Approved in advance by HSRE and Campus Crest. With
respect to any Related Party Agreement (as defined below), the Member who is not a party to
such Related Party Agreement (or whose Affiliate is not a party to such Related Party
Agreement) shall have the unilateral right to exercise and enforce any and all of the
Company’s rights under such Related Party Agreement. For purposes hereof, the term “Related
Party Agreement” shall mean any contract or agreement between the Company (or a Subsidiary)
and a Member (or an Affiliate of such Member) including, without limitation, any agreement
for the performance of any services with respect to the Properties or the sale or
refinancing of the Properties.

     5.2 Major Decisions. Notwithstanding the other provisions of this Agreement, neither
Campus Crest nor any manager, officer, employee or agent thereof shall have the authority on behalf
of the Company or any Subsidiary to take any action, make any decision, expend any sum or suffer
any obligation if to do so would constitute a Major Decision without first obtaining the Approval
of the Executive Committee. For these purposes, each of Campus Crest and HSRE shall from time to
time designate their respective Member representatives, each of whom shall be authorized to act on
behalf of such Member (all four appointed individuals shall be referred to herein as the “Executive
Committee”). The two (2) individuals initially authorized to act on behalf of Campus Crest shall
be Michael S. Hartnett and Ted W. Rollins. The two (2) individuals initially authorized to act on
behalf of HSRE shall be Stephen Gordon and Christopher Merrill. Any representative appointed to
the Executive Committee shall have the right to propose a Major Decision on behalf of the Member
which appointed such representative, and Campus Crest shall cause the Company to present such
proposed Major Decision to the Executive Committee. The representatives of Campus Crest and HSRE
shall meet either by teleconference (upon the agreement of Campus Crest and HSRE) or at the
principal office of the Company (or at such other location as Campus Crest and HSRE may agree

22

 

upon) on the request of any Member upon seven (7) business days’ prior written notice to (i)
all of the individuals then authorized to act on behalf of the other Member and (ii) all of the
parties that are to receive notice under Section 13.8 on behalf of such Member. Any and
all decisions of the Executive Committee shall require the approval of not less three (3) of the
four (4) members of the Executive Committee. The failure of Campus Crest or HSRE to participate in
any such meeting after confirmation of receipt of notice whether by teleconference or otherwise,
shall be deemed to constitute the written approval of such Person of the proposed Major Decision.
Any matters independently constituting Major Decisions shall be deemed approved by the Executive
Committee pursuant to this Section 5.2 if included in a Budget approved by the Executive
Committee in accordance with this Section 5.2. As used herein, “Major Decision” means any
decision proposed by a Member or member of the Executive Committee to do or take any of the
following actions:

     (a) Any Capital Event;

     (b) The adoption of (or Approval of any modifications to) the Annual Business Plan or
Annual Operating Budget;

     (c) Entering into, modifying or enforcing the rights of the Company under any Material
Contracts (as defined below). For purposes of this agreement, a Material Contract shall
mean any written agreement relating to (i) any Major Decision, or (ii) the development,
operation, maintenance, management, lease (excluding tenant leases), or marketing of all or
any portion of the Properties and/or any other asset of the Company, if (i) the services for
such contract are not provided for in the Annual Operating Budget, or (ii) such contract
requires the approval of the Owner under the Property Management Agreement, Construction
Agreement, Development Agreement or other Related Party Agreement or (iii) the contract or
agreement obligates the Company to make aggregate payments in excess of Twenty-Five Thousand
Dollars ($25,000). Notwithstanding the foregoing, change orders made by the General
Contractor where Owner’s consent is not required pursuant to the terms and conditions of the
Development Agreement shall not constitute a Major Decision hereunder;

     (d) The acquisition of any real or personal property other than as set forth in the
Annual Operating Budget and entering into any material license agreement, reciprocal
easement agreement, conditions, covenants and restrictions, or other similar agreements or
easements materially affecting any portion of the Properties or title thereto other than as
set forth in the Review Items Approved by HSRE in connection with a Development Project;

     (e) After receipt by Campus Crest of the IC Approval Notice, all decisions and actions
of the Company with respect to Entitlements, changes in zoning and governmental approvals
with respect to a Property other than as set forth in the Review Items Approved by HSRE in
connection with a Development Project;

     (f) (i) The creation, assumption, incurring or consent to or release of any charge,
mortgage, deed of trust, pledge, encumbrance, lien or security interest of any kind

23

 

upon any property or assets of the Company; (ii) any interest rate “swap” agreement or
similar interest rate hedge or interest rate protection agreement; (iii) any loan, guaranty,
accommodation, endorsement or any other extension or pledge of credit to any Person; and
(iv) the documentation in connection with the foregoing and the exercise of any rights and
remedies with respect thereto;

     (g) Distribution of Operating Cash Flow less frequently than quarterly or Capital
Proceeds other than promptly within thirty (30) days receipt thereof;

     (h) Other than with respect to Bradley Arant Boult Cummings LLP and Easley, Endres,
Parkhill & Brackendorff, P.C. (which firms shall be deemed Approved by the Executive
Committee as of the date of this Agreement), appointing or replacing attorneys (other than
the appointment of attorneys to handle eviction or collection matters with respect to the
Properties), accountants, management consultants, bankers, engaging agents, architects,
engineers, environmental consultants or other independent contractors;

     (i) Establishing working capital and other reserves by or on behalf of the Company or
any Subsidiary (to the extent not set forth in the Annual Operating Budget), and determining
the amount of distributable Net Cash Flow;

     (j) Changing accounting policies, or approving, publishing or distributing, other than
to an existing or prospective lender or purchaser, audited or unaudited accounts of the
Company or any Subsidiary except to the extent required by Law or in the ordinary course of
business with respect to the preparation of consolidated information for the financial
statements of the parent or Affiliates of Campus Crest;

     (k) Any decisions and actions with respect to any tax matters, including, without
limitation, tax elections and other actions taken by Campus Crest in its capacity as tax
matters partner for the Company to the extent permitted by Law;

     (l) Permit the Company to take any action, or refrain from taking any action which, or
the effect of which, would constitute or result in the occurrence of a REIT Prohibited
Transaction (as defined below);

     (m) Review and Approve to file all tax returns of the Company and/or its Subsidiaries
within fifteen (15) days of receipt thereof;

     (n) Indemnifying and advancing expenses in relation to any claim for indemnification to
any Member, Affiliate, agent, advisor, contractor, co-venturer, co-partner, co-shareholder
or investee company, partnership or other entity except to the extent permitted under
Article 7, the Property Management Agreement, Construction Agreement, Development
Agreement and/or any other Related Party Agreement;

     (o) The settlement, compromise, submission to arbitration or any other form of dispute
resolution, or abandonment of any claim, cause of action, liability, debt or damages, due or
owing to or from the Company, the enforcement or defense of suits, legal proceedings,
administrative proceedings, arbitration or other forms of dispute

24

 

resolutions, and the incurring of legal expenses, where the amount involved is
reasonably expected to exceed Twenty Five Thousand Dollars ($25,000);

     (p) (i) The filing or the consent by answer or otherwise to the filing of a petition
for relief or reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium
or other similar law of any jurisdiction, (ii) the convening of a meeting of creditors or
the making or proposing of any arrangement or composition with, or any assignment for the
benefit of, its creditors, or the pursuing of any similar procedure under any applicable
Law, or (iii) the admission in writing of the inability to pay, or the refusal generally to
pay, debts as they become due;

     (q) Except to the extent provided herein, the issuance of additional Membership
Interests to an existing Member or other Person, voting rights, rights to Distributions,
warrants, options, securities convertible into Membership Interests or other rights to
acquire ownership interests in the Company or any Subsidiary; and the admission of any
Person as a Member in the Company or as a holder of equity of a Subsidiary;

     (r) Any merger, reorganization, recapitalization or similar transaction involving the
Company or any Subsidiary;

     (s) The formation of any Subsidiary and the ownership structure of Subsidiary, and the
terms and provisions of the organizational documents and governing agreements of such
entity;

     (t) Changing the name of the Company or any Subsidiary, other than as required by Law,
or changing the registered office or, registered agent of the Company;

     (u) Upon the liquidation of the Company, the appointment of one or more Persons to act
as the liquidator of the Company, and if Campus Crest, HSRE or any Affiliate thereof shall
be appointed as liquidator of the Company, all acts and deeds taken thereby in the
furtherance of the liquidation of the Company;

     (v) Subject to Section 13.19, the disclosure of confidential information
relating to financial matters, other than to existing or prospective lenders or purchasers
Approved by HSRE and Campus Crest; and the disclosure of confidential information relating
to the Members; and any publicity, media communications or other public announcements with
respect to the Company or the Properties (other than with respect to routine public
relations and communications made by each Property in the ordinary course of business); and

     (w) Any decision requiring the Approval of the Company or its subsidiaries under the
Development Agreement or any other Related Party Agreement; and

          Approval of the Executive Committee shall be evidenced by either the execution of a writing by
the required number of members of the Executive Committee or by a writing

25

 

executed by an officer of each of HSRE and Campus Crest, with any such writing being
signed in counterparts.

     5.3 Property Management Agreement. Immediately after the satisfaction of the Funding
Conditions for each Property, the Company or the Property Owning Subsidiaries owning each Property
shall each enter into a Property Management Agreement with the Property Manager in the form
attached hereto as Exhibit G (completion of which shall be subject to HSRE Approval). The
Members hereby Approve The Grove Student Properties, Inc., as the Property Manager. Notwithstanding
anything contained in this Agreement or the Property Management Agreement to the contrary, HSRE
shall have the right (without having to obtain the Approval of Campus Crest) to elect to cause the
Company (or any applicable Property Owning Subsidiary) to obtain and use a master insurance policy
to provide insurance coverage for the Properties; provided, however, that the cost of such policy
shall be equal to or less than the cost of a comparable policy offered by a comparable insurance
provider proposed by Campus Crest.

     5.4 Notice of Certain Developments. Each Member shall promptly notify the other
Member after such Member receives notice or has knowledge thereof, of (i) a default or alleged
default by the Company or a Property Owning Subsidiary under any material contract to which it is a
party; (ii) a default or alleged default by the Property Manager or Developer, Campus Crest or any
Affiliate of any such party under any Property Management Agreement, Construction Agreement or
Development Agreement; (iii) any threatened or pending litigation or investigation concerning the
Company or the Properties of which such Member has actual knowledge; or (iv) any act concerning the
Company, the Properties or any Subsidiary which constituted or would constitute a violation of Law.
The Members shall keep one another informed on a reasonably current basis concerning any such
matter of which Notice is required to be given.

     5.5 Annual Business Plan and Operating Budget.

     (a) Campus Crest shall prepare for the Approval of the Executive Committee, no later
than November 1 of each Fiscal Year (except for the 2011 Fiscal Year, no later than March
31, 2011), the Annual Business Plan for each Property for the next Fiscal Year, which shall
include the following:

     (i) A narrative description of any activity proposed to be undertaken;

     (ii) A detailed operating budget (“Annual Operating Budget”), including
schedules of projected Operating Cash Flow and projected sources and uses of funds
for such Fiscal Year, all projected operating costs and capital expenditures and
administrative expenses, and a schedule of projected operating income or deficits,
as the case may be;

     (iii) A leasing plan indicating, among other things, recommendations for
achieving market rentals for Leases and minimum acceptable terms for Leases at the
Properties;

26

 

     (iv) A description of proposed construction, including projected dates for
commencement and completion and capital expenditure requirements; and

     (v) Such other information, including a description of plans, contracts,
agreements, governmental approvals and other matters, as may be necessary or
reasonably in order to inform the Executive Committee of all matters relevant to the
development, operation, management and/or sale of the Properties or any portion
thereof, and to otherwise allow the Executive Committee to make an informed decision
with respect to the approval of the Annual Business Plan and Annual Operating
Budget.

     (b) If the Executive Committee does not approve an Annual Operating Budget for any
Fiscal Year prior to the commencement of such Fiscal Year, then, until the Executive
Committee shall agree upon an Annual Operating Budget for such year, the Annual Operating
Budget in effect for the immediately preceding Fiscal Year shall constitute the Annual
Operating Budget for such Fiscal Year, except that (i) any items or portions of the Annual
Operating Budget for such Fiscal Year upon which the Executive Committee agrees shall be
substituted for the corresponding items in the preceding year’s Annual Operating Budget,
(ii) with respect to all items of cost and expense that are not within the discretion of the
Company (including, for example, debt service, real property taxes, utilities, costs of
compliance with governmental requirements, contractually required increases and all
expenditures required under the Management Agreement or any Lease), the actual amount of
each such item shall be substituted for the amount of such item set forth in the preceding
year’s Annual Operating Budget, and (iii) with respect to items of operating costs and
expenses that are within the discretion of the Company and which have not been authorized in
accordance with the terms of this Agreement, each such item of operating cost or expense
shall be not more than one hundred five percent (105%) of the amount of such items set forth
in the preceding year’s Annual Operating Budget; and (iv) the Annual Operating Budget shall
not include non-recurring capital expenditures in the prior year’s budget.

     5.6 Development of Project.

     (a) Delivery of Review Items. Without limiting the generality of Section
5.1(b) above, Campus Crest shall submit to HSRE or their authorized designees such
agreements, studies and other information or due diligence items (collectively, the “Review
Items”) as may be reasonably requested by HSRE in order for HSRE to adequately evaluate a
subject Development Project (which Review Items may include, without limitation, those items
described in Exhibit C hereto).

     (b) Limitations on Authority. Except as provided in Section 3.3(a),
the Company shall not make any expenditures of Company funds with respect to the development
of any Property, unless and until the Funding Conditions with respect to such Property have
been met. In the event the Funding Conditions for a Development Project have been satisfied
and subsequently there are any material changes in the Plans and Specifications for an
approved Development Project from that reflected by the

27

 

Review Items previously submitted by Campus Crest to, and Approved by, the Executive
Committee, Campus Crest shall be required to re-submit the modified or corrected Review
Items to the Executive Committee, and to obtain updated Approval prior to making any further
expenditures relative to said Development Project.

     (c) Development Agreement; Property Management Agreement; and Completion and Cost
Overrun Guaranty.

     (i) Immediately after the satisfaction of the Funding Conditions set forth on
Exhibit E with respect to each Property, the Company, the applicable
Property Owning Subsidiary and the Developer shall enter into a Development
Agreement in the form attached hereto as Exhibit F (the completion of any
blanks shall be subject to the Approval of the Executive Committee) with respect to
such Property. The obligations of the Developer shall be guaranteed by the Campus
Crest Guarantors to the extent provided for under the Development Agreement and/or
Completion and Cost Overrun Guaranty.

     (ii) Concurrently with the closing of an Additional Property, the Company or
the Property Owning Subsidiary owning the such Property shall enter into the
Property Management Agreement with the Property Manager in the form attached hereto
as Exhibit G (completion of which shall be subject to HSRE Approval). The
property management fee shall be equal to the sum of (i) three percent (3%) of gross
revenue and (ii) three percent (3%) of net operating income, unless otherwise agreed
to by the Members and as set forth in the applicable Property Management Agreement.

     5.7 Rights of HSRE. Notwithstanding any other provision hereof, (i) HSRE has the
right to propose from time to time any Major Decision and (ii) Campus Crest shall, at the written
request of HSRE, promptly bring to all the Members for their consideration and Approval such
proposed Major Decisions and any other proposed action that Campus Crest is authorized or required
to propose to the Members for Approval hereunder or under the Act.

     5.8 Meetings of the Members. The Company shall have quarterly meetings of the Members
at such time as shall be determined by the Members for the purpose of the transaction of any
business as may come before such meeting or discussing issues concerning the business of the
Company which may be raised by a Member. Special meetings of the Members, for any purpose or
purposes, may be called by either Member at any time. Meetings of the Members shall be held by
teleconference or otherwise at such place as shall be agreed to by the Members. Written notice
stating the place, day and hour of the meeting, indicating that it is being issued by or at the
direction of the person or persons calling the meeting, stating the purpose or purposes for which
the meeting is called shall be delivered no fewer than ten (10) nor more than sixty (60) days
before the date of the meeting. Campus Crest shall be responsible for conducting and directing
meetings of the Members unless such meeting has been called by HSRE, in which case HSRE shall be
responsible for conducting and directing such meeting.

28

 

     5.9 REIT Related Provisions.

     (a) The Members recognize that each Member is owned directly or indirectly by a real
estate investment trust (each a “Parent REIT”) and a real estate investment trust must
comply with a number of restrictions under the Code to maintain its status as a real estate
investment trust (“REIT”) under Section 856 of the Code. Each Member acknowledges that it
has examined the books and records associated with the Property and has determined that the
current operational structure of the Property would allow each Parent REIT to qualify as a
REIT. In the event either Member desires to modify the structural operations of the
Properties or take any action not provided for under an applicable Annual Business Plan or
Annual Operating Budget, it will present such proposed modification to the Executive
Committee. If either Member determines that the proposed modification (x) would cause any
of the income derived by the Company to fail to qualify as “rents from real property” or as
other qualifying income under Section 856(c)(2) of the Code or (y) would otherwise cause a
Parent REIT to fail to qualify as a REIT under the Code, such modification shall not occur
without the Executive Committee’s Approval. Without limiting the generality of the
foregoing, neither Member shall modify the structure currently utilized to provide at the
Property if either Member determines that it would cause the Company to derive
“impermissible tenant service income” within the meaning of Section 856(d)(3) of the Code
without first presenting such proposed modification to the Executive Committee and obtaining
the Executive Committee’s Approval.

     (b) The Company will explore alternatives to providing such services including, but not
limited to, providing any such services through a “Taxable REIT Subsidiary” (“TRS”) of the
Parent REITs or an independent contractor (as defined in Code Section 856(d)(3)) from whom
neither the Company nor the Parent REITs derive any income, directly or indirectly. In this
regard, the Members hereby agree that if requested by either Member, the Company will form a
wholly owned subsidiary that will elect to be a TRS for the purposes of (i) providing any
services to the tenants of the Properties that could potentially cause any income from the
Properties to be impermissible tenant services income and/or (ii) operating any retail
activities undertaken at the Property. Upon the acquisition or development of an Additional
Property, the Company (or a Property Owning Subsidiary) and the TRS shall enter into a
services agreement (the “Services Agreement”) in substantially the same form to be attached
hereto as Exhibit N following the date of this Agreement and upon the review and
approval of both Members, whereby the TRS shall perform such services as set forth in the
Services Agreement.

     5.10 ERISA REOC Related Provisions. The Members acknowledge and agree that (i) HSRE
is wholly owned indirectly by HSRE REIT, which is intended to qualify as a “real estate operating
company” (a “REOC”) as defined in the Department of Labor Regulation 29 C.F.R. Section 2510.3-101,
and that (ii) HSRE REIT must “substantially participate” in the management or development of real
estate in the ordinary course of its business in order to maintain its status as a REOC. In
furtherance thereof, the Members acknowledge that HSRE REIT, for as long as it is the direct or
indirect owner of HSRE has the right to exercise all of the

29

 

approval and other management rights with respect to the Properties that are provided to HSRE
under this Agreement, and that HSRE REIT shall be entitled to receive and review any information
regarding the Properties that is provided to HSRE under this Agreement. Subject to the other terms
of this Agreement, the Members shall cooperate reasonably to ensure that HSRE REIT can maintain and
exercise such approval and other management rights with respect to the Properties to the extent
necessary to maintain its status as a REOC, including, without limitation, using commercially
reasonable efforts to ensure that HSRE REIT’s management rights extend to all management decisions
of the Company regarding the other entities in the chain of ownership and operation of the
Properties, including the Property Owning Subsidiaries.

ARTICLE 6

TRIGGERING EVENTS; REMEDIES

     6.1 Campus Crest Triggering Event. Each of the following shall constitute a Campus
Crest Triggering Event:

     (a) Any material failure by Campus Crest to perform its obligations under this
Agreement that is not cured to HSRE’s reasonable satisfaction within fifteen (15) days after
Notice of breach by HSRE regarding monetary default and within forty (40) days after Notice
of breach by HSRE regarding non-monetary default (provided that such cure period for a
non-monetary default by Campus Crest shall be extended for an additional period, not
exceeding an additional ninety (90) days, so long as Campus Crest is diligently pursuing the
cure of such default during such extended cure period);

     (b) Any material breach of a representation, warranty or covenant (i) by the Property
Manager under the Property Management Agreement so long as the Property Manager is an
Affiliate of Campus Crest; (ii) by the Developer under the Development Agreement, so long as
the Developer is an Affiliate of Campus Crest; (iii) by Campus Crest or its Affiliates under
the Non-Competition and Right of First Opportunity Agreement; (iv) by the General Contractor
under the Construction Agreement so long as the General Contractor is an Affiliate of Campus
Crest or (v) by Campus Crest or its Affiliates under any Related Party Agreement, in each
case in the event such material breach is not cured within any applicable grace period under
the applicable contractual agreement;

     (c) The failure by Campus Crest to obtain the Approval of HSRE prior to taking any
action requiring the Approval of HSRE hereunder; provided, however, that a Campus Crest
Triggering Event shall not be deemed to have occurred if Campus Crest fails to obtain the
Approval of HSRE prior to taking any action requiring HSRE Approval and such action is
ultimately Approved by HSRE after such action is taken;

     (d) RESERVED;

30

 

     (e) The failure by Campus Crest to fund, in full, any Required Amount under Article
3 including any grace period provided therein;

     (f) Any transfer or encumbrance of Campus Crest’s Membership Interest in the Company or
any portion thereof or any direct or indirect interest therein not permitted herein without
the Approval of HSRE; provided, however, that in the event that such transfer or encumbrance
does not cause any material harm to HSRE, Campus Crest shall have the right to cure such
breach to HSRE’s reasonable satisfaction within fifteen (15) days of Notice of breach by
HSRE;

     (g) Any Material Change in Control not Approved by HSRE under Section 5.1(c);
and

     (h) Any act of willful misconduct or fraud by Campus Crest concerning its obligations
under this Agreement or any act of willful misconduct or fraud by the Developer concerning
its obligations under the Development Agreement, the General Contractor concerning its
obligations under the Construction Agreement or by the Property Manager concerning its
obligations under the Property Management Agreement or by any Affiliate of Campus Crest
under any other Related Party Agreement.

     (i) The occurrence of any event of default under any Construction Loan, Acquisition
Loan or any other financing relating to the Properties caused by the occurrence of a
Bankruptcy of Campus Crest or its Affiliates or the failure of Campus Crest or its
Affiliates to comply with any Guarantor Financial Covenants (as defined below), unless such
default is waived by the applicable lender or Campus Crest cures such default within the
time period provided for such cure under the applicable guaranty and/or Construction Loan or
Acquisition Loan documents related thereto. For purposes hereof, the term “Guarantor
Financial Covenants” shall mean: (1) any financial covenants of Campus Crest or its
Affiliates in its capacity as a guarantor under any Acquisition Loan or Construction Loan or
financing related to the Properties and that are contained in the applicable guaranty or
loan documents related thereto, including, without limitation, any covenant requiring such
guarantor(s) to maintain a minimum net worth or a minimum amount of liquid assets or any
covenant or other obligation prohibiting a material adverse change in the financial
condition of such guarantor; (2) any covenant relating to the delivery of any financial
information, compliance certificates, tax returns or other financial information relating to
Campus Crest or its Affiliates required to be delivered under the applicable guaranty or
loan documents related thereto, and (3) the breach by Campus Crest or its Affiliates of any
other representation or warranty contained in the applicable guaranty or loan documents
related to any of the foregoing. In no event shall the Company or any Subsidiary be
considered an Affiliate of Campus Crest for purposes of this Section 6.1.

     6.2 Remedies for Campus Crest Triggering Event. In addition to the remedies set forth
herein, upon the occurrence of a Campus Crest Triggering Event, and at any time thereafter after
the applicable period for cure has lapsed, if any, HSRE may, at its option, exercise any one or
more of the following remedies without the Approval of any other Member:

31

 

     (a) Cause the Company to market and sell the Properties to a third party for such
prices and on such terms as HSRE deems appropriate, without the need for Approval of Campus
Crest and without any right on the part of Campus Crest to purchase any of the Properties;

     (b) Dissolve the Company;

     (c) Exercise, in its sole discretion, the Company’s right to terminate (or otherwise
enforce any other remedy with respect to) the Property Management Agreement, the
Construction Agreement, the Development Agreement or any other Related Party Agreement
between the Company or any Subsidiary and Campus Crest, or any Affiliate of Campus Crest;

     (d) Replace Campus Crest as the Member vested with day-to-day management control of the
affairs of the Company as set forth in Section 5.1 pursuant to Section 6.5;
and

     (e) In the case of a Campus Crest Triggering Event under Section 6.1(h) by
Campus Crest only, purchase the Membership Interest of Campus Crest for an amount equal to
the Net Invested Capital of Campus Crest.

     6.3 HSRE Triggering Event. Each of the following shall constitute an HSRE Triggering
Event:

     (a) Any material failure by HSRE to perform its obligations under this Agreement that
is not cured to Campus Crest’s reasonable satisfaction within fifteen (15) days after Notice
of breach by Campus Crest regarding monetary default and within forty (40) days after Notice
of breach by Campus Crest regarding a non-monetary default (provided that such cure period
for a non-monetary default shall be extended for an additional period, not exceeding an
additional ninety (90) days, so long as HSRE as the case may be, is diligently pursuing the
cure of such default during such extended cure period);

     (b) The failure to fund, in full, any Required Amount under Article 3;

     (c) Any transfer or encumbrance of HSRE’s Membership Interest in the Company or any
portion thereof or any direct or indirect interest therein not permitted herein without the
Approval of Campus Crest; provided, however, that in the event that such transfer or
encumbrance does not cause any material harm to Campus Crest, HSRE shall have the right to
cure such breach to Campus Crest’s reasonable satisfaction within fifteen (15) days of
Notice of breach by Campus Crest; and

     (d) Any act of willful misconduct or fraud by HSRE concerning its obligations under
this Agreement.

     6.4 Remedies for HSRE Triggering Event. Upon the occurrence of a HSRE Triggering
Event, and at any time thereafter, after the applicable period for cure has lapsed, if

32

 

any, Campus Crest may, at its option, exercise any one or more of the following remedies
without the Approval of any other Member:

     (a) Cause the Company to market and sell any or all of the Properties to a third party
for such prices and on such terms as Campus Crest deems appropriate, without the need for
approval of HSRE and without any right on the part of HSRE to purchase any of the
Properties;

     (b) Dissolve the Company; or

     (c) In the case of a HSRE Triggering Event under Section 6.3(d) by HSRE only,
purchase the Membership Interest of HSRE for an amount equal to the Net Invested Capital of
HSRE.

     6.5 Replacement of Campus Crest as Day-to-Day Manager; Executive Committee Changes upon
.

     (a) In the event a Campus Crest Triggering Event, HSRE may elect, by delivery of ten
(10) days prior written notice thereof to Campus Crest, to replace Campus Crest as the
Member vested with day-to-day management control of the affairs of the Company or to admit
an Affiliate of HSRE in such capacity, effective as of the date of the occurrence of such
Campus Crest Triggering Event or Event of Withdrawal as hereinafter defined (the “Conversion
Date”). In the event HSRE exercises its rights under this Section 6.5(a), Campus
Crest or its successor-in-interest, as the case may be, shall promptly upon demand of HSRE
execute and deliver to the Company all documents that may be necessary or appropriate, in
the opinion of counsel of the Company, to effect the transfer of management control of the
day-to-day affairs of the Company and Campus Crest shall remain liable for all liabilities,
duties and obligations of Campus Crest arising prior to such transfer of rights. From and
after the Conversion Date (whether or not such conversion election is made by HSRE), Campus
Crest shall have no rights to participate in the management and affairs of the Company. In
addition, upon the occurrence of a Campus Crest Triggering Event, HSRE shall have the right,
by delivery of written notice thereof to Campus Crest, to direct all Executive Committee
members previously appointed by Campus Crest to immediately resign as Executive Committee
members as of the date of occurrence of the Campus Crest Triggering Event and after the
Campus Crest Conversion Date, (i) Campus Crest shall have no right to appoint any Executive
Committee Members, (ii) HSRE shall have the right to appoint all Executive Committee
Members, (iii) HSRE shall have the right to reduce the size of the Executive Committee to
any number it desires in its sole and absolute discretion, and (iv) Campus Crest shall have
no right to vote on any Major Decisions or other matters relating to the Company or
otherwise make any decisions on behalf of the Company, including, without limitation,
exercising any right to sell the Properties pursuant to Article 9. Notwithstanding
anything in this Section 6.5 to the contrary, Campus Crest shall retain the right to
receive distributions of the Company Operating Cash Flow and Capital Proceeds pursuant to
Article 4 herein.

33

 

     (b) If HSRE terminates Campus Crest’s management rights as provided above, HSRE shall
be entitled to provide and perform, or retain another Person to provide and perform, the
facilities, personnel and services formerly performed by Campus Crest (or its Affiliate) and
HSRE or such Person shall be entitled to a reasonable rate of compensation for such services
and to reimbursement for all expenses reasonably incurred in connection therewith,
including, without limitation, the cost of facilities, supplies and personnel acquired, used
or retained exclusively for the Company and an allocable portion of HSRE’s or such Person’s
general and administrative expenses to reflect the value of shared facilities, supplies and
personnel.

     6.6 Other Remedies for Breach. The rights and remedies of the Members set forth in
this Agreement are neither mutually exclusive nor exclusive of any right or remedy provided by law,
in equity or otherwise. Subject to the dispute resolution provisions of Section 13.3, the
Members agree that all legal remedies (such as monetary damages), other than punitive damages as
well as all equitable remedies (such as specific performance) will be available for any breach or
threatened breach of any provision of this Agreement.

ARTICLE 7

INDEMNIFICATION

     7.1 General.

     (a) None of the Members or any Member’s agents, officers, partners, members, employees,
representatives, directors, shareholders or Affiliates (each such party, an “Indemnified
Party”) shall be liable, responsible or accountable in damages or otherwise to the Company
or any Member for (i) any act performed in good faith within the scope of the authority
conferred by this Agreement that does not constitute a breach of this Agreement, (ii) any
good faith failure or refusal to perform any acts except those required by the terms of this
Agreement, or (iii) any performance or omission to perform any acts in reliance on the
advice of accountants or legal counsel for the Company other than those which would
constitute a breach of this Agreement; provided, however, that each Indemnified Party shall
nevertheless be liable and shall not be entitled to indemnification in all events for its
acts or omissions performed or omitted to be performed in bad faith or for gross negligence
or willful misconduct.

     (b) The Company shall, but only to the extent of the assets of the applicable Property
Owning Subsidiary that specifically relates to the Property giving rise to the applicable
loss, liability, expense, damage or injury, cause each Property Owning Subsidiary to
indemnify and hold harmless each Indemnified Party from and against any loss, liability,
expense, damage or injury suffered or sustained by him, her or it by reason of (i) such
Person’s status as a Member or agent, officer, partner, member, employee, representative,
director shareholder or Affiliate of a Member, (ii) any acts, omissions or alleged acts or
omissions arising out of his, her or its activities within the scope of the authority
conferred on the respective Members, or the Person so appointed by this Agreement or by law;
(iii) any performance or omission to perform any acts based upon

34

 

reasonable good faith reliance on the advice of accountants or legal counsel for the
Company, including any judgment, award, settlement, reasonable attorneys’ fees and other
costs or expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim, and provided that the acts, omissions or alleged acts or
omissions upon which such actual or threatened action, proceedings or claims are based were
not performed or omitted to be performed in bad faith and did not constitute gross
negligence or willful misconduct. The Company shall have the right to assume the defense in
any action or claim with respect to which indemnification is claimed hereunder..

     7.2 Insurance. The indemnification provisions of this Article 7 do not limit
the right of a Member or other Person to recover under any insurance policy maintained by the
Company or a third party. If a Person is or may be entitled to receive a payment under any such
insurance policy, (i) the insurance coverage shall be such Person’s first recourse and the Company
shall be obligated to make payment under this Article 7 only to the extent that the claim
is not fully covered by insurance, and (ii) to the extent that the Company makes any payment under
this Article 7, it shall be subrogated to the claims of such Person under the applicable
insurance policies. If, with respect to any liability against which indemnification is due under
Section 7.1, any Member or other Person receives an insurance policy payment which,
together with any indemnification payment made by the Company, exceeds the amount of such
liability, then such Member or other Person will immediately repay such excess to the Company.

     7.3 Approval of Payments. Prior to making any payment or advance under Section
7.1, the Company shall give notice to all Members of the proposed payment and shall provide the
Members with such information as they may request to assess the Company’s obligation to make such
payment. If either Member objects to such payment within ten (10) days after receipt of such
notice, the Company shall submit the issue to arbitration under Section 13.3 and shall make
payment to the claimant only to the extent that the arbitrators determine payment to be due or that
the Members subsequently agree. As a condition to the right to indemnification under this
Agreement, each Person otherwise entitled to indemnification must execute and deliver to the
Company a written agreement to be bound by the decision of the arbitrator with respect to any claim
for indemnification. Such Person shall be a party to any such arbitration proceedings, whether or
not such person elects to appear therein.

     7.4 Indemnification by Member. If the Company is made a party to any litigation or
otherwise incurs any loss or expense as a result of or in connection with any Member’s personal
obligations or liabilities unrelated to Company business, such Member shall indemnify and reimburse
the Company for all such loss and expense incurred, including reasonable attorneys’ fees. The
liability of any Member pursuant to this Section 7.4 may be assessed against such Member’s
interest in the Company, including such Member’s right to receive Net Cash Flow, and any other
Distributions or payments from the Company; provided, however, the liability of a Member under this
Section 7.4 shall not be limited to such Member’s interest in the Company, but shall also
be enforceable against such Member personally. Nothing herein contained shall be deemed to imply
that any Person shall be a third party beneficiary of the terms of this Section 7.4 (which
terms shall inure solely to the benefit of the Company and the respective Members, as expressly set
forth in this Section 7.4).

35

 

ARTICLE 8

ACCOUNTING; REPORTING

     8.1 Fiscal Year. For income tax and accounting purposes, the Fiscal Year of the
Company will end on December 31 in each year (unless otherwise required by the Code).

     8.2 Accounting Method. For income tax purposes, the Company will use the accrual
method of accounting (unless otherwise required by the Code). For financial reporting purposes,
financial statements of the Company are required to be prepared in accordance with the Generally
Accepted Accounting Principles under U.S. Standards (“GAAP”). Campus Crest acknowledges that the
financial statements of HSRE will be required to be reported in accordance with GAAP, and hereby
agrees to promptly make available to HSRE (and cause the accountants for the Company to deliver)
any and all information relating to the Company, including without limitation books and records,
working papers and financial accounts, which may be requested by HSRE to cause the financial
statements of HSRE to be prepared in accordance with the provisions hereof. Any such costs, as
well as reasonable costs incurred by HSRE, including reasonable fees of the accountants of HSRE, to
adjust financial reports received by the Company to be prepared in accordance with the provisions
hereof, shall be borne by the Company.

     8.3 Determination and Allocation of Profits and Losses. For each Fiscal Year, Profits
and Losses of the Company will be determined and allocated to the Members as provided in
Exhibit B.

     8.4 Returns. Campus Crest will, at the Company’s expense, cause the preparation and
timely filing of all tax returns required to be filed by the Company and any Subsidiary pursuant to
the Code, as well as all other tax returns required in each jurisdiction in which the Company or
any Subsidiaries is required to file a tax return, all of which shall be subject to Approval of the
Executive Committee as described in Section 5.2 hereof. Campus Crest shall deliver a Form
K-1 to each of the Members, along with any other information relating to the Company in order for
the Members to file their respective tax returns by March 15 of each taxable year. Campus Crest
shall deliver copies of all tax returns to HSRE for its prior Approval, which delivery shall be
made no later than forty-five (45) days following the end of each tax fiscal year.

     8.5 Financial Statements and Reports to Members. The Company shall prepare and
provide financial statements and reports to each Member as follows:

     (a) Monthly Financial Statements. Campus Crest shall prepare an unaudited
balance sheet of the Company as of the end of each month of each Fiscal Year and unaudited
operating statements, and statements of cash flow for each calendar month showing the
Company’s results for the month and the year to date and compared to the applicable budget
set forth in the then approved Annual Business Plan and Annual Operating Budget. Each such
financial statement shall be prepared in accordance with GAAP (or such other accounting
principles Approved by HSRE) consistently applied and

36

 

shall be certified to be true and correct to the best of Campus Crest’s knowledge and
belief. Copies shall be furnished to the Members within twenty (20) days after the end of
each calendar month. A form of such financial statement is attached hereto as Exhibit
I.

     (b) Annual Financial Statements. If requested by HSRE, Campus Crest shall, at
the Company’s expense, engage a firm of independent certified public accountants which is
Approved by HSRE, in which case the independent certified public accountants shall within
sixty (60) days after the end of each Fiscal Year (i) render their opinion on the balance
sheet of the Company as of the end of each Fiscal Year, and on the Company’s statements of
income and cash flow for each Fiscal Year, as prepared by Campus Crest, and (ii) render
their report on the computations of Net Cash Flow for each Fiscal Year made by Campus Crest
and as to whether distributions thereof during such Fiscal Year were in accordance with
Sections 4.1 hereof. There shall be no requirement that an audit be performed with
respect to the Company, unless so requested by a Member, in which case the costs and
expenses of such audit shall be borne by the Company. Notwithstanding the foregoing, HSRE
shall have the right at any time to cause the Company to cease using an independent
accounting firm to prepare the foregoing financial statements, in which case such statements
shall be prepared by Campus Crest’s internal accounting department.

     (c) Monthly Status Report. Campus Crest shall prepare (or cause the Property
Manager or Developer, as the case may be, to prepare) and distribute to the Members not less
often than monthly a status report on the Properties which shall contain as appropriate (i)
a description of the status of construction of the Properties in a form attached hereto as
Exhibit J, (ii) occupancy rates and impending lease expirations, (iii) a summary of
rental rates being charged, (iv) any material deviations or expected deviations from all
Development Budgets and the Annual Business Plan and Operating Budget for each Property and
an explanation thereof, (vi) with respect to each Development Project, during the
construction period, a report containing those items listed on Schedule 2 attached
hereto, and (vii) with respect to each Development Project, after the construction period,
and each Acquisition Project, a report containing those items listed on Schedule 3
attached hereto.

     8.6 Books and Records. Campus Crest shall keep or cause to be kept complete and
accurate books and records with respect to the Company’s business and the accounts of the Members
in which shall be entered all matters relating to the business and operations of the Company,
including all income, expenditures, assets and liabilities thereof. The books and records of the
Company will be maintained at the Company’s principal office.

