Document:

Exhibit 10.1

 

INTERMOLECULAR, INC.

 

FOURTH AMENDED AND RESTATED
 INVESTOR RIGHTS AGREEMENT

 

MARCH 4, 2011

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
1.
    	
Restrictions on Transferability; Registration Rights
    	
1
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
1.1
    	
Certain Definitions
    	
1
    
	
 
    	
1.2
    	
Restrictions
    	
4
    
	
 
    	
1.3
    	
Requested Registration
    	
5
    
	
 
    	
1.4
    	
Registration on Form S-3
    	
7
    
	
 
    	
1.5
    	
Company Registration
    	
8
    
	
 
    	
1.6
    	
Registration Procedures
    	
9
    
	
 
    	
1.7
    	
Information by Holder
    	
11
    
	
 
    	
1.8
    	
Indemnification
    	
11
    
	
 
    	
1.9
    	
Expenses of Registration
    	
14
    
	
 
    	
1.10
    	
Rule 144 Reporting
    	
14
    
	
 
    	
1.11
    	
Transfer of Registration Rights
    	
15
    
	
 
    	
1.12
    	
Procedure for Underwriter Cutbacks
    	
15
    
	
 
    	
1.13
    	
Standoff Agreement
    	
15
    
	
 
    	
1.14
    	
Limitations on Subsequent Registration Rights
    	
16
    
	
 
    	
1.15
    	
Termination of Rights
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
2.
    	
Right of First Refusal
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.1
    	
Right of First Refusal
    	
16
    
	
 
    	
2.2
    	
Assignment of Right of First Refusal
    	
17
    
	
 
    	
2.3
    	
Termination of Right of First Refusal
    	
17
    
	
 
    	
2.4
    	
Certain IPO Purchase Rights
    	
18
    
	
 
    	
2.5
    	
Notification of Future Private Rounds
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
Affirmative Covenants of the Company
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.1
    	
Financial Information
    	
19
    
	
 
    	
3.2
    	
Budget
    	
20
    
	
 
    	
3.3
    	
Inspection
    	
20
    
	
 
    	
3.4
    	
Board Observer
    	
21
    
	
 
    	
3.5
    	
Employee and Consultant Stock Option Vesting
    	
21
    
	
 
    	
3.6
    	
Confidential Information and Invention Assignment   Agreements
    	
21
    
	
 
    	
3.7
    	
Directors & Officers Insurance
    	
21
    
	
 
    	
3.8
    	
Key-man Life Insurance
    	
21
    
	
 
    	
3.9
    	
Reservation of Common Stock
    	
21
    
	
 
    	
3.10
    	
Qualified Small Business
    	
22
    
	
 
    	
3.11
    	
Termination of Covenants
    	
22
    
	
 
    	
3.12
    	
Company Confidential Information
    	
22
    
	
 
    	
3.13
    	
Reimbursement of Director’s Expenses
    	
22
    

 

i

 

TABLE OF CONTENTS

(CONTINUED)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
4.
    	
Miscellaneous
    	
22
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.1
    	
Governing Law
    	
22
    
	
 
    	
4.2
    	
Successors and Assigns
    	
23
    
	
 
    	
4.3
    	
Entire Agreement
    	
23
    
	
 
    	
4.4
    	
Notices, Etc.
    	
23
    
	
 
    	
4.5
    	
Delays or Omissions
    	
23
    
	
 
    	
4.6
    	
Dispute Resolution Fees
    	
23
    
	
 
    	
4.7
    	
Counterparts
    	
23
    
	
 
    	
4.8
    	
Severability
    	
24
    
	
 
    	
4.9
    	
Titles and Subtitles
    	
24
    
	
 
    	
4.10
    	
Amendment and Waiver
    	
24
    
	
 
    	
4.11
    	
Effect of Amendment or Waiver
    	
24
    
	
 
    	
4.12
    	
Rights of Investors
    	
24
    
	
 
    	
4.13
    	
Aggregation of Stock
    	
24
    
	
 
    	
4.14
    	
Termination of Prior Agreement
    	
24
    
	
 
    	
4.15
    	
Further Assurances
    	
25
    
	
 
    	
4.16
    	
Confidentiality
    	
25
    
	
 
    	
4.17
    	
Additional Parties
    	
25
    

 

ii

 

INVESTOR RIGHTS AGREEMENT

 

This Fourth Amended and Restated Investor Rights Agreement (this “Agreement”) is made as of March 4, 2011, among Intermolecular, Inc., a Delaware corporation (the “Company”), and the stockholders listed on Exhibit A hereto as the same may be amended pursuant to Section 4.10 herein (individually an “Investor” and collectively the “Investors”).

 

RECITALS

 

A.                                   The Company and certain of the Investors (the “Existing Investors”) are parties to the Third Amended and Restated Investors Rights Agreement, dated as of December 16, 2008, by and among the Company and the parties thereto (the “Prior Agreement”).

 

B.                                     Concurrently with the execution and delivery of this Agreement, certain of the Investors are purchasing shares of the Company’s Series E Preferred Stock pursuant to that certain Series E Preferred Stock Purchase Agreement of even date herewith (the “Series E Purchase Agreement”).

 

C.                                     One condition to such Investors’ obligations to purchase shares of the Company’s Series E Preferred Stock under the Series E Purchase Agreement is that the Company and such Investors enter into this Agreement in order to provide such Investors with certain rights to register shares of the Company’s Common Stock issuable upon conversion of the Company’s Preferred Stock held by such Investors, certain rights to receive information pertaining to the Company and a right of first offer with respect to certain issuances by the Company of its securities.

 

D.                                    The Company and the Existing Investors want to induce such Investors to purchase shares of Series E Preferred Stock pursuant to the Series E Purchase Agreement by agreeing to (a) amend and restate the Prior Agreement in its entirety and (b) the terms and conditions set forth herein.

 

AGREEMENT

 

The parties agree as follows:

 

1.                                       Restrictions on Transferability; Registration Rights.

 

1.1                                 Certain Definitions.  As used in this Agreement, the following terms have the following respective meanings:

 

“Alliance  Agreement” means that Alliance Agreement, dated as of December 19, 2005 between the Company and Symyx, as amended from time to time in accordance with its terms.

 

“ATMI” means Advanced Technology Materials, Inc., a Delaware Corporation.

 

“Commission” means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

 

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“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any similar successor federal statute, and the rules and regulations thereunder, all as the same shall be in effect from time to time.

 

“Form S-3 Initiating Holders” means any Holder or Holders who propose to register securities, the aggregate offering price of which, net of underwriting discounts and commissions, exceeds $1,000,000.

 

“Holder” means (i) any Investor holding Registrable Securities and (ii) any person holding Registrable Securities to whom the rights under this Agreement have been transferred in accordance with Section 1.11 hereof.

 

“Initiating Holders” means any Holder or Holders who (i) in the aggregate hold not less than 50% of the Registrable Securities then outstanding or (ii) who propose to register securities with an aggregate offering price, net of underwriting discounts and commissions, of at least $5,000,000.

 

“IPO” means the first public offering of the Common Stock of the Company to the general public that is affected pursuant to a registration statement filed with, and declared effective by, the Commission under the Securities Act.

 

“New Securities” means any shares of capital stock of the Company, including Common Stock and Preferred Stock, whether authorized or not, and rights, options, or warrants to purchase said shares of capital stock, and securities of any type whatsoever that are, or may become, convertible into capital stock; provided, however, that the term “New Securities” does not include (i) securities issued pursuant to the Series E Purchase Agreement; (ii) securities issued upon conversion of the Shares; (iii) shares of Common Stock or options, warrants or rights to purchase Common Stock issued to employees, consultants, officers or directors pursuant to any stock plans or other arrangements approved by the Board, with the approval of at least 60% of the directors then serving on the Board; (iv) securities issued pursuant to any rights or agreements, including, without limitation, convertible securities, options and warrants, provided that the Company shall have complied with the right of first offer established by Section 2 below with respect to the initial sale or grant by the Company of such rights or agreements, provided that such rights or agreements existed prior to the Company’s obligations under Section 2; (v) securities issued in connection with any stock split, stock dividend or recapitalization by the Company; (vi) securities issued pursuant to the acquisition of another entity by the Company by merger, purchase of substantially all of the assets or shares or other reorganization whereby the Company will own not less than a majority of the voting power of the surviving or successor corporation, in each case as approved by the Board, with the approval of at least 60% of the directors then serving on the Board; (vii) securities issued to lenders, financial institutions, equipment lessors or real estate lessors of the Company in connection with a bona fide borrowing or leasing transaction, if such issuance is approved by the Board, with the approval of at least 60% of the directors then serving on the Board; (viii) securities issued to vendors or customers of the Company, or to persons in similar commercial arrangements with the Company, if such issuance is approved by the Board, with the approval of 60% of the directors then serving on the Board; (ix) securities issued in connection with corporate partnering transactions, if such issuance is approved by the Board, with the approval of at least 60% of the directors then serving 

 

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on the Board; (x) securities which are otherwise excluded by the Board, with the approval of a majority of the directors elected by the Preferred Stock; and (xi) any right, option, or warrant to acquire any security convertible into the securities excluded from the definition of New Securities pursuant to clauses (i) through (x) above.

 

“Other Stockholders” means persons other than Holders who, by virtue of agreements with the Company, are entitled to include their securities in certain registrations hereunder.

 

“Pro Rata Portion” means the ratio that (x) the sum of the number of shares of the Company’s Common Stock issued or issuable upon conversion of Shares held by an Investor immediately prior to the issuance of New Securities bears to (y) the sum of the total number of shares of the Company’s Common Stock then outstanding, assuming full exercise and/or conversion of all Company securities exercisable and/or convertible into the Company’s Common Stock then outstanding.

 

The terms “register”, “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

 

“Registration Expenses” shall mean all expenses incurred by the Company in complying with Sections 1.3, 1.4 and 1.5 hereof, including, without limitation, all registration, qualification, listing and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, reasonable expenses of one counsel to the Holders (not to exceed $25,000), blue sky fees and expenses, and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company), but shall not include Selling Expenses or additional fees and disbursements of counsel for the Holders.

 

“Registrable Securities” shall mean (i) shares of Common Stock issued or issuable pursuant to the conversion of the Shares; (ii) shares of Common Stock issued or issuable pursuant to the conversion or exercise of any warrant, right or other security issued to ATMI; and (iii) any Common Stock of the Company issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referenced in clause (i) above; provided, however, that shares of Common Stock or other securities shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, (B) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale, (C) transferred in a transaction pursuant to which the registration rights are not also assigned in accordance with Section 1.11 hereof, or (D) with respect to each Holder, all such shares held by such Holder become eligible for sale under Rule 144 of the Securities Act (or any similar or successor rule), without reference to subsection (k) of Rule 144, during any one 90-day period.  A holder of Shares need not convert such Shares into Common Stock prior to requesting registration hereunder but may make such request in contemplation of conversion of such Shares into Common Stock prior to the effectiveness of such registration.

 

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“Restricted Securities” shall mean the securities of the Company required to bear the legend set forth in Section 1.2 hereof.

 

“Rule 144” means Rule 144 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

 

“Rule 145” means Rule 145 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

 

“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

 

“Selling Expenses” shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to the securities registered by the Holders.

 

“Shares” means the Company’s Series A Preferred Stock, the Company’s Series B Preferred Stock, the Company’s Series C Preferred Stock, the Company’s Series D Preferred Stock and Company’s Series E Preferred Stock.

 

“Symyx” means Symyx Technologies, Inc., a Delaware corporation.

 

1.2                                 Restrictions.

 

(a)                                  Each Holder agrees not to make any disposition of all or any portion of the Registrable Securities unless and until the transferee has agreed in writing for the benefit of the Company to be bound by this Section 1.2 and Section 1.13, provided and to the extent such Sections are then applicable, and (i) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement, or (ii) such Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and, if reasonably requested by the Company, such Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration under the Securities Act.  It is agreed that the Company will not require opinions of counsel for standard Rule 144 transactions.  Notwithstanding the foregoing, no such registration statement or opinion of counsel shall be necessary for a transfer to an affiliate of a Holder or by a Holder which is (A) a partnership to its partners or retired partners in accordance with partnership interests, (B) a limited liability company to its members or former members in accordance with their interest in the limited liability company, (C) a corporation to its stockholders in accordance with their interests in the corporation, or (D) an individual to the Holder’s family member or trust for the benefit of such individual Holder, provided in the case of a transfer to an affiliate and all cases enumerated in clauses (A) — (D) that the transferee is subject to the terms of this Section 1.2 and Section 1.13 as if such transferee were an original Holder hereunder.  Each Holder consents to the Company making a notation on its records and giving instructions to any transfer agent of the 

 

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Restricted Securities in order to implement the restrictions on transfer established in this Section 1.2.

 

(b)                                 Each certificate representing Registrable Securities shall be stamped or otherwise imprinted with legends substantially in the following forms (in addition to any legend required under applicable state securities laws or the Company’s charter documents):

 

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  SUCH SHARES MAY NOT BE SOLD, TRANSFERRED, OR PLEDGED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

 

THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

 

(c)                                  The Company shall promptly reissue unlegended certificates at the request of any Holder thereof if the Holder shall have obtained an opinion of counsel reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be disposed of without registration, qualification or legend.

 

1.3                                 Requested Registration.

 

(a)                                  Request for Registration.  If the Company shall receive from Initiating Holders a written request that the Company effect any registration, qualification or compliance, the Company will:

 

(i)                                     promptly deliver written notice of the proposed registration, qualification, or compliance to all other Holders; and

 

(ii)                                  as soon as practicable, use its best efforts to effect such registration, qualification or compliance (including, without limitation, the execution of an undertaking to file post-effective amendments, appropriate qualification under applicable blue sky or other state securities laws, and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request delivered to the Company within 20 days after delivery of such written notice 

 

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from the Company; provided, however, that the Company shall not be obligated to take any action to effect any such registration, qualification, or compliance pursuant to this Section 1.3:

 

(A)                              Prior to the earlier of: (i) three years following the date of this Agreement, and (ii) six months following the effective date of the IPO;

 

(B)                                After the Company has effected two such registrations pursuant to this Section 1.3 and such registrations have been declared or ordered effective, and the securities offered pursuant to such registrations have been sold;

 

(C)                                During the period starting with the date 60 days prior to the Company’s estimated date of filing of, and ending on a date 180 days after the effective date of, a registration initiated by the Company; provided  that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective and that the Company’s estimate of the date of filing such registration statement is made in good faith;

 

(D)                               In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act; or

 

(E)                                 If in the good faith judgment of the Board, such registration would be seriously detrimental to the Company and the Board concludes, as a result, that it is essential to defer the filing of such registration statement at such time, and the Company thereafter delivers to the Initiating Holders a certificate, signed by the President or Chief Executive Officer of the Company, stating that in the good faith judgment of the Board it would be detrimental to the Company or its stockholders for a registration statement to be filed in the near future, then the Company’s obligation to use its best efforts to register, qualify or comply under this Section 1.3 shall be deferred for a period not to exceed 120 days from the delivery of the written request from the Initiating Holders; provided, however, that the Company may not utilize this right more than once in any 12 month period and the Company shall not register shares for its own account or the account of any other stockholder during such 120 day period (other than registrations relating solely to employee benefit plans or registration relating solely to a Rule 145 transaction).

 

Subject to the foregoing clauses (A) through (E), the Company shall file a registration statement covering the Registrable Securities so requested to be registered as soon as practicable after receipt of the request or requests of the Initiating Holders.  The registration statement filed pursuant to the request of the Initiating Holders may, subject to the provisions of Sections 1.3(c) and Section 1.12 hereof, include other securities of the Company with respect to which registration rights have been granted, and may include securities being sold for the account of the Company.

 

(b)                                 Underwriting.  If the offering is underwritten, the right of any Holder to registration pursuant to this Section 1.3 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in 

 

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the underwriting to the extent provided herein.  A Holder may elect to include in such underwriting all or a part of the Registrable Securities held by such Holder.

 

(c)                                  Procedures.  If the Company shall request inclusion in any registration pursuant to this Section 1.3 of securities being sold for its own account, or if other persons shall request inclusion in any registration pursuant to this Section 1.3, the Initiating Holders shall, on behalf of all Holders, offer to include such securities in the underwriting and may condition such offer on their acceptance of the applicable provisions of this Section 1 (including without limitation Section 1.13).  The Company shall (together with all Holders or other persons proposing to distribute their securities through such underwriting) enter into and perform its obligations under an underwriting agreement in customary form with the managing underwriter selected for such underwriting by a majority in interest of the Initiating Holders (which managing underwriter shall be reasonably acceptable to the Company).  Notwithstanding any other provision of this Section 1.3, if the managing underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, the number of shares to be included in the underwriting or registration shall be allocated first to the Holders and then to the Company and/or other persons.  If any person who has requested inclusion in such registration as provided above disapproves of the terms of the underwriting, such person shall be excluded therefrom by written notice delivered by the Company or the managing underwriter.  Any Registrable Securities and/or other securities so excluded or withdrawn shall also be withdrawn from registration.  In no event will shares of any other selling stockholder be included in such registration that would reduce the number of Registrable Securities which may be included by Holders without the written consent of Holders of not less than a majority of the Registrable Securities proposed to be sold in the offering.

 

1.4                                 Registration on Form S-3.

 

(a)                                  Qualification on Form S-3.  After the IPO, the Company shall use its best efforts to qualify for registration on Form S-3 or any comparable or successor form.  To that end the Company shall register (whether or not required by law to do so) its Common Stock under the Exchange Act in accordance with the provisions of the Exchange Act following the effective date of the first registration of any securities of the Company on Form S-1 or any comparable or successor form or forms.

 

(b)                                 Request for Registration on Form S-3.  After the Company has qualified for the use of Form S-3, if the Company shall receive from Form S-3 Initiating Holders a written request that the Company effect a registration on Form S-3 the Company will:

 

(i)                                     promptly deliver written notice of the proposed registration to all other Holders; and

 

(ii)                                  as soon as practicable, use its best efforts to effect such registration, qualification or compliance (including, without limitation, the execution of an undertaking to file post-effective amendments, appropriate qualification under applicable blue sky or other state securities laws, and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such 

 

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Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request delivered to the Company within 20 days after delivery of such written notice from the Company; provided, however, that the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 1.4:

 

(A)                              After the sixth anniversary of the IPO;

 

(B)                                If the Company has effected two such registrations during the preceding 12-month period, excluding registrations from which Registrable Securities have been excluded;

 

(C)                                During the period starting with the date 60 days prior to the Company’s estimated date of filing of, and ending on a date 180 days after the effective date of, a registration initiated by the Company; provided  that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective and that the Company’s estimate of the date of filing such registration statement is made in good faith;

 

(D)                               In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification, or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act; or

 

(E)                                 If in the good faith judgment of the Board, such registration would be seriously detrimental to the Company and the Board concludes, as a result, that it is essential to defer the filing of such registration statement at such time, and the Company thereafter delivers to the Form S-3 Initiating Holders a certificate, signed by the President or Chief Executive Officer of the Company, stating that in the good faith judgment of the Board it would be detrimental to the Company or its stockholders for a registration statement to be filed in the near future, then the Company’s obligation to use its best efforts to register, qualify, or comply under this Section 1.4 shall be deferred for a period not to exceed 90 days from the date of delivery of the written request from the Form S-3 Initiating Holders; provided however that the Company may not utilize this right more than once in any 12 month period and the Company shall not register shares for its own account or the account of any other stockholder during such 90 day period.