     8.7 Information; Cooperation with HSRE.

     (a) Each Member shall have complete and unrestricted access to the books and records of
the Company and Subsidiaries and to all information and documents relating to the Company or
its affairs, including the right to copy any or all thereof. A Member wishing to exercise
the right of access shall be required to give Campus Crest reasonable notice and to conduct
its examination during normal business hours in a

37

 

manner that does not unreasonably interfere with the operation of Campus Crest’s or the
Company’s business, but shall be subject to no other procedures, requirements or conditions.
Campus Crest shall not be entitled to keep any information related to the Company
confidential from the Members. A Member need not state the purpose of any request for
information. The information available to the Members shall include, without limitation,
all information relating to the development of a Development Project or operation of a
Property or the Company’s financial affairs under this Agreement, the Property Management
Agreement, the Construction Agreement, the Development Agreement and any other Related Party
Agreements.

     (b) Without limiting the generality of Section 8.7(a), the Members hereby agree
that the Company and Campus Crest shall (i) cooperate with HSRE or its designees or
representatives in delivering to the foregoing parties any information and documents
requested by such parties, (ii) cooperate with HSRE and Ernst & Young in delivering any
information and documents requested by such parties in connection with any external audits
of HSRE or its Affiliates conducted by Ernst & Young, and (iii) cooperate with HSRE in
delivering any information and documents requested by HSRE in connection with any internal
audits of HSRE conducted by HSRE or its Affiliates.

     8.8 Banking. The Company shall establish one or more bank or financial accounts for
the Company and for each Subsidiary. Campus Crest may authorize one or more individuals to sign
checks on and withdraw funds from such bank or financial accounts (each, a “Campus Crest Authorized
Bank Account Signatory”). Campus Crest shall place such limitations and restrictions on such
authority as HSRE shall Approve. In addition, Campus Crest shall cause an individual appointed by
HSRE (the “HSRE Bank Account Representative”) to have access to all information with respect to
such any bank or financial accounts established for the Company by filing the necessary
documentation with the applicable bank and/or financial institution. The individual initially
appointed as HSRE Bank Account Representative shall be Andrew Denekas. If HSRE notifies Campus
Crest that it reasonably believes, in good faith, that a Campus Crest Triggering Event has
occurred, HSRE shall have the right, with or without further cause, in its sole and absolute
discretion, to revoke the authority of any Campus Crest Authorized Bank Account Signatory and to
appoint the HSRE Bank Account Representative as a replacement for such Campus Crest Authorized Bank
Account Signatory. In the event the Members determine that a Campus Crest Triggering Event has not
occurred, then Campus Crest shall have the right to reinstate the authority of the Campus Crest
Authorized Bank Account Signatory with respect to the applicable bank or financial accounts.

ARTICLE 9

SALE OF PROPERTIES; PURCHASE OPTION

     9.1 Right to Initiate Sale of Properties. At any time after the twenty-four (24)
month anniversary of the Substantial Completion Date of the last Property to be developed by the
Company (the “Buy/Sell Trigger Date”), either Campus Crest or HSRE (the “Initiating Member”) shall
have the right to initiate the provisions of this Article 9 with respect to any one or more
of the Properties owned by the Company, by delivering written notice (a “Buy/Sell

38

 

Notice”) to the other Member (the “Non-Initiating Member”) setting forth a price (the
“Buy/Sell Price”) for such Property(ies) (the “Buy/Sell Property”). The Members further agree that
in the event HSRE and Campus Crest and/or their Affiliates shall establish one or more other
Portfolio Companies, the buy/sell provisions set forth in the operating agreement of such Portfolio
Companies shall be the same as set forth in this Agreement.

     9.2 Initiation and Elections.

     (a) The Non-Initiating Member shall have a period of sixty days after the receipt of
the Buy/Sell Notice (the “Exercise Period”) within which to notify the Initiating Member in
writing (the “Reply Notice”) whether the Non-Initiating Member, in its sole discretion,
shall either (x) buy the Initiating Member’s interest in the Buy/Sell Property for cash
pursuant to Section 9.2(b) below (“Purchase Option”), or (y) consent to the sale of
the Buy/Sell Property (or its interest in the Buy/Sell Property) to the Initiating Member at
one hundred percent (100%) of the Buy/Sell Price or to a third party for a cash purchase
price (before deduction of Selling Expenses) not less than ninety-five percent (95%) of the
Buy/Sell Price set forth in the Buy/Sell Notice (“Sale Option”).

     (b) If the Non-Initiating Member timely gives the Reply Notice electing the Purchase
Option, the purchase price for the Initiating Member’s interest in the Buy/Sell Property
(the “Initiating Member Purchase Price”) shall be equal to the amount which would be
distributed under Section 4.1 to the Initiating Member if (i) the Buy/Sell Property
were sold in a hypothetical sale for a net price equal to the Buy/Sell Price, less Selling
Expenses, (ii) all of the Company’s (or the applicable Subsidiary’s) liabilities with
respect to the Buy/Sell Property were paid, in full, (iii) rents, taxes and other similar
items with respect to the Buy/Sell Property were pro-rated, (iv) the applicable Subsidiary
was liquidated, and (v) the remaining proceeds were distributed in accordance with
Section 4.1. For purposes hereof, Selling Expenses shall mean transfer taxes,
survey and title charges, state deed fees, recording fees to clear title, documentary fees
and taxes, if incurred and other closing costs customarily incurred by the seller for
property that is the subject of this Agreement and apportioned to the seller in accordance
with local customs. If the Non-Initiating Member is HSRE, Campus Crest shall promptly
provide HSRE with all information regarding the Company which is reasonably available to
Campus Crest and necessary to calculate the Initiating Member Purchase Price. If the
Non-Initiating Member timely gives the Reply Notice electing the Purchase Option above, the
Non-Initiating Member shall be conclusively deemed to have agreed to purchase, and the
Initiating Member shall be conclusively deemed to have agreed to sell, the interest of the
Initiating Member in the Buy/Sell Property at the Initiating Member Purchase Price.

     (c) If the Non-Initiating Member timely gives the Reply Notice electing the Sale
Option, the Non-Initiating Member shall be deemed to have irrevocably consented to the sale
of the Buy/Sell Property for a cash price equal to or greater than ninety-five percent (95%)
of the price set forth in the Buy/Sell Notice (it being acknowledged that such proceeds
shall be distributed in accordance with Section 4.1 hereof), or if the Initiating
Member elects to purchase the interest of the Non-Initiating Member in the Buy/Sell
Property, to sell its interest in the Buy/Sell Property to the Initiating Member for

39

 

a purchase price based on one hundred percent (100%) of the Buy/Sell Price calculated
pursuant to Section 9.3 below. If the Non-Initiating Member fails to give a Reply
Notice prior to the expiration of the Exercise Period, it shall be conclusively presumed
that the Non-Initiating Member has properly elected the Sale Option.

     9.3 Failure of Non-Initiating Member to Exercise Purchase Option; Marketing of
Properties.

     (a) If the Initiating Member delivers a Buy-Sell Notice and the Non-Initiating Member
elects (or is deemed to have elected) the Sale Option, then the Initiating Member shall have
the obligation to either (i) during the ninety (90) day period (“Sale Period”) following the
exercise or deemed exercise of the Sale Option to take all steps reasonably necessary to
complete the sale of the Buy/Sell Property to a third party for a cash price equal to or
greater than ninety-five percent (95%) of the Buy/Sell Price and on terms deemed
satisfactory to the Initiating Member in its sole discretion; provided, however, that in no
event shall the Initiating Member have the right to execute on behalf of the Company any
contract or documentation imposing personal liability on any Member or Affiliate thereof or
indemnifying the purchaser for any breaches of covenants, representations or warranties of
the Company beyond one year after the date of sale or the expiration of the relevant statute
of limitations, as applicable, or (ii) during the sixty (60) day period following the
exercise or deemed exercise of the Sale Option to deliver written notice to the
Non-Initiating Member stating its intention to purchase the interest of the Non-Initiating
Member in the Buy/Sell Property for a cash price (the “Non-Initiating Member Purchase
Price”) equal to the amount which would be distributed under Section 4.1 to the
Non-Initiating Member if the Buy/Sell Property was sold at one hundred percent (100%) of the
price set forth in the Buy/Sell Notice (and all of the Company’s liabilities with respect to
the Buy/Sell Property were paid, in full, and rents, taxes and other similar items were
pro-rated, and the Company was liquidated).

     (b) If the Initiating Member delivers written notice to the Non-Initiating Member
electing to purchase the interest the Non-Initiating Member in the Buy/Sell Property, upon
delivery of such notice, the Initiating Member shall be obligated to purchase the interest
the Non-Initiating Member in the Buy/Sell Property and the Non-Initiating Member shall be
obligated to sell its interest in the Buy/Sell Property to the Initiating Member for a cash
price equal to the Non-Initiating Member Purchase Price.

     (c) Any marketing of the Buy/Sell Property shall be done in a commercially reasonable
manner, and in the event the Initiating Member causes the Company or the Members to enter
into any term sheet, letter of intent or contract for the sale of the Buy/Sell Property, any
such document shall include customary confidentiality provisions requiring the third party
to keep information regarding the Company confidential and prohibiting the disclosure of any
information relating to the Company to any person other than its attorneys, advisors,
representatives and lenders.

40

 

     9.4 Releases; Consents.

     (a) If any Member properly elects to purchase the other Member’s respective ownership
interest in the Buy/Sell Property or the Membership Interest of the other Member (in the
event a Member has properly elected to purchase the other Member’s respective ownership
interest in all of the Properties), and the selling Member(s) or any of its Affiliates
(including the Developer) is a guarantor or an indemnitor of any obligations of the Company
or its Subsidiaries with respect to the Buy/Sell Property or is otherwise personally liable
thereon (“Recourse Obligations”), a condition precedent to the closing shall be that the
purchasing Member shall obtain a release of all such Recourse Obligations, except for
Recourse Obligations that arise out of acts or events which occur simultaneously with or
prior to the Selling Member’s transfer of its ownership interest in the Buy/Sell Property or
its Membership Interest, as the case may be, to the purchasing Member; or if such a release
is obtainable only with the payment of money by any Member, the purchasing Member shall
fully indemnify the selling Member and its Affiliates with respect to any such obligations.
Any such indemnity by the purchasing Member shall be secured by its right to all
Distributions by the Company (both with respect to the purchased Membership Interest and
with respect to all other Membership Interests of the purchasing Member and its Affiliates).
The purchasing Member and the selling Member shall both use their reasonable best efforts
to obtain any such releases without the payment of money. A condition precedent to the
closing shall also be that the Company shall have obtained the consent of any lenders or
other third parties required under applicable documentation to which the Company is a party.
The purchasing Member and the selling Member shall both use their reasonable best efforts
to obtain any such consents to the transactions contemplated by this Article 9.

     (b) The Members further acknowledge and agree that if any Member properly elects to
purchase the other Member’s respective ownership interest in the Buy/Sell Property or the
Membership Interest of the other Member(s) and (a) the selling Member or any of its
Affiliates (including the Developer) are owed any fees under a Property Management
Agreement, Construction Agreement, Development Agreement or any other Related Party
Agreement and/or are entitled to reimbursement for any Pre-Development Costs under this
Agreement, then a condition precedent to the closing shall be that the Company pay to the
selling Member any such costs and fees under such agreements up to and through the closing
of such transaction; provided, however, that reimbursement for Pre-Development Costs shall
be made only if the Member entitled to such reimbursement agrees, in writing, not to acquire
the Development Project(s) to which such Pre-Development Costs relate (either on its own or
with a third party).

     9.5 Liabilities; Indemnity. If a Member’s Membership Interest is purchased by another
Member pursuant to any provision of this Article 9, the purchasing Member shall indemnify,
defend and hold the selling Member, its directors, officers, shareholders, partners, members,
managers, employees and agents, or any of them harmless from any and all claims, demands, actions,
losses, liabilities, costs, or expenses (including reasonable attorneys’ fees) arising out of or in
connection with all obligations or liabilities of the Company, whether or not incurred or accrued
while the selling Member was a Member or after the date of consummation

41

 

of the purchase and sale of the selling Member’s Membership Interest, such liability to be
capped at the sale price for the Membership Interest sold by the amount of proceeds received by the
selling Member to the purchasing Member.

     9.6 Purchase of Initiating Member Interest; Closing. In the event a Member properly
elects to purchase the other Member’s respective ownership interest in the Buy/Sell Property or the
Membership Interests of the other Member under this Article 9, the closing of the sale
shall be consummated on a date selected by the purchasing Member (“Buy-Out Closing Date”), which
date shall be not less than thirty (30) days and not more than one hundred eighty (180) days after
the exercise of by the purchasing Member of its right to purchase the other Member’s respective
ownership interest in the Buy/Sell Property or the other Member’s Membership Interest.
Notwithstanding the foregoing, if as of the Buy-Out Closing Date, the purchasing Member has not
received any applicable permits and/or approvals required from third parties, including any
existing lender of the Company or of the Property Owning Subsidiaries, as a condition to the
purchase and sale of the selling Member’s Membership Interest to the purchasing Member, the Buy-Out
Closing Date may be extended by the purchasing Member to not less than ten (10) days after the date
of receipt of all such required permits and approvals but in no event beyond one hundred twenty
(120) days after the exercise of the right to purchase. At the closing, the purchasing Member
shall pay the applicable purchase price by wire transfer of immediately available funds to the
account or accounts designated by the selling Member, or by certified bank check. At the closing,
the selling Member shall execute and deliver assignments, instruments of conveyance or other
instruments appropriate to convey the entire membership interest of the selling Member to the
purchasing Member, and shall deliver to the purchasing Member such evidence as the purchasing
Member may reasonably request showing that the membership interest being sold is owned free and
clear of any and all claims, liens and encumbrances of any kind or nature.

     9.7 Purchase of Loans. If there shall be any outstanding loans due from the Company
to the selling Member or any Affiliate thereof (which is not also an Affiliate of the purchasing
Member), such loans, including accrued and unpaid interest, shall be purchased at par or otherwise
repaid in full by the purchasing Member on the Buy-Out Closing Date. The selling Member shall
deliver and endorse without recourse to the purchasing Member each note or other instrument
evidencing such loans and all documents securing such loans.

     9.8 Remedies for Noncompliance. The requirements or obligations, if any, of any
Member to sell or purchase an interest in the Buy/Sell Property in accordance with the provisions
of this Article 9 shall be enforceable, without limitation, by an action for specific
performance, with the same force and effect and at least to the same extent as is permitted at law
or in equity for the specific performance of a contract relating to the purchase of real property
or an interest therein. In the case of a Member obligated to purchase an interest in a Buy/Sell
Property pursuant to this Article 9 who fails to effect such purchase in accordance with
the terms hereof (a “Defaulting Purchaser”), if an order for specific performance against the
Defaulting Purchaser is not enforceable due to the lack of funds or credit by the Defaulting
Purchaser or the selling Member elects not to pursue such an order, the selling Member may elect to
pursue any other remedy at law or in equity and, in addition, the selling Member (herein, the
“Non-Defaulting Party”) shall have the right to purchase the Membership Interest of the Defaulting
Purchaser, the

42

 

closing of which shall occur on any date so designated by the Non-Defaulting Party, and the
purchase price being equal to the amount the Defaulting Purchaser would have received if the
Properties were sold at a price equal to (i) ninety percent (90%) of the Buy/Sell Price, less (ii)
Selling Expenses, and all of the Company’s liabilities were paid, in full, rents, taxes and other
similar items were pro-rated, and the Company was liquidated and the proceeds of such sale were
distributed in accordance with Section 4.1 hereof. In addition, the Defaulting Purchaser
shall reimburse the Non-Defaulting Party for legal fees and other costs reasonably incurred by the
Non-Defaulting Party in evaluating and responding to the Buy/Sell Notice and subsequent notices and
documents provided under Section 9.3.

     9.9 Assignees. For purposes of this Article 9, any elections made by or on
behalf of each Member under this Article 9 shall bind any assignee of any such Member; and
all references in this Article 9 to a Member shall include all Affiliates of such Member
and, except as provided above, all persons to which such Member has transferred or assigned any
portion of his Membership Interest in the Company.

     9.10 Limitation on Competing Options. The Members hereby agree that during the period
of time commencing on the date a Buy/Sell Notice is delivered by an Initiating Member to the
Non-Initiating Member and ending on the earlier of the last date upon which the closing of the sale
of the Properties or the Membership Interest of the selling Member was required to have been
consummated under this Article 9, no Member shall have the right to deliver a competing
Buy/Sell Notice under this Article 9.

     9.11 Expenses/Fees. Unless otherwise set forth in the Buy-Sell Notice, all
miscellaneous title charges, escrow fees, recording fees and transfer taxes shall be paid by the
party who is customarily responsible for such charges and the parties shall prorate items of income
and expense, in accordance with local custom and practice.

ARTICLE 10

TRANSFER OF MEMBERSHIP INTERESTS

     10.1 General Prohibition. Except as set forth herein, a Member may not sell,
transfer, encumber, pledge or assign all or any part of its Membership Interest (referred to herein
as a “Transfer”) without the prior written consent of all of the other Members, which consent may
be granted or withheld in each Member’s sole and absolute discretion. In order for an assignee to
constitute a substituted or additional Member, the conditions set forth in Section 10.6
must be satisfied.

     10.2 Permitted Transfers. Notwithstanding the provisions of Section 10.1, but
subject to this Section 10.2 and Section 10.6 below, a Member may Transfer all or
any part of its Membership Interest without the consent of any other Member to any of the following
(“Permitted Transferees”):

43

 

     (a) a general or limited partnership in which the assigning Member or persons
Controlling the assigning Member are the sole or managing general partner(s) or Control the
sole or managing general partner;

     (b) a corporation Controlled by the assigning Member or persons Controlling the
assigning Member;

     (c) a trust, the sole trustee of which is Controlled by the assigning Member or persons
Controlling the assigning Member on the date hereof, and the beneficiaries of which are
members of the Immediate Family of the assigning Member or of one or more of its owners on
the date hereof;

     (d) a limited liability company Controlled by the assigning Member or persons
Controlling the assigning Member; or

     (e) as otherwise permitted under this Agreement.

Notwithstanding anything in this Section 10.2 to the contrary, a Member may not assign all
or part of its Membership Interest if such assignment would (i) be to a Person that is not an
“accredited investor” (as defined by Rule 501 promulgated under the Securities Act of 1933), (ii)
result in the Company not qualifying for an exemption from the registration requirements of the
federal or any applicable state securities laws, (iii) subject the Company to withholding
obligations to any Member under the Foreign Investment in Real Property Tax Act of 1980, as
amended, (iv) cause any rent received by the Company under a lease to constitute related party
rents under Section 856(d)(2)(B) or (v) result in the violation of or a default under any term or
provision of any agreement to which the Company or any of its assets is bound.

     10.3 Involuntary Transfers. In the event any Member shall be adjudged Bankrupt (such
Member being referred to herein as a “Bankrupt Member”), the personal representative or trustee (or
successor-in-interest) of the deceased, insane or incompetent Member or Bankrupt Member shall be an
assignee of such Member’s Membership Interest having the rights set forth in Section 10.5
and shall not become an additional or substituted Member unless and until the conditions set forth
in Section 10.6 are satisfied; and any such Member’s estate (or successor-in-interest)
shall be liable for all of its obligations as a Member.

     10.4 Dissolution or Termination of Members. In the event of the dissolution of a
Member that is a partnership, limited liability company or a corporation or the termination of a
Member that is a trust, the successors-in-interest of the dissolved or terminated Member shall, for
the purposes of winding up the affairs of the dissolved or terminated Member, have the rights of an
assignee of such Member’s Membership Interest, as described in Section 10.5, and shall not
become additional or substituted Members unless and until the conditions set forth in Section
10.6 are satisfied.

     10.5 Status of Assignor and Assignee. The assignor of a Membership Interest shall
remain liable for all obligations of the assignor under this Agreement unless the other Members
unanimously approve the release of the assignor. Until the provisions of Section 10.6(b), (c)
and

44

 

(d) are satisfied with respect to any such assignee, such assignee shall not be a
Member but shall be an assignee having the rights described in this Section 10.5. Any
Person who acquires all or any portion of the Membership Interest of a Member in the Company in any
manner (including pursuant to a transfer permitted by Section 10.2), shall not be a Member
of the Company unless and until the conditions of Section 10.6 are satisfied. Unless and
until such conditions are satisfied, such Person shall, to the extent of the Membership Interest
acquired, be entitled only to the transferor Member’s rights, if any, in the Profits, Losses,
Operating Cash Flow, Capital Proceeds and other distributions to the Members pursuant to this
Agreement, subject to the liabilities and obligations of transferor Member hereunder; but such
Person shall have no right to participate in the management of the business and affairs of the
Company and shall be disregarded in determining whether the approval, consent or any other action
has been given or taken by the Members. Any such assignee shall have the same right, subject to
the same limitations, as the transferor Member had under the provisions of this Article 10
to assign its Membership Interest as a Member (including the right to assign such Membership
Interest to any person to which such Member could have assigned its Membership Interest pursuant to
Section 10.2), but any such further assignee shall have only the rights set forth in this
Section 10.5 and shall not become an additional or substituted Member of the Company unless
and until the conditions of Section 10.6 have been satisfied.

     10.6 Admission Requirements. No assignee of all or any portion of a Member’s
Membership Interest or any other person shall be admitted as an additional or substituted Member of
the Company unless and until:

     (a) such admission has been Approved in writing by all Members having the right to
Approve such transfer hereunder, which approval may be given or withheld in the sole
discretion of each Member;

     (b) such assignment is made in writing, signed by the assigning Member (or its
successor) and accepted in writing by the assignee, and a duplicate original of such
assignment has been delivered to the non-transferring Member;

     (c) the Company has received an opinion of counsel as contemplated by Section
10.1 or each Member has waived this requirement; and

     (d) the assignee executes and delivers to the Company and each other Member a written
agreement in form reasonably satisfactory to the Member and each Member, pursuant to which
such assignee agrees to be bound by and confirms the obligations, representations and
warranties contained in this Agreement.

     10.7 Effective Assignment. In the event an assignment is made in accordance with this
Agreement, unless otherwise required by the Code:

     (a) the effective date of such assignment shall be the date the written instrument of
assignment is received and approved by all of the non-assigning Members;

45

 

     (b) the Company and the non-assigning Members shall be entitled to treat the
assignor of the assigned Membership Interest as the absolute owner thereof in all respects
and shall incur no liability for allocations of Profits or Losses and distributions of
Operating Cash Flow or Capital Proceeds made in good faith to such assignor until such time
as the written instrument of assignment has been actually received and approved by the other
Members and recorded in the books of the Company; and

     (c) any Profits and Losses shall be allocated between the assignor and the assignee of
the assigned Membership Interest in the manner described in Exhibit B.

     10.8 Cost of Admission. The cost of processing and perfecting an admission
contemplated by this Article 10 (including reasonable attorneys’ fees incurred by the
Company) shall be borne by the party seeking admission as a Member to the Company.

ARTICLE 11

DISSOLUTION

     11.1 Dissolution. Dissolution of the Company will occur upon the happening of any of
the following events:

     (a) Upon the sale or other disposition of substantially all of the assets of the
Company and its Subsidiaries;

     (b) An Event of Withdrawal of Campus Crest (as defined in Section 11.2),
unless the Company is continued as provided in Section 11.2;

     (c) The mutual agreement of Campus Crest and HSRE to dissolve the Company; or

     (d) The election of HSRE to dissolve the Company after a Campus Crest Triggering Event
as provided in Section 6.2, or the election of Campus Crest to dissolve the Company
after an HSRE Triggering Event as provided in Section 6.4.

     11.2 Events of Withdrawal. An Event of Withdrawal of a Member occurs when any of the
following occurs:

     (a) With respect to any Member that is a corporation, upon filing of articles of
dissolution of the corporation;

     (b) With respect to any Member that is a partnership or a limited liability company,
upon dissolution of such entity;

     (c) With respect to any Member who is an individual, upon either the death of the
individual or the entry by a court of competent jurisdiction of an order adjudicating the
individual to be incompetent to manage such individual’s person or estate;

46

 

     (d) With respect to any Member that is a trust, upon termination of the trust;

     (e) With respect to any Member that is an estate, upon final distribution of the
estate’s Membership Interest;

     (f) With respect to any Member, the bankruptcy or insolvency of the Member; or

     (g) Any other event which terminates the continued membership of a Member in the
Company.

     Within 30 days following the occurrence of any Event of Withdrawal with respect to a Member,
such Member (or his representative) must give Notice of the date and the nature of such event to
the Company. The purpose of this Notice is to enable the remaining Members to continue the Company
if such remaining Members desire to avoid a Dissolution and liquidation of the Company. Any Member
failing to give such Notice will be liable in damages for the consequences of such failure as
otherwise provided in this Agreement. Upon the occurrence of an Event of Withdrawal, such Member
will cease to have any management rights under this Agreement and such Member’s Membership Interest
will be deemed transferred to such Member’s transferee or other successor in interest (which
Person, unless already a Member in such capacity, will have only the limited rights of a transferee
as set forth in Section 10.5, unless and until admitted as a Substitute Member).

     11.3 No Voluntary Withdrawal. Each Member agrees that such Member will not
voluntarily withdraw from the Company (whether by resignation, retirement or withdrawal) except for
permissible Transfers under this Agreement. Any such attempted voluntary withdrawal shall be void
and of no effect.

ARTICLE 12

LIQUIDATION

     12.1 Liquidation. Upon Dissolution of the Company, the Company will immediately
proceed to wind up its affairs and liquidate. As soon as possible following the occurrence of a
Dissolution event, the Company will file a statement of intent to dissolve with the Delaware
Secretary of State pursuant to the Act. Campus Crest or if Campus Crest shall no longer be the
day-to-day manager of the Company as a result of being replaced in such capacity pursuant to
Section 6.5, any Person appointed by a majority in interest (determined by Participating
Percentages) of the remaining Members will act as the liquidating trustee. The winding up and
Liquidation of the Company will be accomplished in a businesslike manner as determined by the
liquidating trustee. A reasonable time will be allowed for the orderly Liquidation of the Company
and the discharge of liabilities to creditors so as to enable the Company to minimize any losses
attendant upon Liquidation. Any gain or loss on disposition of any Company assets in Liquidation
(including any distribution in kind) will be allocated to Members, and credited or charged to
Capital Accounts, in accordance with the Tax Allocation Provisions. Any liquidating trustee
(including Members) is entitled to reasonable compensation for services actually

47

 

performed, and may contract for such assistance in the liquidating process as such Person
deems necessary or desirable. Until the filing of articles of dissolution as provided in
Section 12.7, the liquidating trustee may settle and close the Company’s business,
prosecute and defend suits, dispose of its property, discharge or make provision for its
liabilities, and make distributions in accordance with the priorities set forth in Section
12.2.

     12.2 Priority of Payment. The assets of the Company will be distributed in
Liquidation in the following order:

     (a) First, to creditors by the payment or provision for payment of the debts and
liabilities of the Company (including any loans or advances that may have been made by any
Member or Affiliate) and the expenses of Liquidation;

     (b) Second, to the setting up of any reserves that Campus Crest and HSRE determine are
necessary for any contingent, conditional or unmatured liabilities or obligations of the
Company; and

     (c) Third, in the manner provided for in Section 4.1 hereof.

     12.3 Liquidating Distributions. The liquidating Distributions due to the Members will
be made by selling the assets of the Company and distributing the net proceeds. Notwithstanding
the preceding sentence, but only upon the agreement of all Members, the liquidating Distributions
may be made by distributing some or all of the assets of the Company in kind to the Members in
proportion to the amounts distributable to them pursuant to Section 12.2, and valuing such
assets at their Fair Market Value (net of liabilities secured by such property that the Member
takes subject to or assumes) on the date of Distribution. Except as provided herein, any assets
distributed in kind shall be deemed to have been sold for their Fair Market Value (net of such
liabilities) and the Capital Accounts of the parties shall be adjusted to reflect such deemed sale
for purposes of determining the Distributions to which they are entitled under Section
12.2. Each Member agrees to save and hold harmless the other Members from such Member’s
proportionate share of any and all such liabilities which are taken subject to or assumed.
Appropriate and customary prorations and adjustments will be made incident to any Distribution in
kind. The Members will look solely to the assets of the Company for the return of their Capital
Contributions, and if the assets of the Company remaining after the payment or discharge of the
debts and liabilities of the Company are insufficient to return such contributions, they will have
no recourse against any other Member. The Members acknowledge that Section 12.2 may
establish Distribution priorities different from those set forth in the provisions of the Act
applicable to Distributions upon Liquidation, and the Members agree that they intend, to that
extent, to vary those provisions by this Agreement.

     12.4 No Restoration Obligation. Nothing contained in this Agreement imposes on any
Member an obligation to make a contribution in order to restore a deficit Capital Account upon
Liquidation of the Company.

     12.5 Timing. Final Distributions in Liquidation will be made by the end of the
Company’s Fiscal Year in which such actual Liquidation occurs (or, if later, within 90 days after

48

 

such event) in the manner required to comply with the Treasury Regulations promulgated under
Section 704(b) of the Code (the “§704(b) Regulations”). If it is not practicable to make such
Distributions within that time, they may be delayed for a reasonable time to allow the orderly
liquidation of the Company’s assets. Payments or Distributions in Liquidation may be made to a
liquidating trust established by the Company for the benefit of those entitled to payments under
Section 12.2, in any manner consistent with this Agreement and the § 704(b) Regulations.

     12.6 Liquidating Reports. A report will be submitted with each liquidating
Distribution to Members, showing the collections, disbursements and Distributions during the period
which is subsequent to any previous report. A final report, showing cumulative collections,
disbursements and Distributions, will be submitted upon completion of the liquidation process.

     12.7 Certificate of Dissolution. Upon Dissolution of the Company and the completion
of the winding up of its business, the Company will file a Certificate of Dissolution (or other
instrument appropriate to cancel its Certificate of Formation) with the Delaware Secretary of State
pursuant to the Act. At such time, the Company will also file an application for withdrawal of its
certificate of authority in any jurisdiction where it is then qualified to do business.

ARTICLE 13

GENERAL PROVISIONS

     13.1 Amendment. This Agreement may be amended only by a writing signed by all
Members.

     13.2 Authorized Representatives.

     (a) For the purposes hereof, all Approvals hereunder shall be deemed valid and binding
on a Member if given by any Authorized Representative thereof.

     (b) The four individuals appointed to the Executive Committee under Section
5.2, shall be deemed the Authorized Representatives of the respective Members which
appointed them.

     (c) Any Member may remove or change any of its Authorized Representatives or appoint
additional Authorized Representatives by giving written notice thereof to the other Member.
Such change, removal, or appointment shall be effective upon the later to occur of (i) the
date of receipt of such notice by such other Member or (ii) the effective date for such
change, removal or appointment set forth in such notice. Any replacement or additional
Authorized Representative thereof shall in the case of the Campus Crest be either an officer
or manager of Campus Crest or an Affiliate thereof.

49

 

     13.3 Arbitration.

     (a) Except in the event of a breach by a Member under Article 10 or Section
13.19 hereof, if any dispute, controversy or claim arises between the Members with
respect to whether either Member is in breach or default of its respective obligations
hereunder, or as to whether any breach or default has occurred under the Property Management
Agreement, the Construction Agreement or the Development Agreement, or any agreement between
Campus Crest or any of its Affiliates and the Company (or any of its Affiliates), then the
dispute shall be settled by arbitration at a location in the United States where the
defendant Member has its principal place of business (or if the principal place of business
of the defendant Member is outside the United States, at a location in the United States
designated by the defendant Member). Such arbitration shall be administered by the American
Arbitration Association (“AAA”) and shall be conducted in accordance with the Commercial
Arbitration Rules (the “Rules”) of AAA then in effect, or such other arbitral body as the
Members may jointly select.

     (b) The award of the arbitrator shall be binding upon the parties and each party hereby
consents to the entry of judgment by any court of competent jurisdiction in accordance with
the decision of the arbitrator.

     (c) The prevailing party in any such arbitration shall be entitled to recover, in
addition to any other relief awarded, its reasonable costs of preparation for and
participation in the arbitration, including reasonable attorneys’ fees. The arbitrator
shall have no power to award punitive, treble or other multiple damages, as a result of this
Section 13.3, and the arbitrator’s jurisdiction is limited accordingly, and no
arbitration award issued pursuant to this Section 13.3 shall grant such damages.

     (d) The Members hereby agree to make a good faith effort to resolve any dispute,
controversy or claim arising between them prior to electing to arbitrate such matter.

     (e) Any such arbitration proceedings shall include by consolidation, joinder or joint
filing, any additional person or entity not a party to this Agreement to the extent
necessary to the final resolution of the matter in controversy.

     (f) In the event that a Member breaches any provision of Article 10 or
Section 13.19 hereof, the Company or the other Member, as applicable, shall be
entitled to institute and prosecute proceedings in any court of competent jurisdiction
(either in law or in equity) to enforce the specific performance thereof by the Member or to
enjoin the Member from any further or continuing breach or violation without the necessity
of showing actual damages or furnishing a bond or other security. In the event the Company
the other Member, as applicable, initiates any legal action (including, without limitation,
litigation) to enforce Article 10 or Section 13.19 hereof or to seek damages
for any breach hereof, the Company shall be entitled to recover from the Member reasonable
attorneys’ fees and all other costs incurred by it in connection with such legal action.
Each Member hereby irrevocably waives all defenses inconsistent with the terms of this

50

 

Section 13.3(f). Each Member hereby submits to the jurisdiction of the federal
or state courts of the location in the United States where the defendant Member has its
principal place of business (or if the principal place of business of the defendant Member
is outside the United States, at a location in the United States designated by the defendant
Member) for all matters related in any manner to this Section 13.3(f).

     13.4 Unregistered Interests. Each Member (a) acknowledges that the Membership
Interests are not securities and, therefore have not been registered under The Securities Act of
1933, as amended, or under similar provisions of state law, (b) represents and warrants that such
Person is an accredited investor as defined for federal securities laws purposes, (c) represents
and warrants that the Membership Interest is being acquired for such Person’s own account, for
investment, and with no view to the distribution of the Membership Interest, and (d) agrees not to
sell or to offer to sell all or any part of its Membership Interest without registration under the
Securities Act of 1933, as amended, and any applicable state securities laws, unless the transfer
is exempt from such registration requirements.

     13.5 Waiver of Dissolution Rights. The Members agree that irreparable damage would
occur if any Member should bring an action for judicial dissolution of the Company. Accordingly,
each Member accepts the provisions under this Agreement as such Person’s sole entitlement on
Dissolution of the Company and waives and renounces such Person’s right to seek a court decree of
dissolution or to seek the appointment by a court of a liquidator for the Company.

     13.6 Waiver of Partition Right. Each Member waives and renounces any right that it
may have prior to Dissolution and Liquidation to institute or maintain any action for partition
with respect to any real property held by the Company.

     13.7 Waivers Generally. No course of dealing will be deemed to amend or discharge any
provision of this Agreement. No delay in the exercise of any right will operate as a waiver of
such right. No single or partial exercise of any right will preclude its further exercise. A
waiver of any right on any one occasion will not be construed as a bar to, or waiver of, any such
right on any other occasion.

     13.8 Notice. All Notices under this Agreement will be in writing and will be sent
addressed as follows:

	 	 	 	 	 

	 

	 	If to HSRE:
	 	c/o Harrison Street Real Estate Capital, LLC

71 S. Wacker Drive

Suite 3571

Chicago, IL 60606

Attn: Christopher N. Merrill

          Stephen M. Gordon

51

 

	 	 	 	 	 

	 

	 	With copy (not constituting
notice) to:
	 	DLA Piper US LLP

203 N. LaSalle #1900

Chicago, IL 60601

Attn: Jesse A. Criz
	 
	 	 	 	 
	 

	 	If to Campus Crest:
	 	c/o Campus Crest Communities, Inc.

2100 Rexford Rd, 4th Floor

Charlotte, NC 28211

Attention: Donald L. Bobbitt, Jr.
	 
	 	 	 	 
	 

	 	With a copy (not
constituting notice) to:
	 	c/o Bradley Arant Boult Cummings LLP

One Federal Place

1819 Fifth Avenue North

Birmingham, AL 35203

Attention: Dawn Helms Sharff

     Each Member shall have the right from time to time to change its address and add or delete, or
change the addresses of, Persons to whom copies of Notices must be sent. Any Notice given to any
Member in accordance with this Agreement will be deemed to have been duly given: (a) on the date
of receipt if personally delivered, (b) five (5) days after being sent by U.S. mail, postage
prepaid, (c) the date of receipt, if sent by registered or certified U.S. mail, postage prepaid, or
(d) one (1) business day after having been sent by a nationally recognized overnight courier
service. In computing time periods, the day of Notice will be included. For Notice purposes, a
day means a calendar day. Any Notice given by a Member to all other Members shall be deemed given
to the Company.

     13.9 Other Business of Members. Subject to the terms of this Agreement, the terms of
the Non-Competition and Right of First Opportunity Agreement and the terms of the Development
Agreement, Construction Agreement and Property Management Agreement, the Members, their constituent
owners, their Affiliates, and the respective employees and agents of all such parties, shall be
free to engage in or possess any interests in other business ventures of any kind, whether or not
directly competing with the Company or the Properties, and to exploit other business opportunities,
whether or not arising from the conduct of Company business, and the pursuit of such ventures or
business opportunities will not be deemed improper for purposes of this Agreement.

     13.10 Partial Invalidity. Wherever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law. However, if for any
reason any one or more of the provisions of this Agreement are held to be invalid, illegal or
unenforceable in any respect, such action will not affect any other provision of this Agreement.
In such event, this Agreement will be construed as if such invalid, illegal or unenforceable
provision had never been contained in it.

52

 

     13.11 Entire Agreement. This Agreement and the other instruments being entered into
between the parties pursuant hereto or thereto, contains the entire agreement and understanding of
the Members concerning its subject matter.

     13.12 Benefit. The contribution obligations of each Member will inure solely to the
benefit of the other Members and the Company, without conferring on any other Person any rights of
enforcement or other rights.

     13.13 Binding Effect. This Agreement is binding upon, and inures to the benefit of,
the Members and their permitted transferee; provided that, any transferee will have only the rights
specified in Section 10.5 unless admitted as a Substitute Member in accordance with this
Agreement.

     13.14 Further Assurances. Each Member agrees, without further consideration, to sign
and deliver such other documents of further assurance as may reasonably be necessary to effectuate
the provisions of this Agreement.

     13.15 Headings. Article and section titles have been inserted for convenience of
reference only. They are not intended to affect the meaning or interpretation of this Agreement.

     13.16 Governing Law. Except to the extent pre-empted by any federal law, this
Agreement will be governed by, and construed in accordance with, the laws of the State of Delaware.
Any conflict or apparent conflict between this Agreement and the Act will be resolved in favor of
this Agreement, except as otherwise expressly required by the Act.

     13.17 Limited Liability of Member. Except as expressly required under the Act or
required hereunder, (i) no Member shall have any liability to contribute money or make loans to,
the Company, and (ii) no Member shall be liable for any liabilities or obligations of the Company.