 

(c)                                  Underwriting; Procedure.  If a registration requested under this Section 1.4 is for an underwritten offering, the provisions of Sections 1.3(b) and 1.3(c) shall apply to such registration.

 

1.5                                 Company Registration.

 

(a)                                  Notice of Registration.  If the Company shall determine to register any of its securities, either for its own account or the account of a security holder or holders other than (A) a registration pursuant to Sections 1.3 or 1.4 hereof, (B) a registration relating solely to employee benefit plans, (C) a registration relating solely to a Rule 145 transaction or (D) a registration on any registration form that does not permit secondary sales, the Company will:

 

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(i)                                     promptly deliver to each Holder written notice thereof; and

 

(ii)                                  use its best efforts to include in such registration (and any related qualification under blue sky laws or other compliance), except as set forth in Section 1.5(b) below, and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests made by any Holder and delivered to the Company within 10 days after the written notice is delivered by the Company.  Such written request may include all or a portion of a Holder’s Registrable Securities.

 

(b)                                 Underwriting; Procedures.  If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 1.5(a)(i).  In such event, the right of any Holder to registration pursuant to this Section 1.5 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of Registrable Securities in the underwriting to the extent provided herein.  All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other holders distributing their securities through such underwriting) enter into and perform their obligations under an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company.  Notwithstanding any other provision of this Section 1.5, if the managing underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the managing underwriter may (i) in the case of the Company’s IPO, exclude all Registrable Securities from, or limit the number of Registrable Securities to be included in, the registration and underwriting, and (ii) in any subsequent registration and underwriting, limit the number of Registrable Securities to be included in the registration and underwriting to an amount not less than 30% of the securities included in such registration and underwriting.  The Company shall so advise all holders of securities requesting registration, and the number of shares of securities that are entitled to be included in the registration and underwriting shall be allocated as set forth in Section 1.12.  If any person who has requested inclusion in such registration as provided above disapproves of the terms of the underwriting, such person shall be excluded therefrom by written notice delivered by the Company or the managing underwriter.  Any Registrable Securities and/or other securities so excluded or withdrawn shall also be withdrawn from registration.

 

(c)                                  Right to Terminate Registration.  The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 1.5 prior to the effectiveness of such registration, whether or not any Holder has elected to include securities in such registration.

 

1.6                                 Registration Procedures.  In the case of each registration, qualification, or compliance effected by the Company pursuant to this Section 1, the Company will keep each Holder advised in writing as to the initiation of each registration, qualification, and compliance and as to the completion thereof and, at its expense, the Company will use its best efforts to:

 

(a)                                  Prepare and file with the Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for at least 90 days or until the distribution described in the registration statement has been completed, whichever occurs first; provided, however, that (i) such 90-day 

 

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period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of common stock or other securities of the Company, and (ii) in the case of any registration of Registrable Securities on Form S-3 which are intended to be offered on a continuous or delayed basis, such 90-day period shall be extended, if necessary, up to 180 days to keep the registration statement effective until all such Registrable Securities are sold, however in no event longer than one year from the effective date of the registration statement and provided that if Rule 415, or any successor rule under the Securities Act, permits an offering on a continuous or delayed basis, and provided further that if applicable rules under the Securities Act governing the obligation to file a post-effective amendment permit, in lieu of filing a post-effective amendment which (A) includes any prospectus required by Section 10(a)(3) of the Securities Act or (B) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the incorporation by reference of information required to be included in (A) and (B) above shall be contained in periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in the registration statement;

 

(b)                                 Furnish to the Holders participating in such registration and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus, and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities;

 

(c)                                  Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statements as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement;

 

(d)                                 Notify each seller of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances then existing, and at the request of any such seller, prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchaser of such shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances then existing;

 

(e)                                  Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions except as may be required by the Securities Act;

 

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(f)                                    Cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed;

 

(g)                                 Provide a transfer agent and registrar for all Registrable Securities and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

 

(h)                                 Use its best efforts to furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 1, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 1, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) a letter, dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities (to the extent the then-applicable standards of professional conduct permit said letter to be addressed to the Holders); and

 

(i)                                     In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering.  Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

 

1.7                                 Information by Holder.  The Holder or Holders of Registrable Securities included in any registration shall furnish to the Company such information regarding such Holder or Holders, the Registrable Securities held by them, and the distribution proposed by such Holder or Holders as the Company may request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Section 1, and the refusal to furnish such information by any Holder or Holders shall relieve the Company of its obligations in this Section 1 with respect to such Holder or Holders.  Furthermore, the Company shall have no obligation with respect to any registration requested pursuant to Section 1.3 or Section 1.4 of this Agreement if, as a result of the application of the preceding sentence, the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Company’s obligation to initiate such registration as specified in the definition of “Initiating Holders” or “Form S-3 Initiating Holders,” whichever is applicable.

 

1.8                                 Indemnification.

 

(a)                                  To the extent permitted by law, the Company will indemnify each Holder, each of its officers, directors, partners, legal counsel and accountants, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to 

 

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which registration, qualification, or compliance has been effected pursuant to this Section 1, and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages or liabilities (or actions, proceedings or settlements in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular, or other document (including any related registration statement, notification, or the like), or any amendment or supplement thereto, incident to any such registration, qualification, or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of the Securities Act or any rule or regulation promulgated under the Securities Act applicable to the Company in connection with any such registration, qualification or compliance, and the Company will reimburse each such Holder, each of its officers, directors, partners, legal counsel and accountants, and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating, preparing, defending or settling any such claim, loss, damage, liability or action, as such expenses are incurred, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by such Holder, controlling person, or underwriter and stated to be specifically for use therein.  It is agreed that the indemnity agreement contained in this Section 1.8 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld, conditioned or delayed).

 

(b)                                 To the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification, or compliance is being effected, indemnify the Company, each of its directors, officers, partners, legal counsel and accountants, and each underwriter, if any, of the Company’s securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, and each other such Holder and Other Stockholder, each of their officers, directors, and partners and each person controlling such Holder or Other Stockholder within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular, or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such Holders, Other Stockholders, directors, officers, partners, legal counsel and accountants, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, as such expenses are incurred, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein, provided, however, that the obligations of such Holder hereunder 

 

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shall not apply to amounts paid in settlement of any such claims, losses, damages or liabilities (or actions in respect thereof) if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld, conditioned or delayed); and provided that, except in the case of willful fraud, in no event shall any indemnity under this Section 1.8 exceed the net proceeds received by such Holder in such offering.

 

(c)                                  Each party entitled to indemnification under this Section 1.8 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld, conditioned or delayed), and the Indemnified Party may participate in such defense at such party’s expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 1 unless the failure to give such notice is materially prejudicial to an Indemnifying Party’s ability to defend such action.  No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.  Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom.

 

(d)                                 If the indemnification provided for in this Section 1.8 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any claim, loss, damage, liability or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such claim, loss, damage, liability or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and the Indemnified Party on the other in connection with the statements or omissions that resulted in such claim, loss, damage, liability, or expense, as well as any other relevant equitable considerations.  The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact related to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.  The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 1.8 were based solely upon the number of entities from whom contribution was requested or by any other method of allocation which does not take account of the equitable considerations referred to above.  Except in the case of willful fraud, in no event shall any contribution by a Holder under this Section 1.8 exceed the net proceeds received by such Holder in such offering less any amounts paid pursuant to Section 1.8(b) hereof.

 

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(e)                                  The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages, and liabilities referred to above in this Section 1.8 shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim, subject to the provisions of Section 1.8(c).  No person guilty of fraudulent misrepresentation (within the meaning of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

 

(f)                                    Notwithstanding the foregoing, to the extent that the indemnification and contribution provisions contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

 

(g)                                 The obligations of the Company and Holders under this Section 1.8 shall survive the completion of any offering of Registrable Securities in a registration statement.

 

1.9                                 Expenses of Registration.  All Registration Expenses incurred in connection with any registration effected pursuant to section 1.3, 1.4 or 1.5 hereof shall be borne by the Company; provided, however, that if the Holders bear the Registration Expenses for any registration proceeding begun pursuant to Section 1.3 and subsequently withdrawn by the Holders registering shares therein, such registration proceeding shall not be counted as a requested registration pursuant to Section 1.3.  Furthermore, in the event that the Company bears the Registration Expenses, if a withdrawal by the Holders is based upon material adverse information relating to the Company that is different from the information known or available (upon request from the Company or otherwise) to the Holders requesting registration at the time of their request for registration under Section 1.3, such registration proceeding shall not be counted as a requested registration pursuant to Section 1.3.  All Selling Expenses relating to securities registered on behalf of the Holders shall be borne by the holders of the registered securities included in such registration pro rata on the basis of the number of shares so registered.

 

1.10                           Rule 144 Reporting.  With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Restricted Securities to the public without registration after such time as a public market exists for the Common Stock of the Company, the Company agrees to use its best efforts to:

 

(a)                                  Make and keep public information available, as those terms are understood and defined in Rule 144, at all times after the effective date that the Company becomes subject to the reporting requirements of the Securities Act or the Exchange Act;

 

(b)                                 File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); and

 

(c)                                  So long as a Holder owns any Restricted Securities, to furnish to the Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 and of any other reporting requirements of the Securities 

 

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Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration.

 

1.11                           Transfer of Registration Rights.  The rights to cause the Company to register securities granted to any party hereto under Section 1 may be assigned by a Holder only to a transferee or assignee of not less than 500,000 shares of Registrable Securities (as appropriately adjusted for stock splits and the like) held by such Holder, provided that the Company is given written notice at the time of or within a reasonable time after said assignment, stating the name and address of the transferee or assignee and identifying the securities with respect to which such registration rights are being assigned, and, provided  further, that the assignee of such rights assumes in writing the obligations of such Holder under this Section 1.  Notwithstanding the foregoing, no such minimum share assignment requirement shall be necessary for an assignment to an affiliate of a Holder or by a Holder which is (A) a partnership to its partners or retired partners in accordance with partnership interests, (B) a limited liability company to its members or former members in accordance with their interest in the limited liability company, (C) a corporation to its stockholders in accordance with their interests in the corporation, (D) an individual to the Holder’s family member or trust for the benefit of such individual Holder or (E) a party that is a Holder immediately prior to such transfer.

 

1.12                           Procedure for Underwriter Cutbacks.  In any circumstance in which all of the Registrable Securities and other shares of Common Stock of the Company with registration rights (the “Other Shares”) requested to be included in a registration on behalf of Holders or Other Stockholders cannot be so included as a result of limitations on the aggregate number of shares of Registrable Securities and Other Shares that may be so included, the number of shares of Registrable Securities and Other Shares that may be so included shall be allocated first to the Holders on a pro rata basis based on the total number of Registrable Securities held by the Holders and second to the Other Stockholders requesting inclusion of shares pro rata based upon the total number Other Shares held by such Other Stockholders.  The Company shall not limit the number of shares of Registrable Securities to be included in a registration pursuant to this Agreement in order to include shares of stock issued to founders of the Company or to employees, officers, directors or consultants pursuant to the Company’s equity incentive plans, or in the case of registrations under Sections 1.3 or 1.4 hereof, in order to include in such registration securities registered for the Company’s own account.

 

1.13                           Standoff Agreement.  Each Holder agrees in connection with the initial registration of the Company’s securities (other than a registration of securities in a Rule 145 transaction or with respect to an employee benefit plan) that, upon request of the underwriters managing any underwritten offering of the Company’s securities, not to sell, make any short sale of, loan, pledge or otherwise hypothecate or encumber, grant any option for the purchase of, or otherwise dispose of any Registrable Securities (other than those included in the registration) without the prior written consent of such underwriters, as the case may be, for such period of time as may be requested by such managing underwriters (not to exceed 180 days plus such additional period as may reasonably be requested by the Company or such underwriter to 

 

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accommodate regulatory restrictions on (i) the publication or other distribution of research reports or (ii) analyst recommendations and opinions, including (without limitation) the restrictions set forth in Rule 2711(f)(4) of the National Association of Securities Dealers and Rule 472(f)(4) of the New York Stock Exchange, as amended, or any similar successor rules); provided that all officers, directors and holders of not less than one percent of the Company’s securities are similarly obligated and any waiver of this Section 1.13 shall be pro rata among all Holders.  If so requested, each Holder agrees to enter into such underwriter’s form of standoff agreement to give effect to the foregoing.

 

1.14                           Limitations on Subsequent Registration Rights.  From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of at least 60% of the outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (a) to include such securities in any registration filed under Section 1.3 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of his securities will not reduce the amount of the Registrable Securities of the Holders which is included or (b) to make a demand registration which could result in such registration statement being declared effective prior to the earlier of either of the dates set forth in Section 1.3 or within 120 days after the effective date of any registration effected pursuant to Section 1.3.

 

1.15                           Termination of Rights.  The rights of any particular Holder to cause the Company to register securities under Sections 1.3, 1.4 and 1.5 shall terminate (i) six years following the consummation of the IPO and (ii) with respect to any Holder when such Holder can sell all of its Registrable Securities within a three month period pursuant to Rule 144.

 

2.                                       Right of First Refusal.

 

2.1                                 Right of First Refusal.

 

(a)                                  Right of First Refusal.  Subject to the terms and conditions contained in this Section 2.1, the Company hereby grants to each Major Holder (as defined below) the right of first refusal to purchase such Major Holder’s Pro Rata Portion of any New Securities which the Company may, from time to time, propose to issue and sell.

 

(b)                                 Notice of Right.  In the event the Company proposes to undertake an issuance of New Securities to any identified person or persons, it shall give each Major Holder written notice of its intention, describing the type of New Securities, the amount to be offered, and the price and terms upon which the Company proposes to issue and sell the same.  Each Major Holder shall have 15 days from the date of delivery of any such notice to agree to purchase up to such Major Holder’s Pro Rata Portion of such New Securities, for the price and upon the terms specified in the notice, by delivering written notice to the Company and stating therein the quantity of New Securities to be purchased (up to such Major Holder’s Pro Rata Portion).

 

(c)                                  Right of Over-Allotment.  In the event that a Major Holder fails to fully exercise the right of first refusal within such 15-day period, (i) until such time as Symyx’s 

 

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ownership equals or exceeds 20% of the Company, calculated on an as converted to Common Stock basis and on a fully-diluted basis (the “20 Percent Threshold”), Symyx if it fully exercises its right of first refusal and is otherwise a Major Holder may purchase some or all of the non-purchasing or partially purchasing Major Holder’s or Major Holders’ Pro Rata Portion(s), and (ii) in the event that Symyx does not purchase all of the non-purchasing or partially purchasing Major Holder’s or Major Holders’ available Pro Rata Portion(s) or Symyx has reached the 20 Percent Threshold, each Major Holder, including Symyx if it is a Major Holder and the 20 Percent Threshold has been reached, fully exercising its right of first refusal may purchase, on a pro rata basis, the non-purchasing or partially purchasing Major Holder’s or Major Holders’ available Pro Rata Portion(s).  The Company will promptly notify Symyx, and then those Major Holders fully exercising their rights of first refusal (if New Securities remain available after the offer to Symyx), in writing, of the availability of additional New Securities, and each of the fully-exercising Major Holders shall have 10 days from the date of receipt of any such notice to agree to purchase all or part of such additional New Securities, to be allocated among such purchasing Major Holders proportional to their respective Pro Rata Portions.

 

(d)                                 Condition to Purchase.  The Major Holders electing to purchase shares of the New Securities may condition their agreement to purchase such shares upon the consummation of substantially the entire issuance described by the Company in its notice.

 

(e)                                  Lapse and Reinstatement of Right.  The Company shall have 60 days following the 15-day period described in Section 2.1(b) and the additional 10 day period described in Section 2.1(c), if applicable, to sell or enter into an agreement (pursuant to which the sale of New Securities covered thereby shall be closed, if at all, within 30 days from the date of said agreement) to sell the New Securities with respect to which the Major Holders’ right of first refusal was not exercised, at a price and upon terms no more favorable to the purchasers of such securities than specified in the Company’s notice.  In the event the Company has not sold the New Securities or entered into an agreement to sell the New Securities within said 60-day period (or sold and issued New Securities in accordance with the foregoing within 30 days from the date of said agreement), the Company shall not thereafter issue or sell any New Securities without first offering such securities to the Major Holders in the manner provided above.

 

2.2                                 Assignment of Right of First Refusal.  The right of first refusal granted hereunder may not be assigned or transferred, except that such right is assignable (i) by each Major Holder to any wholly-owned subsidiary or parent of, or to any corporation or entity that is, within the meaning of the Securities Act, controlling, controlled by, or under common control with, any such Major Holder; (ii) between and among any Major Holders; (iii) to an affiliate of a Major Holder; or (iv) by a Major Holder which is (A) a partnership to its partners or retired partners in accordance with partnership interests, (B) a limited liability company to its members or former members in accordance with their interest in the limited liability company, (C) a corporation to its stockholders in accordance with their interests in the corporation or (D) an individual to the Major Holder’s family member or trust for the benefit of such individual Major Holder.

 

2.3                                 Termination of Right of First Refusal.  The right of first refusal granted under Section 2.1 of this Agreement shall expire immediately prior to the earlier of: (i) a sale of Company Common Stock to the public effected pursuant to a registration statement filed with, 

 

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and declared effective by, the Securities and Exchange Commission under the Securities Act of 1933, as amended; or (ii) the merger or consolidation of the Company provided  that the Company’s stockholders of record as constituted immediately prior to such transaction hold less than 50% of the voting power of the surviving or acquiring entity (or parent thereof).

 

2.4                                 Certain IPO Purchase Rights.

 

(a)                                  In connection with the Company’s IPO, the Company shall offer Symyx the right to purchase shares of Common Stock in an amount not to exceed that number of shares of Common Stock that equals the difference between a 20% ownership in the Company (calculated on a post-IPO basis, including the over-allotment option, if exercised)  and Symyx’s then current ownership in the Company (calculated on an as converted to Common Stock basis and a fully diluted basis at the time of the IPO) in a private placement transaction contemporaneously with the IPO, provided that such private placement may be made in compliance with all applicable laws, rules and regulations and does not adversely impact the timing of the IPO.  Any shares of Common Stock issued to Symyx in such a private placement shall be purchased by Symyx at the per share price equal to the price per share to the public on the final prospectus related to the IPO.

 

(b)                                 This Section 2.4 in no way obligates the Company to make a registered public offering of its shares and applies only to the Company’s IPO, if and when it occurs.

 

(c)                                  Notwithstanding the foregoing, Symyx shall comply with all requirements and procedures required by the managing underwriter or underwriters of the IPO to affect the commercially reasonable sale of securities in the IPO.  Furthermore, Symyx agrees to furnish upon request of the Company and the managing underwriter or underwriters of the IPO such further information, to execute and deliver to the Company and the managing underwriter or underwriters of the IPO such other documents, and to do such other acts and things, all as the Company and the managing underwriter or underwriters of the IPO may reasonably request for the purpose of carrying out the intent of this Section 2.4.

 

(d)                                 This arrangement between the Company and Symyx with respect to the purchase of the Common Stock pursuant to this Section 2.4 is not an offer to sell or a solicitation of an offer to buy such shares, and any decision Symyx makes with respect to such shares shall only be made with respect to the statutory prospectus in compliance with all applicable laws, rules and regulations.