     13.18 Counterparts. This Agreement may be executed in multiple counterparts with
separate signature pages, each such counterpart shall be considered an original, but all of which
together shall constitute one and the same instrument. To facilitate the execution of this
Agreement, the parties may execute and exchange by facsimile or by Adobe Acrobat counterparts of
the signature pages, and such execution shall be deemed an original by the parties.

     13.19 Confidential Information. Except to the extent required or permitted by this
Agreement or required by any applicable Law, or compelled use in litigation, or for tax return
preparation, each Member shall maintain the confidentiality of, and not publicly disclose, (a) the
terms of this Agreement, any agreement executed in connection herewith or any agreement to which
the Company or any Subsidiary thereof is a party or (b) any financial information or other
forecasts regarding the Company or any Subsidiary thereof, in all cases other than with the
Approval of all Members (which Approval shall not be unreasonably withheld), without the consent of
the Company and the other Members. Without limiting the generality of the foregoing, prior to a
Member issuing any press release, disclosure statement or other marketing

53

 

item, such release, statement or item shall be presented to and subject to the Approval of the
other Member, such Approval not to be unreasonably withheld or delayed. Notwithstanding the
foregoing, no information provided by Campus Crest to its Affiliates or in any private placement
memorandum, organizational documents or regular reports that either HSRE or Campus Crest provides
to investors (or potential investors) in any fund of which it is a sponsor, managing general
partner or the equivalent shall be subject to the foregoing terms of this Section 13.19.
Nothing in this Section 13.19 is intended to waive the attorney-client privilege or any
other privilege, including the tax advisor privilege under Section 7525 of the Code. In the event
either Member shall disclose any information of the other Member to the extent required by Law, (i)
the disclosing Member shall send Notice of such disclosure to the other Member immediately after
such disclosure unless prohibited by Law and (ii) the disclosing party shall use reasonable efforts
to seek protection for confidential information that is required to be disclosed.

[signature pages to follow]

54

 

     IN WITNESS WHEREOF, each of the parties has executed this Operating Agreement of HSRE-Campus
Crest IV, LLC, as of the date first set forth above, and agrees to be bound by this Agreement.

	 	 	 	 	 
	 	CAMPUS CREST:

CAMPUS CREST PROPERTIES, LLC, a North 
Carolina limited liability company

 	 
	 	By:  	/s/ Donald L. Bobbitt, Jr.
 	 
	 	 	Name:  	Donald L. Bobbitt, Jr. 	 
	 	 	Its:        Manager 	 
	 
	 	HSRE:

HSRE-CAMPUS CREST IVA, LLC, a Delaware 

limited liability company

 	 
	 	By:  	HSREP III Holding, LLC, a Delaware
 	 
	 	 	limited liability company, its sole member 	 
	 	 	 	 
	 

					
	 	
 	 
	 	By:  	HSRE REIT III, a Maryland
 	 
	 	 	real estate investment trust, its 	 
	 	 	sole member 	 
	 

					
	 	
 	 
	 	By:  	/s/ Stephen Gordon
 	 
	 	 	Name:  	Stephen Gordon 	 
	 	 	Its:        Trustee 	 

 

 

	 	 	 	 	 

JOINDER

     The undersigned hereby executes this Agreement not as a Member of the Company, but solely for
the purposes of guaranteeing payment of the obligations of Campus Crest and the Developer, to the
extent provided for under this Agreement, the Development Agreement and the Completion and Cost
Overrun Guaranty Agreement.

	 	 	 	 	 
	

January 20, 2011	CAMPUS CREST GUARANTOR:

 CAMPUS CREST COMMUNITIES 

OPERATING PARTNERSHIP, LP

 	 
	 	By:  	Campus Crest Communities, GP,
 	 
	 	 	LLC, it general partner 	 

					
	 	
 	 
	 	By:  	Campus Crest Communities,
 	 
	 	 	Inc., its sole member 	 

					
	 	
 	 
	 	By:  	/s/ Donald L. Bobbitt, Jr.
 	 
	 	 	Name:  	Donald L. Bobbitt, Jr. 	 
	 	 	Its:        Chief Financial Officer 	 

 

 

	 	 	 	 	 

JOINDER

     The undersigned hereby executes this Agreement not as a Member of the Company, but solely for
the purposes of approving the form of the Development Agreement attached hereto as Exhibit
F and the form of the Property Management Agreement attachment hereto Exhibit G.

	 	 	 	 	 
	

January 20, 2011	PROPERTY MANAGER:

 THE GROVE STUDENT 

PROPERTIES, INC., a Delaware 

corporation

 	 
	 	By:  	/s/ Donald L. Bobbitt, Jr.
 	 
	 	 	Name:  	Donald L. Bobbitt, Jr. 	 
	 	 	Its:        Chief Financial Officer 	 
	 
	

January 20, 2011	DEVELOPER:

 CAMPUS CREST DEVELOPMENT,

INC., a Delaware corporation

 	 
	 	By:  	/s/ Donald L. Bobbitt, Jr.
 	 
	 	 	Name:  	Donald L. Bobbitt, Jr. 	 
	 	 	Its:        Chief Financial Officer 	 
	 

 

 

EXHIBIT A

DEFINITIONS

     11% Cash on Cash Return. Shall mean an eleven percent (11%) annual return on the
average daily balance of Net Invested Capital.

     15% Cash on Cash Return. Shall mean a fifteen percent (15%) annual return on the
average daily balance of Net Invested Capital.

     Act. The Delaware Limited Liability Company Act, as amended from time to time.

     Acquisition Budget. For each Property acquired by the Company, a form of which
attached as Exhibit K.

     Acquisition Loan. For each Property acquired by the Company, the loan(s) obtained by
the Company to fund the acquisition of such Property.

     Acquisition Property. An existing student housing Property that has been or is
intended to be acquired by the Company.

     Acquisition Termination Notice. The meaning set forth in Section 3.3(b)
hereof.

     Additional Member. Any new Member admitted after the date of this Agreement other
than a Substitute Member.

     Additional Properties. All Development Projects and Acquisition Properties acquired
by the Company other than the Denton Property, the Valdosta Property and the Columbia Property.

     Affiliate. Any Person that directly, or through one or more intermediaries, Controls
or is Controlled by or is under Common control with a Member; any Person that is an officer,
director, partner, member, principal, manager or trustee of or serves in a similar capacity with
respect to a Member, or any Entity in which a Member, directly or indirectly, is a partner,
principal, shareholder, member, beneficiary or otherwise an owner. For purposes hereof, the term
“Control” of Person shall mean the power, directly or indirectly, to direct or cause the direction
of management and policies of such Person, whether through ownership of voting securities, by
contract or otherwise.

     Agreement. This Operating Agreement of the Company, also known as a limited liability
company agreement under the Act, as amended from time to time.

     Annual Business Plan. The annual business plan of the Company which has been approved
by the Members, from time to time pursuant to Section 5.5 hereof.

A-1

 

     Annual Operating Budget. The annual operating budget of the Company which has been
approved by the Members, from time to time pursuant to Section 5.5 hereof.

     Approve, Approved or Approval. As to the subject matter thereof and as the context
may require or permit, an express approval contained in a written statement signed by an approving
Person or any authorized representative thereof.

     Approved Pre-Development Costs or Pre-Acquisition Costs. The Pre-Development Costs or
Pre-Acquisition Costs incurred by Campus Crest and its Affiliates in connection with the
acquisition or development of a Property, each as set forth in the applicable Acquisition or
Development Budget Approved by HSRE.

     Budgeted Project Costs. The aggregate costs for the acquisition or development of a
Property as set forth in the applicable Acquisition or Development Budget, respectively.

     Buy-Out Closing Date. The meaning set forth in Section 9.6 hereof.

     Buy/Sell Notice. The meaning set forth in Section 9.1 hereof.

     Buy/Sell Price. The meaning set forth in Section 9.1 hereof.

     Campus Crest. The meaning set forth in the Recitals.

     Campus Crest Authorized Bank Account Signatory. The meaning set forth in Section
8.8 hereof.

     Campus Crest Change in Control Effective Date. The meaning set forth in Section
5.1(c) hereof.

     Campus Crest Guarantor. Campus Crest Communities Operating Partnership, LP, a
Delaware limited partnership.

     Campus Crest Guaranty Loan. The meaning set forth in Section 3.10(a) hereof.

     Campus Crest Triggering Event. The meaning set forth in Section 6.1 hereof.

     Capital Account. The meaning set forth in Exhibit B hereof.

     Capital Call. The meaning as set forth in Section 3.2 hereof.

     Capital Contribution. The amount of money and/or the Fair Market Value of any
property contributed to the capital of the Company by a Member (less the amount of liabilities
encumbering such property assumed by the Company or to which such property is subject).

     Capital Event. The borrowing of any funds by the Company or the placement of new or
additional financing securing all or any portion of a Property or any interest therein; the
refinancing of any existing or new financing upon all or any portion of a Property or any interest
therein; or the sale, exchange, condemnation, casualty loss or other disposition (whether

A-2

 

voluntary or involuntary) of all or any portion of the Properties or any interest therein
(including any disposition in consideration for securities in any real estate investment trust or
other entity), other than leases of space and dispositions of personal property in the ordinary
course of business.

     Capital Proceeds. The consideration resulting from a Capital Event with respect to
one or more of the Properties, less the sum of (a) any expenses incurred in connection with such
Capital Event, (b) any portion of such proceeds applied toward the payment of any indebtedness
being refinanced or secured by or relating to the Property disposed of, (c) any portion of such
proceeds applied to acquire, develop, or rehabilitate real property or personal property or
interests therein in accordance with the terms hereof, and (d) any portion of the proceeds
reserved for payment of expenses and/or working capital Approved by HSRE.

     Certificate. The Certificate of Formation of the Company, as amended from time to
time.

     Certificate of Occupancy. The date upon which the Developer secures a final
certificate of occupancy or local equivalent for Development Properties.

     Class B Preferred Return. The meaning set forth in the operating agreement or limited
partnership agreement, as applicable, of the applicable Property Owning Subsidiary

     Code. The Internal Revenue Code of 1986, as amended from time to time (including
corresponding provisions of subsequent revenue laws).

     Columbia Property. The student housing property located in Columbia, Missouri to be
known as “The Grove at Columbia”.

     Company. HSRE-CAMPUS CREST IV, LLC, a Delaware limited liability company, as formed
under the Certificate and governed by this Agreement.

     Completion and Cost Overrun Guaranty. The completion, payment and performance
guaranty to secure the completion of a Development Project and payment of Cost Overruns, executed
and delivered by the Campus Crest Guarantor in favor of the Company and, to the extent required,
the holder of the Construction Loan.

     Completion Date. The date upon which the final completion of a Development Project
occurs in accordance with the Development Agreement.

     Construction Agreement. That certain Construction Agreement to be entered into by
Campus Crest Construction, Inc., a Delaware corporation, and each Property Owning Subsidiary, a
form of which is attached hereto as Exhibit O.

     Construction Loan. The indebtedness of the Company incurred pursuant to Section
3.5 hereof in connection with the construction and development of each Development Project.

     Construction Schedule. The construction schedule for a Development Project.

A-3

 

     Contributed Property Interest. The meaning set forth in Section 3.3(a)
hereof.

     Contributing Member. The meaning set forth in Section 3.6(a) hereof.

     Control or control. The power, directly or indirectly, to direct or cause the
direction of management and policies of a Person, whether through ownership of voting securities,
by contract or otherwise.

     Conversion Date. The meaning set forth in Section 6.5(a) hereof.

     Cost Overruns. The meaning set forth in the Development Agreement.

     “Day” or “day”. Any day which is not a Saturday or Sunday and on which banks are open
for business in the State of New York.

     Default Amount. The meaning set forth in Section 3.6(a) hereof.

     Defaulting Member. The meaning set forth in Section 3.6(a) hereof.

     Defaulting Purchaser. The meaning set forth in Section 9.8 hereof.

     Denton Property. The student housing property located in Denton, Texas to be known as
“The Grove at Denton”.

     Development Agreement. The Development Agreement in the form attached as Exhibit
F to be entered into by Developer and the Property Owning Subsidiary that develops a
Development Project.

     Development Budget. The final development budget for each Development Project
Approved by HSRE, a form of which is attached as Exhibit K.

     Development Project. A Property that has been or is intended to be developed and
constructed by the Company, including, without limitation, the Properties set forth on Schedule
1 attached hereto.

     Developer. Campus Crest Development, Inc., a Delaware corporation, or such other
Person as Approved by HSRE.

     Dilution Percentage. The meaning set forth in Section 3.6(e) hereof

     Distribution. The amount of any money (expressed in United States currency) and the
Fair Market Value of any property (net of liabilities) distributed by the Company to the Members,
whether as a distribution of Net Cash Flow or otherwise under this Agreement. For purposes of
calculating the Internal Rate of Return under Section 4.4, Distributions shall also include
the amount of proceeds received by a Member from the sale or disposition of all or a portion of its
Ownership Interest in the Company or a Property owned by the Company to another Member or a third
party, the amount of Necessary Cost Loans made by a Member, and

A-4

 

any proceeds distributed to a Member in repayment of any preferred equity investment in any
Subsidiary.

     Distribution Shortfall. The meaning set forth in Section 4.4(a) hereof.

     Dissolution. The occurrence of any of the events set forth in Section 11.1,
causing the Company to dissolve as a legal entity.

     Entitlements. Any and all entitlements, permits, zoning, governmental and/or
quasi-governmental approvals and exactions including, without limitation, a vesting tentative tract
map and conditional use permits required to be obtained in order to develop and construct a
Development Project.

     Entity. Any corporation, general partnership, limited partnership, joint venture,
trust, business trust, limited liability company or other association or other form of business or
legal entity.

     Exercise Amount. The meaning set forth in Section 3.7(d) hereof.

     Excess Project Costs. With respect to each line item of Project Costs, the amount, if
any, by which such line item of Project Costs exceeds said line item of Budgeted Project Costs.

     Excess Savings Account. The meaning set forth in Section 3.4(b)(iii) hereof.

     Exercise Period. The meaning set forth in Section 9.2(a) hereof.

     Expected Completion Date. The meaning set forth in Section 3.4(f) hereof.

     Event of Withdrawal. The meaning set forth in Section 11.2 hereof.

     Fair Market Value. The value of any property distributed to a Member by the Company,
as determined by the mutual agreement of HSRE and Campus Crest in the case of any other asset.

     Fiscal Year. The fiscal and taxable year of the Company, including both 12-month and
short fiscal or taxable years.

     Funding Conditions. Those conditions set forth in Exhibit E that must be
satisfied in order for HSRE to be obligated to make a Mandatory Capital Contribution for a
Development Project or the acquisition of a Property.

     Funding Member. The meaning set forth in Section 3.7(a) hereof.

     General Contractor. The general contractor for a Development Project Approved by the
Members.

     Governmental Authority. Any federal, state or local government, any political
subdivision thereof or any court, administrative or regulatory agency, department,

A-5

 

instrumentality, board, office, body or commission or other governmental authority or agency,
domestic or foreign.

     Guaranty Default Paydown. The meaning set forth in Section 3.10(a) hereof.

     Guarantor Financial Covenants. The meaning set forth in Section 6.1(i)
hereof.

     Hard Costs. The total Budgeted Project Costs, excluding land cost, Soft Costs, any
transfer taxes and customary fees payable to local jurisdictions associated with selling the land
and any other fees payable to HSRE, Campus Crest or their Affiliates.

     Hazardous Substance Indemnification Agreement. The meaning set forth in Section
3.5 hereof.

     HSRE. The meaning as set forth in the Recitals.

     HSRE Bank Account Representative. The meaning set forth in Section 8.8
hereof.

     HSRE Guaranty Loan. The meaning set forth in Section 3.10(b) hereof.

     HSRE Mandatory Capital Contribution. Any Mandatory Capital Contribution made by HSRE.

     HSRE Triggering Event. The meaning set forth in Section 6.3 hereof.

     IC Approval Notice. The meaning set forth in Section 3.3(b) hereof.

     Immediate Family. The parents, children, grandchildren and spouse of such Person.

     In Balance. As defined in the Development Agreement.

     Incentive Distributions. The portion of any Distributions of Net Cash Flow to Campus
Crest under Sections 4.1(a)(v) and/or (vi) and Sections 4.1(b)(v) and/or (vi) in
excess of its Participating Percentage.

     Initial Capital Contribution shall mean the amount of cash or the Fair Market Value of
any property contributed to the Company by the Members pursuant to Section 3.1 hereof.

     Initiating Member. The meaning set forth in Section 9.1 hereof.

     Initiating Member Purchase Price. The meaning set forth in Section 9.2(b)
hereof.

     Internal Rate of Return. The rate, determined as set forth herein, which will
discount Distributions made to a Member by the Company to an amount equal to the Capital
Contributions made by such Member. A specified Internal Rate of Return (the “Applicable IRR”)
shall be deemed to have been attained as of any date that (i) the sum of the separate present
values of each Distribution made to the Member, when discounted to their present values as of the
date of the Initial Capital Contribution made by such Member, using a discount rate

A-6

 

equal to the Applicable IRR is equal to (ii) the sum of the separate present values of each
Capital Contribution made to the Company by such Member, when discounted to their present values as
of the date of the Initial Capital Contribution made by such Member, using the same specific
discount rate as referred to above. The XIRR function in Microsoft Excel, U.S. English Version MS
Excel 2003 or any other program approved by the Members shall be used to calculate whether an
Applicable IRR is obtained, and the present value shall be determined using monthly compounding
periods. Any Capital Contributions made by a Member and Distributions made by the Company to a
Member during a month shall be deemed to occur on the first or last day of the month in which such
Distribution or Capital Contribution is made, whichever is closer to the actual date of such
Capital Contribution or Distribution. The Internal Rate of Return with respect to any Member shall
be deemed to include any amount paid or received by any predecessor in interest of any Member.

     “Internal Revenue Service” or “IRS”. The Internal Revenue Service of the United
States.

     Laws. All statutes, rules, codes, regulations, restrictions, ordinances, orders,
decrees, approvals, directives, judgments, injunctions, writs, awards and decrees of, or issued by,
all Governmental Authorities.

     Lease. Any agreement in effect from time to time between the Company or a Property
Owning Subsidiary, as landlord, and any other Person, as tenant, conferring upon said tenant the
right to use and occupy space at a Property, including without limitation the leases for retail,
parking or storage space (including, without limitation, month-to-month tenancies), and any
occupancy, licensee, franchise and concessionaire agreement from time to time applicable to a
Property (other than subleases, occupancy, license, franchise, concessionaire agreements entered
into by tenants and third parties for space within such tenant’s premises) and all amendments and
supplements thereto.

     Liquidation. The process of winding up and terminating the Company after its
Dissolution.

     Major Decisions. The meaning set forth in Section 5.2 hereof.

     Mandatory Capital Contributions. With respect to any Member, any Capital Contribution
required to be made by such Member pursuant to Section 3.2, Section 3.4, or
otherwise designated as a “Mandatory Capital Contribution” under this Agreement.

     Mandatory Capital Limit. An amount equal to the Budgeted Project Costs for the
acquisition or development of a Property, minus the amount of Project Financing to be obtained by
the Company with respect to such Property, all as Approved by HSRE.

     Material Change in Control. The meaning set forth in Section 5.1(c) hereof.

     Member. An initial Member as listed in Section 1.4, and any other Person
subsequently admitted to the Company as an Additional Member or Substitute Member in accordance
with the terms of this Agreement.

A-7

 

     Membership Interest. With respect to each Person owning an interest in the Company,
all of the interests of such Person in the Company, including such Person’s interest in the Profits
and Losses of the Company, such Person’s Capital Account, such Person’s right to receive
Distributions and all other rights and obligations of such Person under this Agreement.

     Minimum Annual Revenue. The meaning set forth in Section 3.4(f) hereof.

     Minimum Loan Amount. The meaning set forth in Section 3.5 hereof.

     Necessary Cost Capital Contributions. The meaning set forth in Section 3.7
hereof.

     Net Cash Flow. Operating Cash Flow and Capital Proceeds.

     Net Invested Capital. Shall mean the aggregate amount of Capital Contributions made
to the Company by a Member, reduced by the amount of distributions constituting a return of capital
under Section 4.1(b)(iii).

     Non-Competition and Right of First Opportunity Agreement. The meaning set forth in
Section 2.4 hereof.

     Non-Defaulting Party. The meaning set forth in Section 9.8 hereof.

     Non-Recourse
Carveout Guaranty. The meaning set forth in Section 3.5 hereof.

     Non-Initiating Member. The meaning set forth in Section 9.1 hereof.

     Non-Initiating Member Purchase Price. The meaning set forth in Section 9.3(a)
hereof.

     Notice. A written notice actually delivered or deemed delivered under Section
13.8 hereof.

     Operating Cash Flow. With respect to any period, the amount by which the gross cash
receipts, other than Capital Contributions, in such period exceed the sum of the following (to the
extent not paid from Capital Proceeds): (a) all principal and interest payments on any indebtedness
of the Company or any Subsidiary, and all other sums paid to such lenders in such period; (b) all
cash expenditures (including expenditures for capital improvements) made in such period incident to
the operation of the Company or any Subsidiary business; and (c) working capital and other reserves
for operation of the Company business Approved by HSRE.

     Parent REIT. The meaning set forth in Section 5.9(a) hereof.

     Participating Percentages. With respect to each Member, the aggregate Capital
Contributions of a Member divided by the aggregate Capital Contributions of all of the Members, as
adjusted from time to time pursuant to the terms of this Agreement. If the Participating
Percentages of the Members are changed pursuant to the terms of this Agreement,

A-8

 

such change shall be effective for all purposes on the date of the change. As of the date
hereof, the Participating Percentages of each Member are as follows:

	 	 	 	 	 

	HSRE
	 	 	80	%
	Campus Crest
	 	 	20	%

     Payment and Performance Guaranty. The meaning set forth in Section 3.5 hereof.

     Permitted Transferees. The meaning set forth in Section 10.2 hereof.

     Person. An individual, corporation, partnership, limited partnership, trust,
unincorporated organization, association or other entity.

     Plans and Specifications. The plans and specifications for the Project, prepared by
the Architect (as defined in the Development Agreement), as the same may thereafter be changed,
replaced in whole or in part, or supplemented in accordance herewith.

     Pool. The meaning set forth in Section 2.3 hereof.

     Pool One Properties. The meaning set forth in Section 2.3 hereof.

     Pooled Reimbursement Amount. The meaning set forth in Section 3.4(b)(ii)
hereof.

     Portfolio Company. The meaning set forth in Section 2.3 hereof.

     Pre-Acquisition Costs. The pre-acquisition costs incurred by Campus Crest and its
Affiliates in connection with the acquisition of a Property.

     Pre-Acquisition Due Diligence Budget. The budgets submitted by Campus Crest to HSRE
setting forth the Pre-Acquisition Costs to be incurred with respect to an acquisition of an
Additional Property.

     Pre-Development Costs. The pre-development costs incurred by Campus Crest and its
Affiliates in connection with the development of a Development Project.

     Prime Rate. The “base rate” of interest announced from time to time by Citibank, New
York, New York; or, if Citibank shall cease to exist or shall cease to announce a prime rate, the
prime rate, corporate base rate or other comparable rate of interest announced from time to time by
the largest national banking association with headquarters in New York, New York.

     Project Costs. The actual costs to acquire, construct and complete the Development
Project, including the cost of land, construction debt financing, all Soft Costs and all actual
operating costs through the Completion Date, including any contingencies provided for in the
Development Budget.

     Project Financing. The amount of the Acquisition Loan, in the case of a Property that
is not a Development Project, or the Construction Loan, in the case of a Development Project, to be

A-9

 

obtained, as set forth in the Acquisition Budget or the Development Budget, as
applicable, Approved by HSRE.

     Properties. The properties set forth on Schedule 1 attached hereto and the
Additional Properties.

     Property Manager. The Grove Student Properties, Inc., a Delaware corporation.

     Property Management Agreement. The Property Management Agreement in the form attached
hereto as Exhibit G to be entered into by the Property Manager and the Company or the
relevant Property Owning Subsidiary.

     Property Owning Subsidiary. Each Subsidiary that owns a Property.

     Purchase Option. The meaning set forth in Section 9.2(a) hereof.

     Re-balancing Contribution. The meaning set forth in Section 3.4(f) hereof.

     Re-balancing Contribution Period. The meaning set forth in Section 3.4(f)
hereof.

     Re-balancing Distribution Shortfall. The meaning set forth in Section 4.4(b)
hereof.

     Re-balancing Period. The meaning set forth in Section 3.4(f) hereof.

     Re-balancing Property. The meaning set forth in Section 3.4(f) hereof.

     Re-balancing Purchase Option. The meaning set forth in Section 3.4(f) hereof.

     Recourse Obligations. The meaning set forth in Section 9.4(a) hereof.

     Reimbursement Amount. The meaning set forth in the Development Agreement.

     Reimbursement Conditions. The meaning set forth in the Development Agreement.

     REIT. The meaning set forth in Section 5.9 hereof.

     REOC. The meaning set forth in Section 5.10 hereof.

     Request for Advance. The meaning set forth in Section 3.4(d) hereof.

     Required Amount. The meaning set forth in Section 3.6(a) hereof.

     Related Party Agreement. The meaning set forth in Section 5.1(d) hereof.

     Reply Notice. The meaning set forth in Section 9.2(a) hereof.

     Revenue Testing School Years. The 2011-2012, 2012-2013 and 2013-2014 academic years.

A-10

 

     Review Items. The meaning set forth in Section 5.6 hereof.

     Sale Option. The meaning set forth in Section 9.2(a) hereof.

     Sale Period. The meaning set forth in Section 9.3(a) hereof.

     Secured Lender. Any owner or holder of a secured claim or lien against a Property,
including any mortgagee under construction or permanent financing.

     Services Agreement. The meaning set forth in Section 5.9(b) hereof.

     Soft Costs. The costs of design, engineering, legal, accounting, interest,
construction loan charges, title company charges and real estate taxes accrued during the
construction period as set forth in the Development Budget and any other costs designated as “soft
costs” in the Development Budget, including, without limitation, projected operating deficit
amounts through the Completion Date, and which shall include reasonable costs incurred by HSRE to
engage legal counsel to review and approve actions undertaken by Campus Crest, evaluate and advise
HSRE with respect to Company matters relating to a Development Project, evaluating approvals
requested by Campus Crest and otherwise performing services for the Company upon Campus Crest’s
prior approval and further provided that any costs incurred by either Member related to engaging
counsel in connection with a dispute between the Members shall not be Soft Costs.

     Subsidiary. Any business enterprise in which the Company has a direct or indirect
ownership interest and which is controlled directly or indirectly by the Company.

     Substantial Completion Date. Shall have the meaning set forth in the Development
Agreement.

     Substitute Member. A transferee of a Membership Interest who is admitted as a new
Member under Section 11.2 in respect of the Membership Interest transferred.

     Tax Allocation Provisions. The tax provisions to be followed by the Company as
described in Exhibit B.

     Tested Property. The meaning set forth in Section 3.4(f) hereof.

     Transfer. The meaning set forth in Section 10.1 hereof.

     Treasury Regulations. The Treasury regulations promulgated under the Code, as amended
from time to time.

     TRS. The meaning set forth in Section 5.9(b) hereof.

     Unfunded Excess Project Costs. Any Excess Project Costs which, at the time they are
required to be paid by the Company, are not able to be funded from Mandatory Capital Contributions
and Project Financing. For purposes of determining Unfunded Excess Project Costs, the proceeds of
borrowings by the Company shall be deemed to be applied first to

A-11

 

Budgeted Project Costs, irrespective of how said proceeds may be allocated as between the
Company and the lenders in question.

     Valdosta Property. The student housing property located in Valdosta, Georgia to be
known as “The Grove at Valdosta”.

A-12exv10w34

Exhibit 10.34

LEASE

by and between

BMR-GATEWAY BOULEVARD LLC,

a Delaware limited liability company

and

STEMCELLS, INC.,

a Delaware corporation

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	1.

	 	Lease of Premises
	 	 	1	 
	2.

	 	Basic Lease Provisions
	 	 	2	 
	3.

	 	Term
	 	 	6	 
	4.

	 	Possession and Commencement Date
	 	 	6	 
	5.

	 	Condition of Premises
	 	 	10	 
	6.

	 	Rentable Area
	 	 	11	 
	7.

	 	Rent
	 	 	12	 
	8.

	 	Rent Adjustments
	 	 	12	 
	9.

	 	Operating Expenses
	 	 	12	 
	10.

	 	Taxes on Tenant’s Property
	 	 	19	 
	11.

	 	Security Deposit
	 	 	20	 
	12.

	 	Use
	 	 	23	 
	13.

	 	Rules and Regulations, CC&Rs, Parking Facilities and Common Areas
	 	 	25	 
	14.

	 	Project Control by Landlord
	 	 	27	 
	15.

	 	Quiet Enjoyment
	 	 	29	 
	16.

	 	Utilities and Services
	 	 	29	 
	17.

	 	Alterations
	 	 	33	 
	18.

	 	Repairs and Maintenance
	 	 	36	 
	19.

	 	Liens
	 	 	37	 
	20.

	 	Estoppel Certificate
	 	 	38	 
	21.

	 	Hazardous Materials
	 	 	39	 
	22.

	 	Odors and Exhaust
	 	 	42	 
	23.

	 	Insurance; Waiver of Subrogation
	 	 	43	 
	24.

	 	Damage or Destruction
	 	 	46	 
	25.

	 	Eminent Domain
	 	 	48	 
	26.

	 	Surrender
	 	 	49	 
	27.

	 	Holding Over
	 	 	49	 
	28.

	 	Indemnification and Exculpation
	 	 	50	 
	29.

	 	Assignment or Subletting
	 	 	51	 
	30.

	 	Subordination and Attornment
	 	 	54	 
	31.

	 	Defaults and Remedies
	 	 	55	 

i

 

	 	 	 	 	 	 	 

	32.

	 	Bankruptcy
	 	 	60	 
	33.

	 	Brokers
	 	 	61	 
	34.

	 	Definition of Landlord
	 	 	62	 
	35.

	 	Limitation of Landlord’s Liability
	 	 	62	 
	36.

	 	Intentionally Omitted
	 	 	63	 
	37.

	 	Representations
	 	 	63	 
	38.

	 	Confidentiality
	 	 	63	 
	39.

	 	Notices
	 	 	63	 
	40.

	 	Rooftop Installation Area
	 	 	64	 
	41.

	 	Miscellaneous
	 	 	65	 
	42.

	 	Option to Extend Term
	 	 	68	 
	43.

	 	Expansion Option
	 	 	69	 

ii

 

LEASE

     THIS LEASE (this “Lease”) is entered into as of this 2nd day of December, 2010 (the
“Execution Date”), by and between BMR-GATEWAY BOULEVARD LLC, a Delaware limited liability
company (“Landlord”), and STEMCELLS, INC., a Delaware corporation (“Tenant”).

RECITALS

     A. WHEREAS, Landlord owns certain real property (the “Property”) and the improvements
thereon located at 7707 Gateway Boulevard in Newark, California, including the building known as
Building No. 5 located thereon (the “Building”) in which the Premises (as defined below)
are located; and

     B. WHEREAS, Landlord wishes to lease to Tenant, and Tenant desires to lease from Landlord,
certain premises located in the Building, pursuant to the terms and conditions of this Lease, as
detailed below.

AGREEMENT

     NOW, THEREFORE, Landlord and Tenant, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, agree as follows:

1. Lease of Premises. Effective on the Term Commencement Date, Landlord hereby leases to
Tenant, and Tenant hereby leases from Landlord for use by Tenant (and its permitted successors and
assigns) in accordance with the Permitted Use (as defined below) and no other uses, that portion of
the Building consisting of approximately one-half of the first (1st) floor of the Building and
one-half of the second (2nd) floor of the Building, as collectively shown on Exhibit A
attached hereto, including exclusive shafts, cable runs, mechanical spaces and rooftop areas (the
“Premises”). The Premises shall consist of approximately forty-three thousand (43,000)
square feet of Rentable Area (as defined in Section 6.3 below). The Property and all
landscaping, parking facilities, loading docks, private drives and other improvements and
appurtenances related thereto, including, without limitation, the Building, the Amenities Building
(as defined below) and the eight (8) other buildings currently located on the Property, and each
additional building that is constructed on the Property (following substantial completion of such
buildings) are hereinafter collectively referred to as the “Project.” The Project is
commonly known as the Pacific Research Center. All portions of the Building that are for the
non-exclusive use of the tenants of the Building only, and not the tenants of the Project
generally, such as service corridors, stairways, elevators, public restrooms, equipment rooms,
loading docks and public lobbies (all to the extent located in the Building), are hereinafter
referred to as the “Building Common Area”. The current Building Common Areas are depicted
in the grey shaded areas of Exhibit A attached hereto. All portions of the Project that
are for the non-exclusive use of tenants of the Project generally, including, without limitation,
driveways, sidewalks, parking areas, landscaped areas, and the amenities building depicted on the
Project Site Plan attached
hereto as Exhibit A-1 (“Amenities Building”) in which Landlord shall

 

 

provide, among
other things, (i) a cafeteria serving hot and cold food prepared on-site, (ii) a fitness center
with Class A workout equipment and related men’s and women’s locker room and shower facilities,
(iii) a conference center with four (4) serviced conference rooms available on a first-reserved
basis, (iv) a Project central mailroom, (v) the Project maintenance shop, (vi) the Project security
command center and (vii) Project management offices (collectively, the “Amenities Building
Services”), but excluding the Building Common Area and the common areas of any other building
in the Project, are hereinafter referred to as the “Project Common Area.” Subject to the
terms and provisions of this Lease, Landlord will provide the Amenities Building Services listed in
items (i) through (iv) above throughout the Term. The Building Common Area and the Project Common
Area are collectively hereinafter referred to as the “Common Areas.” All of the area in
the Amenities Building is currently used to provide the Amenities Building Services; however, if at
any time any portion of the Amenities Building is used as tenant space rentable to other Project
tenants or for other uses aside from the provision of the Amenities Building Services, then the
leasable area of the Amenities Building will be separated such that only that proportion of the
Amenities Building dedicated exclusively to the provision of the Amenities Building Services to the
tenants of the Project will be included in the Project Common Areas (and the Project Operating
Expenses will only include those costs associated with the portion of the Amenities Building used
for the provision of the Amenities Building Services in accordance with Article 9 below),
and such leasable areas will be included in the Project for purposes of calculating Operating
Expenses (i.e., the square footage of the Project will be increased to reflect such areas).

2. Basic Lease Provisions. For convenience of the parties, certain basic provisions of
this Lease are set forth herein. The provisions set forth herein are subject to the remaining
terms and conditions of this Lease and are to be interpreted in light of such remaining terms and
conditions.

     2.1. This Lease shall take effect upon the Execution Date and, except as specifically
otherwise provided within this Lease, each of the provisions hereof shall be binding upon and inure
to the benefit of Landlord and Tenant from the date of execution and delivery hereof by all parties
hereto.

2

 

     2.2. In the definitions below, each current Rentable Area (as defined in Article 6
below) is expressed in rentable square footage. Rentable Area and Tenant’s Pro Rata Shares (as
defined in Section 7.2 below) are all subject to adjustment as provided in this Lease.

	 	 	 	 	 
	 	 	Means the Following (As of the Term
	Definition or Provision	 	Commencement Date)
	Approximate Rentable Area of Premises

	 	43,000 square feet

	Approximate Rentable Area of Building

	 	148,848 square feet

	Approximate Rentable Area of Project

	 	1,389,517 square feet

	Tenant’s Pro Rata Share of Building

	 	 	28.9	%
	Tenant’s Pro Rata Share of Project

	 	 	3.1	%
	Load Factor for Building

	 	 	13	%

     2.3. Monthly and annual installments of Base Rent for the Premises (“Base Rent”) as of
the Term Commencement Date, subject to adjustment as follows:

	 	 	 	 	 	 	 	 	 
	 	 	 	 	Base Rent per	 	 	 	 
	 	 	Square Feet of	 	Square Foot of	 	 	 	 
	Lease Year	 	Rentable Area	 	Rentable Area	 	Monthly Base Rent	 	Annual Base Rent
	Term
Commencement
Date-Month 14 of
the initial Term
	 	43,000	 	$2.20 monthly
(subject to
abatement as set
forth in Section  7.1
below)	 	$94,600	 	$1,135,200
	Months 15-26 of
the initial Term
	 	43,000	 	$2.30 monthly	 	$98,900	 	$1,186,800
	Months 27-38 of
the initial Term
	 	43,000	 	$2.40 monthly	 	$103,200	 	$1,238,400
	Months 39-50 of
the initial Term
	 	43,000	 	$2.50 monthly	 	$107,500	 	$1,290,000
	Months 51-62 of
the initial Term
	 	43,000	 	$2.60 monthly	 	$111,800	 	$1,341,600

3

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	Base Rent per	 	 	 	 
	 	 	Square Feet of	 	Square Foot of	 	 	 	 
	Lease Year	 	Rentable Area	 	Rentable Area	 	Monthly Base Rent	 	Annual Base Rent

	Months 63-74 of
the initial Term
	 	43,000	 	$2.67 monthly	 	$114,810	 	$1,377,720
	Months 75-86 of
the initial Term
	 	43,000	 	$2.74 monthly	 	$117,820	 	$1,413,840
	Months 87-98 of
the initial Term
	 	43,000	 	$2.81 monthly	 	$120,830	 	$1,449,960
	Months 99-110 of
the initial Term
	 	43,000	 	$2.88 monthly	 	$123,840	 	$1,486,080
	Months 111-122 of
the initial Term
	 	43,000	 	$2.95 monthly	 	$126,850	 	$1,522,200
	Month 123-Term
Expiration Date
	 	43,000	 	$3.02 monthly	 	$129,860	 	$1,558,320

     2.4. Estimated Term Commencement Date: July 1, 2011

     2.5. Estimated Term Expiration Date: One hundred thirty four (134) months following the Term
Commencement Date.

     2.6. Security Deposit: $335,825.00 (based on three (3) months’ Base Rent at the average
monthly rate over the initial Term), subject to increase only in the event Tenant elects to expand
the Premises or if the Additional TI Allowance results in an increase of the average monthly Base
Rent amount by more than five percent (5%), at which point, within ten (10) business days of any
such increase in Base Rent, Tenant shall pay to Landlord the additional increase to the Security
Deposit.

     2.7. Permitted Use: Office, R&D, manufacturing support and laboratory use as further detailed
in that certain side letter agreement dated of even dated herewith, which is incorporated herein by
this reference, and to the extent authorized by the City of Newark (“City”), biotechnology
manufacturing, in conformity with all federal, state, municipal and local laws, codes, ordinances,
rules and regulations of Governmental Authorities (as defined below), committees, associations, or
other regulatory committees, agencies or governing bodies having jurisdiction over the Premises,
the Building, the Property, the Project, Landlord or Tenant, including both statutory and common
law and hazardous waste rules and regulations (“Applicable Laws”) (collectively, the
“Permitted Use”). As of the Execution Date the zoning for the Project is MT-1. Landlord
acknowledges and recognizes the oral acknowledgement by the City Community Development Director
that laboratories devoted to experimentation, research and development, do not require a
conditional use permit in order to perform such activities at the Project.