 

(e)                                  The Company shall be relieved of any obligations under this Section 2.4 if (i) regulatory authorities object to this Section 2.4 after discussion and negotiation with the Company and its legal counsel; (ii) regulatory authorities allow the Company to fulfill its obligations under this Section 2.4 only on the condition that rescission rights or other extraordinary liability will be assumed by the Company or the underwriters; or (iii) the resolution with regulatory authorities of the transaction with Symyx that is the subject of this Section 2.4 would delay the Company’s IPO beyond delays caused by other comments from regulatory authorities, provided that the Company has used its commercially reasonable efforts to timely resolve any regulatory issues that arise in connection with this Section 2.4.

 

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2.5                                 Notification of Future Private Rounds.  In the event the Board has authorized the Company to pursue with any party a financing transaction (other than an IPO) pursuant to which the Company will raise money through the issuance and sale of New Securities, the Company shall promptly notify Symyx and ATMI and each of Symyx and ATMI may, its respective sole discretion, present to the Board a term sheet proposal relating to the terms of such New Securities to be issued in such financing.  The Company will consider the any proposal submitted by Symyx or ATMI (as well as any modifications Symyx or ATMI submits to the Board in a timely matter) consistent with its fiduciary obligations, and will permit the member of the Board designated by Symyx to participate in discussions regarding such financing transaction.

 

3.                                       Affirmative Covenants of the Company.  The Company hereby covenants and agrees as follows:

 

3.1                                 Financial Information.

 

(a)                                  The Company will furnish to each Investor holding at least 4,600,000 shares of Common Stock issued or issuable pursuant to the conversion of the Shares (each, a “Major Holder”) the following reports:

 

(i)                                     As soon as practicable after the end of each fiscal year, and in any event within 90 days thereafter, consolidated balance sheets of the Company and its subsidiaries, if any, as of the end of such fiscal year, and consolidated statements of income and cash flows of the Company and its subsidiaries, if any, for such year, prepared in accordance with U.S. generally accepted accounting principles consistently applied and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and certified by independent public accountants of national standing selected by the Company.

 

(ii)                                  As soon as practicable, but in any event within 30 days after the end of each of the first three fiscal quarters of each fiscal year of the Company, consolidated balance sheets of the Company and its subsidiaries, if any, as of the end of such quarterly period, and consolidated statements of income and cash flows of the Company and its subsidiaries, if any, for such quarterly period, prepared in accordance with U.S. generally accepted accounting principles consistently applied and setting forth in each case in comparative form the figures for the corresponding quarterly periods of the previous fiscal year, subject to changes resulting from normal year-end audit adjustments, all in reasonable detail and certified by the principal financial or accounting officer of the Company, except such financial statements need not contain the notes required by U.S. generally accepted accounting principles.

 

(iii)                               As soon as practicable after the end of each calendar month, and in any event within 20 days thereafter, consolidated balance sheets of the Company and its subsidiaries, if any, as of the end of each calendar month, and consolidated statements of income and cash flow for such period and for the current fiscal year to date, all in reasonable detail and certified by the principal financial or accounting officer of the Company.

 

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(iv)                              If the Company has any subsidiaries, the obligation of the Company to deliver information as set forth in this Section 3.1 shall be construed to include the equivalent information concerning each of its subsidiaries.

 

(b)                                 If it is reasonably determined in accordance with generally accepted accounting principles in the United States (“US GAAP”) and confirmed by a “Big Four” independent public accounting firm that the Company is more likely than not to be a Variable Interest Entity (“VIE”) of a Major Holder, then, upon reasonable advance notice and during normal business hours, the Company shall provide such Major Holder with access to the Company’s key personnel, financial and other records of the Company necessary for such Major Holder to determine whether the Company is a VIE of such Major Holder.  In the event that the Company is determined in accordance with US GAAP and such Major Holder’s independent auditors (such determination to be confirmed, at such Major Holder’s expense, by a “Big Four” independent public accounting firm if so reasonably requested by the Company) to be a VIE, then, upon reasonable advance notice and during normal business hours, the Company shall provide such Major Holder and its independent auditors with access to the financial records, systems and key personnel of the Company necessary for such Major Holder to ensure compliance with the requirements of the Sarbanes-Oxley Act of 2002.  Major Holder agrees to use its best efforts to minimize any interruptions to the Company’s business during the course of such review, and to promptly reimburse the Company for all commercially reasonable incremental costs incurred by the Company associated with such requests, access and procedures.

 

3.2                                 Budget.  As soon as practicable upon approval or adoption by the Board, and in any event at least 60 days prior to each new fiscal year of the Company, the Company will furnish to each Major Holder the Company’s budget for such fiscal year. As soon as practicable upon approval or adoption by the Board, and in any event at least 30 days prior to the start of each new fiscal quarter of the Company, the Company will furnish to each Major Holder the Company’s budget for such fiscal quarter. Each such budget shall forecast the Company’s revenue, expenses and cash position on a month to month basis for the applicable period.

 

3.3                                 Inspection. The Company shall permit each Major Holder (except for a Major Holder reasonably deemed by the Company to be a competitor of the Company), at such Major Holder’s expense, to visit and inspect the Company’s properties, to examine its books of account and records and to discuss the Company’s affairs, finances and accounts with its officers, all at such reasonable times as may be requested by the Major Holder; provided, however, that the Company shall not be obligated pursuant to this Section 3.3 to provide access to any information which it reasonably considers (i) to be a trade secret or confidential information or (ii) to relate specifically to any business or entity reasonably deemed by the Company to be a competitor of a Major Holder.  The rights under this Section 3.3 may not be assigned or otherwise conveyed without the prior written consent of the Company.  Notwithstanding the foregoing, (i) the parties agree that for so long as the Alliance Agreement remains in effect, Symyx will not be deemed a “competitor” as such term is used in this paragraph and (ii) upon the expiration or termination of the Alliance Agreement, a determination of whether Symyx shall be deemed a “competitor” shall be made by the board of directors of the Company.

 

20

 

3.4                                 Board Observer.  U.S. Venture Partners IX, L.P. (“USVP”) and ATMI shall each have the right to designate a representative (each, an “Observer”) to attend all meetings of the Company’s Board of Directors in a nonvoting observer capacity, and in connection therewith, the Company shall give such Observer copies of all notices, minutes, consents and other materials, financial or otherwise, which the Company provides to its Board of Directors.  The Observer designated by ATMI shall be a senior management employee of ATMI and, in the event that ATMI designates a person who is not the then-current Chief Executive Officer of ATMI, such designee must be approved by the Board, such approval not to be unreasonably withheld or delayed.  The initial Observer designated by ATMI shall be Doug Neugold.  The Observer shall execute a standard board observer agreement and agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so received or obtained during such meetings.  The Company reserves the right not to provide information and to exclude the Observer from any meeting or portion thereof if the Company believes, as determined in good faith by its Board of Directors, delivery of such information or attendance at such meeting by such Observer (i) would result in disclosure of trade secrets to the Observer, (ii) would adversely affect the attorney-client privilege between the Company and its counsel, (iii) would violate any fiduciary obligations of the Board of Directors, or (iv) would involve a conflict of interest with regard to USVP or ATMI, as applicable, or the Observer, on the one hand, and the Company, on the other hand.

 

3.5                                 Employee and Consultant Stock Option Vesting. Unless otherwise approved by the Board, all shares of the Company’s common stock and common stock equivalents or other securities of the Company, including without limitation, any options, calls, warrants and convertible or exchangeable securities issued or granted after the date hereof to employees, directors, consultants and other service providers by reason of their employment with or service to the Company granted or issued after the date hereof will be subject to vesting (or repurchase) as follows: 25% of such common stock or options to purchase common stock shall vest (or the Company’s repurchase right with respect thereto shall lapse) at the end of the first year following such issuance or grant, with the remaining 75% to vest (or the repurchase right to lapse) in equal monthly installments over the next three years.

 

3.6                                 Confidential Information and Invention Assignment Agreements.  The Company shall require all future officers, employees and consultants hired or otherwise retained after the date hereof to execute and deliver to the Company a customary confidentiality information and invention assignment agreement.

 

3.7                                 Directors & Officers Insurance.  At such time as determined by the Board, the Company will obtain directors’ and officers’ liability insurance in an amount determined by the Board.

 

3.8                                 Key-man Life Insurance.  The Company previously obtained a key-man life insurance policy for David Lazovsky in the amount of $1,000,000, naming the Company as beneficiary.  The Company will cause to be maintained the life insurance policy required by this Section 3.8, except as otherwise decided by the Board of Directors.

 

3.9                                 Reservation of Common Stock.  For so long as Preferred Stock remains outstanding, the Company will at all times reserve and keep available, solely for issuance and 

 

21

 

delivery upon the conversion of the Preferred Stock, the number of shares of Common Stock issuable from time to time upon such conversion.

 

3.10                           Qualified Small Business.  For so long as any of the Shares held by an Investor are eligible (or a transferee in whose hands such Shares are eligible) to qualify as “Qualified Small Business Stock” as defined in Section 1202(c) of the Internal Revenue Code of 1986, as amended (the “Code”), the Company will use its reasonable efforts to comply with the reporting and recordkeeping requirements of Section 1202 of the Code, any regulations promulgated thereunder and any similar state laws and regulations.

 

3.11                           Termination of Covenants.  The covenants set forth Sections 3.1 through 3.4 and 3.7 shall terminate and be of no further force or effect upon the earliest to occur of (i) a sale of Company common stock to the public causing the automatic conversion of the Company’s Preferred Stock into Common Stock; (ii) the merger or consolidation of the Company in which the securities of the surviving or acquiring company are publicly traded on a national securities exchange or the Nasdaq National Market and such surviving or acquiring company is subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended; or (iii) the date on which the Company is required to file reports with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.

 

3.12                           Company Confidential Information.  Each Investor agrees to use the same degree of care as such Investor uses to protect its own confidential information to keep confidential any information furnished to such Investor pursuant to Section 3.1, 3.2 and 3.3 hereof that the Company identifies as being confidential or proprietary, except that such Investor may disclose such proprietary or confidential information (i) to any partner, subsidiary or parent of such Investor for the purpose of evaluating its investment in the Company as long as such partner, subsidiary or parent is advised of the confidentiality provisions of this Section 3.12; (ii) if it was in Investor’s possession before receipt from the Company;  (iii) if such information was in the public domain at the time the Investor receives it or as of or after such time it enters the public domain through no fault of such Investor thereafter; (iv) that is communicated to it free of any obligation of confidentiality; (v) that is developed by Investor or its agents independently of and without reference to any confidential information communicated by the Company; (vi) with the Company’s prior written consent or (vii) to the extent required by applicable law or stock exchange regulation; and provided, further, that any Investor may provide financial information to its partners or members as required by any partnership agreement or limited liability operating agreement and may provide financial information to its potential partners and potential members for capital raising purposes.

 

3.13                           Reimbursement of Director’s Expenses.  The Company shall promptly reimburse each director all reasonable expenses incurred in connection with attending any meetings of the Board or performing any duties as a director.

 

4.                                       Miscellaneous.

 

4.1                                 Governing Law.  This Agreement shall be governed in all respects by the laws of the State of California without regard to choice of laws or conflict of laws provisions thereof.

 

22

 

4.2                                 Successors and Assigns.  Except as otherwise specifically set forth in this Agreement, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the parties hereto.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided by this Agreement.

 

4.3                                 Entire Agreement.  This Agreement and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof.

 

4.4                                 Notices, Etc.  All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, return receipt requested, or otherwise delivered by hand or by messenger, addressed (a) if to an Investor, at such Investor’s address set forth on the signature page of this Agreement, or at such other address as such Investor shall have furnished to the Company in writing, or (b) if to any other holder of any Shares, at such address as such holder shall have furnished the Company in writing, or, until any such holder so furnishes an address to the Company, then to and at the address of the last holder of such Shares who has so furnished an address to the Company, or (c) if to the Company, at its address set forth on the signature page of this Agreement addressed to the attention of the Corporate Secretary, or at such other address as the Company shall have furnished to the Investors.  Unless specifically stated otherwise, if notice is provided by mail, it shall be deemed to be delivered five days after proper deposit in a mailbox, and if notice is delivered by hand or by messenger, it shall be deemed to be delivered upon actual delivery.

 

4.5                                 Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to any Investor upon any breach or default of the Company under this Agreement shall impair any such right, power or remedy of such party, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing or as provided in this Agreement.  All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

4.6                                 Dispute Resolution Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney’s fees, costs, and disbursements in addition to any other relief to which such party may be entitled.

 

4.7                                 Counterparts.  This Agreement may be executed in any number of counterparts and signatures may be delivered by facsimile, each of which may be executed by less than all parties, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.

 

23

 

4.8                                 Severability.  If any provision of this Agreement is held to be unenforceable under applicable law, it shall be interpreted, to the extent possible, to enhance its enforceability in order to achieve the intent of the parties to this Agreement.  The invalidity, illegality or unenforceability of any particular provision shall not affect any other provision of this Agreement; rather, this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein; provided, however, no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party.  The invalidity of any provision of this Agreement as applied to certain circumstances shall not affect the validity or enforceability of such provision as applied to other circumstances or any other provisions of this Agreement.

 

4.9                                 Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

4.10                           Amendment and Waiver.  Any provision of this Agreement may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) with the written consent of the Company and an Investor or Investors holding, in the aggregate, at least 60% of the outstanding shares of the Registrable Securities; provided, that no consent of the Investors shall be necessary for any amendment that merely amends Exhibit A to include additional “Investors” made party to the Agreement in accordance with Section 4.17.  Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Investor and the Company; provided, however, that no amendment of this Agreement shall materially and adversely affect the rights of an Investor in a manner that materially and disproportionately discriminates against such Investor in relation to the other Investors without such Investor’s written consent.  In addition, the Company may waive performance of any obligation owing to it, as to some or all of the Investors, or agree to accept alternatives to such performance, without obtaining the consent of any Investor.

 

4.11                           Effect of Amendment or Waiver.  The Investors and their successors and assigns acknowledge that by the operation of Section 4.10 hereof Investors holding at least 60% of the outstanding Registrable Securities, acting in conjunction with the Company, will have the right and power to diminish or eliminate any or all rights pursuant to this Agreement.

 

4.12                           Rights of Investors.  Each party to this Agreement shall have the absolute right to exercise or refrain from exercising any right or rights that such party may have by reason of this Agreement, including, without limitation, the right to consent to the waiver or modification of any obligation under this Agreement, and such party shall not incur any liability to any other party or other holder of any securities of the Company as a result of exercising or refraining from exercising any such right or rights.

 

4.13                           Aggregation of Stock.  All shares of Preferred Stock and Common Stock of the Company held or acquired by affiliated entities or persons shall be aggregated for the purpose of determining the availability of any rights under this Agreement.

 

4.14                           Termination of Prior Agreement.  The Prior Agreement is hereby terminated in its entirety and restated herein.  All provisions of, rights granted and covenants 

 

24

 

made in the Prior Agreement are hereby waived, released and terminated in their entirety and shall have no further force and effect.

 

4.15                           Further Assurances.  Each of the parties hereto shall execute and deliver such instruments and take such other actions as the other parties may reasonably request in order to carry out the intent of this Agreement.

 

4.16                           Confidentiality.  Each Holder agrees to use, and to use its best efforts to insure that its authorized representatives use, the same degree of care as such Holder uses to protect its own confidential information to keep confidential any information furnished to it which the Company identifies as being confidential or proprietary (so long as such information is not in the public domain), except that such Holder may disclose such proprietary or confidential information to any partner, subsidiary or parent of such Holder for the purpose of evaluating its investment in the Company as long as such partner, subsidiary or parent is advised of, and agrees to abide by, the confidentiality provisions of this Section 4.16.  Notwithstanding the foregoing, each Holder shall be permitted to disclose to its partners and prospective partners (or members and prospective members, or major stockholders and prospective major stockholders, as the case may be) summary financial information and summary narrative descriptions relating to the business of the Company, provided that the recipients of such information are appropriately advised of the confidential nature of such information.  In addition, and with the same exceptions as set forth above, each party hereto agrees that it shall at all times keep confidential and not divulge, furnish or make accessible to anyone any confidential information, knowledge or data concerning or relating to the business or financial affairs of any other party hereto to which such party has been or shall become privy by reason of this Agreement, except with the prior written consent of such other party.  For purposes of this Section 4.16, information shall not be considered confidential or proprietary if, upon a party establishing through documentary evidence, such information (i) was in it’s possession before receipt from the Company; (ii) was in the public domain at the time the party receives it or at such time as it enters the public domain through no fault of such party thereafter; (iii) is communicated to such party free of any obligation of confidentiality; (iv) is developed by such party or its agents independently of and without reference to any confidential information communicated by any other party hereto; or (v) is required to be disclosed by applicable law.  The provisions of this Section 4.16 shall be in addition to, and not in substitution for, the provisions of any separate nondisclosure agreement executed by any of the parties hereto.

 

4.17                           Additional Parties.  Notwithstanding anything herein to the contrary, any Additional Investor (as defined in the Series E Purchase Agreement) who has purchased shares of Series E Preferred Stock after the date hereof in accordance with the terms and conditions of the Series E Purchase Agreement shall become a party to this Agreement as an “Investor” hereunder and Exhibit A shall be amended to include such Additional Investor in accordance with Section 4.10, without the need of any consent other than the consent of the Company, upon such Additional Investor’s execution of a counterpart signature page to this Agreement.

 

[THIS SPACE LEFT BLANK INTENTIONALLY]

 

25

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

	
 
    	
 
    	
COMPANY:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
INTERMOLECULAR, INC.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ David E. Lazovsky
    
	
 
    	
 
    	
 
    	
David   E. Lazovsky, President
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Address:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
2865   Zanker Road
    
	
 
    	
 
    	
San   Jose, California 95134
    
	
 
    	
 
    	
Facsimile:   (408) 582-5401
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
with   a copy to:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Latham &   Watkins LLP
    
	
 
    	
 
    	
140   Scott Drive
    
	
 
    	
 
    	
Menlo   Park, California 94025
    
	
 
    	
 
    	
Attention:   Patrick A. Pohlen
    

 

SIGNATURE PAGE TO THE INTERMOLECULAR, INC.
 FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

 

	
 
    	
 
    	
INVESTORS:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
CMEA   VENTURES VI, L.P.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
  /s/   Thomas R. Baruch
    
	
 
    	
 
    	
General   Partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
CMEA   VENTURES VI GMBH & CO. KG
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
  /s/   Thomas R. Baruch
    
	
 
    	
 
    	
By:
    	
CMEA   Ventures VI Management, L.P., its
    
	
 
    	
 
    	
 
    	
managing   limited partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Address:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
One   Embarcadero Center, Suite 3250
    
	
 
    	
 
    	
San   Francisco, CA 94111
    

 

SIGNATURE PAGE TO THE INTERMOLECULAR, INC.
 FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

 

	
 
    	
 
    	
INVESTORS:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
REDPOINT VENTURES II, L.P., by   its General 
    
	
 
    	
 
    	
Partner Redpoint Ventures II, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
REDPOINT ASSOCIATES II, LLC., as nominee
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
  /s/ John L. Walecka
    
	
 
    	
 
    	
 
    	
John   L. Walecka, Managing Director
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Address:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
3000 Sand Hill Road
    
	
 
    	
 
    	
Building Two, Suite 290
    
	
 
    	
 
    	
Menlo Park, CA 94025
    

 

SIGNATURE PAGE TO THE INTERMOLECULAR, INC.
 FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

 

	
 
    	
 
    	
INVESTORS:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
U.S.   VENTURE PARTNERS IX, L.P.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By: Presidio Management Group IX, L.L.C.
    