4

 

	 	 	 	 	 	 	 	 	 

	 

	 	 	2.8.	 	 	Address for Rent Payment:
	 	BMR-Gateway Boulevard LLC
	 
	 

	 	 	 	 	 	 	 	P.O. Box 511231
	 

	 	 	 	 	 	 	 	Los Angeles, California 90051-2997
	 
	 	 	 	 	 	 	 	 
	 

	 	 	2.9.	 	 	Address for Notices to Landlord:
	 	BMR-Gateway Boulevard LLC
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	17190 Bernardo Center Drive
	 

	 	 	 	 	 	 	 	San Diego, California 92128
	 

	 	 	 	 	 	 	 	Attn: Vice President, Real Estate Counsel
	 
	 	 	 	 	 	 	 	 
	 

	 	 	2.10.	 	 	Address for Notices to Tenant:	 	 

	 	 	 	 	 	 	 

	 

	 	 	 	  Prior to Term Commencement Date:
	 	StemCells, Inc.
	 

	 	 	 	 	 	3155 Porter Drive
	 

	 	 	 	 	 	Palo Alto, CA 94304
	 

	 	 	 	 	 	Attn: Senior Vice President,
	 

	 	 	 	 	 	         Operations
	 
	 	 	 	 	 	 
	 

	 	 	 	  Following Term Commencement Date:
	 	StemCells, Inc.
	 

	 	 	 	 	 	7707 Gateway Boulevard, Suite 200
	 

	 	 	 	 	 	Newark, California 94560
	 

	 	 	 	 	 	Attn: Senior Vice President,
	 

	 	 	 	 	 	         Operations
	 
	 	 	 	 	 	 
	 

	 	 	 	  With a copy to:
	 	StemCells, Inc.
	 

	 	 	 	 	 	7707 Gateway Boulevard, Suite 200
	 

	 	 	 	 	 	Newark, California 94560
	 

	 	 	 	 	 	Attn: General Counsel

	 	 	 	 	 	 	 	 	 

	 	 	 	2.11.	 	 	The following Exhibits are attached hereto and incorporated herein by reference:
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Exhibit A
	 	Premises
	 

	 	 	 	 	 	Exhibit A-1
	 	Project Site Plan
	 

	 	 	 	 	 	Exhibit B
	 	Work Letter
	 

	 	 	 	 	 	Exhibit B-1
	 	Landlord’s Work
	 

	 	 	 	 	 	Exhibit C
	 	Acknowledgement of Term Commencement Date and Term Expiration Date
	 

	 	 	 	 	 	Exhibit D
	 	Form of Additional TI Allowance and Expansion Space Additional TI Allowance Acceptance Letter
	 

	 	 	 	 	 	Exhibit E
	 	Form of Letter of Credit
	 

	 	 	 	 	 	Exhibit F
	 	Rules and Regulations
	 

	 	 	 	 	 	Exhibit G
	 	[Intentionally omitted]
	 

	 	 	 	 	 	Exhibit H
	 	Tenant’s Personal Property
	 

	 	 	 	 	 	Exhibit I
	 	Form of Estoppel Certificate
	 

	 	 	 	 	 	Exhibit J
	 	Expansion Space
	 

	 	 	 	 	 	Exhibit K
	 	Form of Memorandum of Lease

5

 

3. Term. The actual term of this Lease shall be approximately one hundred thirty-four
(134) months (as the same may be extended pursuant to Article 42 hereof, and as the same
may be earlier terminated in accordance with this Lease, the “Term”) and shall commence on
the actual Term Commencement Date (as defined in Article 4) and end on the date that is one
hundred thirty-four (134) months after the actual Term Commencement Date (such date, the “Term
Expiration Date”), subject to extension (as provided in Article 42) and earlier
termination of this Lease as provided herein; provided that if the Term Expiration Date as
calculated above is not the last day of the month, then the Term Expiration Date shall be the last
day of the month which is one hundred thirty-four (134) months after the Term Commencement Date.
TENANT HEREBY WAIVES THE REQUIREMENTS OF SECTION 1933 OF THE CALIFORNIA CIVIL CODE, AS THE SAME MAY
BE AMENDED FROM TIME TO TIME.

4. Possession and Commencement Date.

     4.1. The “Term Commencement Date” shall be the date which is seven (7) months after
Landlord delivers possession of the Premises to Tenant for the completion of the Tenant
Improvements (as defined below), except as extended by any Landlord Delays. Landlord shall deliver
the Premises to Tenant upon the full execution and delivery of this Lease, and, thereafter,
provided Tenant has complied with the provisions of Section 4.5, Tenant and its authorized
representatives, agents and contractors will have the right to access and use the Premises for the
purpose of completing the Tenant Improvements in the Premises, preparing the Premises for Tenant’s
business operations and conducting business from the Premises in the event the Tenant Improvements
are Substantially Complete prior to the Term Commencement Date. Tenant’s occupancy of the Premises
for the Permitted Use prior to the Term Commencement Date shall not accelerate the Term
Commencement Date or the Term Expiration Date, but such occupancy shall be on all terms and
conditions of this Lease other than the obligation to pay Base Rent during such period. Tenant
shall execute and deliver to Landlord written acknowledgment of the actual Term Commencement Date
and the Term Expiration Date within ten (10) days after Tenant takes occupancy of the Premises, in
the form attached as Exhibit C hereto. Failure to execute and deliver such acknowledgment,
however, shall not affect the Term Commencement Date or Landlord’s or Tenant’s liability hereunder.

          (a) Failure by Tenant to obtain validation by any medical review board or other similar
governmental licensing of the Premises required for the Permitted Use by Tenant shall not serve to
extend the Term Commencement Date. Notwithstanding Section 2.7 above, Landlord acknowledges that
Tenant intends to obtain a conditional use permit from the City for the Permitted Use (including
biotechnology manufacturing) following the Execution Date and approval of the Permitted Use by the
Gateway Technology Center Property Owners Association (collectively, the “Required Approvals”), and
Landlord consents to such action by Tenant and agrees that in the event Tenant, despite its
diligent efforts to do so, is unable to obtain the Required Approvals allowing Tenant to use the
Premises for the Permitted Use (including biotechnology manufacturing), Tenant will be permitted to
terminate this Lease by providing prior written notice to Landlord no later than February 28, 2011.
In the event of a termination pursuant to this Section 4.1(a), this Lease shall terminate as of
the date of Tenant’s notice and

6

 

neither party shall have any further liability to the other on account of this Lease; provided
that Landlord will refund all amounts paid to it by Tenant (e.g., Security Deposit and any prepaid
Rent). Landlord shall not expend any TI Allowance prior to the earlier of: (i) the date upon which
the Required Approvals are obtained or (ii) the date on which Tenant delivers written notice of its
election to waive its right to terminate the Lease pursuant to this Article 4 (the “Approval
Date”); provided that from and after the Approval Date, the TI Allowance will be disbursable in
accordance with this Lease and the Work Letter (even for work performed prior to the Approval
Date). Tenant will not have any right to terminate this Lease after the Approval Date except as
otherwise provided in this Lease.

          (b) In the event there are any actual delays in the Substantial Completion of the Tenant
Improvements or Expansion Space Tenant Improvements caused by Landlord, Landlord’s architect,
contractors or agents, including, without limitation, as a result of (i) Landlord’s failure to
approve any item within the time limits set forth in the Work Letter, (ii) failure to deliver the
Premises (or any Expansion Space) as and when required pursuant to this Lease, or (iii) failure to
timely pay Tenant or any contractors, subcontractors, architects, engineers or other parties as
required pursuant to the Work Letter, then after notice to Landlord of such delay and the
expiration of a two (2) business day cure period, any such delay shall be deemed a “Landlord
Delay.” The Term Commencement Date or Expansion Space Rent Commencement Date (as applicable)
will be extended on a day for day basis by the number of days of Landlord Delay which actually
results in a delay in Substantial Completion; provided that the Term Expiration Date will be
calculated from the date upon which the Term Commencement Date would have occurred but for the
Landlord Delay. The term “Substantially Complete” or “Substantial Completion” with
respect to the Tenant Improvements, means that the Tenant Improvements are substantially complete
in accordance with the Approved Plans (as defined in the Work Letter), except for minor punch list
items.

     4.2. Tenant shall cause to be constructed the tenant improvements in the Premises (the
“Tenant Improvements”) pursuant to the Work Letter attached hereto as Exhibit B
(the “Work Letter”) at a cost to Landlord not to exceed (a) Seven Million Nine Hundred
Fifty-Five Thousand Dollars ($7,955,000) (based upon One Hundred Eighty-Five Dollars ($185.00) per
square foot of Rentable Area (as defined below)) (the “Base TI Allowance”) plus (b) if
properly requested by Tenant pursuant to this Section, up to Two Million One Hundred Fifty Thousand
Dollars ($2,150,000) (based upon Fifty Dollars ($50.00) per square foot of Rentable Area) (the
“Additional TI Allowance”), for a total of Ten Million One Hundred Five Thousand Dollars
($10,105,000) (based upon Two Hundred Thirty-Five Dollars ($235.00) per square foot of Rentable
Area), plus (c) if the Expansion Space is leased pursuant to Article 43, the Expansion
Space TI Allowance (as defined in Article 43), if properly requested by Tenant (as
applicable). The Base TI Allowance, together with the Additional TI Allowance and the Expansion
Space TI Allowance (if properly requested by Tenant pursuant to this Articles 4 and
43, respectively), shall be referred to herein as the “TI Allowance.” The TI
Allowance may be applied to the costs of (n) demolition and construction, with up to Five Dollars
($5.00) per square foot of Rentable Area available for wiring and cabling costs, (o) project
management by Landlord (which fee shall equal one percent (1%) of the cost of the Tenant
Improvements, including the Base TI Allowance and, if used by Tenant, the Additional TI Allowance
and the Expansion Space TI

7

 

Allowance), (p) space planning, project management, architect,
engineering and other related services performed by third parties unaffiliated with Tenant, (q) building permits for the Tenant Improvements
and other taxes, fees, charges and levies by Governmental Authorities (as defined below) for
permits or for inspections of the Tenant Improvements, (r) compliance of the Tenant Improvements
with applicable building codes and regulations, including, without limitation, costs to build the
Tenant Improvements in compliance with the Americans with Disabilities Act, 42 U.S.C. § 12101, et
seq. (and any state and local accessibility laws, codes, ordinances and rules (collectively, and
together with regulations promulgated pursuant thereto, the “ADA”), or Title 24 of the
California Code of Regulations (“Title 24”) required as a result of the design of the
Tenant Improvements (with non-compliant conditions in the Common Area existing as of the date of
this Lease to be remedied by Landlord as part of the Landlord’s Work, at Landlord’s sole cost and
expense), (s) signage and (t) costs and expenses for labor, material, equipment and fixtures. In
no event shall the TI Allowance be used for (w) payments to Tenant or any affiliates of Tenant, (x)
the purchase of any furniture, personal property or other non-building system equipment, (y) costs
resulting from any default by Tenant of its obligations under this Lease or (z) costs that are
recoverable by Tenant from a third party (e.g., insurers, warrantors, or tortfeasors). Except for
the 1% project management fee set forth above, Tenant shall not be obligated to pay any additional
construction management fee to Landlord for Landlord’s role in reviewing or approving the initial
Tenant Improvements or plans related thereto, provided Tenant shall be responsible for the
project management fee as set forth in Section 17.10 in connection with any Alterations
performed by Tenant pursuant to the terms of this Lease and the project management fee as set forth
in Article 43 relating to the Expansion Space Tenant Improvements.

     4.3. If the Additional TI Allowance is disbursed by Landlord, Base Rent (commencing on the
Rent Commencement Date (as defined in Section 7) shall be increased by twelve-thousandths
of One Dollar ($.012) per square foot of Rentable Area per month for every dollar per square foot
of Rentable Area of the Additional TI Allowance so disbursed. Tenant shall have until December 31,
2011 (the “TI Deadline”), to expend any unused portion of the TI Allowance (excluding the
Expansion Space TI Allowance, which shall be governed by Section 43.3 below), after which
date Landlord’s obligation to fund such costs shall expire. The amount by which Base Rent shall be
increased shall be determined (and Base Rent shall be increased accordingly) as of the Term
Commencement Date and, if such determination does not reflect use by Tenant of all of the
Additional TI Allowance, shall be determined again as of the TI Deadline, with Tenant paying (on
the next succeeding day that Base Rent is due under this Lease (the “TI True-Up Date”)) any
underpayment of the further adjusted Base Rent for the period beginning on the Term Commencement
Date and ending on the TI True-Up Date. The Additional TI Allowance will be disbursed on an “as
needed” basis and only the amounts disbursed by Landlord pursuant to the Work Letter will be used
for purposes of the above Base Rent calculation.

     4.4. Landlord shall not be obligated to expend any portion of the Additional TI Allowance
until Landlord shall have received from Tenant a letter in the form attached as Exhibit D
hereto executed by an authorized officer of Tenant with respect to the Additional TI Allowance. In
no event shall any unused TI Allowance entitle Tenant to a credit against Rent

8

 

payable under this
Lease, except with respect to the Expansion Space Base TI Allowance, as set forth in Article 43
hereof. Tenant shall deliver to Landlord (i) a certificate of occupancy for the Premises (provided
that Landlord will perform any work necessary to obtain the building department’s completion sign
off on Landlord’s Work as a condition of Substantial Completion
of Landlord’s Work) and (ii) a Certificate of Substantial Completion in the form of the
American Institute of Architects document G704, executed by Tenant’s architect and the Contractor.

     4.5. Prior to entering upon the Premises, Tenant shall furnish to Landlord evidence
satisfactory to Landlord that insurance coverages required of Tenant under the provisions of
Article 23 are in effect, and such entry shall be subject to all the terms and conditions
of this Lease other than the payment of Base Rent or Tenant’s Pro Rata Share of Operating Expenses
(as defined below).

     4.6. Tenant shall select the construction manager, architect, engineer, general contractor
(“Contractor”) and major subcontractors, pursuant to a competitive bidding process
involving three candidates that shall be mutually agreed upon by Landlord and Tenant prior to
commencing the bidding process. Landlord will be provided with copies of the bids and shall have
the right to reasonably disapprove the bid selected by Tenant. Landlord’s failure to object in
writing to the bid selected by Tenant within ten (10) business days following its receipt thereof
shall be deemed Landlord’s approval of such bid. The Contractor’s proposal for the cost of
construction of the Tenant Improvements (or Expansion Space Tenant Improvements) shall either be a
fixed fee or guaranteed maximum price proposal acceptable to both Landlord and Tenant. The general
contract for the Tenant Improvements (or Expansion Space Tenant Improvements) may include
liquidated damages payable by Contractor to Tenant in the event Substantial Completion of the
Tenant Improvements (or Expansion Space Tenant Improvements) is not achieved by the Estimated Term
Commencement Date (or estimated Expansion Space Rent Commencement Date) for any reason other than
Force Majeure or delays attributable to any Tenant initiated Changes (as defined in the Work
Letter). Landlord may refuse to consent to the use of contractors, subcontractors or material
suppliers that Landlord reasonably believes could cause labor disharmony with Landlord’s
contractors, subcontractors or material suppliers performing services at the Building.

     4.7. Commencing on the Execution Date and simultaneously with Tenant’s performance of the
Tenant Improvements, Landlord shall perform the core and shell work listed on Exhibit B-1 (the
“Landlord’s Work”). All Landlord’s Work that must be completed in order to allow Tenant to
Substantially Complete the Tenant Improvements by the Substantial Completion date set forth in the
Schedule prepared in accordance with Section 1.2 of the Work Letter shall be Substantially
Complete on or before June 1, 2011 and, except for completion of construction of the freight
elevator, all Landlord’s Work shall be Substantially Complete on or before June 15, 2011 and the
freight elevator shall be complete by July 31, 2011 ; provided, Tenant agrees that (i) in the event
the Landlord’s Work that must be completed in order to allow Tenant to Substantially Complete the
Tenant Improvements prior to the Substantial Completion date set forth in the Schedule prepared in
accordance with Section 1.2 of the Work Letter is not Substantially Complete on or before
June 1, 2011, (ii) in the event all Landlord’s Work (except for completion of construction of the
freight elevator) is not Substantially Complete on or before

9

 

June 15, 2011 for any reason or (iii)
in the event the freight elevator is not complete on or before July 31, 2011 for any reason then
(a) this Lease shall not be void or voidable and (b) Landlord shall not be liable to Tenant for any
loss or damage resulting therefrom, but any such delays will be “Landlord Delays” as defined in
Section 4.1 above without any notice or cure period. During the completion of the Tenant
Improvements, Tenant and its contractors, subcontractors and
material suppliers will be given access to the Premises using one of the passenger elevators
in the Building, which Landlord will dedicate for construction use and provide any protection
Landlord deems necessary to the interior of the elevator due to such construction use, but upon
occupancy of the Building by another tenant, elevator use shall be subject to reasonable
restrictions based on the needs of such other tenant(s). The term “Substantially Complete”
or “Substantial Completion” with respect to the Landlord’s Work, means that the Landlord’s
Work is substantially complete except for minor punch list items. Notwithstanding anything in
this Lease (including the Work Letter) to the contrary, Landlord’s obligation to timely achieve
Substantial Completion shall be subject to extension on a day-for-day basis as a result of Force
Majeure (as defined below). When the Landlord’s Work is deemed Substantially Complete by Landlord,
Landlord shall deliver written notice to Tenant thereof and shall schedule a walk-through
inspection with Tenant’s architect and the Contractor to verify Substantial Completion and identify
any minor punch list items which will not affect Substantial Completion of the Tenant Improvements
or occupancy of the Premises for the Permitted Use. Such minor punch list items will be remedied
or completed by Landlord within thirty (30) days after such inspection.

5. Condition of Premises. Tenant acknowledges that neither Landlord nor any agent of
Landlord has made any representation or warranty with respect to the condition of the Premises, the
Building or the Project, or with respect to the suitability of the Premises, the Building or the
Project for the conduct of Tenant’s business, except as set forth in this Lease. Tenant
acknowledges that (a) it is fully familiar with the condition of the Premises as of the Execution
Date and agrees to take the same in its condition “as is” as of the Term Commencement Date and (b)
Landlord shall have no obligation to alter, repair or otherwise prepare the Premises for Tenant’s
occupancy except as provided in this Lease or the Work Letter or to pay for or construct any
improvements to the Premises, except for the Base TI Allowance and, if properly requested by
Tenant, the Additional TI Allowance (and Expansion Space TI Allowance, if any). Tenant shall have
until the date that is ninety (90) days after the Term Commencement Date to notify Landlord that
any portion of the Landlord’s Work or the Building systems (i.e., plumbing, HVAC and electrical)
installed or repaired by Landlord (but not including any such systems installed as part of the
Tenant Improvements) was not in working order, when received by Tenant; otherwise, Tenant’s taking
of possession of the Premises shall conclusively establish that the Premises, the Building and the
Project were at such time in good, sanitary and satisfactory condition and repair. In the event
that Tenant notifies Landlord that the Landlord’s Work or Building systems installed or repaired by
Landlord are not in working order, as verified by Landlord, then Landlord shall use commercially
reasonable efforts to correct or repair such condition and the cost of such corrective actions or
repairs performed in the first twelve (12) months of the Term, shall not be included in Operating
Expenses nor otherwise charged to Tenant as Additional Rent.

10

 

6. Rentable Area.

     6.1. The term “Rentable Area” reflects such areas as reasonably calculated by
Landlord’s architect, as the same may be reasonably adjusted from time to time by Landlord in
consultation with Landlord’s architect to reflect (i) actual physical changes in the size of the
Premises, the Building or the Project, as applicable or (ii) in the ratio of useable tenant space
to Common Area; provided that in no event shall the load factor for the Building increase by more
than five percent (5%) of the load factor as of the date of this Lease. Following Tenant’s
completion of Construction Plans for the Premises, Landlord’s architect shall measure the Rentable
Area of the Premises and certify the final Rentable Area to Landlord and Tenant. Such
certification shall include data and calculations supporting how such measurement was arrived at so
that Tenant’s space planner/architect may review Landlord’s architect’s determination of the
Rentable Area of the Premises and Tenant may, within fifteen (15) business days after Tenant’s
receipt of Landlord’s architects certification, object to such determination by written notice to
Landlord. If Tenant objects to such determination, Landlord’s architect and Tenant’s space
planner/architect shall promptly meet and attempt to agree upon the Rentable Area of the Premises.
If Landlord’s architect and Tenant’s space planner/architect cannot agree on the Rentable Area of
the Premises within thirty (30) days after Tenant’s objection thereto, Landlord and Tenant shall
mutually select an independent third party space measurement professional to field measure the
Premises. Such third party independent measurement professional’s determination shall be
conclusive and binding on Landlord and Tenant. Landlord and Tenant shall each pay one-half (1/2) of
the fees and expenses of the independent third party space measurement professional. Following
such measurement, Landlord shall prepare and Tenant shall enter into an amendment to this Lease
memorializing any change in Rentable Area of the Premises on account of such measurement and
adjusting the Base Rent, Security Deposit increase, TI Allowance and Tenant’s Pro Rata Share.

     6.2. The Rentable Area of the Building is generally determined by making separate
calculations of Rentable Area applicable to each floor within the Building and totaling the
Rentable Area of all floors within the Building. The Rentable Area of a floor is computed by
measuring to the outside finished surface of the permanent outer Building walls. The full area
calculated as previously set forth is included as Rentable Area, without deduction for columns and
projections or vertical penetrations, including stairs, elevator shafts, flues, pipe shafts,
vertical ducts and the like, as well as such items’ enclosing walls.

     6.3. The term “Rentable Area,” when applied to the Premises, is that area equal to the
usable area of the Premises, plus an equitable allocation of Rentable Area within the Building that
is not then utilized or expected to be utilized as usable area, including that portion of the
Building devoted to corridors, equipment rooms, restrooms, elevator lobby, atrium and mailroom.

     6.4. The Rentable Area of the Project is the total Rentable Area of all buildings within
the Project, but not including the Amenities Building.

     6.5. Review of allocations of Rentable Areas as between tenants of the Building and the
Project shall be made as frequently as Landlord deems appropriate, including in order to

11

 

facilitate an equitable apportionment of Operating Expenses (as defined below). If such
review is by a licensed architect and allocations are certified by such licensed architect as being
correct, then Tenant shall be bound by such certifications.

7. Rent.

     7.1. Tenant shall pay to Landlord as Base Rent for the Premises, commencing on the date
which is three (3) months after the Term Commencement Date (the “Rent Commencement Date”),
the sums set forth in Section 2.3 subject to the rental adjustments provided in Article
8 hereof. Base Rent shall be paid in equal monthly installments as set forth in Section
2.3, subject to the rental adjustments provided in Article 8 hereof, each in advance on
the first day of each and every calendar month during the Term.

     7.2. In addition to Base Rent, Tenant shall pay to Landlord as additional rent
(“Additional Rent”) at times hereinafter specified in this Lease (a) Tenant’s pro rata
share, as set forth in Section 2.2 (“Tenant’s Pro Rata Share”), of Operating
Expenses (as defined below), (b) the Property Management Fee (as defined below) and (c) any other
amounts that Tenant assumes or agrees to pay under the provisions of this Lease that are owed to
Landlord. In calculating Operating Expenses, Landlord will allocate Operating Expense items which
relate solely to one building of the Project and its occupants (including, without limitation,
portions thereof dedicated to non-exclusive use by building occupants, similar to the Building
Common Areas) to the specific building to which such expenses relate. Any Operating Expenses which
cannot be allocated solely to one building and its occupants will be allocated on a proportionate
basis (based on relative square footage) among the buildings and occupants of the Project (or those
buildings to which such Operating Expense relates, and their occupants, if it is less than the
entire Project (e.g., property tax statements for part, but not all, of the buildings within the
Project).

     7.3. Base Rent and Additional Rent shall together be denominated “Rent.” Rent
shall be paid to Landlord, without abatement, deduction or offset (except as expressly permitted
under the terms and conditions of this Lease), in lawful money of the United States of America at
the office of Landlord as set forth in Section 2.8 or to such other person or at such other
place as Landlord may from time designate in writing. In the event the Term commences or ends on a
day other than the first day of a calendar month, then the Rent for such fraction of a month shall
be prorated for such period on the basis of a thirty (30) day month and shall be paid at the
then-current rate for such fractional month.

8. Rent Adjustments. Base Rent shall be subject to an annual upward adjustment as set
forth in the table in Section 2.3. The first such adjustment shall become effective
commencing on the first (1st) annual anniversary of the Rent Commencement Date, and
subsequent adjustments shall become effective on every successive annual anniversary, as set forth
in the table in Section 2.3 for so long as this Lease continues in effect.

9. Operating Expenses.

     9.1. As used herein, the term “Operating Expenses” shall include:

12

 

          (a) Government impositions including property tax costs consisting of real and personal
property taxes and assessments, including amounts due under any improvement bond upon the Building
or the Project, including the parcel or parcels of real property upon which the Building and areas
serving the Building are located or assessments in lieu thereof imposed by any federal, state,
regional, local or municipal governmental authority, agency or subdivision (each, a
“Governmental Authority”) are levied; taxes on or measured by gross rentals received from
the rental of space in the Project; taxes based on the square footage of the Premises, the Building
or the Project, as well as any parking charges, utilities surcharges or any other costs levied,
assessed or imposed by, or at the direction of, or resulting from Applicable Laws or
interpretations thereof, promulgated by any Governmental Authority in connection with the use or
occupancy of the Project or the parking facilities serving the Project; taxes on this transaction
or any document to which Tenant is a party creating or transferring an interest in the Premises;
any fee for a business license to operate an office building; and any expenses, including the
reasonable cost of attorneys or experts, reasonably incurred by Landlord in seeking reduction by
the taxing authority of the applicable taxes, less tax refunds obtained as a result of an
application for review thereof (collectively, “Taxes”). Notwithstanding anything to the
contrary in this Lease, Taxes included in Operating Expenses payable by Tenant shall not include
any net income, franchise, capital stock, estate or inheritance taxes, or taxes that are the
personal obligation of Tenant or of another tenant of the Project; Landlord’s general income taxes,
succession, transfer or gift tax; excise taxes imposed upon Landlord based upon rentals or income
received by it (except if levied in lieu of real property taxes); taxes attributable to any period
outside of the Term (provided that any holdover by Tenant will be considered within the Term for
purposes of this provision); any assessments, charges, taxes, rents, fees, rates, levies, excises,
license fees, permit fees, inspection fees, impact fees, concurrency fees or other fees or charges
to the extent allocable to or caused by the development or installation of on- or off-site
improvements or utilities (including without limitation street and intersection improvements,
roads, rights of way, lighting and signalization) related solely to any future development of the
vacant pad sites at the Project, or any allocations, reserves or sinking funds relating to such
development, unless the same are contained in the property tax bills for the Project (in which case
the portion allocable to the new building(s) will be allocated to the tenants of such new
building(s)); and

          (b) All other costs of any kind paid or incurred by Landlord in connection with the
operation or maintenance of the Building, Building Common Area, the Project Common Areas (including
the Amenities Building, which shall include (i) Project office rent at fair market rental rates
(not to exceed the net average rental rate of the Project) for a commercially reasonable amount of
space for Project management personnel located in the Amenities Building, to the extent an office
used for Project operations is maintained at the Project, plus customary expenses for such office
and (ii) fair market rent (not to exceed the net average rental rate of the Project) for the
portion of the Amenities Building used in providing the Amenities Building Services, provided,
however, Operating Expenses pertaining to the Amenities Building (including the Project office rent
and the Amenities Building rent) shall in no event exceed Ten Cents ($.10) per square foot of
Rentable Area per month); provided that any costs for services, maintenance, repairs, and the like
provided directly by Landlord or affiliates of Landlord shall be at commercially reasonable prices,
including costs of repairs and replacements to improvements

13

 

within the Project as appropriate to maintain the Project as required hereunder; costs of
utilities furnished to the Building Common Area and Project Common Areas; sewer fees; cable
television; trash collection; Building Common Area and Project Common Area cleaning, including the
windows of the Building and the Amenities Building; heating; ventilation; air-conditioning;
maintenance of landscaping and grounds of the Building Common Area and Project Common Areas;
maintenance of drives and parking areas of the Building Common Area and Project Common Areas;
maintenance of the non-structural portions of the roof of the Building and the Amenities Building;
Building Common Area and Project Common Area security services and devices; building supplies;
maintenance or replacement of equipment utilized for operation and maintenance of the Building,
Building Common Area, Project Common Areas or the Project as a whole (as reasonably allocated to
the Building as set forth in Section 7.2 above); license, permit and inspection fees
associated with Landlord’s maintenance, repair and operation of the Building, Building Common Area,
Project Common Areas or the Project as a whole (as reasonably allocated to the Building as set
forth in Section 7.2 above); sales, use and excise taxes on goods and services purchased by
Landlord in connection with the operation, maintenance or repair of the Building, Building Common
Area, Project Common Areas or the Project as a whole (as reasonably allocated to the Building as
set forth in Section 7.2 above) and its systems and equipment; telephone, postage,
stationery supplies and other expenses incurred in connection with the operation, maintenance or
repair of the Project; reasonable accounting, legal and other professional fees and expenses
incurred in connection with Landlord’s maintenance, repair and operation of the Project, including,
without limitation, determining the Operating Expenses payable by the tenants of the Project; costs
of furniture, draperies, carpeting, landscaping and other customary and ordinary items of personal
property provided by Landlord for use in Common Areas or in the Project office; costs of complying
with Applicable Laws (except to the extent such costs are incurred to remedy non-compliance as of
the Execution Date with Applicable Laws); costs to keep the Project in compliance with, or fees
otherwise required under, any CC&Rs (as defined below), as long as such costs are not otherwise
excluded from Operating Expenses pursuant to the following paragraph; insurance premiums, including
premiums for public liability, property casualty, earthquake, flood, terrorism and environmental
coverages; portions of insured losses paid by Landlord as part of the deductible portion of a loss
pursuant to the terms of insurance policies, provided Tenant’s share of any flood or earthquake
insurance deductible expense shall not exceed $100,000 and Tenant’s share of any property or
general liability insurance deductible shall not exceed $25,000; service contracts for the
Building, Building Common Area, Project Common Areas or the Project as a whole (as reasonably
allocated to the Building as set forth in Section 7.2 above); costs of services of
independent contractors retained to do work of a nature referenced above; and costs of compensation
(including employment taxes and fringe benefits) of all persons in proportion to the time such
persons perform regular and recurring duties connected with the day-to-day operation and
maintenance of the Project, its equipment, the adjacent walks, landscaped areas, drives and parking
areas, including janitors, floor waxers, window washers, watchmen, gardeners, sweepers and
handymen; and capital expenditures (including capital expenditures to increase energy efficiency),
(provided that such capital expenditures shall not include capital expenditures (i) made for
aesthetic purposes
or to enhance the value of the Project (as opposed to repairs, maintenance or
replacement of Building or Project components), (ii) that solely benefit one or more tenants of the
Project (as opposed to the Project as a whole), (iii) to repair or replace

14

 

structural components of the Building or foundation, or (iv) which are made to comply with
Applicable Laws in effect as of the Execution Date of this Lease and provided further that such
capital expenditures shall be amortized over such item’s useful life as determined in accordance
with Generally Accepted Accounting Principles, consistently applied but not to exceed eleven (11)
years with interest calculated at nine percent (9%) per annum, for each such year of useful life of
the capital item during the Term). By way of example only, capital expenditures to “comply with
Applicable Laws” shall not include any capital expenditures made by Landlord to comply with any
nonresidential voluntary measures of the California Green Building Standards Code or similar
voluntary measures unless such capital expenditures result in Operating Expense savings.

          Notwithstanding the foregoing, Operating Expenses shall not include any leasing commissions or
other costs incurred in procuring tenants of the Project, or any fee in lieu of commissions;
expenses that relate to preparation of rental space for a tenant or to provide any other
accommodation for use by less than all of the tenants of the Project; expenses of initial
development and construction, including grading, paving, landscaping and decorating (as
distinguished from maintenance, repair and replacement of the foregoing except to the extent
covered by warranty); legal expenses relating to other tenants; costs of any nature to the extent
reimbursed by condemnation awards, another tenant of the Building (except as part of such tenant’s
operating expense obligations), warranties, or payment of insurance proceeds received by Landlord;
interest upon loans to Landlord or secured by a mortgage or deed of trust covering the Project or a
portion thereof (provided that interest upon a government assessment or improvement bond
payable in installments shall constitute an Operating Expense under Subsection 9.1(a));
salaries of executive officers of Landlord; depreciation claimed by Landlord for tax purposes
(provided that this exclusion of depreciation is not intended to delete from Operating
Expenses actual costs of repairs and replacements that are provided for in Subsection
9.1(b)); costs incurred in keeping the Building systems installed or repaired by Landlord as
part of the Landlord Work in good working order and condition during the first (1st) twelve (12)
months of the Term; costs incurred in connection with Landlord’s performance of the Landlord’s
Work; taxes that are excluded from Operating Expenses by the last sentence of Subsection
9.1(a); the cost of providing any service directly to and paid directly by any tenant (outside
of such tenant’s operating expense payments); ground lease payments (if any); Landlord’s general
corporate overhead; any compensation paid to clerks, attendants or other persons in commercial
concessions operated by Landlord (other than in the parking facility for the Project); bad debt
expenses and interest, principal, points and fees on debts or amortization on any ground lease,
mortgage or mortgages or any other debt instrument encumbering the Building (including the
Property); marketing costs, including attorneys’ fees in connection with the negotiation and
preparation of letters, deal memos, letters of intent, leases, subleases or assignments, space
planning costs, and other costs and expenses incurred in connection with lease, sublease or
assignment negotiations and transactions with present or prospective tenants or other occupants of
the Building; art work; expenses in connection with services or other benefits that are not offered
to Tenant or for which Tenant is charged directly but that are provided to another tenant or
occupant of the Building, without charge; electric power costs or other utility costs for which any
tenant directly contracts with the local public service company; costs of any future expansion of
or development on the vacant pad sites located at the Project; costs incurred solely

15

 

due to the
gross negligence or willful misconduct of another tenant or Landlord (or which would be a
Tenant indemnity obligation hereunder if caused by Tenant’s negligent acts or omissions); costs
incurred to comply with Applicable Laws relating to the removal of Hazardous Materials (as defined
in Article 21 below) or to remove, remedy, treat or contain any Hazardous Material to the
extent such costs (x) result from Landlord’s gross negligence or willful misconduct, (y) resulted
from Hazardous Materials which existed in the Building or on the Property prior to the Execution
Date (provided that any Hazardous Materials in the Premises which are made Tenant’s responsibility
pursuant to Article 21 below shall remain Tenant’s direct obligation) and (z) as to any other
Hazardous Materials-related costs, Landlord will first exhaust any available insurance proceeds and
use good faith and commercially reasonable efforts (short of litigation) to pursue any third
parties for reimbursement of any such costs prior to including such amounts in Operating Expenses;
costs of upgrades to the Building or Project solely effectuated for the purpose of obtaining or
upgrading a LEED certification or similar rating; and costs to perform any Open Space Work (as
defined in the CC&Rs) or to comply with requirements of any development permits for the Project.
To the extent that Tenant uses more than Tenant’s Pro Rata Share of any item of Operating Expenses
(without gross up for purposes of such determination with respect to Operating Expenses of the
Project), Tenant shall pay Landlord for such excess in addition to Tenant’s obligation to pay
Tenant’s Pro Rata Share of Operating Expenses; provided that Landlord shall supply Tenant with
reasonable evidence supporting Landlord’s determination of such excess use and the method of
calculating the amounts being charged to Tenant, and such over standard use charges will be subject
to audit in accordance with Section 9.3 below.

          In the event Landlord ceases to provide, or reduces the level of the Amenities Building
Services, then Operating Expenses will be appropriately reduced to reflect such decrease in
services; provided that the foregoing shall not be deemed to constitute Tenant’s consent to any
such cessation or reduction during the Term unless attributable to (i) any reason beyond the
control of Landlord (e.g., due to a casualty to or condemnation of all or a portion of the
Amenities Building (but only for that period between the event of casualty or the effective date of
taking and completion of the necessary restoration work) or as otherwise permitted under this
Lease, (ii) Force Majeure, or (iii) any change in Applicable Laws which prevents Landlord from
providing some or all of the Amenities Building Services.

     9.2. Tenant shall pay to Landlord on the first day of each calendar month of the Term, as
Additional Rent, (a) the Property Management Fee (as defined below) and (b) Landlord’s estimate of
Tenant’s Pro Rata Share of Operating Expenses with respect to the Building and the Project, as
applicable, for such month.

          (x) The “Property Management Fee” shall equal two percent (2%) of the Base Rent
due from Tenant. Tenant shall pay the Property Management Fee in accordance with Section
9.2 with respect to the entire Term, including any extensions thereof or any holdover periods,
regardless of whether Tenant is obligated to pay Base Rent, Operating Expenses or any other Rent
with respect to any such period or portion thereof. Operating Expenses shall not include any
property management fee, administrative fee or similar compensation to Landlord or any third party
because the Property Management Fee shall be charged in lieu of including all such amounts in
Operating Expenses. During the period from the Term Commencement Date

16

 

through the Rent Commencement Date, the Property Management Fee shall be calculated based on
the Base Rent payable by Tenant on the Rent Commencement Date.

          (y) Within ninety (90) days after the conclusion of each calendar year (or such longer
period as may be reasonably required by Landlord), Landlord shall furnish to Tenant a statement
showing in reasonable detail the actual Operating Expenses and Tenant’s Pro Rata Share of Operating
Expenses for the previous calendar year. Any additional sum due from Tenant to Landlord shall be
due and payable within thirty (30) days after Tenant’s receipt of the statement. If the amounts
paid by Tenant pursuant to this Section exceed Tenant’s Pro Rata Share of Operating Expenses for
the previous calendar year, then Landlord shall credit the difference against the Rent next due and
owing from Tenant; provided that, if the Lease term has expired, Landlord shall accompany
said statement with payment for the amount of such difference. Notwithstanding the foregoing, if
Landlord fails to provide Tenant with a written statement of the actual Operating Expenses incurred
during the prior calendar year by July 31 of the following year, Landlord shall be deemed to have
waived any all rights of Landlord to collect such underpayment of Operating Expenses by Tenant for
the prior calendar year.

          (z) Any amount due under this Section for any period that is less than a full month shall
be prorated (based on a thirty (30)-day month) for such fractional month.