	
 
    	
 
    	
Its General Partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
  /s/   Irwin Federman
    
	
 
    	
 
    	
 
    	
Irwin   Federman, Managing Member
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Address:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
U.S.   Venture Partners
    
	
 
    	
 
    	
Attn:   Chief Financial Officer
    
	
 
    	
 
    	
2735   Sand Hill Road
    
	
 
    	
 
    	
Menlo   Park, CA 94025
    

 

SIGNATURE PAGE TO THE INTERMOLECULAR, INC.
 FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

 

	
 
    	
 
    	
INVESTORS:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
SYMYX   TECHNOLOGIES, INC.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
  /s/   David R. Mersten, Esq.
    
	
 
    	
 
    	
Name: David R. Mersten
    
	
 
    	
 
    	
Title: Vice President & Secretary
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Address:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
10188 Telesis Court, Suite 100
    
	
 
    	
 
    	
San Diego, CA 92121
    

 

SIGNATURE PAGE TO THE INTERMOLECULAR, INC.
 FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

 

	
 
    	
 
    	
INVESTORS:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
ADVANCED TECHNOLOGY MATERIALS, INC.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
  /s/   Daniel P. Sharkey
    
	
 
    	
 
    	
Name: Daniel P. Sharkey
    
	
 
    	
 
    	
Title: EVP, Business Development
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Address:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
7 Commerce Drive
    
	
 
    	
 
    	
Danbury, CT 06810
    

 

SIGNATURE PAGE TO THE INTERMOLECULAR, INC.
 FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

 

 

INTERMOLECULAR, INC.

 

AMENDMENT NO. 1 TO
 FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

This Amendment No. 1 to Fourth Amended and Restated Investor Rights Agreement (this “Amendment”) is made as of June 14, 2011, by and among Intermolecular, Inc., a Delaware corporation (the “Company”), and the persons and entities set forth on the signature pages hereto, and amends that certain Fourth Amended and Restated Investor Rights Agreement, dated as of March 4, 2011, by and among the Company and the stockholders listed on Exhibit A thereto (the “Rights Agreement”).

 

RECITALS

 

A.                                   Certain of the parties to this Agreement (the “Existing Investors”) are parties to the Rights Agreement.

 

B.                                     Concurrently with the execution and delivery of this Agreement, Advanced Technology Investment Company LLC (“ATIC”) will purchase shares of the Company’s Series E Preferred Stock pursuant to Section 1.2(c) of that certain Series E Preferred Stock Purchase Agreement, dated as of March 4, 2011, by and among the Company and the investors listed on Exhibit A thereto.

 

C.                                     One condition to ATIC’s investment is that the Company, ATIC and the Existing Investors enter into this Amendment in order to make such amendments to the Rights Agreement as contained herein.

 

D.                                    Pursuant to Section 4.10 of the Rights Agreement, any term of the Rights Agreement may be amended with the written consent of the Company and the stockholders party to the Rights Agreement that hold, in the aggregate, at least 60% of the outstanding shares of the Registrable Securities (as defined by the Rights Agreement) (the “Amendment Requirement”).

 

E.                                      The undersigned parties hold at least that number of Registrable Securities to satisfy the Amendment Requirement.

 

AGREEMENT

 

In consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:

 

ARTICLE I

 

AMENDMENT TO RIGHTS AGREEMENT

 

1.1                                 Amendment to Section 1.1 of Rights Agreement.  The following defined term shall be added to Section 1.1 of the Rights Agreement as follows:

 

 

“ “Major Holder” means (i) an Investor holding at least 4,600,000 shares of Common Stock issued or issuable pursuant to the conversion of the Shares; (ii) Advanced Technology Investment Company LLC, or any affiliate of Advanced Technology Investment Company LLC who is a transferee of the Shares held by Advanced Technology Investment Company LLC (“ATIC”), so long as ATIC continues to hold at least 2,300,000 shares of Common Stock issued or issuable pursuant to the conversion of the Shares; or (iii) any transferee of ATIC who continues to hold at least 2,300,000 shares of Common Stock issued or issuable pursuant to the conversion of the Shares originally issued to ATIC.”

 

1.2                                 Amendment to Section 1.1 of Rights Agreement.  The following defined term is hereby amended and restated in its entirety to read as follows:

 

“ “Registrable Securities” shall mean (i) shares of Common Stock issued or issuable pursuant to the conversion of the Shares; (ii) shares of Common Stock issued or issuable pursuant to the conversion or exercise of any warrant, right or other security issued to ATMI; (iii) shares of Common Stock issued or issuable pursuant to the conversion or exercise of any warrant, right or other security issued to ATIC; and (iv) any Common Stock of the Company issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referenced in clause (i) above; provided, however, that shares of Common Stock or other securities shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, (B) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale, (C) transferred in a transaction pursuant to which the registration rights are not also assigned in accordance with Section 1.11 hereof, or (D) with respect to each Holder, all such shares held by such Holder become eligible for sale under Rule 144 of the Securities Act (or any similar or successor rule), without reference to subsection (k) of Rule 144, during any one 90-day period.  A holder of Shares need not convert such Shares into Common Stock prior to requesting registration hereunder but may make such request in contemplation of conversion of such Shares into Common Stock prior to the effectiveness of such registration.”

 

1.3                                 Amendment to Section 2.1(a) of Rights Agreement.  Section 2.1(a) of the Rights Agreement is hereby amended and restated in its entirety to read as follows:

 

“(a)                            Right of First Refusal.  Subject to the terms and conditions contained in this Section 2.1, the Company hereby grants to each Major Holder the right of first refusal to purchase such Major Holder’s Pro Rata Portion of any New Securities which the Company may, from time to time, propose to issue and sell.”

 

2

 

1.4                                 Amendment to Section 3.1(a) of Rights Agreement.  The portion of Section 3.1(a) of the Rights Agreement that exists prior to Section 3.1(a)(i) is hereby amended and restated in its entirety to read as follows:

 

“(a)                            The Company will furnish to each Major Holder the following reports:”

 

1.5                                 Amendment to Section 3.4 of Rights Agreement.  Section 3.4 of the Rights Agreement is hereby amended and restated in its entirety to read as follows:

 

“3.4                           Board Observer.         U.S. Venture Partners IX, L.P. (“USVP”), ATMI and ATIC shall each have the right to designate a representative (each, an “Observer”) to attend all meetings of the Company’s Board of Directors in a nonvoting observer capacity, and in connection therewith, the Company shall give such Observer copies of all notices, minutes, consents and other materials, financial or otherwise, which the Company provides to its Board of Directors.  The Observer designated by ATMI shall be a senior management employee of ATMI and, in the event that ATMI designates a person who is not the then-current Chief Executive Officer of ATMI, such designee must be approved by the Board, such approval not to be unreasonably withheld or delayed.  The initial Observer designated by ATMI shall be Doug Neugold.  Each entity nominating an Observer shall execute a standard board observer agreement and agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so received or obtained during such meetings.  The Company reserves the right not to provide information and to exclude an Observer from any meeting or portion thereof if the Company believes, as determined in good faith by its Board of Directors, delivery of such information or attendance at such meeting by such Observer (i) would result in disclosure of trade secrets to the Observer, (ii) would adversely affect the attorney-client privilege between the Company and its counsel, (iii) would violate any fiduciary obligations of the Board of Directors, or (iv) would involve a conflict of interest with regard to USVP, ATMI or ATIC, as applicable, or the Observer, on the one hand, and the Company, on the other hand.”

 

ARTICLE II

 

MISCELLANEOUS

 

2.1                                 Reference to and Effect on Rights Agreement.  On or after the date hereof, each reference in the Rights Agreement to “this Agreement,” “hereunder,” “herein” or words of like import shall mean and be a reference to the Rights Agreement as amended hereby.  No reference to this Amendment need be made in any instrument or document at any time when referring to the Rights Agreement and a reference to any of such in any such instrument or document shall be deemed a reference to the Rights Agreement as amended hereby.

 

2.2                                 No Other Amendments.  Except as set forth herein, the Rights Agreement shall remain in full force and effect in accordance with its terms.

 

3

 

2.3                                 Counterparts; Electronic and Facsimile Signatures.  This Amendment may be executed in any number of counterparts, each of which when so executed and delivered will be deemed an original, and all of which together shall constitute one and the same agreement.  This Amendment may be executed and delivered electronically (including by transmission of .pdf files) and by facsimile and, upon such delivery, such signatures will be deemed to have the same effect as if the original signature had been delivered to the other party.

 

2.4                                 Titles and Subtitles.  The titles and subtitles used in this Amendment are used for convenience only and are not to be considered in construing or interpreting this Amendment.  All references in this Amendment to sections, paragraphs and exhibits shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits attached hereto.

 

2.5                                 Governing Law.  This Amendment shall be governed in all respects by the internal laws of the State of California as applied to agreements entered into among California residents to be performed entirely within California, without regard to principles of conflicts of law.

 

[Remainder of Page Intentionally Left Blank]

 

4

 

IN WITNESS WHEREOF, the parties have executed this amendment as of the date first above written.

 

	
 
    	
 
    	
INTERMOLECULAR, INC.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
  /s/   David E Lazovsky
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
David   E. Lazovsky, President
    

 

SIGNATURE PAGE TO THE INTERMOLECULAR, INC.
 AMENDMENT NO. 1 TO FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

 

IN WITNESS WHEREOF, the parties have executed this amendment as of the date first above written.

 

	
 
    	
 
    	
CMEA VENTURES VI, L.P.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
  /s/   Thomas R. Baruch
    
	
 
    	
 
    	
 
    	
General Partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
CMEA VENTURES VI GMBH & CO. KG
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
  /s/   Thomas R. Baruch
    
	
 
    	
 
    	
 
    	
CMEA Ventures VI Management, L.P.,
    
	
 
    	
 
    	
 
    	
its managing limited partner
    

 

SIGNATURE PAGE TO THE INTERMOLECULAR, INC.
 AMENDMENT NO. 1 TO FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

 

IN WITNESS WHEREOF, the parties have executed this amendment as of the date first above written.

 

	
 
    	
 
    	
REDPOINT VENTURES II, L.P.,   by its 
    
	
 
    	
 
    	
General Partner Redpoint Ventures II, LLC
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
REDPOINT ASSOCIATES II, LLC.,   as nominee
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
  /s/   John L. Walecka
    
	
 
    	
 
    	
 
    	
John L. Walecka, Managing Director
    

 

SIGNATURE PAGE TO THE INTERMOLECULAR, INC.
 AMENDMENT NO. 1 TO FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

 

IN WITNESS WHEREOF, the parties have executed this amendment as of the date first above written.

 

	
 
    	
 
    	
U.S. VENTURE PARTNERS IX, L.P., by
    
	
 
    	
 
    	
Presidio Management Group IX, L.L.C., its 
    
	
 
    	
 
    	
General Partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
  /s/   Michael P. Maher
    
	
 
    	
 
    	
 
    	
Michael P. Maher, Attorney-in-Fact
    

 

SIGNATURE PAGE TO THE INTERMOLECULAR, INC.
 AMENDMENT NO. 1 TO FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

 

IN WITNESS WHEREOF, the parties have executed this amendment as of the date first above written.

 

	
 
    	
 
    	
SYMYX TECHNOLOGIES, INC.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
  /s/   David Mersten
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:   David Mersten
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:   General Counsel
    

 

SIGNATURE PAGE TO THE INTERMOLECULAR, INC.
 AMENDMENT NO. 1 TO FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

 

IN WITNESS WHEREOF, the parties have executed this amendment as of the date first above written.

 

	
 
    	
 
    	
ADVANCED TECHNOLOGY
    
	
 
    	
 
    	
MATERIALS, INC.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
  /s/   Douglas Neugold
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:   Douglas Neugold
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:   CEO, President
    

 

SIGNATURE PAGE TO THE INTERMOLECULAR, INC.
 AMENDMENT NO. 1 TO FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

 

IN WITNESS WHEREOF, the parties have executed this amendment as of the date first above written.

 

 

For and on behalf of ADVANCED TECHNOLOGY INVESTMENT COMPANY LLC by:

 

 

	
  /s/   Ibrahim Ajami
    	
 
    	
  /s/   Bruce McDougall
    
	
 
    	
 
    	
 
    
	
Name:
    	
Ibrahim Ajami
    	
 
    	
Name:
    	
Bruce McDougall
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Title:
    	
Chief   Executive Officer
    	
 
    	
Title:
    	
Chief   Financial Officer
    

 

SIGNATURE PAGE TO THE INTERMOLECULAR, INC.
 AMENDMENT NO. 1 TO FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENTExhibit 10.2

 

 

LEASE AGREEMENT BETWEEN

 

NOVELLUS SYSTEMS, INC.,

 

AS LANDLORD, AND

 

INTERMOLECULAR, INC.,

 

AS TENANT

 

DATED MAY 11, 2010

 

 

SAN JOSE, CALIFORNIA

 

 

INDUSTRIAL/OFFICE LEASE FORM FOR CALIFORNIA

 

 

TABLE OF CONTENTS

 

	
 
    	
Page
    
	
 
    	
 
    
	
TABLE OF CONTENTS
    	
i
    
	
 
    	
 
    
	
LIST OF DEFINED TERMS
    	
v
    
	
 
    	
 
    
	
BASIC LEASE INFORMATION
    	
1
    
	
 
    	
 
    
	
LEASE
    	
4
    
	
 
    	
 
    
	
1.
    	
Definitions and Basic Provisions
    	
4
    
	
 
    	
 
    	
 
    	
 
    
	
2.
    	
Lease Grant
    	
4
    
	
 
    	
(a)
    	
Term
    	
4
    
	
 
    	
(b)
    	
Delivery of Premises
    	
4
    
	
 
    	
(d)
    	
Early Entry
    	
5
    
	
 
    	
(e)
    	
Early Termination Option
    	
5
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
Rent
    	
5
    
	
 
    	
(a)
    	
Payment
    	
5
    
	
 
    	
(b)
    	
Operating Costs and Taxes
    	
6
    
	
 
    	
 
    	
 
    	
 
    
	
4.
    	
Delinquent Payment; Handling Charges
    	
6
    
	
 
    	
 
    	
 
    	
 
    
	
5.
    	
Security Deposit
    	
6
    
	
 
    	
 
    	
 
    	
 
    
	
6.
    	
Landlord’s Maintenance Obligations
    	
6
    
	
 
    	
(a)
    	
Building’s Structure
    	
7
    
	
 
    	
(b)
    	
Outside Areas, Landscaping, Etc.
    	
7
    
	
 
    	
(c)
    	
Landlord’s Right to Perform Tenant’s   Obligations
    	
7
    
	
 
    	
 
    	
 
    	
 
    
	
7.
    	
Improvements; Alterations; Tenant’s   Maintenance and Repair Obligations; Signage
    	
8
    
	
 
    	
(a)
    	
Improvements; Alterations
    	
8
    
	
 
    	
(b)
    	
Repairs; Maintenance
    	
8
    
	
 
    	
(c)
    	
Performance of Work
    	
9
    
	
 
    	
(d)
    	
Mechanic’s Liens
    	
9
    
	
 
    	
(e)
    	
Janitorial Services
    	
9
    
	
 
    	
(f)
    	
Landlord’s Right to Perform Tenant’s   Maintenance Obligations
    	
10
    
	
 
    	
(g)
    	
Signage
    	
10
    
	
 
    	
 
    	
 
    	
 
    
	
8.
    	
Utilities; Licenses and Permits
    	
10
    
	
 
    	
(a)
    	
Utilities
    	
10
    
	
 
    	
(b)
    	
Licenses and Permits
    	
10
    
	
 
    	
(c)
    	
Landlord’s Right to Perform Tenant’s   Obligations
    	
10
    
	
 
    	
 
    	
 
    	
 
    
	
9.
    	
Use; Compliance With Laws
    	
11
    
	
 
    	
(a)
    	
Use
    	
11
    
	
 
    	
(b)
    	
Compliance with Laws
    	
11
    
	
 
    	
 
    	
 
    	
 
    
	
10.
    	
Assignment and Subletting
    	
11
    
	
 
    	
(a)
    	
Transfers
    	
11
    
	
 
    	
(b)
    	
Consent Standards
    	
11
    
	
 
    	
(c)
    	
Request for Consent
    	
12
    
	
 
    	
(d)
    	
Conditions to Consent
    	
12
    
	
 
    	
(e)
    	
Attornment by Subtenants
    	
12
    

 

i

 

	
 
    	
(f)
    	
Intentionally omitted
    	
13
    
	
 
    	
(g)
    	
Additional Compensation
    	
13
    
	
 
    	
(h)
    	
Permitted Transfers
    	
13
    
	
 
    	
 
    	
 
    	
 
    
	
11.
    	
Insurance; Waivers; Subrogation;   Indemnity
    	
14
    
	
 
    	
(a)
    	
Insurance
    	
14
    
	
 
    	
(b)
    	
No Subrogation
    	
14
    
	
 
    	
(c)
    	
Indemnity
    	
14
    
	
 
    	
 
    	
 
    	
 
    
	
12.
    	
Subordination; Attornment; Notice to   Landlord’s Mortgagee
    	
15
    
	
 
    	
(a)
    	
Subordination
    	
15
    
	
 
    	
(b)
    	
Attornment
    	
15
    
	
 
    	
(c)
    	
Notice to Landlord’s Mortgagee
    	
15
    
	
 
    	
(d)
    	
Landlord’s Mortgagee’s Protection   Provisions
    	
15
    
	
 
    	
 
    	
 
    	
 
    
	
13.
    	
Intentionally Omitted
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
14.
    	
Condemnation
    	
16
    
	
 
    	
(a)
    	
Total Taking
    	
16
    
	
 
    	
(b)
    	
Partial Taking – Tenant’s Rights
    	
16
    
	
 
    	
(c)
    	
Partial Taking – Landlord’s Rights
    	
16
    
	
 
    	
(d)
    	
Temporary Taking
    	
16
    
	
 
    	
(e)
    	
Award
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
15.
    	
Fire or Other Casualty
    	
17
    
	
 
    	
(a)
    	
Repair Estimate
    	
17
    
	
 
    	
(b)
    	
Tenant’s Rights
    	
17
    
	
 
    	
(c)
    	
Landlord’s Rights
    	
17
    
	
 
    	
(d)
    	
Repair Obligation
    	
17
    
	
 
    	
(e)
    	
Abatement of Rent
    	
17
    
	
 
    	
(f)
    	
Exclusive Remedy
    	
18
    
	
 
    	
 
    	
 
    	
 
    
	
16.
    	
Personal Property Taxes
    	
18
    
	
 
    	
 
    	
 
    	
 
    
	
17.
    	
Events of Default
    	
18
    
	
 
    	
(a)
    	
Payment Default
    	
18
    
	
 
    	
(b)
    	
Abandonment
    	
18
    
	
 
    	
(c)
    	
Estoppel
    	
18
    
	
 
    	
(d)
    	
Insurance
    	
18
    
	
 
    	
(e)
    	
Mechanic’s Liens
    	
19
    
	
 
    	
(f)
    	
Other Defaults
    	
19
    
	
 
    	
(g)
    	
Insolvency
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
18.
    	