     9.3. Landlord’s annual statement shall be final and binding upon Tenant unless Tenant,
within forty-five (45) days after Tenant’s receipt thereof, shall contest any item therein by
giving written notice to Landlord, specifying each item contested and the reasons therefor. If,
during such forty-five (45)-day period, Tenant reasonably and in good faith questions or contests
the correctness of Landlord’s statement of Tenant’s Pro Rata Share of Operating Expenses, Landlord
shall provide Tenant with reasonable access to Landlord’s books and records to the extent relevant
to determination of Operating Expenses, and such information as Landlord reasonably determines to
be responsive to Tenant’s written inquiries. In the event that, after Tenant’s review of such
information, Landlord and Tenant cannot agree upon the amount of Tenant’s Pro Rata Share of
Operating Expenses, then Tenant shall have the right to have an independent public accounting firm
(the “Independent Auditor”) hired by Tenant on an hourly basis and not on a contingent-fee
basis (at Tenant’s sole cost and expense) and approved by Landlord (which approval Landlord shall
not unreasonably withhold or delay) audit and review such of Landlord’s books and records for the
year in question as directly relate to the determination of Operating Expenses for such year (the
“Independent Review”). Landlord shall make such books and records available for review by
the Independent Auditor and/or Tenant’s employees at the location where Landlord maintains them in
the ordinary course of its business (which location shall be in the State of California). Landlord
need not provide copies of any books or records to the Independent Auditor at any other location.
Tenant shall commence the Independent Review within fifteen (15) days after the date Landlord has
given Tenant access to Landlord’s books and records for the Independent Review. Tenant shall
complete the Independent Review and notify Landlord in writing of Tenant’s specific objections to
Landlord’s calculation of Operating Expenses or Tenant’s Pro Rata Share thereof (including the
Independent Auditor’s written statement of the basis, nature and amount of each proposed
adjustment) no later than sixty (60) days after Landlord has first given Tenant access to
Landlord’s books and

17

 

records for the Independent Review. Landlord shall review the results of any
such Independent
Review. The parties shall endeavor to agree promptly and reasonably upon Operating Expenses
taking into account the results of such Independent Review. If, as of sixty (60) days after Tenant
has submitted the Independent Review to Landlord, the parties have not agreed on the appropriate
adjustments to Operating Expenses or Tenant’s Pro Rata Share thereof, then the parties shall engage
a mutually agreeable independent third party accountant with at least ten (10) years’ experience in
commercial real estate accounting in the greater Bay Area, California, area (the
“Accountant”). If the parties cannot agree on the Accountant, each shall within ten (10)
days after such impasse appoint an Accountant (different from the Independent Auditor and the
Independent Auditor’s firm) and, within ten (10) days after the appointment of both such
Accountants, those two Accountants shall select a third (which cannot be the accountant and
accounting firm that conducted the Independent Review). If either party fails to timely appoint an
Accountant, then the Accountant the other party appoints shall be the sole Accountant. Within ten
(10) days after appointment of the Accountant(s), Landlord and Tenant shall each simultaneously
give the Accountants (with a copy to the other party) its determination of Operating Expenses or
Tenant’s Pro Rata Share thereof, with such supporting data or information as each submitting party
determines appropriate. Within ten (10) days after such submissions, the Accountants shall by
majority vote select either Landlord’s or Tenant’s determination of Operating Expenses or Tenant’s
Pro Rata Share thereof. The Accountants may not select or designate any other determination of
Operating Expenses or Tenant’s Pro Rata Share thereof. The determination of the Accountant(s)
shall bind the parties. If the parties agree or the Accountant(s) determine that Tenant’s Pro Rata
Share of Operating Expenses actually paid for the calendar year in question exceeded Tenant’s
obligations for such calendar year, then Landlord shall, at Tenant’s option, either (a) credit the
excess to the next succeeding installments of estimated Additional Rent or (b) pay the excess to
Tenant within thirty (30) days after delivery of such results. If the parties agree or the
Accountant(s) determine that Tenant’s payments of Tenant’s Pro Rata Share of Operating Expenses for
such calendar year were less than Tenant’s obligation for the calendar year, then Tenant shall pay
the deficiency to Landlord within thirty (30) days after delivery of such results. If the
Independent Review reveals or the Accountant(s) determine that the Operating Expenses billed to
Tenant by Landlord and paid by Tenant to Landlord for the applicable calendar year in question
exceeded by more than five percent (5%) what Tenant should have been billed during such calendar
year, then Landlord shall pay the reasonable cost of the Independent Review and the Accountant(s).
In all other cases, Tenant shall pay the cost of the Independent Review and the Accountant(s).

     9.4. Tenant shall not be responsible for Operating Expenses attributable to the time
period prior to the Term Commencement Date; provided, however, that if Tenant commences
operating and conducting its business from the Premises prior to the Term Commencement Date as
permitted pursuant to Section 4.1, Tenant shall be responsible for Operating Expenses
associated with such early occupancy of the Premises from the date it commences business operations
within the Premises. Tenant’s responsibility for Tenant’s Pro Rata Share of Operating Expenses
shall continue to the latest of (a) the date of termination of the Lease or (b) the date Tenant has
fully vacated the Premises (as evidenced by the absence of all of Tenant’s employees and
furnishings from the Premises, and the cessation of all business operations of

18

 

Tenant therein, the
surrender of the Premises in the condition set forth in Section 18.2 and the satisfaction of all
terms and conditions of Section 26.1.

     9.5. Operating Expenses for the calendar year in which Tenant’s obligation to share
therein commences and for the calendar year in which such obligation ceases shall be prorated on a
basis reasonably determined by Landlord. Expenses such as taxes, assessments and insurance
premiums that are incurred for an extended time period shall be prorated based upon the time
periods to which they apply so that the amounts attributed to the Premises relate in a reasonable
manner to the time period wherein Tenant has an obligation to share in Operating Expenses.

     9.6. Within thirty (30) days after the end of each calendar month, Tenant shall submit to
Landlord an invoice, or, in the event an invoice is not available, an itemized list, of all costs
and expenses that (a) Tenant has incurred (either internally or by employing third parties) during
the prior month and (b) for which Tenant reasonably believes it is entitled to reimbursements from
Landlord pursuant to the terms of this Lease or that Tenant reasonably believes is the
responsibility of Landlord pursuant to this Lease or the Work Letter.

     9.7. In the event that the Building is less than fully occupied, Tenant acknowledges that
Landlord may extrapolate those Variable Building Operating Expenses (defined below) by dividing (a)
the total cost of Variable Building Operating Expenses by (b) the Rentable Area of the Building,
that is occupied, then multiplying (y) the resulting quotient by (z) ninety-five percent (95%) of
the total Rentable Area of the Building; provided that such adjustment shall not result in an
increase in Tenant’s cost of Variable Operating Expenses in excess of ten percent (10%) above the
Variable Operating Expenses that would be payable by Tenant prior to making such adjustment.
Tenant shall pay Tenant’s Pro Rata Share of the product of (y) and (z); provided, however, that
Landlord shall not recover more than one hundred percent (100%) of such Operating Expenses. No
Operating Expenses attributable to the Project as a whole will be subject to gross up.
Notwithstanding the foregoing, in the event there is vacant space in the Building, to the extent it
is feasible, Landlord will not provide services resulting in Operating Expenses to such space.

     9.8. “Variable Building Operating Expenses” shall mean the following Operating
Expenses which exclusively relate to the Building and which fluctuate based on occupancy of the
Building: (i) water, (ii) sewer, (iii) trash removal, (iv) janitorial supplies, and (v)
carpet/floor cleaning and repairs.

10. Taxes on Tenant’s Property.

     10.1. Tenant shall pay prior to delinquency any and all taxes levied against any personal
property or trade fixtures placed by Tenant in or about the Premises.

     10.2. If any such taxes on Tenant’s personal property or unattached equipment are levied
against Landlord or Landlord’s property or, if the assessed valuation of the Building, the Property
or the Project is increased by inclusion therein of a value attributable to Tenant’s personal
property or unattached equipment, as reasonably determined by Landlord (the

19

 

“Personal Property
Taxes”), and if Landlord, after written notice to Tenant including documentary evidence of
Landlord’s basis for such determination, pays the Personal Property Taxes based upon any such
increase in the assessed value of the Building, the Property or the Project, then Tenant shall,
upon demand, repay to Landlord the Personal Property Taxes so paid by Landlord; provided
that
Tenant shall not be liable for such assessments associated with the value of any other
tenant’s personal property or trade fixtures as part of Operating Expenses.

     10.3. If any improvements in or alterations to the Premises, whether owned by Landlord or
Tenant and whether or not affixed to the real property so as to become a part thereof, are assessed
for real property tax purposes at a valuation higher than the valuation at which improvements in
other spaces in the Building are assessed, then the real property taxes and assessments levied
against Landlord or the Building, the Property or the Project by reason of such excess assessed
valuation shall be deemed to be taxes levied against personal property of Tenant and shall be
governed by the provisions of Section 10.2. Any such excess assessed valuation due to
personal property, unattached equipment or improvements in or alterations to any space in the
Building or Project leased by other tenants of the Building or Project shall not be included in the
Operating Expenses defined in Article 9, but shall be treated, as to such other tenants, as
provided in this Section 10.3. If the records of the County Assessor are available and
sufficiently detailed to serve as a basis for determining whether said Tenant improvements or
alterations are assessed at a higher valuation than the building standard, then such records shall
be binding on both Landlord and Tenant.

     10.4. Tenant, at its sole risk, cost and expense, shall have the right, to request that
Landlord seek, on Tenant’s behalf, a reduction in the assessed valuation of the Tenant Improvements
and trade fixtures or to contest any taxes thereon that are to be paid by Tenant and Landlord
agrees to proceed with such request. If Tenant desires Landlord seek a reduction or contests such
taxes, despite the submission of such proceeding or contest by Landlord, Tenant shall still be
required to pay such taxes as part of Operating Expenses. Landlord, on final determination of the
proceeding or contest, if such proceeding or contest is successful, shall promptly pay to Tenant
any refund received by Landlord in connection with such proceeding or contest.

11. Security Deposit.

     11.1. Tenant shall deposit with Landlord on or before the Execution Date the sum set forth
in Section 2.6 (the “Security Deposit”), which sum shall be held by Landlord as
security for the faithful performance by Tenant of all of the terms, covenants and conditions of
this Lease to be kept and performed by Tenant during the period commencing on the Execution Date
and ending upon the expiration or termination of Tenant’s obligations under this Lease. If Tenant
defaults with respect to any provision of this Lease, including any provision relating to the
payment of Rent and such default is not timely cured in accordance with the cure rights provided in
this Lease as applicable to such default (if any), then Landlord may (but shall not be required to)
use, apply or retain all or any part of the Security Deposit for the payment of any Rent or any
other sum in default, or to compensate Landlord for any other loss or damage that Landlord may
suffer by reason of Tenant’s default. If any portion of the Security Deposit is so used or
applied, then Tenant shall, within ten (10) business days following demand therefor, deposit cash
with

20

 

Landlord in an amount sufficient to restore the Security Deposit to its original amount, and
Tenant’s failure to do so shall be a material breach of this Lease. The provisions of this Article
shall survive the expiration or earlier termination of this Lease. TENANT HEREBY WAIVES
THE REQUIREMENTS OF SECTION 1950.7 OF THE CALIFORNIA CIVIL CODE, AS THE SAME MAY BE AMENDED
FROM TIME TO TIME.

     11.2. In the event of bankruptcy or other debtor-creditor proceedings against Tenant, the
Security Deposit shall be deemed to be applied first to the payment of Rent and other charges due
Landlord for all periods prior to the filing of such proceedings.

     11.3. Landlord may deliver to any purchaser of Landlord’s interest in the Premises the
funds deposited hereunder by Tenant, and upon such purchaser’s written acknowledgement of its
receipt of such funds to Tenant, thereupon Landlord shall be discharged from any further liability
with respect to such deposit. This provision shall also apply to any subsequent transfers.

     11.4. If Tenant shall fully and faithfully perform every provision of this Lease to be
performed by it as a condition of effective surrender of the Premises, then the Security Deposit,
or any balance thereof, shall be returned to Tenant (or, at Landlord’s option, to the last assignee
of Tenant’s interest hereunder) within thirty (30) days after the expiration or earlier termination
of this Lease. Landlord’s obligation to return the unused balance of the Security Deposit shall
survive the expiration or earlier termination of this Lease.

     11.5. [Intentionally Omitted]

     11.6. If the Security Deposit shall be in cash, Landlord shall hold the Security Deposit
in an account at a banking organization selected by Landlord; provided, however, that
Landlord shall not be required to maintain a separate account for the Security Deposit, but may
intermingle it with other funds of Landlord. Landlord shall be entitled to all interest and/or
dividends, if any, accruing on the Security Deposit. Landlord shall not be required to credit
Tenant with any interest for any period during which Landlord does not receive interest on the
Security Deposit.

     11.7. The Security Deposit may be in the form of cash, a letter of credit or any other
security instrument acceptable to Landlord in its sole discretion. Tenant may at any time, deliver
a letter of credit (the “L/C Security”) as the entire Security Deposit, as follows:

          (a) If Tenant elects to deliver L/C Security, then Tenant shall provide Landlord, and
maintain in full force and effect throughout the Term and until the date that is sixty (60) days
after the then-current Term Expiration Date, a letter of credit in substantially the form of
Exhibit E issued by an issuer reasonably satisfactory to Landlord, in the amount of the
Security Deposit, with an initial term of at least one year. Landlord may require the L/C Security
to be re-issued by a different issuer at any time during the Term if Landlord reasonably believes
that the issuing bank of the L/C Security is or may soon become insolvent; provided, however,
Landlord shall return the existing L/C Security to the existing issuer immediately upon receipt of
the substitute L/C Security. If any issuer of the L/C Security shall become insolvent or placed
into FDIC receivership, then Tenant shall promptly, after Tenant receives knowledge of

21

 

such
receivership or insolvency, deliver to Landlord (without the requirement of notice from Landlord)
substitute L/C Security issued by an issuer reasonably satisfactory to Landlord, and otherwise
conforming to the requirements set forth in this Article. As used herein with respect to the
issuer of the L/C Security, “insolvent” shall mean the determination of insolvency as made by
such issuer’s primary bank regulator (i.e., the state bank supervisor for state chartered
banks; the OCC or OTS, respectively, for federally chartered banks or thrifts; or the Federal
Reserve for its member banks). If, at the Term Expiration Date, any Rent remains uncalculated or
unpaid, then: (i) Landlord shall with reasonable diligence complete any necessary calculations;
(ii) Tenant shall extend the expiry date of such L/C Security from time to time as Landlord
reasonably requires (but in no event to a date more than sixty (60) days after the Term Expiration
Date); and (iii) in such extended period, Landlord shall not unreasonably refuse to consent to an
appropriate reduction of the L/C Security. Tenant shall reimburse Landlord’s reasonable legal
costs (as estimated by Landlord’s counsel) in handling Landlord’s acceptance of L/C Security or its
replacement or extension; provided such reimbursement shall not exceed Two Thousand Five
Hundred Dollars ($2500) for each review of the initial L/C Security or its replacement or
extension.

          (b) If Tenant delivers to Landlord satisfactory L/C Security in place of the entire
Security Deposit, Landlord shall remit to Tenant any cash Security Deposit Landlord previously
held.

          (c) Landlord may draw upon the L/C Security, and hold and apply the proceeds in the same
manner and for the same purposes as the Security Deposit, if: (i) an uncured Default (as defined
below) exists; (ii) as of the date thirty (30) days before any L/C Security expires (even if such
scheduled expiry date is after the Term Expiration Date) Tenant has not delivered to Landlord an
amendment or replacement for such L/C Security, reasonably satisfactory to Landlord, extending the
expiry date to the earlier of (1) sixty (60) days after the then-current Term Expiration Date or
(2) the date one year after the then-current expiry date of the L/C Security; (iii) the L/C
Security provides for automatic renewals, Landlord asks the issuer to confirm the current L/C
Security expiry date, and the issuer fails to do so within ten (10) business days; (iv) Tenant
fails to pay (when and as Landlord reasonably requires) any bank charges for Landlord’s transfer of
the L/C Security; or (v) the issuer of the L/C Security ceases, or announces that it will cease, to
maintain an office in the city where Landlord may present drafts under the L/C Security (and fails
to permit drawing upon the L/C Security by overnight courier or facsimile). This Section does not
limit any other provisions of this Lease allowing Landlord to draw the L/C Security under specified
circumstances.

          (d) Tenant shall not seek to enjoin, prevent, or otherwise interfere with Landlord’s draw
under L/C Security, even if it violates this Lease. Tenant acknowledges that the only effect of a
wrongful draw would be to substitute a cash Security Deposit for L/C Security. Landlord shall not
be liable to Tenant for any damages as a result of a wrongful draw under the L/C Security and a
wrongful draw shall not be considered a Landlord breach or default under the Lease. Landlord shall
hold the proceeds of any draw in the same manner and for the same purposes as a cash Security
Deposit. In the event of a wrongful draw, the parties shall cooperate to allow Tenant to post
replacement L/C Security simultaneously with the return to Tenant of the

22

 

wrongfully drawn sums, and
Landlord shall upon request confirm in writing to the issuer of the L/C Security that Landlord’s
draw was erroneous.

          (e) If Landlord transfers its interest in the Premises, then Tenant shall at Tenant’s
expense, within thirty (30) days after receiving a request from Landlord, deliver (and, if
the issuer requires, Landlord shall consent to) an amendment to the L/C Security naming
Landlord’s grantee as substitute beneficiary, or, in Tenant’s sole discretion, replace the L/C
Security with a cash Security Deposit delivered to Landlord’s transferee. If the required Security
Deposit changes while L/C Security is in force, then Tenant shall deliver (and, if the issuer
requires, Landlord shall consent to) a corresponding amendment to the L/C Security.

12. Use.

     12.1. Tenant shall use the Premises for the Permitted Use, and shall not use the Premises,
or permit or suffer the Premises to be used, for any other purpose without Landlord’s prior written
consent, which consent Landlord may withhold in its sole and absolute discretion.

     12.2. Tenant shall not use or occupy the Premises in violation of Applicable Laws;
provided however, Tenant shall not be required to cause the Building or Project to comply with any
Applicable Laws requiring any improvements or alterations outside of the Premises (except (i) to
the extent such compliance relates to Tenant’s installation, use, or maintenance of its equipment
which Tenant is permitted to so install and maintain in accordance with the terms and conditions of
this Lease or (ii) for Operating Expenses Tenant is responsible for pursuant to Article 9
of this Lease ). Subject to Landlord’s acknowledgement set forth in Section 2.7, Tenant shall not
use or occupy the Premises in violation of zoning ordinances; or the certificate of occupancy
issued for the Building or the Project, and shall, upon five (5) days’ written notice from Landlord
(which will include the notice of violation from such Governmental Authority), discontinue any use
of the Premises that is conclusively determined by any Governmental Authority having jurisdiction
to be a violation of any of the above (subject to Tenant’s right to contest such finding). Tenant
shall comply with any direction of any Governmental Authority having jurisdiction that shall, by
reason of the nature of Tenant’s use or occupancy of the Premises, impose any duty upon Tenant or
Landlord with respect to the Premises or with respect to the use or occupation thereof; provided
that Tenant shall not be in default of such obligation if it has the right to appeal such directive
and Tenant prosecutes such appeal in a timely fashion and in a manner that does not impose or
threaten to impose any lien, charge or other obligation, penalty or sanction on Landlord or any
portion of the Project and Tenant shall indemnify Landlord for any Claims (as defined in
Section 12.11) arising out of or in connection with Tenant’s appeal of any such
Governmental Authority directive.

     12.3. Tenant shall not do or permit to be done anything that will invalidate or increase
the cost of any fire, environmental, extended coverage or any other insurance policy covering the
Building or the Project, and shall comply with all reasonable and customary rules, orders,
regulations and requirements of the insurers of the Building and the Project, and Tenant shall
promptly, upon demand, reimburse Landlord for any additional premium charged for such policy by
reason of Tenant’s failure to comply with the provisions of this Article. Landlord’s insurance
will be underwritten for laboratory biotechnology use.

23

 

     12.4. Tenant shall keep all doors opening onto public corridors closed, except when in use
for ingress and egress.

     12.5. No additional locks or bolts of any kind shall be placed upon any of the doors or
windows by Tenant, nor shall any changes be made to existing locks or the mechanisms thereof
without Landlord’s prior written consent. Tenant shall, upon termination of this Lease, return to
Landlord all keys to offices and restrooms either furnished to or otherwise procured by Tenant. In
the event any key so furnished to Tenant is lost, Tenant shall pay to Landlord the cost of
replacing the same or of changing the lock or locks opened by such lost key if Landlord shall deem
it necessary to make such change.

     12.6. No awnings or other projections shall be attached to any outside wall of the
Building. No curtains, blinds, shades or screens shall be attached to or hung in, or used in
connection with, any window or door of the Premises other than Landlord’s standard window
coverings. Neither the interior nor exterior of any windows shall be coated or otherwise
sunscreened without Landlord’s prior written consent. No equipment, furniture or other items of
personal property shall be placed on any exterior balcony without Landlord’s prior written consent.

     12.7. Except for Tenant’s exterior signage in the common lobby of the Building (as
hereinafter provided), no sign, advertisement or notice (“Signage”) shall be exhibited,
painted or affixed by Tenant on any part of the Premises (other than signs in the interior of the
Premises which are not visible from outside the Premises) or the Building without Landlord’s prior
written consent. In the event Landlord installs a new monument sign at the Project, Tenant will
have the right to a listing on such monument sign at a level which corresponds to the Rentable Area
of the Premises as compared to the Rentable Area of the premises leased by third parties with right
to such signage. Tenant shall have the right to place its identification signage for the Premises
on the main entrance door of the Premises, in the second floor elevator lobby and the directory
tablet of the Building lobby, which directory tablet listing shall be inscribed, painted or affixed
for Tenant by Landlord at Tenant’s sole cost and expense, and shall be of a size, color and type
and be located in a place reasonably acceptable to Landlord. The Building directory tablet shall
be provided exclusively for the display of the name and location of Building tenants only. Tenant
shall not place anything on the exterior of the corridor walls or corridor doors other than
Landlord’s standard lettering. Tenant shall have Signage rights for the Premises substantially
consistent with the Signage permitted for other comparable Tenants in the Project, as Landlord
reasonably determines. At Landlord’s option, Landlord may install any such Signage, and Tenant
shall pay all costs associated with such installation within thirty (30) days after demand
therefor.

     12.8. Tenant shall only place equipment within the Premises with floor loading consistent
with the Building’s structural design as indicated on Landlord’s as-built plans for the Building
and such equipment shall be placed in a location designed to carry the weight of such equipment.

     12.9. Tenant shall cause any equipment or machinery to be installed in the Premises so as
to reasonably prevent sounds or vibrations therefrom from extending into the Common Areas

24

 

or other
offices in the Project; provided that the foregoing shall not prohibit Tenant from operating the
Tenant Generator (as defined in Section 16.10 below) for emergency use requirements, nor
from testing and performing regular maintenance on the equipment and
machinery installed in the Premises and the Tenant Generator at times reasonably approved by
Landlord.

     12.10. Tenant shall not (a) do or permit anything to be done in or about the Premises that
shall unreasonably obstruct or interfere with the rights of other tenants or occupants of the
Building or the Project, or injure them, (b) cause, maintain or permit any nuisance or waste in, on
or about the Premises, the Building or the Project or (c) take any other action that would in
Landlord’s reasonable determination in any manner adversely affect other tenants’ quiet use and
enjoyment of their space or adversely impact their ability to conduct business in a professional
and suitable work environment.

     12.11. Landlord shall be responsible for ensuring that the Common Areas comply with the
ADA (which cost may be included in Operating Expenses to the extent permitted by Article 9
above) and that any non-compliance conditions existing as of the date of this Lease be remedied by
Landlord as part of the Landlord’s Work. Notwithstanding any other provision herein to the
contrary, Tenant shall be responsible for all liabilities, costs and expenses arising out of or in
connection with the compliance of the Premises after the Substantial Completion of Landlord’s Work
(and any Tenant Alterations thereto, including the Tenant Improvements and Expansion Space Tenant
Improvements) with the ADA, and Tenant shall indemnify, save, defend (at Landlord’s option and with
counsel reasonably acceptable to Landlord) and hold Landlord and its affiliates, employees, agents
and contractors; and any lender, mortgagee or beneficiary (each, a “Lender” and,
collectively with Landlord and its affiliates, employees, agents and contractors, the “Landlord
Indemnitees”) harmless from and against any demands, claims, liabilities, losses, costs,
expenses, actions, causes of action, damages or judgments, and all reasonable expenses (including
reasonable attorneys’ fees, charges and disbursements) incurred in investigating or resisting the
same (collectively, “Claims”) arising out of any such failure of the Premises to comply
with the ADA. The provisions of this Section shall survive the expiration or earlier termination
of this Lease.

     12.12. Subject to (a) use of the loading dock and appurtenant parking by other tenants of
the Building and the Project (provided that such other tenants will have no higher priority to use
the loading dock than Tenant) and (b) the other provisions of this Lease, Tenant shall have access
to and use of the loading dock and the parking areas twenty-four (24) hours per day seven (7) days
per week.

13. Rules and Regulations, CC&Rs, Parking Facilities and Common Areas.

     13.1. Tenant shall have the non-exclusive right, in common with others, to use the Common
Areas, subject to the rules and regulations reasonably adopted by Landlord and attached hereto as
Exhibit F, together with such other reasonable and nondiscriminatory rules and regulations
with respect to the Building Common Area and Project Common Areas as are hereafter promulgated by
Landlord in its sole and absolute discretion (the “Rules and Regulations”). Tenant shall
faithfully observe and comply with the Rules and Regulations.

25

 

Landlord shall not be responsible to
Tenant for the violation or non-performance by any other tenant or any agent, employee or invitee
thereof of any of the Rules and Regulations; provided,
that Landlord shall endeavor to enforce the Rules and Regulations in a non-discriminatory
manner.

     13.2. This Lease is subject to any covenants, conditions or restrictions that are
currently recorded, or may in the future be recorded, on the Project or Property (the
“CC&Rs”),as the same may be amended, amended and restated, supplemented or otherwise
modified from time to time; provided that any such amendments, restatements, supplements or
modifications do not materially modify Tenant’s rights or obligations hereunder nor materially
increase Tenant’s occupancy costs for the Premises. Tenant shall comply with the CC&Rs.

     13.3. Tenant shall have a non-exclusive, irrevocable license, which license shall be
appurtenant to Tenant’s leasehold interest in the Premises, to use Tenant’s Pro Rata Share of
parking facilities serving the Building in common on an unreserved basis with other tenants of the
Building and the Project during the Term, as the same may be extended pursuant to the terms hereof,
at no additional cost to Tenant. The parking ratio for the Project is approximately three and two
tenths (3.2) spaces per one thousand (1,000) square feet of Rentable Area (“Parking
Ratio”). Tenant will not be charged a separate fee for parking, other than the parking repairs
and maintenance costs charged to Tenant as Operating Expenses pursuant to Article 9.

     13.4. Tenant agrees not to unreasonably overburden the parking facilities and agrees to
cooperate with Landlord and other tenants in the use of the parking facilities. Landlord shall act
reasonably to ensure that no other tenant or occupant of the Project is overburdening the parking
facilities of the Building. In the event Tenant notifies Landlord that Tenant reasonably believes
the parking facilities are becoming overcrowded such that Tenant is unable to utilize Tenant’s Pro
Rata Share of parking facilities serving the Building, Landlord will endeavor to take reasonable
steps to alleviate such overcrowding. Landlord reserves the right to determine that parking
facilities are becoming overcrowded and to limit Tenant’s use thereof to an amount not less than
the Parking Ratio above. Upon such determination, Landlord may reasonably allocate parking spaces
among Tenant and other tenants of the Building or the Project. Nothing in this Section, however,
is intended to create an affirmative duty on Landlord’s part to monitor parking.

     13.5. Landlord reserves the right to modify the Common Areas (including the Amenities
Building), including the right to add or remove exterior and interior landscaping and to subdivide
real property; provided, however, such modifications shall not materially increase Tenant’s Pro
Rata Share of Operating Expenses under this Lease and shall not materially diminish Tenant’s use of
or access to the Premises (including elements of the Common Areas reasonably necessary for Tenant’s
use of the Premises, e.g. driveways, interior roads and parking areas) nor Tenant’s interest in the
Amenities Building Services. Tenant acknowledges that Landlord specifically reserves the right to
allow the exclusive use of corridors and restroom facilities located on specific floors to one or
more tenants occupying such floors; provided, however, that Tenant shall not be deprived of
the use of the corridors reasonably required to serve the Premises or of restroom facilities
serving the floor upon which the Premises are located.

26

 

     13.6. Subject to Article 17 of this Lease, relating to the procedures for design,
approval and construction of Alterations, Article 21 of this Lease regarding Tenant’s
obligations with
respect to Hazardous Materials, and to all Applicable Laws, Tenant shall have the right to
install or construct, from time to time, a Hazardous Materials storage facility within the Common
Area in a location in proximity to the Building reasonably acceptable to Landlord and classified by
the UBC as an “H” occupancy area for the use and storage of Hazardous Materials, which may be used
by Tenant for temporary Hazardous Materials waste storage (the “Hazardous Materials Storage
Shed”). The Hazardous Materials Storage Shed shall not exceed fifteen feet (15’) in diameter,
nor shall it exceed fifteen feet (15’) in height without Landlord’s consent. Landlord hereby
acknowledges that an underground water line and electrical power conduit may be required to provide
fire-sprinkler protection and safety and security systems for the Hazardous Materials storage
facility, and agrees that Tenant shall have the right to trench between the Building and such
storage facility for the purpose of installing underground piping and conduit for such purposes.
Tenant’s installation and use of the Hazardous Materials Storage Shed shall be at no additional
Rent for the use of such facilities (nor shall the area of such storage facility be incorporated
into any conversion factor used in the determination of rentable area of the Premises for the
purpose of Tenant’s Building or Project Pro Rata Share). Landlord shall have the right (to be
exercised at the time of Tenant’s request for Landlord’s consent) to construct such Hazardous
Materials Storage Shed, in its sole and absolute discretion, and to require Tenant to remove any
such improvements installed by Tenant and restore the area in which it is located to their prior
use and appearance upon the expiration or earlier termination of the Term. In addition to the
Hazardous Materials Storage Shed, Tenant shall also have the right to store, in a secure manner (in
a small fenced enclosure or similar protected area) and location adjacent to the exterior of the
Building, any compressed gas storage tanks required for Tenant’s Permitted Use in the Premises.
The cost for permitting, constructing, maintaining and removing any such improvements shall be
payable by Tenant. Unless specified by Landlord pursuant to the provisions of Article 17,
the
Hazardous Materials Storage shed shall remain in the Common Areas upon Tenant’s surrender
of the Premises and shall be the property of Landlord.

14.
Project Control by Landlord.

     14.1. Subject to the limitations of Section 13.5, Landlord reserves full control over the Building and
the Project to the extent not inconsistent with Tenant’s access, use and enjoyment of the Premises
and appurtenant rights as provided by this Lease. This reservation includes Landlord’s right to subdivide
the Project; convert the Building and other buildings within the Project to condominium units; change the size
of the Project by selling all or a portion of the Project or adding real property and any improvements thereon
to the Project; grant easements and licenses to third parties; maintain or establish ownership of the Building
separate from fee title to the Property; make additions to or reconstruct portions of the Building and the Project;
install, use, maintain, repair, replace and relocate for service to the Premises and other parts of the Building or
the Project pipes, ducts, conduits, wires and appurtenant fixtures, wherever located in the Premises, the Building or
elsewhere at the Project; and alter or relocate any other Common Area or facility, including private drives, lobbies
and entrances; provided that the foregoing shall not: (i) materially impair access to and from the Premises from the
parking areas or (ii) otherwise unreasonably interfere with Tenant’s access to and use of the Premises, the

27

 

parking areas and the Common Areas adjacent to the Building in any material manner
without Tenant’s prior written consent, which consent may be withheld in Tenant’s sole discretion.

     14.2. Possession of areas of the Premises necessary for utilities, services, safety and
operation of the Building is reserved to Landlord for maintenance, repairs and alterations, subject
to the provisions of this Lease.

     14.3. Tenant shall, at Landlord’s request (and at Landlord’s expense to the extent legal
review is reasonably required to determine the impact of such documents on Tenant’s rights under
this Lease), promptly execute such further documents as may be reasonably appropriate to assist
Landlord in the performance of its obligations hereunder; provided that Tenant need not
execute any document that creates additional liability for Tenant or that deprives Tenant of the
quiet enjoyment and use of the Premises as provided for in this Lease.

     14.4. Landlord may, at any and all reasonable times during non-business hours (or during
business hours if Tenant so requests), and upon twenty-four (24) hours’ prior written (for which
notice an email communication to Tenant’s facilities manager shall suffice) notice
(provided that no time restrictions shall apply or advance notice be required if an
emergency necessitates immediate entry) and subject to Tenant’s reasonable security and safety
requirements(which may be provided to Landlord from time to time, as reasonably determined by
Tenant to be appropriate for the protection of Tenant’s research and other proprietary activities
and information in the Premises), enter the Premises to (a) inspect the same and to determine
whether Tenant is in compliance with its obligations hereunder, (b) supply any service Landlord is
required to provide hereunder, (c) show the Premises to prospective purchasers or tenants during
the final year of the Term, (d) post notices of nonresponsibility, (e) access the telephone
equipment, electrical substation and fire risers and (f) alter, improve or repair any portion of
the Building other than the Premises for which access to the Premises is reasonably necessary. In
connection with any such alteration, improvement or repair as described in Subsection
14.4(f), Landlord may erect in the Premises or elsewhere in the Project scaffolding and other
structures reasonably required for the alteration, improvement or repair work to be performed. In
no event shall Tenant’s Rent abate as a result of Landlord’s activities pursuant to this Section;
provided, however, that all such activities shall be conducted in such a manner so as to
cause as little interference to Tenant as is reasonably possible. Landlord shall at all times
retain a key with which to unlock all of the doors in the Premises. If an emergency necessitates
immediate access to the Premises, Landlord may use whatever force is necessary under the
circumstances to enter the Premises, and any such emergency entry to the Premises shall not
constitute a forcible or unlawful entry to the Premises, a detainer of the Premises, or an eviction
of Tenant from the Premises or any portion thereof. Notwithstanding anything to the contrary
contained herein, because of the proprietary nature of the materials and information in the
Premises and the potential for material harm to Tenant’s business in the event such information
were compromised, Tenant is hereby granted the right to designate certain portions of the Premises
as “Secured Area(s)” and reserves the right to install door locks or other access control
systems as necessary to secure such Secured Area(s), and Landlord agrees not to enter such Secured
Area(s) except in the case of an emergency (as set forth above), unless it shall have first
obtained Tenant’s consent and Tenant has a reasonable opportunity to have a representative

28

 

present (at the option of Tenant). Tenant hereby releases Landlord and waives any Claim
against Landlord arising out of or related to Landlord’s inability to gain timely access to the
Secured Areas.

15. Quiet Enjoyment. So long as Tenant is not in Default under this Lease, Landlord or
anyone acting through or under Landlord shall not disturb Tenant’s occupancy of the Premises or
Tenant’s use of the parking facilities and other Common Areas of the Building, except as permitted
by this Lease.

16. Utilities and Services.

     16.1. Tenant shall pay for all water (including the cost to service, repair and replace
reverse osmosis, de-ionized and other treated water), gas, heat, light, power, telephone, internet
service, cable television, other telecommunications and other utilities supplied to the Premises,
together with any fees, surcharges and taxes thereon. Landlord shall install separate water, gas
and electrical meters or submeters for the Premises as part of the Landlord’s Work, and such meters
shall be registered in Tenant’s name for direct payment to the applicable utility providers. If
any other such utility is not separately metered to Tenant, Tenant shall pay a reasonable
proportion (to be determined by Landlord based on Tenant’s usage) of all charges of such utility
jointly metered with other premises as Additional Rent. To the extent that Tenant uses more than
Tenant’s proportional share of any utilities that are not separately metered to Tenant, including
utilities for the Common Areas, then Tenant shall pay Landlord for such excess in addition to
Tenant’s obligation to pay Tenant’s Pro Rata Share of Operating Expenses. In the event that the
Building is less than fully occupied, Tenant acknowledges that Landlord may extrapolate the cost of
water and sewer that vary depending on the occupancy of the Building, by dividing (a) the total
cost of water and sewer usage by (b) the Rentable Area of the Building that is occupied, then
multiplying (y) the resulting quotient by (z) ninety-five percent (95%) of the total Rentable Area
of the Building; provided that such adjustment shall not result in an increase in Tenant’s cost of
such water and sewer fees in excess of ten percent (10%) above the cost of such water and sewer
fees that would be payable by Tenant prior to making such adjustment. Tenant shall pay Tenant’s
Pro Rata Share of the product of (y) and (z); provided, however, that Landlord shall not recover
more than one hundred percent (100%) of such water and sewer costs.

     16.2. Landlord shall not be liable for, nor shall any eviction of Tenant result from, the
failure to furnish any utility or service, whether or not such failure is caused by accident;
breakage; repair; strike, lockout or other labor disturbance or labor dispute of any character; act
of terrorism; shortage of materials, which shortage is not unique to Landlord or Tenant, as the
case may be; governmental regulation, moratorium or other governmental action, inaction or delay;
other causes beyond Landlord’s control (collectively, “Force Majeure”) or Landlord’s
negligence. In the event of such failure, Tenant shall not be entitled to termination of this
Lease or any abatement or reduction of Rent, nor shall Tenant be relieved from the operation of any
covenant or agreement of this Lease. Notwithstanding the foregoing, or anything to the contrary in
this Lease, if as a result of Landlord’s gross negligence or willful misconduct, for more than
three (3) consecutive business days following written notice to Landlord: (a) HVAC or electricity
services to all or a material portion of the Premises is interrupted or is unable to support
Tenant’s normal occupancy requirements for the Permitted Use, or (b) an interruption of

29

 

other essential utilities and building services, such as fire protection or water, prevents
the use or occupancy of all or a material portion of the Premises for the Permitted Use (including
biotechnology manufacturing to the extent biotechnology manufacturing is a Permitted Use), then
Tenant’s Base Rent and Operating Expenses (or an equitable portion of such Base Rent and Additional
Rent based on the impact of such interruption on Tenant’s business operations, to the extent that
less than all of the Premises are affected) shall thereafter be abated until the Premises are again
usable by Tenant for the Permitted Use; provided, however, that if Landlord is diligently pursuing
the repair of such utilities or services and Landlord provides substitute services reasonably
suitable for Tenant’s continued use and occupancy of the Premises for Permitted Use purposes, as
for example, bringing in portable air-conditioning equipment or potable water supplies, then there
shall not be an abatement of Base Rent. In any such event, regardless of cause, Landlord shall
diligently pursue the repair of such utilities and services. The foregoing provisions shall be
Tenant’s sole recourse and remedy in the event of an interruption of services to the Premises
caused by Landlord’s gross negligence or willful misconduct. The foregoing provisions shall not
apply in case of the actions of parties other than Landlord, in the case of simple negligence of
Landlord, or in the case of damage to, or destruction of, the Premises (which shall be governed by
the provisions of Article 24 of the Lease). In addition to Tenant’s abatement rights set
forth above, in the event that Tenant is prevented from using all or a portion of the Premises due
to the failure to furnish any utility or essential building service (including due to a failure to
repair and maintain as required by Article 18 of this Lease) and such failure or
circumstance continues for more than one hundred thirty five (135) consecutive days, Tenant shall
have the right to terminate this lease upon five (5) business days notice to Landlord as a result
of such extended interruption. The foregoing provision shall not apply in the case of damage to,
or destruction of, the Premises (which shall be governed by the provisions of Article 24 of
the Lease).

     16.3. Tenant shall pay for, prior to delinquency of payment therefor, any utilities and
services that may be furnished to the Premises during or, if Tenant occupies the Premises after the
expiration or earlier termination of the Term, after the Term, beyond those utilities provided by
Landlord, including telephone, internet service, cable television and other telecommunications,
together with any fees, surcharges and taxes thereon. Utilities and services provided to the
Premises that are separately metered shall be paid by Tenant directly to the supplier of such
utilities or services.

     16.4. Tenant shall not, without Landlord’s prior written consent, use any device in the
Premises (including data processing machines) that will in any way (a) increase the amount of
ventilation, air exchange, gas, steam, electricity or water beyond the existing capacity of the
Building or the Project as proportionately allocated to the Premises based upon Tenant’s Pro Rata
Share of the Building as usually furnished or supplied for the use set forth in Section 2.7
or (b) exceed Tenant’s Pro Rata Share of the Building’s capacity to provide such utilities or
services. Notwithstanding the foregoing, should Tenant desire increased ventilation, air exchange,
gas, steam, electricity or water in the Building or Project, Tenant may offer to pay for all costs
to increase the Building or Project capacity and Landlord shall consider such request in its
reasonable discretion.

30

 

     16.5. Without limiting Tenant’s right to install supplemental equipment and system
improvements within the Premises as part of the Tenant Improvements and subsequent Alterations
(subject to Landlord’s applicable approval rights), if Tenant shall require utilities or services
in excess of those usually furnished or supplied for tenants in similar spaces in the Building by
reason of Tenant’s equipment or extended hours of business operations, then Tenant shall first
procure Landlord’s consent for the use thereof, which consent Landlord may condition upon the
availability of such excess utilities or services, and Tenant shall pay as Additional Rent an
amount equal to the cost of providing such excess utilities and services.

     16.6. Utilities and services provided to the Premises that are separately metered shall be
paid by Tenant directly to the supplier of such utility or service.

     16.7. Landlord shall provide the Amenities Building Services as set forth in this Lease
throughout the Term and the cost of such Amenities Building Services shall be a Project Operating
Expense.

     16.8. Landlord shall provide water in the Building Common Area for lavatory purposes only and
such water shall be separately metered for the Building Common Area; provided, however, that if
Landlord determines that Tenant requires, uses or consumes water in the Common Area for any purpose
other than ordinary lavatory purposes, then Tenant shall pay Landlord for such excess Common Area
water usage in addition to Tenant’s obligation to pay Tenant’s Pro Rata Share of Operating
Expenses.

     16.9. Landlord reserves the right (with such notice as is practical under the circumstances,
if any) to stop service of the elevator, plumbing, ventilation, air conditioning, electric systems
and Amenities Building Services when Landlord deems necessary or desirable, due to accident,
emergency or the need to make repairs, alterations or improvements, until such repairs, alterations
or improvements shall have been completed, and except as provide in Section 16.2 above,
Landlord shall further have no responsibility or liability for failure to supply elevator
facilities, plumbing, ventilation, air conditioning or electric service when prevented from doing
so by Force Majeure; a failure by a third party to deliver gas, oil or another suitable fuel
supply; or Landlord’s inability by exercise of reasonable diligence to obtain gas, oil or another
suitable fuel. Without limiting the foregoing, it is expressly understood and agreed that any
covenants on Landlord’s part to furnish any service pursuant to any of the terms, covenants,
conditions, provisions or agreements of this Lease, or to perform any act or thing for the benefit
of Tenant, shall not be deemed breached if Landlord is unable to furnish or perform the same by
virtue of Force Majeure. Landlord shall use commercially reasonable efforts in exercising its
rights pursuant to this Section in a manner so as to minimize or prevent interference with Tenant’s
use of, or access to the Premises and to perform such repairs outside of normal business hours.

     16.10. Tenant shall be entitled to use up to its proportionate share of power from the
Landlord’s existing emergency backup generator (the “Generator”) on a non-exclusive basis
with other Tenants in the Building. The cost of maintaining, repairing and replacing the Generator
shall constitute Operating Expenses. Landlord expressly disclaims any warranties with regard to
the Generator or the installation thereof, including any warranty of merchantability or fitness for
a particular purpose; provided Landlord will conduct regular testing and maintenance of the

31

 

Generator. Landlord shall maintain the Generator in good working condition, but shall not be
liable for any failure to make any repairs or to perform any maintenance that is an obligation of
Landlord unless such failure shall persist for an unreasonable time after Tenant provides Landlord
with written notice of the need for such repairs or maintenance. The provisions of Section
16.2 of this Lease shall apply to Landlord’s existing Generator, and shall not affect Tenant’s
operation or maintenance of any Tenant Generator that may be installed by Tenant during the Lease
Term as a trade fixture of Tenant in the Project Common Areas adjacent to the Building as
hereinafter provided: Landlord acknowledges that Tenant may determine that a separate emergency
backup generator under Tenant’s control may be appropriate to protect its operations in the
Premises, and therefore, Landlord agrees that Tenant shall have the right to install, as part of
the initial Tenant Improvements or as subsequent Alterations, Tenant’s own separately dedicated
emergency generator on or about the Building (the “Tenant Generator”) in locations
reasonably acceptable to Landlord, provided that, (a) such installation complies with all
Applicable Laws and provisions of this Lease, and (b) in the event that Tenant pays for the cost of
the Tenant Generator (and the cost thereof is not paid out of the TI Allowance), the Tenant
Generator and related equipment shall be deemed a Tenant trade fixture, which shall remain Tenant’s
personal property and will be removed by Tenant upon the expiration or earlier termination of this
Lease.

     16.11. For the Premises, Landlord shall (a) maintain and operate the heating, ventilating and
air conditioning systems at levels required for the Permitted Use only (“HVAC”) and (b)
subject to clause (a) above, furnish HVAC as reasonably required (except as this Lease otherwise
provides) for reasonably comfortable occupancy of the Premises twenty-four (24) hours a day, every
day during the Term, subject to casualty, eminent domain or as otherwise specified in this Article.
The costs and expenses of Landlord’s operation, maintenance, repair or replacement of the
aforementioned HVAC shall be considered Operating Expenses of the Building. Notwithstanding
anything to the contrary in this Section, (except as provided in Section 16.2 above) Landlord shall
have no liability, and Tenant shall have no right or remedy, on account of any interruption or
impairment in HVAC services; provided that Landlord diligently endeavors to cure any such
interruption or impairment. Pursuant to the terms of the Work Letter, Tenant shall be permitted to
install as part of the Tenant Improvements, its own separate, dedicated package HVAC units to
exclusively serve the Premises (the “Tenant HVAC System”). Tenant shall be responsible for
the operation and maintenance and all associated costs of the Tenant HVAC System. The Tenant HVAC
System shall remain in the Premises upon Tenant’s surrender of the Premises and shall be the
property of Landlord.

     16.12. For any utilities serving the Premises for which Tenant is billed directly by such
utility provider, Tenant agrees to furnish to Landlord (a) any invoices or statements for such
utilities within thirty (30) days after Tenant’s receipt thereof, (b) within thirty (30) days after
Landlord’s request, any other utility usage information reasonably requested by Landlord, and (c)
within thirty (30) days after each calendar year during the Term, an ENERGY STAR® Statement of
Performance (or similar comprehensive utility usage report for laboratories such as Labs21®, about
which information can be found at www.labs21century.gov), if requested by Landlord) and any other
information reasonably requested by Landlord for the immediately preceding year; provided that none
of the foregoing results in more than a de minimus cost to

32

 

Tenant and is readily obtainable from the utility provider. Tenant shall retain records of
utility usage at the Premises, including invoices and statements from the utility provider, for at
least sixty (60) months following payment thereof, or such other period of time as may be requested
by Landlord. Tenant acknowledges that any utility information for the Premises, the Building and
the Project may be shared with third parties, including Landlord’s consultants and Governmental
Authorities. In the event that Tenant fails to timely comply with the reporting requirements in
this Section, Tenant hereby appoints Landlord as Tenant’s attorney-in-fact for the purpose of
Landlord collecting utility usage information directly from the applicable utility providers.

17. Alterations.

     17.1. Tenant shall make no alterations, additions or improvements in or to the Premises or
engage in any construction, demolition, reconstruction, renovation, or other work (whether major or
minor) of any kind in, at, or serving the Premises (“Alterations”) without Landlord’s prior
written approval, which approval Landlord shall not unreasonably withhold; provided,
however, that in the event any proposed Alteration affects (a) any structural portions of the
Building, including exterior walls, roof, foundation, foundation systems (including barriers and
subslab systems), or core of the Building, (b) the exterior of the Building or (c) any Building
systems, including elevator, plumbing, air conditioning, heating, electrical, security, life safety
and power, then Landlord may withhold its approval with respect thereto in its sole and absolute
discretion; and provided, further, that the Expansion Space Tenant Improvements shall be
governed by Articles 4 and 43 hereof and the Work Letter, rather than this
Article. Tenant shall, in making any such Alterations, use only those architects,
contractors, suppliers and mechanics of which Landlord has given prior written approval, which
approval shall be in Landlord’s sole and absolute discretion. In seeking Landlord’s approval,
Tenant shall provide Landlord, at least fourteen (14) days in advance of any proposed construction,
with plans, specifications, bid proposals, certified stamped engineering drawings and calculations
by Tenant’s engineer of record or architect or record, (including connections to the Building’s
structural system, modifications to the Building’s envelope, non-structural penetrations in slabs
or walls, and modifications or tie-ins to life safety systems), work contracts, requests for
laydown areas and such other information concerning the nature and cost of the Alterations in all
cases as Landlord may reasonably request. In no event shall Tenant use or Landlord be required to
approve any architects, consultants, contractors, subcontractors or material suppliers that
Landlord reasonably believes could cause labor disharmony. Notwithstanding the foregoing, Tenant
may make strictly cosmetic changes to the Premises (“Cosmetic Alterations”) without
Landlord’s consent; provided that (y) the cost of any Cosmetic Alterations does not exceed Fifty
Thousand Dollars ($50,000) in any one instance, (z) such Cosmetic Alterations do not (i) require
any structural or other substantial modifications to the Premises, (ii) require any changes to, or
adversely affect, the Building systems, (iii) affect the exterior of the Building or (iv) trigger
any requirement under Applicable Laws that would require Landlord to make any alteration or
improvement to the Premises, the Building or the Project. Tenant shall give Landlord at least ten
(10) days’ prior written notice of any Cosmetic Alterations. Subject to the provisions of this
Lease and all Applicable Laws, Tenant shall have the right, to (A) construct and install the
Hazardous Materials Storage Shed and a compressed gas storage area in a portion of the Common Areas
as

33

 

provided in Section 13.6 above; (B) install rooftop antennae or satellite dishes, and
solar panels, on its Pro Rata Share of the Building’s roof for Tenant’s sole use for administration
of its business or research in the Premises, or for generation of electricity, in accordance with
Article 40 of this Lease, (C) install a Tenant Generator, as provided in Section
16.10 above, and (D) install and maintain its own security system for the Premises (including
card readers, cameras and on-site security guards) all of which unless otherwise specified by
Landlord pursuant to this Article 17 (other than the Tenant Generator or on-site security
guards hired by Tenant) shall remain in at the Project upon Tenant’s surrender of the Premises and
shall be the property of Landlord.

     17.2. Tenant shall not construct or permit to be constructed partitions or other obstructions
that might interfere with free access to mechanical installation or service facilities of the
Building or with other tenants’ components located within the Building, or interfere with the
moving of Landlord’s equipment to or from the enclosures containing such installations or
facilities.

     17.3. Tenant shall accomplish any work performed on the Premises or the Building in such a
manner as to permit any life safety systems to remain fully operable at all times.

     17.4. Any work performed on the Premises, the Building or the Project by Tenant or Tenant’s
contractors shall be done at such times and in such manner as Landlord may from time to time
reasonably designate. Tenant covenants and agrees that all work done by Tenant or Tenant’s
contractors shall be performed in compliance with Applicable Laws. Within thirty (30) days after
completion of any Alterations, Tenant shall provide Landlord with complete “as-built” drawing print
sets and electronic CADD files on disc (excluding Cosmetic Alterations, and otherwise only to the
extent “as-built” drawings and CADD modifications are typically provided for such Alterations or in
the event such “as-built” drawings and CADD modifications are actually obtained by Tenant) or files
in such other current format in common use as Landlord reasonably approves or requires showing any
changes in the Premises.

     17.5. Before commencing any Alterations, Tenant shall give Landlord at least fourteen (14)
days’ prior written notice of the proposed commencement of such work and shall, if required by
Landlord, secure, at Tenant’s own cost and expense, a completion and lien indemnity bond
satisfactory to Landlord for said work; provided that no bond will be required unless such
Alterations cost in excess of Two Hundred Fifty Thousand Dollars ($250,000).

     17.6. Other than the Tenant Generator, all Alterations, attached equipment, attached
decorations, fixtures, trade fixtures, additions and improvements which are paid for by Landlord,
subject to Section 17.8, attached to or built into the Premises, made by either of the
Parties, including all floor and wall coverings, built-in cabinet work and paneling, sinks and
related plumbing fixtures, laboratory benches, exterior venting fume hoods and walk-in freezers and
walk-in refrigerators, ductwork, conduits, electrical panels and circuits, shall (unless, prior to
such construction or installation, Landlord elects otherwise) become the property of Landlord upon
the expiration or earlier termination of the Term, and shall remain upon and be surrendered with
the Premises as a part thereof. Notwithstanding the foregoing, any equipment, trade fixtures,
appliances, laboratory benches and equipment, fume hoods, refrigerators or freezers or

34

 

similar items which Tenant pays for, shall be and remain Tenant’s property regardless of the
method of attachment to the Premises. The Premises shall at all times remain the property of
Landlord and shall be surrendered to Landlord upon the expiration or earlier termination of this
Lease. All Tenant Improvements or Alterations attached to the Premises (other than Tenant’s trade
fixtures and equipment so long as such trade fixtures and equipment were paid for by Tenant in
which case such trade fixtures and equipment may be removed by Tenant so long as Tenant repairs any
damage caused by such removal) shall be the property of Landlord.

     17.7. Tenant shall repair any damage to the Premises caused by Tenant’s removal of any
property and Signage from the Premises. During any such restoration period, Tenant shall pay Rent
to Landlord as provided herein as if said space were otherwise occupied by Tenant. The provisions
of this Section shall survive the expiration or earlier termination of this Lease.

     17.8. Except as to those items listed on Exhibit H attached hereto (which Exhibit may
be updated by Tenant from and after the Term Commencement Date, but in each case only upon receipt
of Landlord’s prior written approval of such updates in accordance with the procedures set forth
hereafter), all initial Tenant Improvements, all business and trade fixtures paid for by Landlord,
built-in machinery and equipment paid for by Landlord, built-in furniture and cabinets, future
Alterations which are affixed to the Premises (excluding any later installed trade fixtures and
equipment paid for by Tenant, which will remain Tenant’s property whether or not included in
Exhibit H), installed in and upon the Premises shall be and remain the property of Landlord
and shall not be moved by Tenant at any time during the Term. Following the Term Commencement
Date, and prior to the commencement of any work relating to any Alterations occurring thereafter,
Tenant shall have the ability to update Exhibit H by submitting such updated Exhibit
H to Landlord at least twenty (20) days prior to the installation at the Premises of any items
requested to be included on Exhibit H by Tenant. Within twenty (20) days of Landlord’s
receipt of Tenant’s updated Exhibit H, Landlord shall notify Tenant whether or not Landlord
approved the updated Exhibit H. If Landlord fails to respond within such twenty (20) day
period, Tenant shall provide a written reminder notice to Landlord. Landlord’s failure to respond
to such reminder notice within ten (10) days after delivery of such reminder notice shall be deemed
approval by Landlord of the updated Exhibit H as submitted to Landlord. Any property or
equipment which is not attached or built in to the Premises will be and remain Tenant’s personal
property removable at any time by Tenant. If Tenant shall fail to remove any of its effects from
the Premises prior to termination of this Lease, then Landlord may, at its option, remove the same
in any manner that Landlord shall choose and store said effects without liability to Tenant for
loss thereof or damage thereto, and Tenant shall pay Landlord, upon demand, any costs and expenses
incurred due to such removal and storage or Landlord may, at its sole option and without notice to
Tenant, sell such property or any portion thereof at private sale and without legal process for
such price as Landlord may obtain and apply the proceeds of such sale against any (a) amounts due
by Tenant to Landlord under this Lease and (b) any expenses incident to the removal, storage and
sale of said personal property, provided that any remaining amounts shall be promptly delivered to
Tenant.

     17.9. Notwithstanding any other provision of this Article to the contrary, in no event shall
Tenant remove any improvement from the Premises as to which Landlord contributed

35

 

payment, including the Tenant Improvements, Landlord’s Work and Expansion Space Tenant
Improvements made pursuant to the Work Letter without Landlord’s prior written consent, which
consent Landlord may withhold in its sole and absolute discretion.

     17.10. Tenant shall pay to Landlord an amount equal to one percent (1%) of the cost to Tenant
of all Alterations installed by Tenant or its contractors or agents to cover Landlord’s overhead
and expenses for plan review, coordination, scheduling and supervision thereof. For purposes of
payment of such sum, Tenant shall submit to Landlord copies of all bills, invoices and statements
covering the costs of such charges, accompanied by payment to Landlord of the fee set forth in this
Section. Tenant shall reimburse Landlord for any extra expenses incurred by Landlord by reason of
faulty work done by Tenant or its contractors, or by reason of inadequate clean-up.

     17.11. Within sixty (60) days after final completion of any Alterations performed by Tenant in
the Premises or Common Areas, Tenant shall submit to Landlord documentation showing the amounts
expended by Tenant with respect to such Alterations performed by Tenant, together with supporting
documentation reasonably acceptable to Landlord, and appropriate lien waivers and releases
indicating that the contractor and subcontractors engaged in such work have been fully paid (or
evidence that appropriate bonding has been obtained for the cost of any work that is subject to a
payment dispute).

     17.12. Tenant shall take, and shall cause its contractors to take, commercially reasonable
steps to protect the Premises during the performance of any Alterations, including covering or
temporarily removing any window coverings so as to guard against dust, debris or damage.

     17.13. Tenant shall require its contractors and subcontractors performing work on the Premises
to name Landlord and its affiliates and Lenders as additional insureds on their respective
insurance policies.

     17.14. As used in this Lease, “Alterations” do not include the Landlord’s Work and
Tenant Improvements and Expansion Space Tenant Improvements to be constructed pursuant to the
attached Work Letter.

18. Repairs and Maintenance.

     18.1. Landlord shall repair and maintain the structural and exterior portions of the Building
and all Common Areas of the Building and the Project, including, without limitation, the roof
membrane and covering materials; foundations; floor/ceiling slabs, columns, beams, shafts, exterior
walls; plumbing; fire sprinkler systems (if any); heating, ventilating, air conditioning systems;
elevators; and electrical systems installed or furnished by Landlord. Subject to the provisions of
this Lease and the limitations of Section 9.1(b), if any, any costs incurred by Landlord pursuant
to this Section 18.1 shall constitute Operating Expenses, unless such costs are incurred
due in whole or in part to any act, neglect, fault or omissions of Tenant, or its agents,
contractors, employees or invitees, in which case Tenant shall pay to Landlord the cost of such
repairs and maintenance.

36

 

     18.2. Except for services of Landlord, if any, required by Section 18.1, Tenant shall
at Tenant’s sole cost and expense maintain and keep the Premises and every part thereof in good
condition and repair, damage thereto from ordinary wear and tear excepted. Tenant shall, upon the
expiration or sooner termination of the Term, surrender the Premises to Landlord in as good a
condition as when received, ordinary wear and tear excepted. Tenant shall, upon the expiration or
sooner termination of the Term, at Landlord’s request, remove all telephone and data systems,
wiring and equipment from the Premises, but only to the extent any of the foregoing were installed
by Tenant (i.e. Tenant shall not be required to remove any telephone and data systems, wiring and
equipment existing in the Premises as of the Execution Date) and repair any damage to the Premises
caused thereby. Landlord shall have no obligation to alter, remodel, improve, repair, decorate or
paint the Premises or any part thereof, other than (a) pursuant to the terms and provisions of the
Work Letter and (b) performing the Landlord’s Work.

     18.3. Landlord shall not be liable for any failure to make any repairs or to perform any
maintenance that is an obligation of Landlord unless such failure shall persist for an unreasonable
time after Tenant provides Landlord with written notice of the need of such repairs or maintenance.
Tenant waives its rights under Applicable Laws now or hereafter in effect to make repairs at
Landlord’s expense.

     18.4. If any excavation shall be made upon land adjacent to or under the Building, or shall be
authorized to be made, Tenant shall afford to the person causing or authorized to cause such
excavation, license to enter the Premises for the purpose of performing such work as said person
shall deem necessary or desirable to preserve and protect the Building from injury or damage and to
support the same by proper foundations, without any claim for damages or liability against Landlord
and without reducing or otherwise affecting Tenant’s obligations under this Lease; provided that
Landlord shall endeavor to cause any such person to perform any such work in a commercially
reasonable manner which minimizes interference with Tenant’s use and enjoyment of the Premises.

     18.5. This Article relates to repairs and maintenance arising in the ordinary course of
operation of the Building and the Project. In the event of a casualty described in Article
24, Article 24 shall apply in lieu of this Article. In the event of eminent domain,
Article 25 shall apply in lieu of this Article.

     18.6. Costs incurred by Landlord pursuant to this Article shall constitute Operating Expenses,
unless such costs are incurred due in whole or in part to any act, neglect, fault or omissions of
Tenant or its employees, agents, contractors or invitees, in which case Tenant shall pay to
Landlord the cost of such repairs and maintenance.

19. Liens.

     19.1. Subject to the immediately succeeding sentence, Tenant shall keep the Premises, the
Building and the Project free from any liens arising out of work performed, materials furnished or
obligations incurred by Tenant. Tenant further covenants and agrees that any mechanic’s lien filed
against the Premises, the Building or the Project for work claimed to have

37

 

been done for, or materials claimed to have been furnished to, shall be discharged or bonded
by Tenant within ten (10) business days after the filing thereof, at Tenant’s sole cost and
expense.

     19.2. Should Tenant fail to discharge or bond against any lien of the nature described in
Section 19.1, Landlord may, at Landlord’s election, pay such claim or post a bond or
otherwise provide security to eliminate the lien as a claim against title, and Tenant shall
immediately reimburse Landlord for the costs thereof as Additional Rent. Tenant shall indemnify,
save, defend (at Landlord’s option and with counsel reasonably acceptable to Landlord) and hold the
Landlord Indemnitees harmless from and against any Claims arising from any such liens, including
any administrative, court or other legal proceedings related to such liens.

     19.3. In the event that Tenant leases or finances the acquisition of office, laboratory or
manufacturing equipment, furnishings or other personal property of a removable nature utilized by
Tenant in the operation of Tenant’s business, Tenant warrants that any Uniform Commercial Code
financing statement shall, upon its face or by exhibit thereto, indicate that such financing
statement is applicable only to removable personal property of Tenant located within the Premises.
In no event shall the address of the Premises, the Building or the Project be furnished on a
financing statement without qualifying language as to applicability of the lien only to removable
personal property located in an identified suite leased by Tenant. Should any holder of a
financing statement record or place of record a financing statement that appears to constitute a
lien against any interest of Landlord or against equipment that may be located other than within an
identified suite leased by Tenant, Tenant shall, within thirty (30) days after filing such
financing statement, cause (a) a copy of the Lender security agreement or other documents to which
the financing statement pertains to be furnished to Landlord to facilitate Landlord’s ability to
demonstrate that the lien of such financing statement is not applicable to Landlord’s interest and
(b) Tenant’s Lender to amend such financing statement and any other documents of record to clarify
that any liens imposed thereby are not applicable to any interest of Landlord in the Premises, the
Building or the Project. Landlord shall endeavor to cooperate with Tenant in the event that Tenant
leases or finances the acquisition of office equipment, furnishings or other personal property of a
removable nature utilized by Tenant in the operation of Tenant’s business, and shall execute a
Landlord’s waiver and consent in connection with such lease or equipment financing;
provided such waiver and consent is in a form approved by Landlord in its reasonable
discretion.

20. Estoppel Certificate. Tenant shall, within ten (10) business days of receipt of
written notice from Landlord, execute, acknowledge and deliver a statement in writing substantially
in the form attached to this Lease as Exhibit I, or on any other form reasonably requested
by a proposed Lender or purchaser, (a) certifying that this Lease is unmodified and in full force
and effect (or, if modified, stating the nature of such modification and certifying that this Lease
as so modified is in full force and effect) and the dates to which rental and other charges are
paid in advance, if any, (b) acknowledging that there are not, to Tenant’s knowledge, any uncured
defaults on the part of Landlord hereunder, or specifying such defaults if any are claimed, and (c)
setting forth such further factual information of which Tenant has or should have actual knowledge
with respect to this Lease or the Premises as may be reasonably requested thereon. Any such
statement may be relied upon by any prospective purchaser or encumbrancer of all or

38

 

any portion of
the real property of which the Premises are a part. Tenant’s failure to deliver such
statement within such the prescribed time shall, at Landlord’s option, constitute a Default (as
defined below) under this Lease, and, in any event, shall be binding upon Tenant that the Lease is
in full force and effect and without modification except as may be represented by Landlord in any
certificate prepared by Landlord and delivered to Tenant for execution.

21. Hazardous Materials.

     21.1. Tenant shall not cause or permit any Hazardous Materials (as defined below) to be
brought upon, kept or used in or about the Premises, the Building or the Project in violation of
Applicable Laws by Tenant or its employees, agents, contractors or invitees. If Tenant breaches
such obligation, or if the presence of Hazardous Materials as a result of such a breach results in
contamination of the Project, any portion thereof, or any adjacent property, or if contamination of
the Premises by Hazardous Materials otherwise occurs during the Term or any extension or renewal
hereof or holding over hereunder (other than if such contamination results from (a) migration of
Hazardous Materials from outside the Premises not caused by Tenant or its employees, agents,
contractors or invitees or (b) to the extent such contamination is solely caused by Landlord’s
gross negligence or willful misconduct), then Tenant shall indemnify, save, defend (at Landlord’s
option and with counsel reasonably acceptable to Landlord) and hold the Landlord Indemnitees
harmless from and against any and all Claims, including (a) diminution in value of the Project or
any portion thereof, (b) damages for the loss or restriction on use of rentable or usable space or
of any amenity of the Project, (c) damages arising from any adverse impact on marketing of space in
the Project or any portion thereof and (d) sums paid in settlement of Claims that arise during or
after the Term as a result of such breach or contamination. This indemnification by Tenant
includes costs incurred in connection with any investigation of site conditions or any clean-up,
remedial, removal or restoration work required by any Governmental Authority because of Hazardous
Materials present in the air, soil or groundwater above, on or under or about the Project. Without
limiting the foregoing, if the presence of any Hazardous Materials in, on, under or about the
Project, any portion thereof or any adjacent property caused or permitted by Tenant results in any
contamination of the Project, any portion thereof or any adjacent property, then Tenant shall
promptly take all actions at its sole cost and expense as are necessary to return the Project, any
portion thereof or any adjacent property to its respective condition existing prior to the time of
such contamination or in compliance with Applicable Laws if the foregoing is not possible;
provided that Landlord’s written approval of such action shall first be obtained, which
approval Landlord shall not unreasonably withhold; and provided, further, that it shall be
reasonable for Landlord to withhold its consent if such actions could have a material adverse
long-term or short-term effect on the Project, any portion thereof or any adjacent property. In
the event Landlord receives notice of a Claim for which Tenant is obligated to indemnify Landlord
pursuant to this Section 21.1, then Landlord shall (i) promptly provide notice to Tenant of
such Claim and (ii) not enter into any settlement agreement without the express written consent of
Tenant, which consent shall not be unreasonably withheld, conditioned or delayed. Notwithstanding
anything in this Article 21 to the contrary, Tenant’s indemnification obligation under this
Section 21.1 shall not extend to contamination of the soils or groundwater of the Project
by Hazardous Materials that migrate onto the Project from adjacent properties, or which are caused
by defects or breaks in the

39

 

underground sewer piping of the Project, except to the extent that such
contamination is attributable to the use or disposal of Hazardous Materials by Tenant or its
agents, employees, contractors or invitees.

     21.2. Landlord acknowledges that it is not the intent of this Article to prohibit Tenant from
operating its business for the Permitted Use. Tenant may operate its business according to the
custom of Tenant’s industry so long as the use or presence of Hazardous Materials is strictly and
properly monitored in accordance with Applicable Laws. Landlord will reasonably cooperate with
Tenant, at Tenant’s sole cost and expense, in Tenant’s efforts to obtain or close any Hazardous
Materials licenses required for the operation of Tenant’s business, including a radioactive
license. As a material inducement to Landlord to allow Tenant to use Hazardous Materials in
connection with its business, Tenant agrees to deliver to Landlord prior to the Term Commencement
Date a list identifying each type of Hazardous Material to be present at the Project and setting
forth any and all governmental approvals or permits required in connection with the presence of
such Hazardous Material at the Project (the “Hazardous Materials List”). Tenant shall
deliver to Landlord an updated Hazardous Materials List on or prior to each annual anniversary of
the Term Commencement Date and shall also deliver an updated Hazardous Materials List before any
new Hazardous Materials are brought to the Project. Tenant shall deliver to Landlord true and
correct copies of the following documents (hereinafter referred to as the “Documents”)
relating to the handling, storage, disposal and emission of Hazardous Materials prior to the Term
Commencement Date or, if unavailable at that time, concurrently with the receipt from or submission
to any Governmental Authority: permits; approvals; reports and correspondence; storage and
management plans; notices of violations of Applicable Laws; plans relating to the installation of
any storage tanks to be installed in, on, under or about the Project (provided that
installation of storage tanks shall only be permitted after Landlord has given Tenant its written
consent to do so, which consent Landlord may withhold in its sole and absolute discretion), except
as follows: (a) Tenant may install one (1) above-ground storage tank (not to exceed two thousand
(2,000) gallons) associated with the Tenant Generator, subject to Landlord’s reasonable approval
and approval by the City of Newark; and (b) Tenant may install one above-ground storage tank (not
to exceed sixty (60) gallons) as part of the Hazardous Materials Storage Shed improvements
permitted under Section 16.1 above, subject to Landlord’s reasonable approval and approval
by the City of Newark); and all closure plans or any other documents required by any and all
Governmental Authorities for any storage tanks installed in, on, under or about the Project for the
closure of any such storage tanks. Tenant shall not be required, however, to provide Landlord with
any portion of the Documents containing information of a proprietary nature, which Documents, in
and of themselves, do not contain a reference to any Hazardous Materials or activities related to
Hazardous Materials.

     21.3. Notwithstanding the provisions of Sections 21.1 21.2 or 21.9, if
Tenant has asked Landlord to consent to a proposed transfer, assignment or sublease of this Lease,
it shall not be unreasonable for Landlord to withhold its consent to such proposed transfer,
assignment or subletting if the proposed transferee, sublessee or assignee (a) has been required by
any prior landlord, Lender or Governmental Authority to take material remedial action in connection
with Hazardous Materials contaminating a property if the contamination resulted from such party’s
action or omission or use of the property in question, or (b) is subject to a material enforcement

40

 

order issued by any Governmental Authority in connection with the use, disposal or storage of
Hazardous Materials. Tenant represents and warrants that it (a) has not been required by any prior
landlord, Lender or Governmental Authority to take material remedial action in connection with
Hazardous Materials contaminating a property if the contamination resulted from such
party’s action or omission or use of the property in question, or (b) is not subject to a
material enforcement order issued by any Governmental Authority in connection with the use,
disposal or storage of Hazardous Materials.

     21.4. At any time, and from time to time, prior to the expiration of the Term, Landlord shall
have the right to conduct appropriate tests of the Project or any portion thereof to demonstrate
that Hazardous Materials are present or that contamination has occurred due to Tenant or Tenant’s
employees, agents, contractors or invitees. Tenant shall pay all reasonable costs of such tests if
such tests reveal that Hazardous Materials exist at the Project in violation of Tenant’s
obligations under this Lease.

     21.5. If underground or other storage tanks storing Hazardous Materials installed or utilized
by Tenant are located on the Premises or are hereafter placed on the Premises by Tenant or by any
other party if such storage tanks are utilized by Tenant, then Tenant shall monitor the storage
tanks, maintain appropriate records, implement reporting procedures, properly close any underground
storage tanks, and take or cause to be taken all other steps necessary or required under the
Applicable Laws. Tenant shall have no responsibility or liability for underground or other storage
tanks installed by anyone other than Tenant unless Tenant utilizes such underground or other
storage tanks, in which case Tenant’s responsibilities for such tanks are as set forth in this
Section 21.5.

     21.6. Tenant shall promptly report to Landlord any actual or suspected presence of mold or
water intrusion at the Premises.

     21.7. Tenant’s obligations under this Article shall survive the expiration or earlier
termination of the Lease. During any period of time needed by Tenant or Landlord after the
termination of this Lease to complete the removal from the Premises of any such Hazardous
Materials, Tenant shall be deemed a holdover tenant and subject to the provisions of Article
27 below.

     21.8. As used herein, the term “Hazardous Material” means any hazardous or toxic
substance, material or waste that is or becomes regulated by any Governmental Authority.

     21.9. Notwithstanding anything to the contrary in this Lease, Landlord shall have sole control
over the equitable allocation of fire control areas (as defined in the Uniform Building Code as
adopted by the city or municipality(ies) in which the Project is located (the “UBC”))
within the Project for the storage of Hazardous Materials. Notwithstanding anything to the
contrary in this Lease, the quantity of Hazardous Materials allowed by this Section 21.9 is
specific to Tenant and shall not run with the Lease in the event of a Transfer (as defined in
Article 29). In the event of a Transfer, if the use of Hazardous Materials by such new
tenant (“New Tenant”) is such that New Tenant utilizes fire control areas in the Project in
excess of New Tenant’s Pro Rata Share of the Building or the Project, as applicable, then New
Tenant

41

 

shall, at its sole cost and expense and upon Landlord’s written request, establish and
maintain a separate area of the Premises classified by the UBC as an “H” occupancy area for the use
and storage of Hazardous Materials, or take such other action as is necessary to ensure that its
share
of the fire control areas of the Building and the Project is not greater than New Tenant’s Pro
Rata Share of the Building or the Project, as applicable.

     21.10. Landlord shall indemnify Tenant against any and all Claims resulting from the presence
of Hazardous Materials in, on or under the Project (a) in violation of Applicable Laws as of the
Execution Date, unless placed at the Project by Tenant or its affiliates, employees, agents or
contractors or (b) caused by the gross negligence or willful misconduct of Landlord or its agents,
employees or contractors.

     21.11. Landlord represents and warrants that, as of the Execution Date, to its knowledge, no
Hazardous Materials exist in the Project, Premises or the Common Area in violation of Applicable
Laws other than as may be disclosed in that certain Phase I Environmental Site Assessment dated as
of July 11, 2006, prepared by URS Corporation, which shall constitute the baseline environmental
condition of the Premises (the “Baseline Phase 1”) and, notwithstanding anything to the
contrary in this Lease, Tenant shall have no obligation to perform any remediation recommendations
that are inconsistent with the Baseline Phase 1 environmental condition of the Premises.

22. Odors and Exhaust. Tenant acknowledges that Landlord would not enter into this Lease
with Tenant unless Tenant gave Landlord reasonable assurances that other occupants of the Building
or the Project (including persons legally present in any outdoor areas of the Project) will not be
subjected to an Odor Nuisance (as defined below), and that the Building and the Project will not be
damaged by any exhaust, in each case from Tenant’s operations in the Premises. However, Landlord
and Tenant acknowledge that the nature of Tenant’s business and the Permitted Use will result in
certain odors and fumes, which will be abated in accordance with this Article 22. Landlord and
Tenant therefore agree as follows:

     22.1. Tenant shall not cause or conduct any activities that would cause an Odor Nuisance. For
purposes of this Article 22, an “Odor Nuisance” means any release of any offensive
or noxious odors or fumes from the Premises, which release either creates a nuisance or materially
and adversely impacts any portion of the Building, the Project or the use of any portion of the
Building or Project by other tenants.

     22.2. Tenant shall design and construct ventilation equipment as part of the Tenant
Improvements to be constructed in the Premises. The parties anticipate that the above referenced
ventilation equipment is adequate, suitable, and appropriate to vent the Premises in a manner that
will prevent an Odor Nuisance and Tenant shall vent the Premises through such system. If an Odor
Nuisance exists at any time, Tenant shall, in compliance with Applicable Laws, make any changes to
the ventilation system which Tenant determines are necessary to abate the Odor Nuisance. The
placement and configuration of all ventilation exhaust pipes, louvers and other equipment to be
installed by Tenant shall be subject to Landlord’s approval, which approval Landlord may not
unreasonably withhold, condition or delay.

42

 

     22.3. Tenant acknowledges Landlord’s legitimate desire to maintain the Project (indoor and
outdoor areas) in a manner free of any Odor Nuisance and Landlord may require Tenant to
abate any such Odor Nuisance in a manner that goes beyond the requirements of Applicable Laws
in accordance with Section 22.6 below.

     22.4. In the event that at any time during the Term, Landlord receives complaints from other
tenants or occupants of the Building or Project of an Odor Nuisance, Landlord and Tenant will work
together to reasonably resolve any odor issues. In such event, Tenant shall, at Tenant’s sole cost
and expense, use commercially reasonable efforts to install odor eliminators and other devices
(such as filters, air cleaners, scrubbers and whatever similar equipment may be available at
reasonable cost) to remove, eliminate and abate any Odor Nuisance. Any work Tenant performs under
this Section shall constitute Alterations.

     22.5. Tenant’s responsibility to remove, eliminate and abate any Odor Nuisance shall continue
throughout the Term. Landlord’s approval of the Tenant Improvements shall not preclude Landlord
from requiring additional measures to eliminate any Odor Nuisance.