Remedies
    	
19
    
	
 
    	
(a)
    	
Continuance of Lease in Effect
    	
19
    
	
 
    	
(b)
    	
Termination of Lease
    	
19
    
	
 
    	
(c)
    	
Election to Terminate or Continue
    	
20
    
	
 
    	
(d)
    	
Rights and Remedies upon Termination
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
19.
    	
Non-Waiver; Cumulative Remedies
    	
21
    
	
 
    	
(a)
    	
No Waiver
    	
21
    
	
 
    	
(b)
    	
Cumulative Remedies
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
20.
    	
Intentionally Omitted
    	
21
    

 

ii

 

	
21.
    	
Surrender of Premises
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
22.
    	
Holding Over
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
23.
    	
Certain Rights Reserved by Landlord
    	
22
    
	
 
    	
(a)
    	
Building Operations
    	
22
    
	
 
    	
(b)
    	
Prospective Purchasers and Lenders
    	
22
    
	
 
    	
(c)
    	
Prospective Tenants
    	
22
    
	
 
    	
 
    	
 
    	
 
    
	
24.
    	
Intentionally Omitted
    	
22
    
	
 
    	
 
    	
 
    	
 
    
	
25.
    	
Miscellaneous
    	
22
    
	
 
    	
(a)
    	
Landlord Transfer
    	
22
    
	
 
    	
(b)
    	
Liability
    	
22
    
	
 
    	
(c)
    	
Brokerage
    	
23
    
	
 
    	
(d)
    	
Estoppel Certificates
    	
23
    
	
 
    	
(e)
    	
Notices
    	
23
    
	
 
    	
(f)
    	
Separability
    	
23
    
	
 
    	
(g)
    	
Amendments; Binding Effect
    	
23
    
	
 
    	
(h)
    	
Quiet Enjoyment
    	
24
    
	
 
    	
(i)
    	
No Merger
    	
24
    
	
 
    	
(j)
    	
No Offer
    	
24
    
	
 
    	
(k)
    	
Entire Agreement
    	
24
    
	
 
    	
(1)
    	
Waiver of Jury Trial
    	
24
    
	
 
    	
(m)
    	
Governing Law
    	
25
    
	
 
    	
(n)
    	
Recording
    	
25
    
	
 
    	
(o)
    	
Water or Mold Notification
    	
25
    
	
 
    	
(p)
    	
Joint and Several Liability
    	
25
    
	
 
    	
(q)
    	
Financial Reports
    	
25
    
	
 
    	
(r)
    	
Landlord’s Fees
    	
25
    
	
 
    	
(s)
    	
Telecommunications
    	
26
    
	
 
    	
(t)
    	
Confidentiality
    	
26
    
	
 
    	
(u)
    	
Authority
    	
26
    
	
 
    	
(v)
    	
Security Service
    	
26
    
	
 
    	
(w)
    	
Intentionally Omitted
    	
26
    
	
 
    	
(x)
    	
Prohibited Persons and Transactions
    	
26
    
	
 
    	
(y)
    	
List of Exhibits
    	
27
    
	
 
    	
 
    	
 
    	
 
    
	
26.
    	
Environmental Requirements
    	
27
    
	
 
    	
(a)
    	
Hazardous Materials
    	
27
    
	
 
    	
(b)
    	
Environmental Requirements
    	
27
    
	
 
    	
(c)
    	
Removal of Hazardous Materials
    	
27
    
	
 
    	
(d)
    	
Tenant’s Indemnity
    	
28
    
	
 
    	
(e)
    	
Inspections and Tests
    	
28
    
	
 
    	
(f)
    	
Tenant’s Financial Assurance in the   Event of a Breach
    	
29
    
	
 
    	
(g)
    	
Landlord’s Indemnity
    	
29
    
	
 
    	
(h)
    	
Tenant’s Inventory of Hazardous   Materials
    	
29
    
	
 
    	
(i)
    	
Landlord’s Disclosure
    	
29
    
	
 
    	
 
    	
 
    	
 
    
	
27.
    	
Parking
    	
29
    

 

iii

 

	
28.
    	
Furniture
    	
30
    
	
 
    	
 
    
	
EXHIBIT A OUTLINE OF PREMISES
    	
32
    
	
 
    	
 
    
	
EXHIBIT B LANDLORD’S WORK
    	
33
    
	
 
    	
 
    
	
EXHIBIT C INTENTIONALLY OMITTED
    	
34
    
	
 
    	
 
    
	
EXHIBIT D CONFIRMATION OF COMMENCEMENT DATE
    	
35
    
	
 
    	
 
    
	
1.
    	
Condition of Premises
    	
35
    
	
 
    	
 
    	
 
    
	
2.
    	
Commencement Date
    	
35
    
	
 
    	
 
    	
 
    
	
3.
    	
Expiration Date
    	
35
    
	
 
    	
 
    	
 
    
	
4.
    	
Ratification
    	
35
    
	
 
    	
 
    	
 
    
	
5.
    	
Binding Effect; Governing Law
    	
35
    
	
 
    	
 
    	
 
    
	
EXHIBIT E FORM OF TENANT ESTOPPEL CERTIFICATE
    	
37
    
	
 
    	
 
    
	
EXHIBIT F OPERATING COSTS
    	
39
    
	
 
    	
 
    
	
EXHIBIT G INSURANCE
    	
41
    
	
 
    	
 
    
	
1.
    	
Tenant’s Insurance
    	
41
    
	
 
    	
 
    	
 
    
	
2.
    	
Landlord’s Insurance
    	
41
    
	
 
    	
 
    	
 
    
	
3.
    	
Cost of Landlord’s Insurance
    	
42
    
	
 
    	
 
    	
 
    
	
EXHIBIT H DESCRIPTION   OF FURNITURE
    	
43
    

 

iv

 

LIST OF DEFINED TERMS

 

	
 
    	
Page (s)
    
	
 
    	
 
    
	
Area
    	
1,   33
    
	
Area A
    	
1
    
	
Area B
    	
1
    
	
Area B2
    	
1,   33
    
	
Area C
    	
1
    
	
Area D
    	
1
    
	
Building
    	
1,   6, 7, 8, 9, 11, 14, 22, 27, 33, 39
    
	
Building’s Structure
    	
4,   7, 9
    
	
Building’s Systems
    	
4,   8, 9, 11
    
	
Casualty
    	
17,   21
    
	
Damage Notice
    	
17
    
	
Default Rate
    	
6,   8, 9, 10, 18, 19, 20
    
	
Early Termination Date
    	
5
    
	
Early Termination Notice
    	
5
    
	
Early Termination Option
    	
1,   5, 17
    
	
Effective Date
    	
4
    
	
Environmental Requirements
    	
27,   28, 29
    
	
Event of Default
    	
6,   8, 11, 12, 18, 19, 21, 22, 25
    
	
Exhibit A
    	
1
    
	
Failure Notice
    	
7,   28
    
	
Furniture
    	
26,   27, 30, 33
    
	
GAAP
    	
13
    
	
Hazardous Materials
    	
7,   11, 21, 27, 28, 29, 33, 38
    
	
including
    	
passim
    
	
Landlord
    	
passim
    
	
Landlord’s Mortgagee
    	
15,   16, 17, 21, 23, 25, 38, 41
    
	
Law
    	
4,   6, 11, 14, 18, 25, 27, 28, 35
    
	
Laws
    	
4,   6, 7, 8, 9, 10, 11, 14, 27, 38
    
	
Lease
    	
passim
    
	
Lease Month
    	
1,   2, 6
    
	
License Agreement
    	
5,   24, 28, 29
    
	
Mortgage
    	
15
    
	
Operating Costs
    	
2,   6, 7, 10, 27, 39, 40
    
	
Plan
    	
8
    
	
Premises
    	
passim
    
	
Taking
    	
16
    
	
Tangible Net Worth
    	
13
    
	
Telecommunications Services
    	
26
    
	
Tenant
    	
passim
    
	
Tenant Party
    	
4,   9, 11, 17, 26, 27, 28, 29, 41
    
	
Termination   Date
    	
1,   2, 5, 17
    

 

v

 

BASIC LEASE INFORMATION

 

	
Lease Date:
    	
 
    	
May      ,   2010
    
	
 
    	
 
    	
 
    
	
Landlord:
    	
 
    	
Novellus Systems, Inc., a   California corporation
    
	
 
    	
 
    	
 
    
	
Tenant:
    	
 
    	
Intermolecular, Inc., a Delaware   corporation
    
	
 
    	
 
    	
 
    
	
Premises:
    	
 
    	
The “Premises”,   containing for purposes of this Lease approximately 146,159 rentable square feet,   are located at 3011 North 1st Street,   San Jose, California, are outlined on the plan attached to this Lease as Exhibit A and consist of the   real property, together with a building comprised of five   (5) office/research, warehouse, manufacturing and laboratory areas   (collectively, the “Building”   and each an “Area”),   designated as “Area A”,   comprising approximately 19,816 rentable square feet, “Area B”,   comprising approximately 23,597 rentable square feet, “Area B2”,   comprising approximately 28,142 rentable square feet, “Area C”,   comprising approximately 22,790 rentable square feet, and “Area D”, comprising approximately 45,814 rentable square feet, and the   hallways between and among them comprising approximately 6,000 rentable square   feet, and the driveways, parking facilities, loading dock areas, roadways,   any rail tracks associated with the Building and all other improvements   located on such real property and all easements associated with the foregoing   or the operation thereof. Landlord and Tenant stipulate that the number of   rentable square feet in the Premises set forth above is conclusive and shall   be binding upon them.
    
	
 
    	
 
    	
 
    
	
Term:
    	
 
    	
Eighty Four (84) Lease Months,   commencing on the Commencement Date and ending at 11:59 p.m. local time on   the last day of the Eighty Fourth (84th) full calendar month following the Commencement Date (the “Termination Date”), subject to   adjustment and earlier termination as provided in the Lease, including   without limitation, on the last day of the Sixtieth (60th) full calendar month following the Commencement Date upon exercise   of the Early Termination Option by either party hereto.
    
	
 
    	
 
    	
 
    
	
Target Commencement Date:
    	
 
    	
May 14, 2010
    
	
 
    	
 
    	
 
    
	
Basic Rent:
    	
 
    	
Basic Rent shall be the following   amounts for the following periods of time:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Lease Month
    	
 
    	
Monthly Basic Rent
    	
 
    
	
 
    	
 
    	
1 – 9
    	
 
    	
$
    	
0.00
    	
 
    
	
 
    	
 
    	
10 – 15
    	
 
    	
$
    	
55,774.00
    	
 
    
	
 
    	
 
    	
16 – 21
    	
 
    	
$
    	
113,048.00
    	
 
    
	
 
    	
 
    	
22 – 33
    	
 
    	
$
    	
134,732.00
    	
 
    
	
 
    	
 
    	
34 – 45
    	
 
    	
$
    	
138,774.00
    	
 
    
	
 
    	
 
    	
46 – 57
    	
 
    	
$
    	
142,937.00
    	
 
    
	
 
    	
 
    	
58 – 69
    	
 
    	
$
    	
147,226.00
    	
 
    
	
 
    	
 
    	
70 – 81
    	
 
    	
$
    	
151,642.00
    	
 
    
	
 
    	
 
    	
82 – 84
    	
 
    	
$
    	
156,192.00
    	
 
    

 

1

 

	
 
    	
 
    	
As used herein, the term “Lease Month”   means each calendar month during the Term (and if the Commencement Date does   not occur on the first day of a calendar month, the period from the   Commencement Date to the first day of the next calendar month and the next   calendar month shall be included in the first Lease Month for purposes of   determining the duration of the Term and the monthly Basic Rent rate   applicable for such partial month).
    
	
 
    	
 
    	
 
    
	
Additional Rent:
    	
 
    	
Tenant shall pay as Additional Rent the   Proportionate Share (as set forth in the table below) of Operating Costs (as   defined in the Lease). Tenant shall be responsible for all maintenance   associated with the Premises except as expressly set forth in Section 6   of this Lease.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Lease Month
    	
 
    	
Monthly Basic Rent
    	
 
    
	
 
    	
 
    	
1 – 15
    	
 
    	
41.03
    	
%
    
	
 
    	
 
    	
16 – 21
    	
 
    	
80.75
    	
%
    
	
 
    	
 
    	
22 – 84
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
 
    
	
Security Deposit:
    	
 
    	
$100,000.00 for that portion of the   Term commencing on the Commencement Date and continuing through the last day   of the 9th Lease Month; and $147,226.00 for that   portion of the Term commencing on the first day of the 10th Lease Month and continuing   through the Termination Date.
    
	
 
    	
 
    	
 
    
	
Permitted Use:
    	
 
    	
Light manufacturing, general office, research   and development, laboratory, clean room, warehousing and distribution, and   all other legally permissible uses related thereto.
    
	
 
    	
 
    	
 
    
	
Initial Liability Insurance Amount:
    	
 
    	
$1,000,000 per occurrence; $2,000,000   aggregate; and $5,000,000 umbrella.
    
	
 
    	
 
    	
 
    
	
Tenant’s Address:
    	
 
    	
Prior to Commencement Date:

 

2865 Zanker Road 

San Jose, Ca 95134
    	
 
    	
Following Commencement Date:

 

3011 North 1st Street

San Jose, Ca. 95134
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Attention: Peter Eidelman

Telephone:

Telecopy:
    	
 
    	
Attention: CFO

Peter   Eidelman

Telephone:

Telecopy:

 

with a copy to:

 

Latham & Watkins, LLP

355 S. Grand Ave.

Los Angeles, California 90071-1560

Attention: Jonathan J.   Delshad, Esq.

Telephone: 213-891-7995
    
							

 

2

 

 

	
Landlord’s   Address:
    	
 
    	
4000   North 1st Street
    
	
 
    	
 
    	
San   Jose, California 95134
    
	
 
    	
 
    	
Attention:   Randy McFarland
    
	
 
    	
 
    	
Telephone:   408 570 2603
    
	
 
    	
 
    	
Facsimile:   408 324 3943
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
with a copy to:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Dillingham &   Murphy, LLP
    
	
 
    	
 
    	
225 Bush Street, 6th Floor
    
	
 
    	
 
    	
San Francisco,   California, 94104
    
	
 
    	
 
    	
Attention: Tyrrell   M. Prosser, Esq.
    
	
 
    	
 
    	
Telephone:   415-397-2700
    
	
 
    	
 
    	
Facsimile:   415-397-3300
    

 

The foregoing Basic Lease Information is incorporated into and made a part of the Lease identified above. If any conflict exists between any Basic Lease Information and the Lease, then the Lease shall control.

 

 

	
LANDLORD:
    	
 
    	
NOVELLUS, SYSTEMS, INC., a California corporation
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Jeffrey C Benzing
    
	
 
    	
 
    	
Name:
    	
Jeffrey C Benzing
    
	
 
    	
 
    	
Title:
    	
Executive Vice President, CAO
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
TENANT:
    	
 
    	
INTERMOLECULAR, INC. a Delaware corporation
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Peter Eidelman
    
	
 
    	
 
    	
Name:
    	
Peter Eidelman
    
	
 
    	
 
    	
Title:
    	
Chief Financial Officer
    

 

3

 

LEASE

 

THIS LEASE AGREEMENT (this “Lease”) is entered into as of May      , 2010 (the “Effective Date”), between NOVELLUS SYSTEMS, INC., a California corporation (“Landlord”),  and INTERMOLECULAR, INC., a Delaware corporation (“Tenant”).

 

1.             Definitions and Basic Provisions.

 

The definitions and basic provisions set forth in the Basic Lease Information (the “Basic Lease Information”) executed by Landlord and Tenant contemporaneously herewith are incorporated herein by reference for all purposes. Additionally, the following terms shall have the following meanings when used in this Lease: “Affiliate” means any person or entity which, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the party in question; “Building’s Structure” means the structural roof elements, footings, foundation, slab and structural portions of the interior floors and the exterior load-bearing walls (expressly excluding any painting or sealing) of the Building; “Building’s Systems” means the Building’s HVAC, life-safety, plumbing, electrical, elevator and mechanical systems; “including” means including, without limitation; “Laws” means all federal, state, and local laws, ordinances, rules and regulations, all court orders, governmental directives, and governmental orders, and all interpretations of the foregoing, and all restrictive covenants affecting the Premises, and “Law” means any of the foregoing; and “Tenant Party” means any of the following persons: Tenant; any assignees claiming by, through, or under Tenant; any subtenants claiming by, through, or under Tenant; and any of their respective agents, contractors, employees, licensees, guests, and invitees.

 

2.             Lease Grant.

 

Subject to the terms of this Lease, Landlord leases to Tenant, and Tenant leases from Landlord, the Premises.

 

(a)           Term.

 

The Term of this Lease shall be as described in the Basic Lease Information, commencing on the Commencement Date (defined below) and expiring on the last day of the Term, unless the Term is sooner terminated as hereinafter provided. Subject to Subparagraph (b) below, the actual commencement date (the “Commencement Date”) shall be the last to occur of the following events, as determined by Landlord: (i) the Target Commencement Date specified in the Basic Lease Information or (ii) the date of mutual execution and delivery of this Lease.

 

(b)           Delivery of Premises.

 

It is acknowledged that the Target Commencement Date listed in the Basic Lease Information represents an estimate of the actual commencement date of the Lease Term. The Lease Term shall not be deemed to have commenced and Tenant shall not be obligated to pay any Basic Rent or Additional Rent (collectively, along with all other sums payable by Tenant to Landlord hereunder, “Rent”) until the actual Commencement Date. If Landlord for any reason cannot deliver early possession of the Premises to Tenant on the Target Commencement Date, then Landlord shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease or the obligations of Tenant hereunder; however, either party, at its option, may terminate this Lease by giving written notice of its election to the other party if the Commencement Date has not occurred on or before thirty (30) days after the Target Commencement Date through no fault of the terminating party. Such termination right shall be exercised within ten (10) days after the expiration of said 30-day period, provided that the Commencement Date has not then occurred. Upon the termination of this Lease pursuant to this Subparagraph (2), the parties shall have no further rights or liabilities towards each other except for those provisions of this Lease which expressly survive the termination of this Lease and Landlord shall return any advance rent or security deposits previously paid by Tenant. Notwithstanding the foregoing sentence, if Landlord is unable to deliver possession of the Premises to Tenant within the 30-day period due to delays caused by Tenant or force majeure, the 30-day period shall be extended by the number of days of Tenant delays or force majeure.

 

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(c)           Commencement Date Memorandum.

 

When the actual Commencement Date is determined, the parties shall execute a Confirmation of Commencement Date in the form attached hereto as Exhibit D setting forth the actual Commencement Date.

 

(d)           Early Entry.

 

Landlord has permitted Tenant to enter upon the Premises prior to the Commencement Date pursuant to the terms of that certain License Agreement dated April 6, 2010, as amended by that certain Extension of License Agreement dated April 30, 2010, by and between Landlord and Tenant (the “License Agreement”) for the purpose of its fixturing and preparing the Premises for Tenant’s occupancy. Such early entry shall be at Tenant’s sole risk and subject to all the terms and provisions of the License Agreement and hereof, except for the payment of Rent which shall commence on the Commencement Date. Tenant shall not unreasonably interfere with Landlord’s contractors and subcontractors which may be performing work in the Premises, if any. Landlord shall have the right to impose such additional conditions on Tenant’s early entry as Landlord shall deem reasonably appropriate which are not inconsistent with the terms of the License Agreement.

 

(e)           Early Termination Option.