     22.6. If after Tenant has implemented measures pursuant to Section 22.4 and if such measures
have failed to abate the Odor Nuisance, then Landlord shall notify Tenant what additional measures
Landlord requests Tenant to undertake to abate the Odor Nuisance. In the event Tenant fails to
take such measures or otherwise abate the Odor Nuisance within ten (10) business days after
Landlord has notified Tenant of the requested measures (the “Odor Cure Period”), then,
Landlord may, without limiting Landlord’s other rights and remedies and upon twenty-four (24) hours
notice to Tenant, purchase and install such odor control equipment within the Premises or the
Building Common Areas as contained in Landlord’s prior notice; provided that such corrective work
will be completed in, on or to the ventilation system. Landlord will perform any such work in a
commercially reasonable manner and so as to minimize interference with Tenant’s business
operations. The cost of any corrective work will be split equally between Landlord and Tenant up
to a maximum of $60,000.00 in the aggregate, and any costs in excess of that cap will be Landlord’s
sole responsibility. Notwithstanding the foregoing, if Tenant’s installation of requested odor
control equipment cannot be completed within the Odor Cure Period as a result of Tenant having to
order lead time items such as filters, air cleaners, scrubbers and similar equipment, then Landlord
shall not purchase and install odor control equipment in accordance with this Section so long as
Tenant has ordered the lead time items within the Odor Cure Period and thereafter diligently
prosecutes the installation of such equipment to completion.

23. Insurance; Waiver of Subrogation.

     23.1. Landlord shall maintain insurance for the Building and the Project in amounts equal to
full replacement cost (exclusive of the costs of excavation, foundations and footings, and without
reference to depreciation taken by Landlord upon its books or tax returns) or such lesser coverage
as Landlord may elect, provided that such coverage shall not be less than ninety percent
(90%) of such full replacement cost or the amount of such insurance Landlord’s Lender, if any,
requires Landlord to maintain, providing protection against any peril generally included within the
classification “Fire and Extended Coverage,” together with insurance against sprinkler

43

 

damage (if
applicable), vandalism and malicious mischief. Landlord, subject to availability thereof, shall
further insure, if Landlord deems it appropriate, coverage against flood, environmental hazard,
earthquake, loss or failure of building equipment, rental loss during the
period of repairs or rebuilding, workmen’s compensation insurance and fidelity bonds for
employees employed to perform services. Notwithstanding the foregoing, Landlord may, but shall not
be deemed required to, provide insurance for any improvements installed by Tenant or that are in
addition to the standard improvements customarily furnished by Landlord, without regard to whether
or not such are made a part of or are affixed to the Building.

     23.2. In addition, Landlord shall carry public liability insurance with a single limit of not
less than Five Million Dollars ($5,000,000) for death or bodily injury, or property damage with
respect to the Project.

     23.3. Tenant shall, at its own cost and expense, procure and maintain in effect, beginning on
the Term Commencement Date or the date of occupancy, whichever occurs first, and continuing
throughout the Term (and occupancy by Tenant, if any, after termination of this Lease)
comprehensive public liability insurance with limits of not less than Five Million Dollars
($5,000,000) per occurrence for death or bodily injury and property damage with respect to the
Premises (including $100,000 fire legal liability (each loss)).

     23.4. The insurance required to be purchased and maintained by Tenant pursuant to this Lease
shall name Landlord, BioMed Realty, L.P., BioMed Realty Trust, Inc., and their respective officers,
directors, employees, agents, general partners, members, subsidiaries, affiliates and Lenders
(“Landlord Parties”) as additional insureds. Said insurance shall be with companies
authorized to do business in the state in which the Project is located and having a rating of not
less than policyholder rating of A and financial category rating of at least Class XII in “Best’s
Insurance Guide.” Tenant shall obtain for Landlord from the insurance companies or cause the
insurance companies to furnish certificates of coverage to Landlord. No such policy shall be
cancelable or subject to reduction of coverage or other modification or cancellation except after
thirty (30) days’ prior written notice to Landlord from the insurer (except in the event of
non-payment of premium, in which case ten (10) days written notice shall be given). All such
policies shall be written as primary policies, not contributing with and not in excess of the
coverage that Landlord may carry. Tenant’s policy may be a “blanket policy” that specifically
provides that the amount of insurance shall not be prejudiced by other losses covered by the
policy. Tenant shall, at least twenty (20) days prior to the expiration of such policies, furnish
Landlord with renewals or binders. Tenant agrees that if Tenant does not take out and maintain
such insurance, Landlord may (but shall not be required to) procure said insurance on Tenant’s
behalf and at its cost to be paid by Tenant as Additional Rent.

     23.5. Except to the extent any leasehold improvements are insured by Landlord (in which case
the proceeds of such insurance shall be utilized to restore such improvements in accordance with
Section 24.7 below), Tenant assumes the risk of damage to any fixtures, goods, inventory,
merchandise, equipment and leasehold improvements, and Landlord shall not be liable for injury to
Tenant’s business or any loss of income therefrom, relative to such damage, all as more
particularly set forth within this Lease. Tenant shall, at Tenant’s sole cost and

44

 

expense, carry
such insurance as Tenant desires for Tenant’s protection with respect to personal property of
Tenant or business interruption.

     23.6. In each instance where insurance is to name Landlord Parties as additional insureds,
Tenant shall, upon Landlord’s written request, also designate and furnish certificates evidencing
such Landlord Parties as additional insureds to (a) any Lender of Landlord holding a security
interest in the Building, the Property or the Project, (b) the landlord under any lease whereunder
Landlord is a tenant of the Property if the interest of Landlord is or shall become that of a
tenant under a ground lease rather than that of a fee owner and (c) any management company retained
by Landlord to manage the Project.

     23.7. Landlord and Tenant each hereby waive any and all rights of recovery against the other
or against the officers, directors, employees, agents, general partners, members, subsidiaries,
affiliates and Lenders of the other on account of loss or damage occasioned by such waiving party
or its property or the property of others under such waiving party’s control, in each case to the
extent that such loss or damage is insured against under any fire and extended coverage insurance
policy that either Landlord or Tenant may have in force at the time of such loss or damage (or
would have been covered had the insuring party carried the insurance required under the provisions
of this Lease). Such waivers shall continue so long as they are available at a commercially
reasonable rate. Any termination of such a waiver shall be by written notice to the other party,
containing a description of the circumstances hereinafter set forth in this Section. Landlord and
Tenant, upon obtaining the policies of insurance required or permitted under this Lease, shall give
notice to the insurance carrier or carriers that the foregoing mutual waiver of subrogation is
contained in this Lease. If such policies shall not be obtainable with such waiver or shall be so
obtainable only at a material premium over that chargeable without such waiver, then the party
seeking such policy shall notify the other of such conditions, and the party so notified shall have
ten (10) business days thereafter to either (a) procure such insurance with companies reasonably
satisfactory to the other party or (b) agree to pay such additional premium (in Tenant’s case, in
the proportion that the area of the Premises bears to the insured area). If the parties do not
accomplish either (a) or (b), then this Section shall have no effect during such time as such
policies shall not be obtainable or the party in whose favor a waiver of subrogation is desired
refuses to pay the additional premium. If such policies shall at any time be unobtainable, but
shall be subsequently obtainable, then neither party shall be subsequently liable for a failure to
obtain such insurance until a reasonable time after notification thereof by the other party. If
the release of either Landlord or Tenant, as set forth in the first sentence of this Section, shall
contravene Applicable Laws, then the liability of the party in question shall be deemed not
released but shall be secondary to the other party’s insurer.

     23.8. Landlord may require insurance policy limits required under this Lease to be raised to
conform with requirements of Landlord’s Lender or to bring coverage limits to levels then being
required of new tenants within the Project.

     23.9. Any costs incurred by Landlord pursuant to this Article shall constitute a portion of
Operating Expenses.

45

 

24. Damage or Destruction.

     24.1. In the event of a partial destruction of (a) the Premises or (b) Common Areas of the
Building or the Project ((a) and (b) together, the “Affected Areas”) by fire or other
perils
covered by extended coverage insurance not exceeding twenty-five percent (25%) of the full
insurable value thereof, and provided that (w) repairs of such damage are reasonably
estimated to be completed prior to the last twenty-four (24) months of the current Lease Term, (x)
the damage thereto is such that the Affected Areas may be repaired, reconstructed or restored
within a period of twelve (12) months from the date of the happening of such casualty (in
accordance with a Damage Repair Estimate, as defined below), (y) Landlord shall receive insurance
proceeds sufficient to cover the cost of such repairs (except for any deductible amount provided by
Landlord’s policy, which deductible amount, if paid by Landlord, shall constitute an Operating
Expense, subject to the caps set forth in Article 9) (Landlord’s decision to self-insure or
failure to otherwise maintain the insurance required under Section 23.1 of this Lease shall
cause this clause (y) to be deemed satisfied regardless of the amount of insurance proceeds
received by Landlord) and (z) such casualty was not intentionally caused by Tenant or its
employees, agents or contractors (a “Required Restoration Event”), then Landlord shall
commence and proceed diligently with the work of repair, reconstruction and restoration of the
Affected Areas and this Lease shall continue in full force and effect.

     24.2. In the event of any damage to or destruction of the Building or the Project other than
as described in Section 24.1, Landlord may elect to repair, reconstruct and restore the
Building or the Project, as applicable, in which case this Lease shall continue in full force and
effect. If Landlord elects not to repair the Building or the Project, as applicable, then this
Lease shall terminate as of the date of such damage or destruction. In the event of any damage or
destruction (regardless of whether such damage falls under Section 24.1 or this Section
24.2), if (i) in Landlord’s determination as set forth in the Damage Repair Estimate (defined
below), the Affected Areas cannot be restored within twelve (12) months after the date of such
casualty, (ii) subject to Section 24.6, the Affected Areas are not actually repaired within
twelve (12) months after the date of such casualty, or (iii) the damage and destruction occurs
within the last twelve (12) months of the current Lease Term, then Tenant shall have the right to
terminate this Lease, effective as of the date of such damage or destruction, by delivering to
Landlord its written notice of termination no later than fifteen (15) days after Landlord delivers
Landlord’s Damage Repair Estimate (or, subject to Section 24.6, in the event the Affected
Areas are not restored within twelve (12) months after the date of such casualty, at any time
following such twelve (12) month period).

     24.3. As soon as reasonably practicable, but in any event within sixty (60) days following
the date of damage or destruction, Landlord shall notify Tenant of Landlord’s good faith estimated
assessment of the period of time in which the repairs will be completed (“Damage Repair
Estimate”), which assessment shall be based upon the opinion of a contractor reasonably
selected by Landlord and experienced in comparable repairs of similar buildings. Additionally,
Landlord shall give written notice to Tenant within sixty (60) days following the date of damage or
destruction of its election not to repair, reconstruct or restore the Building or the Project, as
applicable.

46

 

     24.4. Upon any termination of this Lease under any of the provisions of this Article, the
parties shall be released thereby without further obligation to the other from the date possession
of the Premises is surrendered to Landlord, except with regard to (a) items occurring prior to the
damage or destruction and (b) provisions of this Lease that, by their express terms, survive
the expiration or earlier termination hereof.

     24.5. In the event of repair, reconstruction and restoration as provided in this Article, all
Rent to be paid by Tenant under this Lease shall be abated proportionately based on the extent to
which Tenant’s use of the Premises is impaired during the period of such repair, reconstruction or
restoration, unless Landlord provides Tenant with other space during the period of repair that, in
Tenant’s reasonable opinion, is suitable for the temporary conduct of Tenant’s business;
provided, however, that the amount of such abatement shall be reduced by the proceeds of
business interruption or loss of rental income insurance actually received by Tenant with respect
to the Premises.

     24.6. Notwithstanding anything to the contrary contained in this Article, should Landlord be
delayed or prevented from completing the repair, reconstruction or restoration of the damage or
destruction to the Premises after the occurrence of such damage or destruction by Force Majeure,
then the time for Landlord to commence or complete repairs shall be extended on a day-for-day
basis; provided, however, that, at Landlord’s election, Landlord shall be relieved of its
obligation to make such repair, reconstruction or restoration (in which case Tenant will be
permitted to terminate this Lease by providing written notice to Landlord). In no event shall any
Force Majeure event pursuant to this Section 24.6 exceed eighteen (18) months.

     24.7. If Landlord is obligated to or elects to repair, reconstruct or restore as herein
provided, then Landlord shall be obligated to make such repair, reconstruction or restoration only
with regard to (a) those portions of the Premises that were originally provided at Landlord’s
expense and (b) the Common Area portion of the Affected Areas. The repair, reconstruction or
restoration of improvements not originally provided by Landlord or at Landlord’s expense shall be
the obligation of Tenant except as provided in Section 23.5 above, and in the event Landlord
maintains insurance on any leasehold improvements, Landlord shall fund such insurance proceeds
toward the cost of repair, restoration or reinstatement of such improvements. In the event Tenant
has elected to upgrade certain improvements, Landlord shall, upon the need for replacement due to
an insured loss, provide only the building standard, unless Tenant again elects to upgrade such
improvements and pay any incremental costs related thereto, except to the extent that excess
insurance proceeds, if received, are adequate to provide such upgrades, in addition to providing
for basic repair, reconstruction and restoration of the Premises, the Building and the Project.

     24.8. Notwithstanding anything to the contrary contained in this Article, Landlord shall not
have any obligation whatsoever to repair, reconstruct or restore the Premises if the damage
resulting from any casualty covered under this Article occurs during the last twenty-four (24)
months of the Term or any extension hereof, or to the extent that insurance proceeds are not
available therefor; provided that in the event Landlord does not elect to make such repairs, this
Lease shall terminate effective as of the date of such damage or destruction.

47

 

     24.9. Landlord’s obligation, should it elect or be obligated to repair or rebuild, shall
be limited to the Affected Areas. Tenant shall, at its expense, replace or fully repair all of
Tenant’s personal property and any Alterations installed by Tenant existing at the time of such
damage or destruction. If Affected Areas are to be repaired in accordance with the foregoing,
Landlord shall make available to Tenant any portion of insurance proceeds it receives that are
allocable to the Alterations constructed by Tenant pursuant to this Lease; provided Tenant
is not then in Default under this Lease, and subject to the requirements of any Lender of Landlord.

     24.10. In the event of damage and destruction to the Premises, Building or Common Areas,
Landlord will consider, in its sole discretion, based on market factors in existence at the time of
such damage and destruction, executing a lease if requested by Tenant for temporary or replacement
premises in vacant space in the Project or other buildings in the Newark area owned by Landlord
upon terms to be negotiated at such time.

25. Eminent Domain.

     25.1. In the event (a) the whole of all Affected Areas or (b) such part thereof as shall
substantially interfere with Tenant’s use and occupancy of the Premises for the Permitted Use shall
be taken for any public or quasi-public purpose by any lawful power or authority by exercise of the
right of appropriation, condemnation or eminent domain, or sold to prevent such taking (a
“Material Taking”), Tenant or Landlord may terminate this Lease effective as of the date
possession is required to be surrendered to said authority, except with regard to (y) items
occurring prior to the taking and (z) provisions of this Lease that, by their express terms,
survive the expiration or earlier termination hereof.

     25.2. In the event of a taking that does not amount to a Material Taking of (a) the Building
or the Project or (b) drives, walkways or parking areas serving the Building or the Project for any
public or quasi-public purpose by any lawful power or authority by exercise of right of
appropriation, condemnation, or eminent domain, or sold to prevent such taking, then, without
regard to whether any portion of the Premises occupied by Tenant was so taken, Landlord may elect
to terminate this Lease (except with regard to (a) items occurring prior to the damage or
destruction and (b) provisions of this Lease that, by their express terms, survive the expiration
or earlier termination hereof) as of such taking if such taking is, in Landlord’s sole opinion, of
a material nature such as to make it uneconomical to continue use of the unappropriated portion for
purposes of renting office or laboratory space.

     25.3. Tenant shall be entitled to any award that is specifically awarded as compensation for
(a) the taking of Tenant’s personal property that was installed at Tenant’s expense, (b) the costs
of Tenant moving to a new location and (c) other leasehold damages suffered by Tenant and
compensable by Applicable Law as set forth in the specific award. Except as set forth in the
previous sentence, any award for such taking shall be the property of Landlord.

     25.4. If, upon any taking of the nature described in this Article, this Lease continues in
effect, then Landlord shall promptly proceed to restore the Affected Areas to substantially their
same condition prior to such partial taking. To the extent such restoration is infeasible, as

48

 

determined by Landlord in its sole and absolute discretion, the Rent shall be decreased
proportionately to reflect the loss of any portion of the Premises no longer available to Tenant.

26. Surrender.

     26.1. At least ten (10) days prior to Tenant’s surrender of possession of any part of the
Premises, Tenant shall provide Landlord with (a) a facility decommissioning and Hazardous Materials
closure plan for the Premises (“Exit Survey”) prepared by an independent third party
reasonably acceptable to Landlord, and (b) written evidence of all appropriate governmental
releases obtained by Tenant in accordance with Applicable Laws, including laws pertaining to the
surrender of the Premises. In addition, Tenant agrees to remain responsible after the surrender of
the Premises for the remediation of any recognized environmental conditions set forth in the Exit
Survey and compliance with any recommendations set forth in the Exit Survey (to the extent such
conditions or recommendations are Tenant’s responsibility pursuant to this Lease and do not relate
to any conditions identified in the Baseline Phase I). Tenant’s obligations under this Section
shall survive the expiration or earlier termination of the Lease.

     26.2. No surrender of possession of any part of the Premises shall release Tenant from any of
its obligations hereunder, unless such surrender is accepted in writing by Landlord (provided no
acceptance of surrender will be required if it occurs at the end of the Term of this Lease).

     26.3. The voluntary or other surrender of this Lease by Tenant shall not effect a merger with
Landlord’s fee title or leasehold interest in the Premises, the Building, the Property or the
Project, unless Landlord consents in writing, and shall, at Landlord’s option, operate as an
assignment to Landlord of any or all subleases.

     26.4. The voluntary or other surrender of any ground or other underlying lease that now exists
or may hereafter be executed affecting the Building or the Project, or a mutual cancellation
thereof or of Landlord’s interest therein by Landlord and its lessor shall not effect a merger with
Landlord’s fee title or leasehold interest in the Premises, the Building or the Property and shall,
at the option of the successor to Landlord’s interest in the Building or the Project, as
applicable, operate as an assignment of this Lease.

27. Holding Over.

     27.1. If, with Landlord’s prior written consent, Tenant holds possession of all or any part of
the Premises after the Term, Tenant shall become a tenant from month to month after the expiration
or earlier termination of the Term, and in such case Tenant shall continue to pay (a) Base Rent in
accordance with Article 7, as adjusted in accordance with Article 8, and (b) any
amounts for which Tenant would otherwise be liable under this Lease if the Lease were still in
effect, including payments for Tenant’s Pro Rata Share of Operating Expenses. Any such
month-to-month tenancy shall be subject to every other term, covenant and agreement contained
herein.

49

 

     27.2. Notwithstanding the foregoing, if Tenant remains in possession of the Premises after the
expiration or earlier termination of the Term without Landlord’s prior written consent,
Tenant shall become a tenant at sufferance subject to the terms and conditions of this Lease,
except that the monthly rent shall be equal to one hundred fifty percent (150%) of the Rent in
effect during the last thirty (30) days of the Term. In addition, if Tenant remains in possession
of the Premises after the expiration or earlier termination of the Term without Landlord’s prior
written consent for a period of more than three (3) months, Tenant shall be liable to Landlord for
any and all damages suffered by Landlord as a result of such holdover, including any lost rent or
consequential, special and indirect damages.

     27.3. Acceptance by Landlord of Rent after the expiration or earlier termination of the Term
shall not result in an extension, renewal or reinstatement of this Lease.

     27.4. The foregoing provisions of this Article are in addition to and do not affect Landlord’s
right of reentry or any other rights of Landlord hereunder or as otherwise provided by Applicable
Laws.

28. Indemnification and Exculpation.

     28.1. Tenant agrees to indemnify, save, defend (at Landlord’s option and with counsel
reasonably acceptable to Landlord) and hold the Landlord Indemnitees harmless from and against any
and all Claims arising from injury or death to any person or damage to any property occurring
within or about the Premises, the Building, the Property or the Project arising directly or
indirectly out of Tenant’s or Tenant’s employees’, agents’, contractors’ or invitees’ use or
occupancy of the Premises or a breach or default by Tenant in the performance of any of its
obligations hereunder, except to the extent caused by Landlord’s negligence or willful misconduct
or gross negligence. In the event Landlord receives notice of a Claim for which Tenant is
obligated to indemnify Landlord pursuant to the preceding sentence, the Landlord shall (x) promptly
provide notice to Tenant of such Claim and (y) not enter into any settlement agreement without the
express written consent of Tenant, which consent shall not be unreasonably withheld, conditioned or
delayed.

     28.2. Notwithstanding any provision of Section 28.1 to the contrary, Landlord shall
not be liable to Tenant for, and Tenant assumes all risk of, damage to personal property or
scientific research, including loss of records kept by Tenant within the Premises and damage or
losses caused by fire, electrical malfunction, gas explosion or water damage of any type (including
broken water lines, malfunctioning fire sprinkler systems, roof leaks or stoppages of lines),
unless any such loss is due to Landlord’s willful disregard of written notice by Tenant of need for
a repair that Landlord is responsible to make for an unreasonable period of time. Tenant further
waives any claim for injury to Tenant’s business or loss of income relating to any such damage or
destruction of personal property as described in this Section.

     28.3. Landlord shall not be liable for any damages arising from any act, omission or neglect
of any other tenant in the Building or the Project, or of any other third party.

50

 

     28.4. Tenant acknowledges that security devices and services, if any, while intended to deter
crime, may not in given instances prevent theft or other criminal acts. Landlord shall not be
liable for injuries or losses caused by criminal acts of third parties, and Tenant assumes the risk
that any security device or service may malfunction or otherwise be circumvented by a
criminal. If Tenant desires protection against such criminal acts, then Tenant shall, at Tenant’s
sole cost and expense, obtain appropriate insurance coverage.

     28.5. Landlord agrees to indemnify, save, defend (at Tenant’s option and with counsel
reasonably acceptable to Tenant) and hold Tenant and its employees, agents and contractors harmless
from and against any and all Claims arising from injury or death to any person or damage to any
property occurring within or about the Premises, the Building, the Property or the Project arising
out of Landlord’s gross negligence, willful misconduct or breach of this Lease.

     28.6. Except as otherwise provided herein or as may be provided by law in the event of
Tenant’s breach of Article 21 or Section 26.1, in no event shall either Landlord or Tenant be
liable to the other for any consequential, special or indirect damages arising out of this Lease.

     28.7. The provisions of this Article shall survive the expiration or earlier termination of
this Lease.

29. Assignment or Subletting.

     29.1. Except as hereinafter expressly permitted, Tenant shall not, either voluntarily or by
operation of Applicable Laws, directly or indirectly sell, hypothecate, assign, pledge, encumber or
otherwise transfer this Lease, or sublet the Premises (each, a “Transfer”), without
Landlord’s prior written consent. Notwithstanding the foregoing, Tenant shall have the right to
Transfer without Landlord’s prior written consent the Premises or any part thereof to any person
that as of the date of determination and at all times thereafter directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common control with Tenant, or
that becomes a parent, or affiliate of Tenant, or is a successor of Tenant by reason of merger,
consolidation or public offering or sale of stock, membership or partnership interests or assets
(“Tenant’s Affiliate”), provided that Tenant shall notify Landlord in writing at
least thirty (30) but not more than ninety (90) calendar days prior to the effectiveness of such
Transfer (if prior notice is permissible in accordance with Applicable Laws and is not prohibited
by the terms of any acquisition agreement, and if prior notice is not permissible, Tenant shall
provide notice of such Transfer as soon as any such notice is permitted pursuant to Applicable Laws
or the terms of any acquisition agreement) to Tenant’s Affiliate (an “Exempt Transfer”) and
otherwise comply with the requirements of this Lease regarding such Transfer. For purposes of
Exempt Transfers, “control” requires both (a) owning (directly or indirectly) at least fifty
percent (50%) of the stock or other equity interests of another person and (b) possessing,
directly or indirectly, the power to direct or cause the direction of the management and policies
of such person. An Exempt Transfer shall also include a public or private placement or offering of
stock in Tenant to raise additional capital, including any initial public offering of such stock
(collectively, an “Additional Funding”), so long as following any such Additional Funding,
Tenant remains substantially the same legal entity that exist prior to such Additional Funding. In
no event shall Tenant perform a Transfer to or with an entity that is a tenant at the Project or
that is in

51

 

discussions or negotiations with Landlord or an affiliate of Landlord to lease premises
at the Project or a property owned by Landlord or an affiliate of Landlord.

     29.2. In the event Tenant desires to effect a Transfer, then, at least thirty (30) but not
more than ninety (90) calendar days prior to the date when Tenant desires the assignment or
sublease to be effective (the “Transfer Date”), Tenant shall provide written notice to
Landlord (the “Transfer Notice”) containing information (including references) concerning
the character of the proposed transferee, assignee or sublessee; the Transfer Date; any ownership
or commercial relationship between Tenant and the proposed transferee, assignee or sublessee; and
the consideration and all other material terms and conditions of the proposed Transfer, all in such
detail as Landlord shall reasonably require.

     29.3. Landlord, in determining whether consent should be given to a proposed Transfer, may
give consideration to (a) the financial strength of such transferee, assignee or sublessee
(notwithstanding Tenant remaining liable for Tenant’s performance), (b) any change in use that such
transferee, assignee or sublessee proposes to make in the use of the Premises and (c) Landlord’s
desire to exercise its rights under Section 29.8 to cancel this Lease. In no event shall
Landlord be deemed to be unreasonable for declining to consent to a Transfer to a transferee,
assignee or sublessee of poor reputation, lacking financial qualifications or seeking a change in
the Permitted Use, or jeopardizing directly or indirectly the status of Landlord or any of
Landlord’s affiliates as a Real Estate Investment Trust under the Internal Revenue Code of 1986 (as
the same may be amended from time to time, the “Revenue Code”). Notwithstanding anything
contained in this Lease to the contrary, (w) no Transfer shall be consummated on any basis such
that the rental or other amounts to be paid by the occupant, assignee, manager or other transferee
thereunder would be based, in whole or in part, on the income or profits derived by the business
activities of such occupant, assignee, manager or other transferee; (x) Tenant shall not furnish or
render any services to an occupant, assignee, manager or other transferee with respect to whom
transfer consideration is required to be paid, or manage or operate the Premises or any capital
additions so transferred, with respect to which transfer consideration is being paid; (y) Tenant
shall not consummate a Transfer with any person in which Landlord owns an interest, directly or
indirectly (by applying constructive ownership rules set forth in Section 856(d)(5) of the Revenue
Code); and (z) Tenant shall not consummate a Transfer with any person or in any manner that could
cause any portion of the amounts received by Landlord pursuant to this Lease or any sublease,
license or other arrangement for the right to use, occupy or possess any portion of the Premises to
fail to qualify as “rents from real property” within the meaning of Section 856(d) of the Revenue
Code, or any similar or successor provision thereto or which could cause any other income of
Landlord to fail to qualify as income described in Section 856(c)(2) of the Revenue Code.

     29.4. As conditions precedent to Tenant subleasing the Premises or to Landlord considering a
request by Tenant to Tenant’s transfer of rights or sharing of the Premises, Landlord may require
any or all of the following:

          (a) Tenant shall remain fully liable under this Lease during the unexpired Term;

52

 

          (b) Tenant shall provide Landlord with evidence reasonably satisfactory to Landlord that the
value of Landlord’s interest under this Lease shall not be diminished or reduced by the proposed
Transfer. Such evidence shall include evidence respecting the relevant business
experience and financial responsibility and status of the proposed transferee, assignee or
sublessee;

          (c) Tenant shall reimburse Landlord for Landlord’s actual costs and expenses, including
reasonable attorneys’ fees, charges and disbursements incurred in connection with the review,
processing and documentation of such request (provided that such costs and expenses do not exceed
Two Thousand Five Hundred Dollars ($2,500) in any one instance);

          (d) If Tenant’s transfer of rights or sharing of the Premises provides for the receipt by, on
behalf of or on account of Tenant of any consideration of any kind whatsoever (including a premium
rental for a sublease or lump sum payment for an assignment, but excluding Tenant’s reasonable
costs in marketing and subleasing the Premises and provided that nothing contained in this Section
29.4(d) shall be construed to entitle Landlord to any consideration attributable to any
intellectual property or goodwill of Tenant) in excess of the rental and other charges due to
Landlord under this Lease, Tenant shall pay fifty percent (50%) of all of such excess to Landlord,
after deductions for any transaction costs incurred by Tenant, including reasonable marketing
expenses, tenant improvement allowances actually provided by Tenant, alterations, cash concessions,
brokerage commissions, attorneys’ fees and free rent actually paid by Tenant. If said
consideration consists of cash paid to Tenant, payment to Landlord shall be made upon receipt by
Tenant of such cash payment;

          (e) The proposed transferee, assignee or sublessee shall agree that, in the event Landlord
gives such proposed transferee, assignee or sublessee notice that Tenant is in default under this
Lease, such proposed transferee, assignee or sublessee shall thereafter make all payments otherwise
due Tenant directly to Landlord, which payments shall be received by Landlord without any liability
being incurred by Landlord, except to credit such payment against those due by Tenant under this
Lease, and any such proposed transferee, assignee or sublessee shall agree to attorn to Landlord or
its successors and assigns should this Lease be terminated for any reason; provided,
however, that in no event shall Landlord or its Lenders, successors or assigns be obligated
to accept such attornment;

          (f) Landlord’s consent to any such Transfer shall be effected on Landlord’s forms;

          (g) Tenant shall not then be in default hereunder in any respect;

          (h) Such proposed transferee, assignee or sublessee’s use of the Premises shall be the same as
the Permitted Use;

          (i) Landlord shall not be bound by any provision of any agreement pertaining to the Transfer,
except for Landlord’s written consent to the same;

53

 

          (j) Tenant shall pay all transfer and other taxes (including interest and penalties) assessed
or payable for any Transfer;

          (k) Landlord’s consent (or waiver of its rights) for any Transfer shall not waive Landlord’s
right to consent to any later Transfer;

          (l) Tenant shall deliver to Landlord one executed copy of any and all written instruments
evidencing or relating to the Transfer; and

          (m) A list of Hazardous Materials (as defined in Section 21.7), certified by the
proposed transferee, assignee or sublessee to be true and correct, that the proposed transferee,
assignee or sublessee intends to use or store in the Premises. Additionally, Tenant shall deliver
to Landlord, on or before the date any proposed transferee, assignee or sublessee takes occupancy
of the Premises, all of the items relating to Hazardous Materials of such proposed transferee,
assignee or sublessee as described in Section 21.2.

     29.5. Any Transfer that is not in compliance with the provisions of this Article shall be
void.

     29.6. The consent by Landlord to a Transfer shall not relieve Tenant or proposed transferee,
assignee or sublessee from obtaining Landlord’s consent to any further Transfer, nor shall it
release Tenant or any proposed transferee, assignee or sublessee of Tenant from full and primary
liability under this Lease.

     29.7. Notwithstanding any Transfer, Tenant shall remain fully and primarily liable for the
payment of all Rent and other sums due or to become due hereunder, and for the full performance of
all other terms, conditions and covenants to be kept and performed by Tenant. The acceptance of
Rent or any other sum due hereunder, or the acceptance of performance of any other term, covenant
or condition thereof, from any person or entity other than Tenant shall not be deemed a waiver of
any of the provisions of this Lease or a consent to any Transfer.

     29.8. Intentionally Omitted.

     29.9. If Tenant sublets the Premises or any portion thereof, Tenant hereby immediately and
irrevocably assigns to Landlord, as security for Tenant’s obligations under this Lease, all rent
from any such subletting, and appoints Landlord as assignee and attorney-in-fact for Tenant, and
Landlord (or a receiver for Tenant appointed on Landlord’s application) may collect such rent and
apply it toward Tenant’s obligations under this Lease; provided that, until the occurrence
of a Default (as defined below) by Tenant, Tenant shall have the right to collect such rent.

30. Subordination and Attornment.

     30.1. This Lease shall be subject and subordinate to the lien of any mortgage, deed of trust,
or lease in which Landlord is tenant now or hereafter in force against the Building or the Project
and to all advances made or hereafter to be made upon the security thereof without the

54

 

necessity of the execution and delivery of any further instruments on the part of Tenant to effectuate such
subordination. As of the Execution Date, there is no deed of trust encumbering the Project.

     30.2. Notwithstanding the foregoing, Tenant shall execute and deliver upon demand such further
instrument or instruments evidencing such subordination of this Lease to the lien of any such
mortgage or mortgages or deeds of trust or lease in which Landlord is tenant as may be required by
Landlord, provided that such instrument contains commercially reasonable non-disturbance
covenants of the Mortgagee and that Tenant’s occupancy and rights under this Lease
shall not be materially and adversely modified as long as Tenant is not in Default under this
Lease. If any such mortgagee, beneficiary or landlord under a lease wherein Landlord is tenant
(each, a “Mortgagee”) so elects, however, this Lease shall be deemed prior in lien to any
such lease, mortgage, or deed of trust upon or including the Premises regardless of date and Tenant
shall execute a statement in writing to such effect at Landlord’s request. If Tenant fails to
execute any commercially reasonable document required from Tenant under this Section within ten
(10) business days after written request therefor, Tenant hereby constitutes and appoints Landlord
or its special attorney-in-fact to execute and deliver any such document or documents in the name
of Tenant. Such power is coupled with an interest and is irrevocable.

     30.3. Upon written request of Landlord and opportunity for Tenant to review and approve (which
Tenant shall not unreasonably withhold, condition or delay), Tenant agrees to execute any Lease
amendments not materially altering the terms of this Lease, if required by a mortgagee or
beneficiary of a deed of trust encumbering real property of which the Premises constitute a part
incident to the financing of the real property of which the Premises constitute a part.

     30.4. In the event any proceedings are brought for foreclosure, or in the event of the
exercise of the power of sale under any mortgage or deed of trust made by Landlord covering the
Premises, Tenant shall at the election of the purchaser at such foreclosure or sale attorn to the
purchaser upon any such foreclosure or sale and recognize such purchaser as Landlord under this
Lease.

31. Defaults and Remedies.

     31.1. Late payment by Tenant to Landlord of Rent and other sums due shall cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which shall be extremely difficult
and impracticable to ascertain. Such costs include processing and accounting charges and late
charges that may be imposed on Landlord by the terms of any mortgage or trust deed covering the
Premises. Therefore, if any installment of Rent due from Tenant is not received by Landlord within
five (5) business days after such payment is due, Tenant shall pay to Landlord (a) an additional
sum of six percent (6%) of the overdue Rent as a late charge plus (b) interest at an annual rate
(the “Default Rate”) equal to the lesser of (a) twelve percent (12%) and (b) the highest
rate permitted by Applicable Laws. The parties agree that this late charge represents a fair and
reasonable estimate of the costs that Landlord shall incur by reason of late payment by Tenant and
shall be payable as Additional Rent to Landlord due with the next installment of Rent or within
five (5) business days after Landlord’s demand, whichever is

55

 

earlier. Landlord’s acceptance of any Additional Rent (including a late charge or any other amount hereunder) shall not be deemed an
extension of the date that Rent is due or prevent Landlord from pursuing any other rights or
remedies under this Lease, at law or in equity. Notwithstanding the foregoing, Landlord shall not
assess a late charge in accordance with this Section 31.1 until Landlord has given written
notice of the payment default for the first late payment in any twelve (12) month period, and only
if Tenant has not cured such default within five (5) days after receipt of such notice. No other
notices shall be required during the twelve
(12) months following such notice for a late charge to be incurred in accordance with this
Section 31.1.

     31.2. No payment by Tenant or receipt by Landlord of a lesser amount than the Rent payment
herein stipulated shall be deemed to be other than on account of the Rent, nor shall any
endorsement or statement on any check or any letter accompanying any check or payment as Rent be
deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice
to Landlord’s right to recover the balance of such Rent or pursue any other remedy provided in this
Lease or in equity or at law. If a dispute shall arise as to any amount or sum of money to be paid
by Tenant to Landlord hereunder, Tenant shall have the right to make payment “under protest,” such
payment shall not be regarded as a voluntary payment, and there shall survive the right on the part
of Tenant to institute suit for recovery of the payment paid under protest.

     31.3. If Tenant fails to pay any sum of money required to be paid by it hereunder, or shall
fail to perform any other act on its part to be performed hereunder, in each case within the
applicable cure period (if any) described in Section 31.4, then Landlord may, without
waiving or releasing Tenant from any obligations of Tenant, but shall not be obligated to, make
such payment or perform such act; provided that such failure by Tenant unreasonably
interfered with the use of the Building or the Project by any other tenant or with the efficient
operation of the Building or the Project, or resulted or could have resulted in a violation of
Applicable Laws or the cancellation of an insurance policy maintained by Landlord. Notwithstanding
the foregoing, in the event of an emergency, Landlord shall have the right to enter the Premises
and act in accordance with its rights as provided elsewhere in this Lease. In addition to the late
charge described in Section 31.1, Tenant shall pay to Landlord as Additional Rent all sums
so paid or incurred by Landlord, together with interest at the Default Rate, computed from the date
such sums were paid or incurred.

     31.4. The occurrence of any one or more of the following events shall constitute a
“Default” hereunder by Tenant:

          (a) [intentionally omitted];

          (b) Tenant fails to make any payment of Rent, as and when due, or to satisfy its obligations
under Article 19, where such failure shall continue for a period of three (3) business days
after written notice thereof from Landlord to Tenant;

          (c) Tenant fails to observe or perform any obligation or covenant contained herein (other than
described in Subsections 31.4(a) and 31.4(b)) to be performed by Tenant,

56

 

          where such failure continues for a period of ten (10) days after written notice thereof from Landlord to
Tenant; provided that, if the nature of Tenant’s default is such that it reasonably
requires more than ten (10) days to cure, Tenant shall not be deemed to be in Default if Tenant
commences such cure within said ten (10) day period and thereafter diligently prosecute the same to
completion; and provided, further, that such cure is completed no later than thirty (30)
days after Tenant’s receipt of written notice from Landlord;

          (d) Tenant makes an assignment for the benefit of creditors;

          (e) A receiver, trustee or custodian is appointed to or does take title, possession or control
of all or substantially all of Tenant’s assets and such action is not dismissed within thirty (30)
days;

          (f) Tenant files a voluntary petition under the United States Bankruptcy Code or any successor
statute (as the same may be amended from time to time, the “Bankruptcy Code”) or an order
for relief is entered against Tenant pursuant to a voluntary proceeding commenced under any chapter
of the Bankruptcy Code;

          (g) Any involuntary petition is filed against Tenant under any chapter of the Bankruptcy Code
and is not dismissed within one hundred twenty (120) days;

          (h) Tenant fails to deliver an estoppel certificate in accordance with Article 20; or

          (i) Tenant’s interest in this Lease is attached, executed upon or otherwise judicially seized
and such action is not released within one hundred twenty (120) days of the action.

          Notices given under this Section shall specify the alleged default and shall demand that
Tenant perform the provisions of this Lease or pay the Rent that is in arrears, as the case may be,
within the applicable period of time, or quit the Premises. No such notice shall be deemed a
forfeiture or a termination of this Lease unless Landlord elects otherwise in such notice.

     31.5. In the event of a Default by Tenant, and at any time thereafter, with or without notice
or demand and without limiting Landlord in the exercise of any right or remedy that Landlord may
have, Landlord have the right to do any or all of the following:

          (a) Halt any Tenant Improvements and Alterations and order Tenant’s contractors,
subcontractors, consultants, designers and material suppliers to do stop work;

          (b) Terminate Tenant’s right to possession of the Premises by any lawful means, in which case
Tenant shall immediately surrender possession of the Premises to Landlord. In such event, Landlord
shall have the immediate right to re-enter and remove all persons and property, and such property
may be removed and stored in a public warehouse or elsewhere at the cost and for the account of
Tenant, all without service of notice or resort to legal

57

 

process and without being deemed guilty of
trespass or becoming liable for any loss or damage that may be occasioned thereby; and

          (c) Terminate this Lease by any lawful means, in which event Tenant shall immediately
surrender possession of the Premises to Landlord. In such event, Landlord shall have the immediate
right to re-enter and remove all persons and property, and such property may be removed and stored
in a public warehouse or elsewhere at the cost and for the account of Tenant, all without service
of notice or resort to legal process and without being deemed guilty of
trespass or becoming liable for any loss or damage that may be occasioned thereby. In the
event that Landlord shall elect to so terminate this Lease, then Landlord shall be entitled to
recover from Tenant all damages incurred by Landlord by reason of Tenant’s default, including:

               (i) The worth at the time of award of any unpaid Rent that had accrued at the time of such
termination; plus

               (ii) The worth at the time of award of the amount by which the unpaid Rent that would have
accrued during the period commencing with termination of the Lease and ending at the time of award
exceeds that portion of the loss of Landlord’s rental income from the Premises that Tenant proves
to Landlord’s reasonable satisfaction could have been reasonably avoided; plus

               (iii) The worth at the time of award of the amount by which the unpaid Rent for the balance of
the Term after the time of award exceeds that portion of the loss of Landlord’s rental income from
the Premises that Tenant proves to Landlord’s reasonable satisfaction could have been reasonably
avoided; plus

               (iv) Any other amount necessary to compensate Landlord for all the detriment caused by
Tenant’s failure to perform its obligations under this Lease or that in the ordinary course of
things would be likely to result therefrom, including the cost of restoring the Premises to the
condition required under the terms of this Lease, including any rent payments not otherwise
chargeable to Tenant (e.g., during any “free” rent period or rent holiday); plus

               (v) At Landlord’s election, such other amounts in addition to or in lieu of the foregoing as
may be permitted from time to time by Applicable Laws.

As used in Subsections 31.5(c)(i) and 31.5(c)(ii), “worth at the time of award”
shall be computed by allowing interest at the Default Rate. As used in Subsection
31.5(c)(iii), the “worth at the time of the award” shall be computed by taking the present
value of such amount, using the discount rate of the Federal Reserve Bank of San Francisco at the
time of the award plus one (1) percentage point.

     31.6. In addition to any other remedies available to Landlord at law or in equity and under
this Lease, Landlord shall have the remedy described in California Civil Code Section 1951.4 and
may continue this Lease in effect after Tenant’s Default and abandonment and recover Rent as it
becomes due, provided Tenant has the right to sublet or assign, subject only to reasonable
limitations. In addition, Landlord shall not be liable in any way whatsoever for its

58

 

failure or refusal to relet the Premises. For purposes of this Section, the following acts by Landlord will
not constitute the termination of Tenant’s right to possession of the Premises:

          (a) Acts of maintenance or preservation or efforts to relet the Premises, including
alterations, remodeling, redecorating, repairs, replacements or painting as Landlord shall consider
advisable for the purpose of reletting the Premises or any part thereof; or

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

Notwithstanding the foregoing, in the event of a Default by Tenant, Landlord may elect at any time
to terminate this Lease and to recover damages to which Landlord is
entitled.

     31.7. If Landlord does not elect to terminate this Lease as provided in Section 31.5,
then Landlord may, from time to time, recover all Rent as it becomes due under this Lease. At any
time thereafter, Landlord may elect to terminate this Lease and to recover damages to which
Landlord is entitled.

     31.8. In the event Landlord elects to terminate this Lease and relet the Premises, Landlord
may execute any new lease in its own name. Tenant hereunder shall have no right or authority
whatsoever to collect any Rent from such tenant. The proceeds of any such reletting shall be
applied as follows:

          (a) First, to the payment of any indebtedness other than Rent due hereunder from Tenant to
Landlord, including storage charges or brokerage commissions owing from Tenant to Landlord as the
result of such reletting;

          (b) Second, to the payment of the costs and expenses of reletting the Premises, including (i)
alterations and repairs that Landlord deems reasonably necessary and advisable and (ii) reasonable
attorneys’ fees, charges and disbursements incurred by Landlord in connection with the retaking of
the Premises and such reletting;

          (c) Third, to the payment of Rent and other charges due and unpaid hereunder; and

          (d) Fourth, to the payment of future Rent and other damages payable by Tenant under this
Lease.

     31.9. All of Landlord’s rights, options and remedies hereunder shall be construed and held to
be nonexclusive and cumulative. Landlord shall have the right to pursue any one or all of such
remedies, or any other remedy or relief that may be provided by Applicable Laws, whether or not
stated in this Lease. No waiver of any default of Tenant hereunder shall be implied from any
acceptance by Landlord of any Rent or other payments due hereunder or any omission by Landlord to
take any action on account of such default if such default persists or is repeated, and no express
waiver shall affect defaults other than as specified in said waiver.

59

 

     31.10. Landlord’s termination of (a) this Lease or (b) Tenant’s right to possession of the
Premises shall not relieve Tenant of any liability to Landlord that has previously accrued or that
shall arise based upon events that occurred prior to the later to occur of (i) the date of Lease
termination or (ii) the date Tenant surrenders possession of the Premises.

     31.11. To the extent permitted by Applicable Laws, Tenant waives any and all rights of
redemption granted by or under any present or future Applicable Laws if Tenant is evicted or
dispossessed for any cause, or if Landlord obtains possession of the Premises due to Tenant’s
default hereunder or otherwise.

     31.12. Landlord shall not be in default under this Lease unless Landlord fails to perform
obligations required of Landlord within a reasonable time, but in no event shall such failure
continue for more than thirty (30) days after written notice from Tenant specifying the nature of
Landlord’s failure; provided, however, that if the nature of Landlord’s obligation is such
that more than thirty (30) days are required for its performance, then Landlord shall not be in
default if Landlord commences performance within such thirty (30) day period and thereafter
diligently prosecutes the same to completion. In no event shall Tenant have the right to terminate
or cancel this Lease or to withhold or abate rent or to set off any Claims against Rent as a result
of any default or breach by Landlord of any of its covenants, obligations, representations,
warranties or promises hereunder, unless such remedy is granted by a court of competent
jurisdiction, except as may otherwise be expressly set forth in this Lease.

     31.13. In the event of any default by Landlord, Tenant shall give notice by registered or
certified mail to any (a) beneficiary of a deed of trust or (b) mortgagee under a mortgage covering
the Premises, the Building or the Project and to any landlord of any lease of land upon or within
which the Premises, the Building or the Project is located, and shall offer such beneficiary,
mortgagee or landlord a reasonable opportunity to cure the default, including time to obtain
possession of the Building or the Project by power of sale or a judicial action if such should
prove necessary to effect a cure; provided that Landlord shall furnish to Tenant in
writing, upon written request by Tenant, the names and addresses of all such persons who are to
receive such notices.

32. Bankruptcy. In the event a debtor, trustee or debtor in possession under the
Bankruptcy Code, or another person with similar rights, duties and powers under any other
Applicable Laws, proposes to cure any default under this Lease or to assume or assign this Lease
and is obliged to provide adequate assurance to Landlord that (a) a default shall be cured, (b)
Landlord shall be compensated for its damages arising from any breach of this Lease and (c) future
performance of Tenant’s obligations under this Lease shall occur, then such adequate assurances
shall include any or all of the following, as designated by Landlord in its sole and absolute
discretion:

     32.1. Those acts specified in the Bankruptcy Code or other Applicable Laws as included within
the meaning of “adequate assurance,” even if this Lease does not concern a shopping center or other
facility described in such Applicable Laws;

     32.2. A prompt cash payment to compensate Landlord for any monetary defaults or actual damages
arising directly from a breach of this Lease;

60

 

     32.3. A cash deposit in an amount at least equal to the then-current amount of the Security
Deposit; or

     32.4. The assumption or assignment of all of Tenant’s interest and obligations under this
Lease.

33. Brokers. Tenant represents and warrants that it has had no dealings with any real
estate broker or agent in connection with the negotiation of this Lease other than Randy Scott of
Cornish & Carey, Palo Alto (“Broker”), and that it knows of no other real estate broker or
agent that is or might be entitled to a commission in connection with this Lease (except for GVA Kidder
Matthews which represents Landlord). Landlord shall compensate Broker in relation to this Lease
pursuant to a separate agreement between Landlord and Broker.

     33.1. Tenant represents and warrants that no broker or agent has made any representation or
warranty relied upon by Tenant in Tenant’s decision to enter into this Lease, other than as
contained in this Lease.

     33.2. Tenant acknowledges and agrees that the employment of brokers by Landlord is for the
purpose of solicitation of offers of leases from prospective tenants and that no authority is
granted to any broker to furnish any representation (written or oral) or warranty from Landlord
unless expressly contained within this Lease. Landlord is executing this Lease in reliance upon
Tenant’s representations, warranties and agreements contained within Sections 33.1 and
33.2.

     33.3. Tenant agrees to indemnify, save, defend (at Landlord’s option and with counsel
reasonably acceptable to Landlord) and hold the Landlord Indemnitees harmless from any and all cost
or liability for compensation claimed by any broker or agent, other than Broker, employed or
engaged by Tenant or claiming to have been employed or engaged by Tenant.

61

 

34. Definition of Landlord. With regard to obligations imposed upon Landlord pursuant to
this Lease, the term “Landlord,” as used in this Lease, shall refer only to Landlord or
Landlord’s then-current successor-in-interest. In the event of any transfer, assignment or
conveyance of Landlord’s interest in this Lease or in Landlord’s fee title to or leasehold interest
in the Property, as applicable, Landlord herein named (and in case of any subsequent transfers or
conveyances, the subsequent Landlord) shall be automatically freed and relieved, from and after the
date of such transfer, assignment or conveyance, from all liability for the performance of any
covenants or obligations contained in this Lease thereafter to be performed by Landlord and,
without further agreement, the transferee, assignee or conveyee of Landlord’s in this Lease or in
Landlord’s fee title to or leasehold interest in the Property, as applicable, shall be deemed to
have assumed and agreed to observe and perform any and all covenants and obligations of Landlord
hereunder during the tenure of its interest in the Lease or the Property. Landlord or any
subsequent Landlord may transfer its interest in the Premises or this Lease without Tenant’s
consent.

35. Limitation of Landlord’s Liability.

     35.1. If Landlord is in default under this Lease and, as a consequence, Tenant recovers a
monetary judgment against Landlord, the judgment shall be satisfied only out of (a) the proceeds of
sale received on execution of the judgment and levy against the right, title and interest of
Landlord in the Building and the Project of which the Premises are a part, (b) rent or other income
or insurance or condemnation proceeds from such real property receivable by Landlord or (c) the
consideration received by Landlord from the sale, financing, refinancing or other disposition of
all or any part of Landlord’s right, title or interest in the Building or the Project of which the
Premises are a part.

     35.2. Landlord shall not be personally liable for any deficiency under this Lease. If
Landlord is a partnership or joint venture, then the partners of such partnership shall not be
personally liable for Landlord’s obligations under this Lease, and no partner of Landlord
shall be sued or named as a party in any suit or action, and service of process shall not be made
against any partner of Landlord except as may be necessary to secure jurisdiction of the
partnership or joint venture. If Landlord is a corporation, then the shareholders, directors,
officers, employees and agents of such corporation shall not be personally liable for Landlord’s
obligations under this Lease, and no shareholder, director, officer, employee or agent of Landlord
shall be sued or named as a party in any suit or action, and service of process shall not be made
against any shareholder, director, officer, employee or agent of Landlord. If Landlord is a
limited liability company, then the members of such limited liability company shall not be
personally liable for Landlord’s obligations under this Lease, and no member of Landlord shall be
sued or named as a party in any suit or action, and service of process shall not be made against
any member of Landlord except as may be necessary to secure jurisdiction of the limited liability
company. No partner, shareholder, director, employee, member or agent of Landlord shall be
required to answer or otherwise plead to any service of process, and no judgment shall be taken or
writ of execution levied against any partner, shareholder, director, employee, member or agent of
Landlord.

62

 

     35.3. Each of the covenants and agreements of this Article shall be applicable to any covenant
or agreement either expressly contained in this Lease or imposed by Applicable Laws and shall
survive the expiration or earlier termination of this Lease.

36. Intentionally Omitted.

37. Representations. Tenant guarantees, warrants and represents that (a) Tenant is duly
incorporated or otherwise established or formed and validly existing under the laws of its state of
incorporation, establishment or formation, (b) Tenant has and is duly qualified to do business in
the state in which the Property is located, (c) Tenant has full corporate, partnership, trust,
association or other appropriate power and authority to enter into this Lease and to perform all
Tenant’s obligations hereunder, (d) each person (and all of the persons if more than one signs)
signing this Lease on behalf of Tenant is duly and validly authorized to do so and (e) neither (i)
the execution, delivery or performance of this Lease nor (ii) the consummation of the transactions
contemplated hereby will violate or conflict with any provision of documents or instruments under
which Tenant is constituted or to which Tenant is a party. In addition, Tenant guarantees,
warrants and represents that none of (x) it, (y) its affiliates or partners nor (z) to the best of
its knowledge, its members, shareholders or other equity owners or any of their respective
employees, officers, directors, representatives or agents is a person or entity with whom U.S.
persons or entities are restricted from doing business under regulations of the Office of Foreign
Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s
Specially Designated and Blocked Persons List) or under any statute, executive order (including the
September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who
Commit, Threaten to Commit, or Support Terrorism) or other similar governmental action.

38. Confidentiality. Landlord and Tenant shall keep the terms and conditions of this Lease
and any information provided to Landlord or Tenant or their respective employees, agents or
contractors pursuant to Article 9 confidential and shall not (a) disclose to any third
party any terms or conditions of this Lease or any other Lease-related document (including subleases,
assignments, side letters, work letters, construction contracts, letters of credit, subordination
agreements, non-disturbance agreements, brokerage agreements or estoppels) or (b) provide to any
third party an original or copy of this Lease (or any Lease-related document). Landlord shall not
release to any third party any non-public financial information or non-public information about
Tenant’s ownership structure that Tenant gives Landlord. Notwithstanding the foregoing,
confidential information under this Section may be released by Landlord or Tenant under the
following circumstances: (x) if required by Applicable Laws (including to comply with any
Securities Exchange Commission (“SEC”) regulations) or in any judicial proceeding;
provided that the releasing party has given the other party reasonable notice of such
requirement, if feasible, (y) to a party’s attorneys, accountants, brokers and other bona fide
consultants or advisers (with respect to this Lease only); provided such third parties
agree to be bound by this Section or (z) to bona fide prospective assignees or subtenants of this
Lease; provided they agree in writing to be bound by this Section.

39. Notices. Any notice, consent, demand, bill, statement or other communication required
or permitted to be given hereunder shall be in writing and shall be given by personal delivery,

63

 

overnight delivery with a reputable nationwide overnight delivery service, or certified mail
(return receipt requested), and if given by personal delivery, shall be deemed delivered upon
receipt; if given by overnight delivery, shall be deemed delivered one (1) day after deposit with a
reputable nationwide overnight delivery service; and, if given by certified mail (return receipt
requested), shall be deemed delivered three (3) business days after the time the notifying party
deposits the notice with the United States Postal Service. Any notices given pursuant to this
Lease shall be addressed to Tenant at the Premises, or to Landlord or Tenant at the addresses shown
in Sections 2.9 and 2.10, respectively. Either party may, by notice to the other
given pursuant to this Section, specify additional or different addresses for notice purposes.

40. Rooftop Installation Area.

     40.1. Tenant may use those portions of the Building identified as a “Rooftop Installation
Area” on Exhibit A attached hereto (the “Rooftop Installation Area”) solely to
operate, maintain, repair and replace rooftop antennae, mechanical equipment, communications
antennas, deionized water stills, solar panels, dedicated rooftop exhaust ducts, ventilation
equipment, HVAC units and related equipment and other equipment installed by Tenant in the Rooftop
Installation Area in accordance with this Article (“Tenant’s Rooftop Equipment”). Tenant’s
Rooftop Equipment shall be only for Tenant’s use of the Premises for the Permitted Use. Tenant
shall have the right to install exhaust fans as part of Tenant’s Rooftop Equipment (provided that
any such installations shall be made in compliance with this Lease and all Applicable Laws and
subject to Landlord’s approval, in Landlord’s reasonable discretion).

     40.2. Tenant shall install Tenant’s Rooftop Equipment at its sole cost and expense (which may
be funded from the TI Allowance if such equipment is installed as part of the Tenant Improvements
or Expansion Space Tenant Improvements), at such times and in such manner as Landlord may
reasonably designate, and in accordance with this Article and the applicable provisions of this
Lease regarding Alterations. Tenant’s Rooftop Equipment and the installation thereof shall be
subject to Landlord’s prior written approval, which approval shall not be
unreasonably withheld. Among other reasons, Landlord may withhold approval if the
installation or operation of Tenant’s Rooftop Equipment could reasonably be expected to damage the
structural integrity of the Building or to transmit vibrations or noise or cause other adverse
effects beyond the Premises to an extent not customary in first class laboratory Buildings, unless
Tenant implements measures that are acceptable to Landlord in its reasonable discretion to avoid
any such damage or transmission.

     40.3. Tenant shall comply with any roof or roof-related warranties. Tenant shall obtain a
letter from Landlord’s roofing contractor within thirty (30) days after completion of any Tenant
work on the rooftop stating that such work did not affect any such warranties. Tenant, at its sole
cost and expense, shall inspect the Rooftop Installation Area at least annually, and correct any
loose bolts, fittings or other appurtenances and repair any damage to the roof caused by the
installation or operation of Tenant’s Rooftop Equipment. Tenant shall not permit the installation,
maintenance or operation of Tenant’s Rooftop Equipment to violate any Applicable Laws or constitute
a nuisance. Tenant shall pay Landlord within thirty (30) days after demand (a) all applicable
taxes, charges, fees or impositions imposed on Landlord by Governmental Authorities as the result
of Tenant’s use of the Rooftop Installation Areas in excess of those for

64

 

which Landlord would otherwise be responsible for the use or installation of Tenant’s Rooftop Equipment and (b) the
amount of any increase in Landlord’s insurance premiums as a result of the installation of Tenant’s
Rooftop Equipment. Upon Tenant’s written request to Landlord, Landlord shall use commercially
reasonable efforts to cause other tenants to remedy any interference in the operation of Tenant’s
Rooftop Equipment caused by any such tenants’ equipment installed after the applicable piece of
Tenant’s Rooftop Equipment; provided, however, that Landlord shall not be required to
request that such tenants waive their rights under their respective leases.

     40.4. If Tenant’s Equipment (a) causes physical damage to the structural integrity of the
Building, (b) interferes with any telecommunications, mechanical or other systems located at or
near or servicing the Building or the Project that were installed prior to the installation of
Tenant’s Rooftop Equipment, (c) interferes with any other service provided to other tenants in the
Building or the Project by rooftop or penthouse installations that were installed prior to the
installation of Tenant’s Rooftop Equipment or (d) interferes with any other tenants’ business, in
each case in excess of that permissible under Federal Communications Commission regulations, then
Tenant shall cooperate with Landlord to determine the source of the damage or interference and
promptly repair such damage and eliminate such interference, in each case at Tenant’s sole cost and
expense, within ten (10) days after receipt of notice of such damage or interference (which notice
may be oral; provided that Landlord also delivers to Tenant written notice of such damage
or interference within twenty-four (24) hours after providing oral notice).

     40.5. Landlord reserves the right to cause Tenant to relocate Tenant’s Rooftop Equipment to
comparably functional space on the roof or in the penthouse of the Building by giving Tenant prior
written notice thereof. Landlord agrees to pay the reasonable costs thereof. Tenant shall arrange
for the relocation of Tenant’s Rooftop Equipment within sixty (60) days after receipt of Landlord’s
notification of such relocation. In the event Tenant fails to arrange for relocation within such
sixty (60)-day period, Landlord shall have the right to arrange for the
relocation of Tenant’s Rooftop Equipment in a manner that does not unnecessarily interrupt or
interfere with Tenant’s use of the Premises for the Permitted Use.

     40.6. Unless specified by Landlord pursuant to the provisions of Article 17, Tenant’s
Rooftop Equipment shall remain in the Rooftop Installation Area upon Tenant’s surrender of the
Premises and shall be the property of Landlord.

41. Miscellaneous.

     41.1. Landlord reserves the right to change the name of the Building or the Project in its
sole discretion.

     41.2. To induce Landlord to enter into this Lease, Tenant agrees that, if Tenant is not then a
publicly traded company on a United States exchange, Tenant shall (a) promptly furnish to Landlord,
from time to time (but not more than twice per calendar year), upon Landlord’s written request, the
most recent audited year-end financial statements reflecting Tenant’s current financial condition
and (b) within ninety (90) days after the end of Tenant’s financial year, furnish Landlord with a
certified copy of Tenant’s audited year-end financial statements for the

65

 

previous year; provided, that as long as the common stock of Tenant (or its permitted assigns) is
publicly-traded and such information is available as part of Tenant’s (or its permitted assigns’)
10-K or 10-Q report filings on the SEC’s Edgar website, and such materials are current per SEC
filing requirements, then the above requirements shall be fulfilled by such filings. Tenant
represents and warrants that all financial statements, records and information furnished by Tenant
to Landlord in connection with this Lease are true, correct and complete in all respects. If
audited financials are not otherwise prepared, unaudited financials certified by the chief
financial officer of Tenant as true, correct and complete in all respects shall suffice for
purposes of this Section. This Section 41.2 shall not apply if Tenant is a publicly traded
entity and nothing in this Section 41.2 shall require Tenant to create audited financial
statements if Tenant does not otherwise do so in the ordinary course of its business.

     41.3. Where applicable in this Lease, the singular includes the plural and the masculine or
neuter includes the masculine, feminine and neuter. The words “include,” “includes,” “included”
and “including” shall mean “‘include,’ etc., without limitation.” The section headings of this
Lease are not a part of this Lease and shall have no effect upon the construction or interpretation
of any part hereof.

     41.4. If either party commences an action against the other party arising out of or in
connection with this Lease, then the substantially prevailing party shall be reimbursed by the
other party for all reasonable costs and expenses, including reasonable attorneys’ fees and
expenses, incurred by the substantially prevailing party in such action or proceeding and in any
appeal in connection therewith.

     41.5. Submission of this instrument for examination or signature by Tenant does not constitute
a reservation of or option for a lease, and shall not be effective as a lease or otherwise until
execution by and delivery to both Landlord and Tenant.

     41.6. Time is of the essence with respect to the performance of every provision of this Lease
in which time of performance is a factor.

     41.7. [Intentionally Omitted].

     41.8. Whenever consent or approval of either party is required, that party shall not
unreasonably withhold such consent or approval, except as may be expressly set forth to the
contrary.

     41.9. The terms of this Lease are intended by the parties as a final expression of their
agreement with respect to the terms as are included herein, and may not be contradicted by evidence
of any prior or contemporaneous agreement.

     41.10. Any provision of this Lease that shall prove to be invalid, void or illegal shall in no
way affect, impair or invalidate any other provision hereof, and all other provisions of this Lease
shall remain in full force and effect and shall be interpreted as if the invalid, void or illegal
provision did not exist.

66

 

     41.11. Upon Tenant’s written request and payment of the costs associated therewith, Landlord
shall record a short form or memorandum of this Lease in the form attached hereto as Exhibit
K. Neither party shall record this Lease. Tenant shall be responsible for the cost of
recording any short form or memorandum of this Lease, including any transfer or other taxes
incurred in connection with said recordation.

     41.12. The language in all parts of this Lease shall be in all cases construed as a whole
according to its fair meaning and not strictly for or against either Landlord or Tenant.

     41.13. Each of the covenants, conditions and agreements herein contained shall inure to the
benefit of and shall apply to and be binding upon the parties hereto and their respective heirs;
legatees; devisees; executors; administrators; and permitted successors, assigns, sublessees.
Nothing in this Section shall in any way alter the provisions of this Lease restricting assignment
or subletting.

     41.14. This Lease shall be governed by, construed and enforced in accordance with the laws of
the state in which the Premises are located, without regard to such state’s conflict of law
principles.

     41.15. Landlord and Tenant guarantee, warrant and represent that the individual or individuals
signing this Lease have the power, authority and legal capacity to sign this Lease on behalf of and
to bind all entities, corporations, partnerships, limited liability companies, joint venturers or
other organizations and entities on whose behalf said individual or individuals have signed.

     41.16. This Lease may be executed in one or more counterparts, each of which, when taken
together, shall constitute one and the same document.

     41.17. No provision of this Lease may be modified, amended or supplemented except by an
agreement in writing signed by Landlord and Tenant. The waiver by Landlord or Tenant of any breach
by the other party of any term, covenant or condition herein contained shall not be deemed to be a
waiver of any subsequent breach of the same or any other term, covenant or condition herein
contained.

     41.18. To the extent permitted by Applicable Laws, the parties waive trial by jury in any
action, proceeding or counterclaim brought by the other party hereto related to matters arising out
of or in any way connected with this Lease; the relationship between Landlord and Tenant; Tenant’s
use or occupancy of the Premises; or any claim of injury or damage related to this Lease or the
Premises.

67

 

42. Option to Extend Term. Tenant shall have the option (“Option”) to extend
the Term by five (5) years (the “Option Term”) as to the entire Premises (and no less than
the entire Premises) upon the following terms and conditions. Any extension of the Term pursuant
to the Option shall be on all the same terms and conditions as this Lease, except as follows:

     42.1. Base Rent during the Option Term shall equal the fair market rent for similar premises
in similar buildings in the cities of Newark and Fremont as of the commencement of the Option Term,
including fair market rent increases (“FMR”). If Landlord and Tenant cannot agree on the
FMR for the Option Term within thirty (30) days after the date on which Tenant notifies Landlord
that it is exercising the Option, then, no later than an additional thirty (30) days thereafter
(the “Submission Period”), Landlord and Tenant shall each furnish to the other a notice in
writing (an “FMR Notice”) stating such party’s estimate of the FMR. Such notices shall be
accompanied by a statement from a qualified, licensed real estate appraiser with at least ten (10)
years’ experience in the Fremont/Newark area (an “Appraiser”) stating such Appraiser’s
opinion of FMR. If only one (1) party’s Appraiser timely submits its opinion of FMR, such FMR
shall be binding on Landlord and Tenant. If, within twenty (20) days after expiration of the
Submission Period, Landlord and Tenant still cannot agree on the FMR, the two (2) Appraisers shall
appoint a third qualified, licensed real estate appraiser (the “Referee”) within seven (7)
days. If the Appraisers are unable to agree upon the selection of the Referee, then the Referee
shall be selected within ten (10) days thereafter from among the Northern California panel of
qualified Real Estate Industry Arbitrators of the American Arbitrator Association (the
“Association”) pursuant to the Real Estate Industry Arbitration rules of the Association.
The Referee shall, within thirty (30) days after appointment, render the Referee’s decision as to
the FMR, which opinion shall be strictly limited to choosing one of the two determinations made by
the Appraisers. The decision by the Referee shall be binding upon Landlord and Tenant, and each
shall pay for its own appraisal. The cost of the Referee shall be shared equally by Landlord and
Tenant. In determining FMR, Landlord, Tenant and, if applicable, the Appraisers and Referee shall
each take into account all relevant factors, including, without limitation, (a) the size of the
Premises and length of the Option Term, (b) rent in comparable buildings in the relevant
competitive market, including concessions offered to new tenants, such as free rent, tenant
improvement allowances, and moving allowances, (c) Tenant’s creditworthiness and (d) the quality
and location of the Building and the Project.

     42.2. The Option is not assignable separate and apart from this Lease.

     42.3. The Option is conditional upon Tenant giving Landlord written notice of its election to
exercise the Option at least twelve (12) months prior to the end of the expiration of the initial
Term. Time shall be of the essence as to Tenant’s exercise of the Option. Tenant assumes full
responsibility for maintaining a record of the deadlines to exercise the Option. Tenant
acknowledges that it would be inequitable to require Landlord to accept any exercise of the Option
after the date provided for in this Section.

     42.4. Notwithstanding anything contained in this Article to the contrary, Tenant shall not
have the right to exercise the Option:

68

 

          (a) At any time after any Default as described in Article 31 of the Lease and
continuing until Tenant cures any such Default; or

          (b) In the event that Tenant has defaulted in the performance of its obligations under this
Lease three (3) or more times and a service or late charge has become payable under Section
31.1 for each of such defaults during the twelve (12)-month period immediately prior to the
date that Tenant intends to exercise the Option, whether or not Tenant has cured such defaults.

     42.5. The period of time within which Tenant may exercise the Option shall not be extended or
enlarged by reason of Tenant’s inability to exercise such Option because of the provisions of
Section 41.4 or Section 42.5.

     42.6. All of Tenant’s rights under the provisions of the Option shall terminate and be of no
further force or effect even after Tenant’s due and timely exercise of the Option if, after such
exercise, but prior to the commencement date of the Option Term, (a) Tenant fails to pay to
Landlord a monetary obligation of Tenant for a period of thirty (30) days after written notice from
Landlord to Tenant, (b) Tenant fails to commence to cure a material non-monetary default within
thirty (30) days after the date Landlord gives notice to Tenant of such default or (c) Tenant has
Defaulted under this Lease two (2) or more times.

43. Expansion Option.

     43.1. Subject to the conditions set forth in this Article and the rights of third parties
existing as of the Effective Date of this Lease to the Expansion Space, Tenant shall have the
right, but not the obligation, to expand the Premises (the “Expansion Option”) to include
up to approximately thirty thousand (30,000) square feet of contiguous Rentable Area in the
Building, as more particularly shown on the floor plan attached hereto as Exhibit J (the
“Expansion Space”). Notwithstanding anything to the contrary contained herein, in the
event Landlord enters into negotiations with a third party to lease all or any portion of the
Expansion Space during the Expansion Option Period (as hereinafter defined), Landlord will provide
Tenant with written notice that it has a tenant interested in leasing the Expansion Space at the
time it enters into a letter of intent or similarly agrees on general bona fide terms of leasing
the Expansion Space (or portion thereof), which shall be made subject to Tenant’s right to exercise
the Expansion Option, and Tenant shall have a period of ten (10) business days after its receipt of
such notice to exercise the Expansion Option in accordance with the terms of this Article 43.

     43.2. Tenant may exercise the Expansion Option by providing Landlord, no later than the
eighteen (18) month anniversary of the Term Commencement Date (the “Expansion Option
Period”), with written notice that Tenant has elected to exercise the Expansion Option. Within
ten (10) business days after exercising the Expansion Option, Tenant and Landlord shall enter into
a written amendment to the Lease (the “Amendment”), which amendment shall provide, unless
otherwise agreed in writing, (a) the date on which the Expansion Space shall be delivered to Tenant
for Tenant’s construction of the Expansion Space Tenant Improvements (the “Expansion Space
Delivery Date”), which date shall be no later than ten (10) business days after
the date of full execution and delivery of the Amendment and the date upon which the Expansion

69

 

Space Base Rent will commence, which date shall be four (4) months after the Expansion Space
Delivery Date (the “Expansion Space Rent Commencement Date”), (b) that the Premises under
this Lease shall be increased to include the square feet of Rentable Area of the Expansion Space
determined as of the Expansion Space Delivery Date, which Rentable Area shall be remeasured as of
the Expansion Space Rent Commencement Date in accordance with the provisions of Article 6,
(c) that Tenant’s lease of the Expansion Space shall terminate on the Term Expiration Date, (d) the
Expansion Space Base Rent (as defined below), with the base rent applicable to the Expansion Space
equal to the One and 70/100s Dollars ($1.70) per square foot of Rentable Area per month (the
“Expansion Space Base Rent”), increasing by Ten Cents ($0.10) on each annual anniversary of
the Expansion Space Rent Commencement Date in lease years two through five (2-5) (as applicable to
the Expansion Space) and then by Seven Cents ($0.07) on each annual anniversary of the Expansion
Space Rent Commencement Date in lease years six through eleven (6-11) (as applicable to the
Expansion Space), (e) Tenant’s new Pro Rata Shares of Operating Expenses based upon the addition of
the Expansion Space to the Premises (which new Pro Rata Shares will become effective as of the
Expansion Space Rent Commencement Date), (f) the proportionate increase to the Security Deposit
(which increase shall be payable to Landlord upon execution of the Amendment) and (g) that the
tenant improvements in the Expansion Space (the “Expansion Space Tenant Improvements”) will
be constructed by Tenant pursuant to the Work Letter at a cost to Landlord not to exceed (a) Three
Million Seven Hundred Fifty Thousand Dollars ($3,750,000) (based upon One Hundred Twenty-Five
Dollars ($125.00) per square foot of Rentable Area of Expansion Space (the “Expansion Space
Base TI Allowance”) plus (ii) if properly requested by Tenant pursuant to this Article,
One Million Five Hundred Thousand Dollars ($1,500,000) (based upon Fifty Dollars ($50.00) per
square foot of Rentable Area of Expansion Space) (the “Expansion Space Additional TI
Allowance”), for a total of Five Million Two Hundred Fifty Thousand Dollars ($5,250,000) (based
upon One Hundred Seventy-Five Dollars ($175) per square foot of Rentable Area, collectively the
Expansion Space Base TI Allowance and the Expansion Space Additional TI Allowance (if properly
requested by Tenant pursuant to Articles 4 and 43, respectively), shall be
referred to herein as the “Expansion Space TI Allowance”). In all other respects, this
Lease shall remain in full force and effect, and shall apply to the Expansion Space. The Expansion
Space TI Allowance may be applied to the costs of (n) construction, with up to Five Dollars ($5.00)
per square foot of Rentable Area available for wiring and cabling costs, (o) project management by
Landlord (which fee shall equal one percent (1%) of the cost of the Expansion Space Tenant
Improvements, including the Expansion Space Base TI Allowance and, if used by Tenant, the Expansion
Space Additional TI Allowance), (p) space planning, project management, architect, engineering and
other related services performed by third parties unaffiliated with Tenant, (q) building permits
for the Expansion Space Tenant Improvements and other taxes, fees, charges and levies by
Governmental Authorities (as defined below) for permits or for inspections of the Expansion Space
Tenant Improvements, (r) compliance of the Expansion Space Tenant Improvements with applicable
building codes and regulations, including, without limitation, costs to build the Expansion Space
Tenant Improvements in compliance with the ADA or Title 24 required as a result of the design
 of
the Expansion Space Tenant Improvements, (s) costs and expenses for labor, material, equipment and
fixtures. In no event shall the Expansion Space TI Allowance be used for (w) payments to
Tenant or any affiliates of Tenant, (x) the purchase of any furniture, personal property or
other non-building system equipment, (y) costs resulting from any default by Tenant of its
obligations

70

 

under this Lease or (z) costs that are recoverable by Tenant from a third party (e.g.,
insurers, warrantors, or tortfeasors). All Tenant TI Allowances will be adjusted based upon the
actual Rentable Area, as determined in accordance with the provisions hereof.

     43.3. For any savings on the Expansion Space Base TI Allowance, Tenant shall be entitled to a
credit to the Expansion Space Base Rent equal to twelve-thousandths of one dollar ($.012) per
square foot of Rentable Area per month for every dollar of the Expansion Space Base TI Allowance
savings on the initial Expansion Space Tenant Improvements; provided, however, in no event
shall the Expansion Space Base Rent be reduced below One Dollar ($1) per square foot of Rentable
Area per month, subject to annual increase as provided above. If the Expansion Space Additional TI
Allowance is disbursed by Landlord, (a) it shall be conclusive that there was no savings on the
Expansion Space Base TI Allowance and (b) Expansion Space Base Rent shall be increased by
twelve-thousandths of One Dollar ($.012) per square foot of Rentable Area per month for every
dollar per square foot of Rentable Area of the Expansion Space Additional TI Allowance so
disbursed, subject to annual increase as provided above.

     43.4. Tenant shall have until the date which is twelve (12) months after the Expansion Space
Rent Commencement Date (the “Expansion Space TI Deadline”), to expend any unused portion of
the Expansion Space Additional TI Allowance, after which date Landlord’s obligation to fund such
costs shall expire. The amount by which Base Rent for the Expansion Space shall be increased or
credited shall be determined (and Base Rent for the Expansion Space shall be increased or credited
accordingly) as of the Expansion Space Rent Commencement Date and, if such determination does not
reflect use by Tenant of all of the Expansion Space Additional TI Allowance, then such amount shall
be determined again as of the Expansion Space TI Deadline, with Tenant paying (on the next
succeeding day that Base Rent is due under this Lease (the “Expansion Space TI True-Up
Date”)) any underpayment of the further adjusted Base Rent for the period beginning on the
Expansion Space Rent Commencement Date and ending on the Expansion Space TI True-Up Date.

     43.5. Notwithstanding anything in this Article to the contrary, Tenant shall not exercise the
Expansion Option during such period of time that Tenant is in Default under any provision of this
Lease. Any attempted exercise of the Expansion Option during a period of time in which Tenant is
so in Default shall be void and of no effect. In addition, Tenant shall not be entitled to
exercise the Expansion Option if Landlord has given Tenant two (2) or more notices of Default under
this Lease, whether or not the Defaults are cured, during the twelve (12) month period prior to the
date on which Tenant seeks to exercise the Expansion Option.

     43.6. Notwithstanding anything in this Lease to the contrary, the Expansion Option shall
expire on the date that is eighteen (18) months following the Term Commencement Date.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

71

 

IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date first above written.

LANDLORD:

	 	 	 	 	 
	 	BMR-GATEWAY BOULEVARD LLC,

a Delaware limited liability company

 	 
	 	By:  	/s/ Anne L. Hoffman
 	 
	 	 	Name:  	Anne L. Hoffman 	 
	 	 	Title:  	Sr. Vice President, Development 	 
	 
	 	TENANT:

STEMCELLS, INC.,

a Delaware corporation

 	 
	 	By:  	/s/ Ken Stratton
 	 
	 	 	Name:  	Ken Stratton 	 
	 	 	Title:  	General Counsel

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00186-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00186-of-00352.parquet"}]]