 

Each of Landlord and Tenant shall have the option (the “Early Termination Option”), exercisable in the sole and absolute discretion, to terminate this Lease early, effective as of 11:59 p.m. local time on the last day of the Sixtieth (60th) full calendar month following the Commencement Date (the “Early Termination  Date”), as if such day were the natural expiry date of the Lease Term. Subject to the following conditions, the Early Termination Option may only be exercised by delivery of written notice from the exercising party to the other party hereto (an “Early Termination Notice”) at least six (6) months prior, but not more than twelve (12) months prior, to the Early Termination Date electing to terminate the Term of this Lease as of the Early Termination Date. The Early Termination Option may only be exercised by Landlord if Landlord certifies in its Early Termination Notice delivered to Tenant that Landlord, in good faith, intends to redevelop the Premises for its own use or for investment purposes. The Early Termination Option may only be exercised by Tenant if Tenant delivers with its Early Termination Notice delivered to Landlord the sum of Four Hundred Forty One Thousand Six Hundred Seventy Eight and No/100 Dollars ($441,678.00), in cash or equivalent, as consideration for the early termination of the Lease Term, and upon delivery thereof by Tenant to Landlord, said consideration shall be deemed fully earned by Landlord. As a further condition precedent to Tenant’s exercise of the Early Termination Option, if any sums due under the Lease at the time of exercise are then past due, Tenant’s exercise of the Early Termination Option shall not be effective unless all such past due sums are paid to Landlord on or before delivery of Tenant’s Early Termination Notice. Any failure by Landlord or Tenant to effectively exercise the Early Termination Option as set forth above at least six (6) months prior to the Early Termination Date shall render any later attempt to exercise the Early Termination Option null and void and without force or effect, the parties agreeing that time is of the essence in so exercising the Early Termination Option.

 

3.             Rent

 

(a)           Payment.

 

Tenant shall timely pay to Landlord Rent, without notice, demand, deduction or set off (except as otherwise expressly provided herein), by good and sufficient check drawn on a national banking association at Landlord’s address provided for in this Lease or as otherwise specified by Landlord (including, without limitation, by wire transfer) and shall be accompanied by all applicable state and local sales or use taxes. The obligations of Tenant to pay Basic Rent and other sums to Landlord and the obligations of Landlord under this Lease are independent obligations. Basic Rent, adjusted as herein provided, shall be payable on the first day of each month. The monthly Basic Rent for any partial calendar month during the Term shall be prorated based on the ratio that the number of days during the Term in such partial calendar month bears to the total number of days in such calendar month multiplied by the Basic Rent in effect during such partial month, and shall be due, in advance either on the Commencement Date for the first such partial month during the Term or the regular monthly payment date at the end of the Term. Payments of Basic Rent for any fractional calendar month at the end of the Term shall be similarly prorated. Tenant shall pay Additional Rent at the same time and in the same manner as Basic Rent.

 

5

 

(b)           Operating Costs and Taxes.

 

Tenant shall pay Operating Costs in accordance with Exhibit F attached hereto. Tenant’s Proportionate Share of Operating Costs shall be as set forth in the Basic Lease Information. Notwithstanding any contrary implication or expression in the foregoing or elsewhere in this Lease, Tenant shall have no obligation to pay any portion of Tenant’s Proportionate Share of Operating Costs for each calendar year which is attributable to an increase in the sum of Taxes and Insurance Costs which is in excess of the sum of Taxes and Insurance Costs paid by Tenant for the previous calendar year (grossed up to a full calendar year for any partial year during the Term), increased by three percent (3%).

 

4.             Delinquent Payment; Handling Charges.

 

All past due payments required of Tenant hereunder shall bear interest from the date due until paid at the lesser of (i) three percent (3%) per annum plus the annual “Reference Rate” announced from time to time by Bank of America during such period, or (ii) the maximum lawful rate of interest (such lesser amount is referred to herein as the “Default Rate”); additionally, Landlord, in addition to all other rights and remedies available to it, may charge Tenant a fee equal to five (5%) percent of the delinquent amount(s) to reimburse Landlord for its cost and inconvenience incurred as a consequence of Tenant’s delinquency. In no event, however, shall the charges permitted under this Section 4 or elsewhere in this Lease, to the extent they are considered to be interest under applicable Law, exceed the maximum lawful rate of interest. Notwithstanding the foregoing, the late fee referenced above shall not be charged with respect to the first occurrence (but not any subsequent occurrence) during any 12-month period that Tenant fails to make payment when due, until five days after Landlord delivers written notice of such delinquency to Tenant.

 

5.             Security  Deposit.

 

(a)           Contemporaneously with the execution of this Lease, Tenant shall pay to Landlord the Security Deposit as stated in the Basic Lease Information to be held for that portion of the Term commencing on the Commencement Date and continuing through the last day of the ninth (9th) Lease Month, and at least fifteen (15) business days prior to the commencement of the tenth (10th) Lease Month of the Term, Tenant shall pay to Landlord the Security Deposit as stated in the Basic Lease Information to be held for that portion of the Term commencing on the first day of the tenth (10th) Lease Month and continuing through expiration of the Term, which sums shall be held by Landlord to secure Tenant’s performance of its obligations under this Lease. The Security Deposit is not an advance payment of Rent or a measure or limit of Landlord’s damages upon an Event of Default (as defined herein). Landlord may, from time to time following an Event of Default and without prejudice to any other remedy, use all or a part of the Security Deposit to perform any obligation Tenant fails to perform hereunder or to compensate Landlord for any damages due to a default by Tenant. In this regard, Tenant hereby waives any restriction on the uses to which the Security Deposit may be applied as contained in Section 1950.7(c) of the California Civil Code and/or any successor statute. Following any such application of the Security Deposit, Tenant shall pay to Landlord on demand the amount so applied in order to restore the Security Deposit to its original amount. Provided that Tenant has performed all of its obligations hereunder, Landlord shall, within sixty (60) days after the expiration of the Term and Tenant’s surrender of the Premises in compliance with the provisions of this Lease, return to Tenant the portion of the Security Deposit which was not applied to satisfy Tenant’s obligations (and Tenant hereby waives the provisions of California Civil Code Section 1950.7 to the contrary). The Security Deposit may be comingled with other funds, and no interest shall be paid thereon. If Landlord transfers its interest in the Premises and the transferee assumes Landlord’s obligations under this Lease, then Landlord may assign the Security Deposit to the transferee in conformity with the provisions of Section 1950.7 of the California Civil Code and/or any successor statute, and Landlord thereafter shall have no further liability for the return of the Security Deposit. The rights and obligations of Landlord and Tenant under this Section 5 are subject to any other requirements and conditions imposed by Laws applicable to the Security Deposit.

 

6.             Landlord’s Maintenance Obligations.

 

This Lease is intended to be a net lease, however at Lease Commencement Landlord shall deliver the Premises with all Building Systems, including HVAC, Elevator, Plumbing, Mechanical, Electrical (including panels and outlets), roof, exterior walls and doors, fire sprinklers, lighting, ceiling tiles, window coverings, and all

 

6

 

clean-room related systems located on the pad or otherwise, as well as the parking area serving the Premises, in good repair and working order, and the Premises and Building shall be inspected and cleaned of all chemical or hazardous material contamination in accordance with all Laws (including the filing of closure applications, closure plans, and post closure reports, if applicable, and Chapter 17.68 of the San Jose Code of Ordinances). Landlord shall provide Tenant with copies of all maintenance reports in Landlord’s possession relating to the maintenance of such systems in the past two (2) years. Additionally, Landlord, at Landlord’s cost, in response to any governmental orders or notices demanding correction, shall correct any components of the Building which do not comply with Laws currently applicable to the Building as of the date of this Lease; provided however, that Landlord shall have no obligation to correct, or improve or upgrade any components of the Building as a result of Tenant’s alterations or improvements to the Building or as a result of any specialized use or activity conducted within the Building by Tenant. Except as expressly set forth above or otherwise in this Section or elsewhere in this Lease, Tenant will be responsible for all maintenance of the Building and the Building Systems. Landlord’s maintenance obligations are limited to the obligations specifically set forth in this Section 6. Notwithstanding anything to the contrary contained herein, Landlord shall, in its reasonable discretion, determine the appropriate remedial action required of it to satisfy its maintenance obligations hereunder (e.g., Landlord shall, in its reasonable discretion, determine whether, and to the extent, repairs or replacements are the appropriate remedial action). Subject to the obligations of Landlord to deliver the Premises in accordance with this Lease, including removal of all Hazardous Materials as required hereunder, Tenant hereby accepts the Premises in their “as-is” condition as of the date of this Lease.

 

(a)           Building’s Structure.

 

Landlord shall, at its sole cost and expense, repair and maintain the Building’s Structure; provided, however, that Landlord shall not be responsible for (i) any such work until Tenant notifies Landlord of the need thereof in writing, (ii) alterations to the Building’s Structure required by applicable law because of Tenant’s use of the Premises (which alterations shall be Tenant’s responsibility), or (ii) any structural damage caused by Tenant’s acts or omissions or failure to comply with Tenant’s obligations under this Lease. The Building’s Structure does not include exterior surfaces, roof membranes, skylights, windows, glass or plate glass, doors or overhead doors, special fronts, or office entries, dock bumpers, dock plates or levelers, loading areas and docks, and loading dock equipment or any other items not expressly set forth in Section 1 above as being part of the Building’s Structure, all of which shall be maintained and replaced, as necessary, by Tenant. Landlord’s liability for any defects, repairs, replacement or maintenance for which Landlord is specifically responsible for under this Lease shall be limited to the cost of performing the work. Prior to the mutual execution and delivery of this Lease, Tenant may inspect the Premises for water damage, mold, and infestations of rodents and other pests and provide Landlord with an estimate for the cost of remediation along with the results of the investigation. If Tenant fails to deliver the results of all such investigations and the recommended remediation (and estimated costs thereof) prior to the mutual execution and delivery of this Lease, Landlord shall have no responsibility therefor except as otherwise expressly set forth herein. If Tenant does so timely deliver such results and recommended remediation, Landlord shall promptly undertake the recommended remediation, at Landlord’s cost, for the identified water leaks, water damage, and mold (including any remediation of carpet damage and smell from water leaks, or mold) and rodents and other pests and shall use all commercially reasonable efforts to complete such remediation in a prompt and expeditious manner. In the event that Landlord does not undertake such remediation required under this Section 6(a) within fifteen (15) days of the mutual execution and delivery of this Lease, Tenant may undertake such remediation and Landlord shall reimburse Tenant for all reasonable costs incurred therefor within fifteen (15) business days after receipt of reasonable evidence of the costs so incurred in connection therewith.

 

(b)           Outside Areas, Landscaping, Etc.

 

Landlord shall maintain the areas of the Premises outside the Building, including landscaping and the parking lot foundation (but not the surface thereof, which shall be Tenant’s responsibility) and the costs thereof shall be part of Operating Costs.

 

(c)           Landlord’s Right to Perform Tenant’s Obligations

 

If at any time during the Term Landlord determines, in Landlord’s reasonable discretion, that Tenant is not adequately performing any of Tenant’s obligations under Section 7 or 8 (or Section 28), Landlord shall notify Tenant in writing of such failure (the “Failure Notice”), and Tenant shall submit to Landlord a plan of

 

7

 

remediation (the “Plan”) for approval by Landlord within fifteen (15) days after receiving the Failure Notice. If Landlord does not disapprove of such plan within five (5) days, Tenant shall implement the Plan. If Tenant does not submit a Plan within fifteen (15) days after notice or, in the event that such failure poses an imminent threat of personal injury or property damage, then Landlord may elect to take over and perform any such obligations going forward, in which event all costs incurred by Landlord in performing such obligations (together with interest at the Default Rate if an Event of Default has occurred with respect to any such obligation) shall be for Tenant’s account and shall be reimbursed and paid to Landlord by Tenant after completion of the work and within ten (10) days after delivery by Landlord of an invoice therefor.

 

7.             Improvements; Alterations; Tenant’s Maintenance and Repair Obligations; Signage

 

(a)           Improvements; Alterations

 

(1)           In General.   Improvements to the Premises shall be installed at Tenant’s expense only in accordance with plans and specifications which have been previously submitted to and approved in writing by Landlord, and by engineers, contractors and subcontractors which have been previously approved in writing by Landlord, which approval shall be governed by the provisions set forth in this Section 7(a). No alterations or physical additions in or to the Premises may be made without Landlord’s prior written consent, which shall not be unreasonably withheld or delayed; however, Landlord may withhold its consent to any alteration or addition that would adversely affect (in the reasonable discretion of Landlord) (1) the Building’s Structure or the Building’s Systems (including the Building’s restrooms or mechanical rooms), (2) the exterior appearance of the Building, (3) the appearance of the Premises’ common areas, or (4) the provision of services to other Building occupants (if any). Tenant shall not paint or install lighting or decorations, signs, window or door lettering, or advertising media of any type to the exterior of the Building or the Premises or on the monument sign thereon without the prior written consent of Landlord, which consent may be withheld in Landlord’s sole and absolute discretion. All alterations, additions, and improvements shall be constructed, maintained, and used by Tenant, at its risk and expense, in accordance with all Laws; Landlord’s consent to or approval of any alterations, additions or improvements (or the plans therefor) shall not constitute a representation or warranty by Landlord, nor Landlord’s acceptance, that the same comply with sound architectural and/or engineering practices or with all applicable Laws, and Tenant shall be solely responsible for ensuring all such compliance.

 

(2)           Minor Alterations.   Notwithstanding Section 7(a)(1)above, Tenant, without Landlord’s prior written consent (but subject to the other terms and conditions of this Section 7, including Section 7(c) below), shall be permitted to make alterations to the Premises that do not affect the Building’s Structure, do not affect the Building’s Systems and do not materially affect the appearance of the Premises viewed from the exterior, provided that: (a) such alterations do not exceed $20,000 per project, (b) Tenant shall timely provide Landlord the information required pursuant to Section 7(c) below, (c) Tenant shall notify Landlord in writing within thirty (30) days of completion of the alteration and deliver to Landlord a set of the plans and specifications therefor, either “as built” or marked to show construction changes made, and (d) Tenant shall, upon Landlord’s request made within a reasonable time prior to termination of this Lease, remove the alteration at the termination of the Lease and restore the Premises to its condition prior to such alteration. Notwithstanding anything herein to the contrary, Tenant shall not require Landlord’s prior written consent to install process equipment, metrology and other standard equipment needed in clean rooms and labs for Tenant’s general business use.

 

(b)           Repairs; Maintenance

 

Except for Landlord’s obligations set forth in Section 6, Tenant shall, at its sole expense, repair, replace and maintain all portions of the Premises in a good, clean, safe, and operable condition and in accordance with all Laws and the equipment manufacturer’s suggested service programs, and shall not permit or allow to remain any waste or damage to any portion of the Premises. Such repair and replacements include capital expenditures and repairs whose benefit may extend beyond the Term. No later than 14 days prior to the end of the Term, Tenant shall deliver to Landlord a certificate from an engineer reasonably acceptable to Landlord certifying that all such items which Tenant is required to maintain hereunder are then in good repair and condition and have been maintained in accordance with this Section 7.

 

8

 

(c)           Performance of Work

 

All work described in this Section 7 shall be performed only by contractors and subcontractors approved in writing by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. Tenant shall cause all contractors and subcontractors to procure and maintain insurance coverage naming Landlord, Landlord’s property management company and Landlord’s asset management company as additional insureds against such risks, in such amounts, and with such companies as Landlord may reasonably require. Tenant shall provide Landlord with the identities, mailing addresses and telephone numbers of all persons performing work or supplying materials prior to beginning such construction and Landlord may post on and about the Premises notices of non-responsibility pursuant to applicable Laws. All such work shall be performed in accordance with all Laws and in a good and workmanlike manner so as not to damage the Premises (including the Building’s Structure and the Building’s Systems). All such work which may affect the Building’s Structure or the Building’s Systems must be approved by the Landlord’s engineer of record, at Tenant’s expense and, at Landlord’s election, must be performed by Landlord’s usual contractor for such work. All work affecting the roof of the Building must be performed by Landlord’s roofing contractor, and no such work will be permitted if it would void or reduce the warranty on the roof.

 

(d)           Mechanic’s Liens

 

All work performed, materials furnished, or obligations incurred by or at the request of a Tenant Party shall be deemed authorized and ordered by Tenant only, and Tenant shall not permit any mechanic’s liens to be filed against the Premises in connection therewith. Upon completion of any such work, Tenant shall deliver to Landlord final lien waivers from all contractors, subcontractors and materialmen who performed such work. If such a lien is filed, then Tenant shall, within ten (10) days after Landlord has delivered notice of the filing thereof to Tenant (or such earlier time period as may be necessary to prevent the forfeiture of the Premises or any interest of Landlord therein or the imposition of a civil or criminal fine with respect thereto), either (1) pay the amount of the lien and cause the lien to be released of record, or (2) diligently contest such lien and deliver to Landlord a bond or other security reasonably satisfactory to Landlord. If Tenant fails to timely take either such action, then Landlord may pay the lien claim, and any amounts so paid, including expenses and interest at the Default Rate from the time of Landlord’s payment, shall be paid by Tenant to Landlord within ten days after Landlord has invoiced Tenant therefor. Landlord and Tenant acknowledge and agree that their relationship is and shall be solely that of “landlord-tenant” (thereby excluding a relationship of “owner-contractor,” “owner-agent” or other similar relationships). Accordingly, all materialmen, contractors, artisans, mechanics, laborers and any other persons now or hereafter contracting with Tenant, any contractor or subcontractor of Tenant or any other Tenant Party for the furnishing of any labor, services, materials, supplies or equipment with respect to any portion of the Premises, at any time from the date hereof until the end of the Term, are hereby charged with notice that they look exclusively to Tenant to obtain payment for same. Nothing herein shall be deemed a consent by Landlord to any liens being placed upon the Premises or Landlord’s interest therein due to any work performed by or for Tenant or deemed to give any contractor or subcontractor or materialman any right or interest in any funds held by Landlord to reimburse Tenant for any portion of the cost of such work. Without limiting the generality of the foregoing, Tenant shall notify Landlord in writing no later than one (1) day after the commencement of any work or the furnishing of any materials at or to the Premises in order that Landlord shall be able timely to post and record Notices of Non-Responsibility. Tenant shall defend, indemnify and hold harmless Landlord and its agents and representatives from and against all claims, demands, causes of action, suits, judgments, damages and expenses (including reasonable attorneys’ fees) in any way arising from or relating to the failure by any Tenant Party to pay for any work performed, materials furnished, or obligations incurred by or at the request of a Tenant Party. This indemnity provision shall survive termination or expiration of this Lease.

 

(e)           Janitorial Services

 

Tenant, at its sole expense, shall provide its own janitorial services to the Premises and shall maintain the Premises in a clean and safe condition. Tenant shall store all trash and garbage in receptacles and shall, at its sole expense, arrange for the regular pickup of such trash and garbage.

 

9

 

(f)            Landlord’s Right to Perform Tenant’s Maintenance Obligations

 

In accordance with the procedures provided in Section 6(c), Landlord may perform Tenant’s maintenance obligations at Tenant’s cost.

 

(g)           Signage

 

Notwithstanding Section 7(a) above, throughout the Term, Tenant shall have the right to install on the existing monument sign on the Premises (or a new monument sign in a location near the corner of North First Street as reasonably acceptable to Landlord), subject to Landlord’s prior approval, which shall not be unreasonably withheld, conditioned or delayed, and to all applicable Laws. Tenant shall be responsible for maintaining any such signs in first-class condition and shall remove such signs at the expiration or earlier termination of this Lease. Tenant shall repair all damage to the Premises caused by the installation, maintenance or removal of such signs.

 

8.             Utilities; Licenses and Permits

 

(a)           Utilities

 

Tenant shall, at its sole cost and expense, contract for and pay for all water, gas, electricity, heat, telephone, sewer, sprinkler charges and other utilities and services used at the Premises, together with any taxes, penalties, surcharges, connection charges, maintenance charges, and the like pertaining to Tenant’s use of the Premises. Tenant, at its expense, shall obtain all utility services for the Premises, including making all applications thereof, obtaining meters and other related equipment, and paying all deposits and connection charges. Landlord shall not be liable for any interruption or failure of utility service to the Premises, and such interruption or failure of utility service shall not be a constructive eviction of Tenant, constitute a breach of any implied warranty, or entitle Tenant to any abatement of Tenant’s obligations hereunder. Notwithstanding the foregoing to the contrary, Landlord shall attempt to maintain, using commercially reasonable efforts, for the benefit of the named Tenant only, its contract pricing terms with Sempra Energy and Air Products (as it relates to the procurement of Nitrogen gas), and to request extensions of such contracts as appropriate to endure throughout the term of the named Tenant’s occupancy of the Premises under this Lease, and Tenant’s obligations hereunder shall include without limitation, all surcharges for electricity used at the Premises in excess of the contracted monthly volumes or amounts applicable to the Premises under Landlord’s contracts to obtain electricity for the Premises and Landlord’s other nearby facilities (and Tenant hereby acknowledges that Landlord has provided Tenant with copies of the current pertinent contract terms with Sempra Energy relating to such contracted monthly volumes or amounts of electricity to be provided to the Premises). Landlord shall provide Tenant with copies of all monthly utility usage information received by Landlord from any utility provider for which Landlord invoices Tenant. To the extent that costs of utilities are incurred by Landlord in the performance of its obligations hereunder and are included in Operating Costs payable by Tenant hereunder, Tenant shall not have the obligation to pay any such duplicative costs outside of its obligation to pay Operating Costs as herein provided.

 

(b)           Licenses and Permits

 

Tenant shall, at its sole cost and expense, obtain and keep in force during the Term, and all extensions thereof, all licenses, certificates and permits necessary for it to use the Premises in accordance with applicable Laws. Upon Landlord’s request, Tenant shall promptly deliver to Landlord copies of all such licenses, certificates and permits.

 

(c)           Landlord’s Right to Perform Tenant’s Obligations

 

As provided in Section 6(c), upon notice and Tenant’s failure to act as set forth therein, Landlord may perform Tenant’s obligations under this Section 8. Any out-of-pocket sums expended by Landlord with respect to any of the foregoing, together with interest thereon at the Default Rate from the time of Landlord’s payment, shall be deemed to be Additional Rent owing by Tenant to Landlord and shall be part of Operating Costs.

 

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9.             Use; Compliance With Laws

 

(a)           Use

 

Tenant shall continuously occupy and use the Premises only for the Permitted Use, shall comply with all Laws relating to the use, condition, access to, and occupancy of the Premises and will not commit waste, overload the Building’s Structure or the Building’s Systems or subject the Premises to use that would damage the Premises. The Premises shall not be used for any use which is disreputable, creates extraordinary fire hazards, or results in an increased rate of insurance on the Premises or its contents, or for the storage of any Hazardous Materials (except as provided in Section 26 hereto). Outside storage, including storage of trucks or other vehicles, is prohibited without Landlord’s prior written consent. If, because of a Tenant Party’s acts or because Tenant vacates Premises, the rate of insurance on the Premises or its contents increases, then such acts shall be an Event of Default, Tenant shall pay to Landlord the amount of such increase on demand, and acceptance of such payment shall not waive any of Landlord’s other rights. Tenant shall conduct its business and control each other Tenant Party so as not to create any nuisance or unreasonably interfere with other tenants (if any) or Landlord in its management of the Premises.

 

(b)           Compliance with Laws

 

Tenant shall not do or permit anything to be done in or about the Premises that will in any way violate or conflict with any Law now in force or hereinafter enacted. Tenant, at its sole cost and expense, shall promptly comply with all such present and future Laws relating to the condition, use or occupancy of the Premises and shall perform all work to the Premises required to effect such compliance (or, at Landlord’s election, as otherwise permitted herein, Landlord may perform such work at Tenant’s cost), unless such work is required to correct a violation of a Law that was applicable prior to the date of Tenant’s first entry upon or occupancy of the Premises and with which, as then interpreted, the Premises failed to comply prior to such date. The judgment of any court of competent jurisdiction or the admission of Tenant in an action against Tenant, whether or not Landlord is a party thereto, that Tenant has violated any Law shall be conclusive of that fact as between Landlord and Tenant. Tenant shall as soon as reasonably possible furnish Landlord with any notices received from any insurance company or governmental agency or inspection bureau regarding any unsafe or unlawful conditions within the Premises or the violation of any Law.

 

10.           Assignment and Subletting

 

(a)           Transfers

 

Except as provided in Section 10(h), Tenant shall not, without the prior written consent of Landlord, (1) assign, transfer, or encumber this Lease or any estate or interest herein, whether directly or by operation of law, (2) permit any other entity to become Tenant hereunder by merger, consolidation, or other reorganization, (3) if Tenant is an entity other than a corporation whose stock is publicly traded, permit the transfer, other than in connection with a public offering, of an ownership interest in Tenant so as to result in a change in the current control of Tenant, (4) sublet any portion of the Premises, (5) grant any license, concession, or other right of occupancy of any portion of the Premises, or (6) permit the use of the Premises by any parties other than Tenant (any of the events listed in Section 10(a)(1) through 10(a) (6) being a “Transfer”).

 

(b)           Consent Standards

 

Landlord shall not unreasonably withhold its consent to any assignment or subletting of the Premises, provided that, in Landlord’s reasonable business judgment, the proposed transferee (1) is creditworthy, (2) has a good reputation in the business community, (3) will use the Premises only for the Permitted Use and will not use the Premises in any manner that would conflict with any exclusive use agreement or other similar agreement entered into by Landlord with any other tenant of the Premises, (4) will not use the Premises in a manner that would materially increase the pedestrian or vehicular traffic to the Premises, (5) is not a governmental entity, or subdivision or agency thereof, (6) is not another occupant of the Premises, and (7) is not a person or entity with whom Landlord is then, or has been within the six-month period prior to the time Tenant seeks to enter into such assignment or

 

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subletting, negotiating to lease space in the Premises, or any Affiliate of any such person or entity; otherwise, Landlord may withhold its consent in its sole discretion. Additionally, Landlord may withhold its consent in its sole discretion to any proposed Transfer if any Event of Default by Tenant then exists. Notwithstanding any contrary provision of law, including California Civil Code Section 1995.310, Tenant shall have no right, and Tenant hereby waives and relinquishes any right, to cancel or terminate this Lease in the event Landlord is determined to have unreasonably withheld or delayed its consent to a proposed Transfer.

 

(c)           Request for Consent

 

If Tenant requests Landlord’s consent to a Transfer, then, at least fifteen (15) business days prior to the effective date of the proposed Transfer, Tenant shall provide Landlord with a written description of all terms and conditions of the proposed Transfer, copies of the proposed documentation, and the following information about the proposed transferee: name and address; reasonably satisfactory information about its business and business history; its proposed use of the Premises; banking, financial, and other credit information; and general references sufficient to enable Landlord to determine the proposed transferee’s creditworthiness and character. Concurrently with Tenant’s notice of any request for consent to a Transfer, Tenant shall pay to Landlord shall reimburse Landlord immediately upon request for its reasonable attorneys’ fees and other out-of-pocket costs reasonably incurred in connection with considering any request for consent to a Transfer, not to exceed $1,000 in any one instance. Any failure by Landlord to notify Tenant of its consent to or rejection of a request for a Transfer, after delivery to Landlord of all reasonably requested information concerning the Transfer or transferee, shall be deemed a consent by Landlord to the Transfer as so requested.

 

(d)           Conditions to Consent

 

If Landlord consents to a proposed Transfer, then the proposed transferee shall deliver to Landlord a written agreement whereby it expressly assumes Tenant’s obligations hereunder; however, any transferee of less than all of the space in the Premises shall be liable only for obligations under this Lease that are properly allocable to the space subject to the Transfer for the period of the Transfer. No Transfer shall release Tenant from its obligations under this Lease, but rather Tenant and its transferee shall be jointly and severally liable therefor. Landlord’s consent to any Transfer shall not waive Landlord’s rights as to any subsequent Transfers. If an Event of Default occurs while the Premises or any part thereof are subject to a Transfer, then Landlord, in addition to its other remedies, may collect directly from such transferee all rents becoming due to Tenant and apply such rents against Rent. Tenant authorizes its transferees to make payments of rent directly to Landlord upon receipt of notice from Landlord to do so following the occurrence of an Event of Default hereunder. Tenant shall pay for the cost of any demising walls or other improvements necessitated by a proposed subletting or assignment, which improvements shall be subject to Section 7 hereof.

 

(e)           Attornment by Subtenants

 

Each sublease by Tenant hereunder shall be subject and subordinate to this Lease and to the matters to which this Lease is or shall be subordinate, and each subtenant by entering into a sublease is deemed to have agreed that in the event of termination, re-entry or dispossession by Landlord under this Lease, Landlord may, at its option, take over all of the right, title and interest of Tenant, as sublandlord, under such sublease, and such subtenant shall, at Landlord’s option, attorn to Landlord pursuant to the then executory provisions of such sublease, except that Landlord shall not be (1) liable for any previous act or omission of Tenant under such sublease, (2) subject to any counterclaim, offset or defense that such subtenant might have against Tenant, (3) bound by any previous modification of such sublease not approved by Landlord in writing or by any rent or additional rent or advance rent which such subtenant might have paid for more than the current month to Tenant, and all such rent shall remain due and owing, notwithstanding such advance payment, (4) bound by any security or advance rental deposit made by such subtenant which is not delivered or paid over to Landlord and with respect to which such subtenant shall look solely to Tenant for refund or reimbursement, or (5) obligated to perform any work in the subleased space or to prepare it for occupancy, and in connection with such attornment, the subtenant shall execute and deliver to Landlord any instruments Landlord may reasonably request to evidence and confirm such attornment. Each subtenant or licensee of Tenant shall be deemed, automatically upon and as a condition of its occupying or using the Premises or any part thereof, to have agreed to be bound by the terms and conditions set forth in this

 

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Section 10(e). The provisions of this Section 10(e) shall be self-operative, and no further instrument shall be required to give effect to this provision.

 

(f)            Intentionally omitted

 

(g)           Additional Compensation

 

Tenant shall pay to Landlord, immediately upon receipt thereof, in the case of a sublease or license Transfer, fifty percent (50%) of the excess of (1) all compensation received by Tenant for a Transfer less the actual out-of-pocket costs reasonably incurred by Tenant with unaffiliated third parties (i.e., market rate brokerage commissions, reasonable legal fees and any generic improvement costs for work approved in advance by Landlord) in connection with such Transfer (such costs shall be amortized on a straight-line basis over the term of the Transfer in question) over (2) the Rent allocable to the portion of the Premises covered thereby, and in the case of an assignment Transfer, fifty percent (50%) of the sums received in consideration therefor less the actual out-of-pocket costs reasonably incurred by Tenant with unaffiliated third parties in connection therewith.

 

(h)           Permitted Transfers

 

Notwithstanding any other provision of Section 10(a), Tenant may Transfer all or part of its interest in this Lease or all or part of the Premises (a “Permitted Transfer”) to the following types of entities (a “Permitted Transferee”) without the written consent of Landlord:

 

(1)           an Affiliate of Tenant;

 

(2)           any corporation, limited partnership, limited liability partnership, limited liability company or other business entity in which or with which Tenant, or its corporate successors or assigns, is merged or consolidated, in accordance with applicable statutory provisions governing merger and consolidation of business entities, so long as (A) Tenant’s obligations hereunder are assumed by the entity surviving such merger or created by such consolidation; and (B) the Tangible Net Worth of the surviving or created entity is not less than the Tangible Net Worth of Tenant as of the date hereof; or

 

(3)           any corporation, limited partnership, limited liability partnership, limited liability company or other business entity acquiring all or substantially all of Tenant’s assets (and for the sake of clarity, any transfers in the stock or ownership interests in Tenant or any entity that controls Tenant where Tenant remains as tenant hereunder and continues to exist in good standing shall not require Landlord’s prior consent hereunder).

 

Tenant shall promptly notify Landlord of any such Permitted Transfer. Tenant shall remain liable for the performance of all of the obligations of Tenant hereunder, or if Tenant no longer exists because of a merger, consolidation, or acquisition, the surviving or acquiring entity shall expressly assume in writing the obligations of Tenant hereunder. Additionally, the Permitted Transferee shall comply with all of the terms and conditions of this Lease, including the Permitted Use, and the use of the Premises by the Permitted Transferee may not violate any other agreements affecting the Premises, the Landlord or other tenants of the Premises. No later than 30 days after the effective date of any Permitted Transfer, Tenant agrees to furnish Landlord with (A) copies of the instrument effecting any of the foregoing Transfers, (B) documentation establishing Tenant’s satisfaction of the requirements set forth above applicable to any such Transfer, and (C) evidence of insurance as required under this Lease with respect to the Permitted Transferee. The occurrence of a Permitted Transfer shall not waive Landlord’s rights as to any subsequent Transfers. “Tangible Net Worth” means the excess of total assets over total liabilities, in each case as determined in accordance with generally accepted accounting principles consistently applied (“GAAP”), excluding, however, from the determination of total assets all assets which would be classified as intangible assets under GAAP including goodwill, licenses, patents, trademarks, trade names, copyrights, and franchises. Any subsequent Transfer by a Permitted Transferee shall be subject to the terms of this Section 10.

 

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11.           Insurance; Waivers; Subrogation; Indemnity

 

(a)           Insurance

 

Tenant shall maintain insurance policies in accordance with Exhibit G attached hereto.

 

(b)           No Subrogation

 

Landlord and Tenant each waives any claim it might have against the other for any damage to or theft, destruction, loss, or loss of use of any property, to the extent the same is insured against under any insurance policy of the types described in this Section 11 that covers the Premises, Landlord’s or Tenant’s fixtures, personal property, leasehold improvements, or business, or is required to be insured against under the terms hereof, regardless of whether the negligence of the other party caused such Loss. Additionally, Tenant waives any claim it may have against Landlord for any Loss to the extent such Loss is caused by a terrorist act. Each party shall cause its insurance carrier to endorse all applicable policies waiving the carrier’s rights of recovery under subrogation or otherwise against the other party.

 

(c)           Indemnity

 

Subject to Section 11(b), Tenant shall defend with competent counsel reasonably satisfactory to Landlord any claims made or legal actions filed or threatened against Landlord with respect to the violation of any Law, or the death, bodily injury, personal injury, property damage, or interference with contractual or property rights suffered by any third party occurring within the Premises or resulting from Tenant’s use or occupancy of the Premises, or resulting from Tenant’s activities in or about the Premises or a breach of this Lease, and Tenant shall indemnify and hold Landlord, Landlord’s partners, principals, members, employees, agents and contractors harmless from any loss liability, penalties, or expense whatsoever (including any loss attributable to vacant space which otherwise would have been leased, but for such activities) resulting therefrom, except to the extent proximately caused by the gross negligence or willful misconduct of Landlord. Landlord hereby agrees to defend (with competent counsel reasonably satisfactory to Tenant), indemnify and hold harmless Tenant, Tenant’s partners, principals, members, employees, agents and contractors, from and against any claims made or legal actions filed or threatened against Tenant with respect to the violation of any Law, or the death, bodily injury, personal injury, property damage, or interference with contractual or property rights suffered by any third party occurring within the Premises and resulting from the performance by Landlord of its obligations under this Lease, or resulting from Landlord’s activities in or about the Premises, except to the extent resulting from Tenant’s gross negligence or willful misconduct. Further, and as a point of clarity, the foregoing defense and indemnity obligations undertaken by Landlord for the benefit of Tenant shall cover any loss, cost, damage or liability incurred by Tenant arising from a claim or civil action brought by an unaffiliated third party against Tenant for any injury related to the Building’s violation as of the date of this Lease of any applicable building codes, fire/life safety codes, and handicapped accessibility codes (including without limitation, the Americans with Disabilities Act and Title 24 of the California Administrative Code); provided however, that Landlord shall have no defense or indemnification obligations for any such claims or actions brought as a result of any claims of any current non-compliance with any applicable Laws by reason of any alterations or improvements made to the Building by Tenant or by reason of any specialized use or activity conducted within the Building by Tenant. If a claim or civil action is brought by an unaffiliated third party against Tenant for any injury related to the Building’s violation as of the date of this Lease of any applicable building codes, fire/life safety codes, and handicapped accessability codes, Tenant shall promptly notify Landlord, in writing, of such claim or action. The indemnities set forth in this Lease shall survive termination or expiration of this Lease and shall not terminate or be waived, diminished or affected in any manner by any abatement or apportionment of Rent under any provision of this Lease. If any proceeding is filed for which indemnity is required hereunder, the indemnifying party agrees, upon request thereof, to defend the indemnified party in such proceeding at its sole cost utilizing counsel satisfactory to the indemnified party.

 

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12.           Subordination; Attornment; Notice to Landlord’s Mortgagee

 

(a)           Subordination

 

This Lease shall be subordinate to any deed of trust, mortgage, or other security instrument (each, a “Mortgage”),  or any ground lease, master lease, or primary lease (each, a “Primary Lease”), that now or, subject to a customary grant of non-disturbance rights to Tenant, hereafter covers all or any part of the Premises (the mortgagee under any such Mortgage, beneficiary under any such deed of trust, or the lessor under any such Primary Lease is referred to herein as a “Landlord’s Mortgagee”). Any Landlord’s Mortgagee may elect, at any time, unilaterally, to make this Lease superior to its Mortgage, Primary Lease, or other interest in the Premises by so notifying Tenant in writing. The provisions of this Section shall be self-operative and no further instrument of subordination shall be required; however, in confirmation of such subordination, Tenant shall execute and return to Landlord (or such other party designated by Landlord) within ten days after written request thereof such documentation, in recordable form if required, as a Landlord’s Mortgagee may reasonably request to evidence the subordination of this Lease to such Landlord’s Mortgagee’s Mortgage or Primary Lease (including a subordination, non-disturbance and attornment agreement) or, if the Landlord’s Mortgagee so elects, the subordination of such Landlord’s Mortgagee’s Mortgage or Primary Lease to this Lease.

 

(b)           Attornment

 

Tenant shall attorn to any party succeeding to Landlord’s interest in the Premises, whether by purchase, foreclosure, deed in lieu of foreclosure, power of sale, termination of lease, or otherwise, upon such party’s request, and shall execute such agreements confirming such attornment as such party may reasonably request; provided that such party recognizes Tenant’s rights under this Lease, except that such party shall not: (a) be liable for any act or omission of any prior landlord under this Lease; (b) be subject to any offsets or defenses which Tenant might have against any prior Landlord under this Lease (prior to such party becoming landlord under this Lease); (c) be bound by any Rent or Additional Rent which Tenant might have paid to any prior landlord under this Lease for more than the current month or more than one (1) month prior to the due date for the then current installment; (d) be liable for any deposits made or prepaid Rent paid by Tenant hereunder unless such deposits or payments have been transferred to such party; or (e) be bound by any amendment or modification of this Lease made without any required lessor’s or lender’s consent.

 

(c)           Notice to Landlord’s Mortgagee

 

Tenant shall not seek to enforce any remedy it may have for any default on the part of Landlord without first giving written notice by certified mail, return receipt requested, specifying the default in reasonable detail, to any Landlord’s Mortgagee whose address has been given to Tenant, and affording such Landlord’s Mortgagee a reasonable opportunity to perform Landlord’s obligations hereunder.

 

(d)           Landlord’s Mortgagee’s Protection Provisions

 

If Landlord’s Mortgagee shall succeed to the interest of Landlord under this Lease, Landlord’s Mortgagee shall not be: (1) liable for any act or omission of any prior lessor (including Landlord); (2) bound by any rent or additional rent or advance rent which Tenant might have paid for more than the current month to any prior lessor (including Landlord), and all such rent shall remain due and owing, notwithstanding such advance payment; (3) bound by any security or advance rental deposit made by Tenant which is not delivered or paid over to Landlord’s Mortgagee and with respect to which Tenant shall look solely to Landlord for refund or reimbursement; (4) bound by any termination, amendment or modification of this Lease made without Landlord’s Mortgagee’s consent and written approval, except for those terminations, amendments and modifications permitted to be made by Landlord without Landlord’s Mortgagee’s consent pursuant to the terms of the loan documents between Landlord and Landlord’s Mortgagee; (5) subject to the defenses which Tenant might have against any prior lessor (including Landlord); and (6) subject to the offsets which Tenant might have against any prior lessor (including Landlord) except for those offset rights which (A) are expressly provided in this Lease, (B) relate to periods of time following the acquisition of the Premises by Landlord’s Mortgagee, and (C) Tenant has provided written notice to Landlord’s Mortgagee and provided Landlord’s Mortgagee a reasonable opportunity to cure the event giving rise to such offset event. Landlord’s Mortgagee shall have no liability or responsibility under or pursuant to the terms of this Lease or

 

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otherwise after it ceases to own an interest in the Premises. Nothing in this Lease shall be construed to require Landlord’s Mortgagee to see to the application of the proceeds of any loan, and Tenant’s agreements set forth herein shall not be impaired on account of any modification of the documents evidencing and securing any loan.

 

13.           Intentionally Omitted

 

14.           Condemnation

 

(a)           Total Taking

 

If the entire Premises are taken by right of eminent domain or conveyed in lieu thereof (a “Taking”), this Lease shall terminate as of the date of the Taking (which date shall be the earlier of the date upon which the condemning authority is entitled to possession of the property so taken or title thereof is transferred to the condemning authority).

 

(b)           Partial Taking — Tenant’s Rights

 

If any part of the Premises becomes subject to a Taking and such Taking will prevent Tenant from conducting on a permanent basis its business in the Premises in a manner reasonably comparable to that conducted immediately before such Taking, then Tenant may terminate this Lease as of the date of such Taking by giving written notice to Landlord within 30 days after the Taking, and Basic Rent and Additional Rent shall be apportioned as of the date of such Taking. If Tenant does not terminate this Lease, then Rent shall be abated on a reasonable basis as to that portion of the Premises rendered untenantable by the Taking.

 

(c)           Partial Taking — Landlord’s Rights

 

If any material portion, but less than all, of the Premises becomes subject to a Taking, or if Landlord is required to pay any of the proceeds arising from a Taking to a Landlord’s Mortgagee, then Landlord may terminate this Lease by delivering written notice thereof to Tenant within 30 days after such Taking, and Basic Rent and Additional Rent shall be apportioned as of the date of such Taking. If Landlord does not so terminate this Lease, then this Lease will continue, but if any portion of the Premises has been taken, Rent shall abate as provided in the last sentence of Section 14(b).

 

(d)           Temporary Taking

 

If all or any portion of the Premises becomes subject to a Taking for a limited period of time, this Lease shall remain in full force and effect and Tenant shall continue to perform all of the terms, conditions and covenants of this Lease, including the payment of Basic Rent and all other amounts required hereunder. If any such temporary Taking terminates prior to the expiration of the Term, Tenant shall restore the Premises as nearly as possible to the condition prior to such temporary Taking, at Tenant’s sole cost and expense. Landlord shall be entitled to receive the entire award for any such temporary Taking, except that Tenant shall be entitled to receive the portion of such award which (1) compensates Tenant for its loss of use of the Premises within the Term and (2) reimburses Tenant for the reasonable out-of-pocket costs actually incurred by Tenant to restore the Premises as required by this Section 14(d).

 

(e)           Award

 

If any Taking occurs, then Landlord shall receive the entire award or other compensation for the Premises taken; however, Tenant may separately pursue a claim (to the extent it will not reduce Landlord’s award) against the condemning entity for the value of Tenant’s personal property which Tenant is entitled to remove under this Lease, moving costs, loss of business, and other claims it may have. The rights of Landlord and Tenant regarding any Taking shall be determined as provided in this Section, and each party hereby waives the provisions of Section 1265.130 of the California Code of Civil Procedure, and the provisions of any similar law hereinafter enacted, allowing either party to petition the Supreme Court to terminate this Lease and/or otherwise allocate condemnation awards between Landlord and Tenant in the event of a Taking.

 

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15.           Fire or Other Casualty

 

(a)           Repair Estimate

 

If the Premises are damaged by fire or other casualty (a “Casualty”), Landlord shall, within 90 days after such Casualty, deliver to Tenant a good faith estimate (the “Damage Notice”) of the time needed to repair the damage caused by such Casualty.

 

(b)           Tenant’s Rights

 

If a material portion of the Premises is damaged by Casualty such that Tenant is prevented from conducting its business in the Premises in a manner reasonably comparable to that conducted immediately before such Casualty and Landlord estimates that the damage caused thereby cannot be repaired within 270 days after the commencement of repairs (the “Repair Period”), then Tenant may terminate this Lease by delivering written notice to Landlord of its election to terminate within 30 days after the Damage Notice has been delivered to Tenant; provided, however, that if such damage occurs within twelve (12) months of the last day of the Term (which shall mean the Early Termination Date only if the Early Termination Option has then previously been effectively exercised) and the time estimated to substantially complete the repair exceeds one hundred eighty (180) days after the commencement of repairs, then Tenant may terminate this Lease by delivering written notice to Landlord of its election to terminate within 30 days after the Damage Notice has been delivered to Tenant.

 

(c)           Landlord’s Rights

 

If a Casualty damages the Premises and (1) Landlord estimates that the damage to the Premises cannot be repaired within the Repair Period, (2) the damage to the Premises exceeds 50% of the replacement cost thereof (excluding foundations and footings), as estimated by Landlord, and such damage occurs during the last two years of the Term (which shall mean the Early Termination Date only if the Early Termination Option has then previously been effectively exercised), (3) regardless of the extent of damage to the Premises, the damage is not fully covered by Landlord’s insurance policies or Landlord makes a good faith determination that restoring the Premises would be uneconomical, or (4) Landlord is required to pay any insurance proceeds arising out of the Casualty to a Landlord’s Mortgagee, then Landlord may terminate this Lease by giving written notice of its election to terminate within 30 days after the Damage Notice has been delivered to Tenant.

 

(d)           Repair Obligation

 

If neither party elects to terminate this Lease following a Casualty, then Landlord shall, within a reasonable time after such Casualty, begin to repair the Premises and shall proceed with reasonable diligence to restore the Premises to substantially the same condition as they existed immediately before such Casualty; however, Landlord shall not be required to repair or replace any alterations or betterments within the Premises (which shall be promptly and with due diligence repaired and restored by Tenant at Tenant’s sole cost and expense) or any furniture, equipment, trade fixtures or personal property of Tenant or others in the Premises, and Landlord’s obligation to repair or restore the Premises shall be limited to the extent of the insurance proceeds actually received by Landlord for the Casualty in question. If this Lease is terminated under the provisions of this Section 15, Landlord shall be entitled to the full proceeds of the insurance policies carried by Landlord providing coverage for all alterations, improvements and betterments in the Premises.

 

(e)           Abatement of Rent

 

If the Premises are damaged by Casualty, Rent for the portion of the Premises rendered untenantable by the damage shall be abated on a reasonable basis from the date of damage until the completion of Landlord’s repairs (or until the date of termination of this Lease by Landlord or Tenant as provided above, as the case may be), unless a Tenant Party caused such damage, in which case, Tenant shall continue to pay Rent without abatement except to the extent that Landlord receives rental interruption insurance proceeds specifically applicable thereto.

 

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(f)            Exclusive Remedy

 

This Section 15 shall provide Tenant’s sole and exclusive remedy in the event of damage or destruction to the Premises, and Tenant, as a material inducement to Landlord entering into this Lease, irrevocably waives and releases Tenant’s rights under California Civil Code Sections 1932(2), 1933(4), 1941 and 1942. No damages, compensation or claim shall be payable by Landlord for any inconvenience, any interruption or cessation of Tenant’s business, or any annoyance, arising from any damage to or destruction of all or any portion of the Premises, except for the abatement of rent provided in Section 15(e) above.

 

16.           Personal Property Taxes

 

Tenant shall be liable for all taxes levied or assessed against personal property, furniture, or fixtures placed by Tenant in the Premises, including without limitation, that left by Landlord for Tenant’s use as provided by the terms of this Lease. If any taxes for which Tenant is liable are levied or assessed against Landlord or Landlord’s property and Landlord elects to pay the same, or if the assessed value of Landlord’s property is increased by inclusion of such personal property, furniture or fixtures and Landlord elects to pay the taxes based on such increase, then Tenant shall pay to Landlord, within thirty (30) days following written request therefor, the part of such taxes for which Tenant is primarily liable hereunder, together with interest thereon at the Default Rate from the time of Landlord’s payment; however, Landlord shall not pay such amount if Tenant notifies Landlord that it will contest the validity or amount of such taxes before Landlord makes such payment, and thereafter diligently proceeds with such contest in accordance with Law and if the non-payment thereof does not pose a threat of loss or seizure of the Premises or interest of Landlord therein or impose any fee or penalty against Landlord.

 

17.           Events of Default

 

Each of the following occurrences shall be an “Event of Default”:

 

(a)           Payment Default

 

Tenant’s failure to pay Rent within five days after Landlord has delivered written notice to Tenant that the same is due; however, an Event of Default shall occur hereunder without any obligation of Landlord to give any notice if Tenant fails to pay Rent when due and, during the 12 month interval preceding such failure, Landlord has given Tenant written notice of failure to pay Rent on one or more occasions;

 

(b)           Abandonment

 

Tenant abandons the Premises or any substantial portion thereof and fails to maintain or insure the Premises as otherwise required herein;

 

(c)           Estoppel

 

Tenant fails to provide a commercially reasonable estoppel certificate after Landlord’s written request therefor pursuant to Section 25(d) and such failure shall continue for five days after Landlord’s second written notice thereof to Tenant;

 

(d)           Insurance

 

Tenant fails to procure, maintain and deliver to Landlord evidence of the insurance policies and coverages as required under Exhibit G, and such failure continues for two days after Landlord’s written notice thereof to Tenant;

 

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(e)           Mechanic’s Liens

 

Tenant fails to pay and release of record, or diligently contest and bond around, any mechanic’s lien filed against the Premises for any work performed, materials furnished, or obligation incurred by or at the request of Tenant, within the time and in the manner required by Section 7(d);

 

(f)            Other Defaults

 

Tenant’s failure to perform, comply with, or observe any other material agreement or material obligation of Tenant under this Lease and the continuance of such failure for a period of more than thirty (30) days after Landlord has delivered to Tenant written notice thereof; and

 

(g)           Insolvency

 

The filing of a petition by or against Tenant (the term “Tenant” shall include, for the purpose of this Section 17(g), any guarantor of Tenant’s obligations hereunder) (1) in any bankruptcy or other insolvency proceeding; (2) seeking any relief under any state or federal debtor relief law; (3) for the appointment of a liquidator or receiver for all or substantially all of Tenant’s property or for Tenant’s interest in this Lease; (4) for the reorganization or modification of Tenant’s capital structure; or (5) in any assignment for the benefit of creditors proceeding; however, if such a petition is filed against Tenant, then such filing shall not be an Event of Default unless Tenant fails to have the proceedings initiated by such petition dismissed within 90 days after the filing thereof.

 

18.           Remedies

 

During the continuance of an Event of Default, Landlord may, in addition to all other rights and remedies afforded Landlord hereunder or by law or equity, take any one or more of the following actions:

 

(a)           Continuance of Lease in Effect

 

Landlord may, at Landlord’s election, keep this Lease in effect and enforce, by an action at law or in equity, all of its rights and remedies under this Lease including, without limitation, (i) the right to recover the rent and other sums as they become due by appropriate legal action (the remedy provided by California Civil Code Section 1951.4 being specifically reserved hereby), (ii) the right to make payments required by Tenant, or perform Tenant’s obligations and be reimbursed by Tenant for the cost thereof with interest at the Default Rate from the date the sum is paid by Landlord until Landlord is reimbursed by Tenant, and (iii) the remedies of injunctive relief and specific performance to prevent Tenant from violating the terms of this Lease and/or to compel Tenant to perform its obligations under this Lease, as the case may be.

 

(b)           Termination of Lease

 

Landlord may, at Landlord’s election, terminate this Lease by giving Tenant written notice of termination, in which event this Lease shall terminate on the date set forth for termination in such notice. Any termination under this subparagraph shall not relieve Tenant from its obligation to pay to Landlord all Basic Rent and Additional Rent then or thereafter due, or any other sums due or thereafter accruing to Landlord, or from any claim against Tenant for damages previously accrued or then or thereafter accruing. In no event shall any one or more of the following actions by Landlord, in the absence of a written election by Landlord to terminate this Lease constitute a termination of this Lease:

 

(1)           Appointment of a receiver or keeper in order to protect Landlord’s interest hereunder;

 

(2)           Consent to any subletting of the Premises or assignment of this Lease by Tenant, whether pursuant to the provisions hereof or otherwise; or

 

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(3)           Any action taken by Landlord or its partners, principals, members, officers, agents, employees, or servants, which is intended to mitigate the adverse effects of any breach of this Lease by Tenant, including, without limitation, any action taken to maintain and preserve the Premises or any action taken to relet the Premises or any portion thereof for the account of Tenant and in the name of Tenant.

 

(c)           Election to Terminate or Continue

 

In the event Tenant breaches this Lease and abandons the Premises, Landlord may terminate this Lease, but this Lease shall not terminate unless Landlord gives Tenant written notice of termination. If Landlord does not terminate this Lease by giving written notice of termination, Landlord may enforce all its rights and remedies under this Lease, including the right and remedies provided by California Civil Code Section 1951.4 (“lessor may continue lease in effect after lessee’s breach and abandonment and recover rent as it becomes due, if lessee has right to sublet or assign, subject only to reasonable limitations”), as in effect on the Lease Date.

 

(d)           Rights and Remedies upon Termination

 

In the event Landlord terminates this Lease, Landlord shall be entitled, at Landlord’s election, to the rights and remedies provided in California Civil Code Section 1951.2, as in effect on the Lease Date. For purposes of computing damages pursuant to Section 1951.2, an interest rate equal to the Default Rate shall be used. Such damages shall include, without limitation:

 

(1)           (i) The worth at the time of award of the unpaid rent which had been earned at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of the award exceeds the amount of the rental loss that Tenant proves could have been reasonably avoided; (iii) the worth at the time of award computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%) of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of rental loss that Tenant proves could be reasonably avoided; (iv) all reasonable legal expenses and other related costs incurred by Landlord following Tenant’s default; (v) all reasonable costs incurred by Landlord in restoring the Premises to good order and condition to relet the Premises; and (vi) all reasonable costs, including without limitation, any brokerage commissions incurred by Landlord in reletting the Premises; and

 

(2)           Any other amount necessary to compensate Landlord for all detriment proximately caused by Tenant’s failure to perform Tenant’s obligations under this Lease, or which in the ordinary course of things would be likely to result therefrom, including without limitation, the following: (i) expenses for cleaning, repairing or restoring the Premises, (ii) expenses for altering, remodeling or otherwise improving the Premises for the purpose of reletting, including removal of existing leasehold improvements and/or installation of additional leasehold improvements (regardless of how the same is funded, including reduction of rent, a direct payment or allowance to a new tenant, or otherwise), (iii) broker’s fees allocable to the remainder of the Term, advertising costs and other expenses of reletting the Premises; (iv) costs of carrying and maintaining the Premises, such as taxes, insurance premiums, utility charges and security precautions, (v) expenses incurred in removing, disposing of and/or storing any of Tenant’s personal property, inventory or trade fixtures remaining therein; (vi) reasonable attorney’s fees, expert witness fees, court costs and other reasonable expenses incurred by Landlord (but not limited to taxable costs) in retaking possession of the Premises, establishing damages hereunder, and releasing the Premises; and (vii) any other expenses, costs or damages otherwise incurred or suffered as a result of Tenant’s default.

 

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19.                       Non-Waiver; Cumulative Remedies

 

(a)                                  No Waiver

 

Landlord’s acceptance of Rent following an Event of Default shall not waive Landlord’s rights regarding such Event of Default. No waiver by Landlord of any violation or breach of any of the terms contained herein shall waive Landlord’s rights regarding any future violation of such term. Landlord’s acceptance of any partial payment of Rent shall not waive Landlord’s rights with regard to the remaining portion of the Rent that is due, regardless of any endorsement or other statement on any instrument delivered in payment of Rent or any writing delivered in connection therewith; accordingly, Landlord’s acceptance of a partial payment of Rent shall not constitute an accord and satisfaction of the full amount of the Rent that is due.

 

(b)                                 Cumulative Remedies

 

Any and all remedies set forth in this Lease: (1) shall be in addition to any and all other remedies Landlord may have at law or in equity, (2) shall be cumulative, and (3) may be pursued successively or concurrently as Landlord may elect. The exercise of any remedy by Landlord shall not be deemed an election of remedies or preclude Landlord from exercising any other remedies in the future. Additionally, Tenant shall defend, indemnify and hold harmless Landlord, Landlord’s Mortgagee and their respective representatives and agents from and against all claims, demands, liabilities, causes of action, suits, judgments, damages and expenses (including reasonable attorneys’ fees) arising from Tenant’s failure to perform its obligations under this Lease.

 

20.                       Intentionally Omitted

 

21.                       Surrender of Premises

 

No act by Landlord shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept a surrender of the Premises shall be valid unless it is in writing and signed by Landlord. At the expiration or termination of this Lease, Tenant shall deliver to Landlord the Premises with all improvements located therein in good repair and condition, free of Hazardous Materials placed by or attributable to Tenant on, at or about the Premises during the Term, broom-clean, reasonable wear and tear (and condemnation and Casualty damage not caused by Tenant, as to which Sections 14 and 15 shall control) excepted, and shall deliver to Landlord all keys to the Premises. Provided that Tenant has performed all of its obligations hereunder, Tenant may remove all unattached trade fixtures, furniture, and personal property placed in the Premises by Tenant (but Tenant may not remove any such item which was let by Landlord hereunder, or paid for, in whole or in part, by Landlord or any wiring or cabling unless Landlord requires such removal). Additionally, at Landlord’s option, Tenant shall remove such alterations, additions, improvements, trade fixtures, personal property, equipment, wiring, conduits, cabling, and furniture as Landlord may request; however, Tenant shall not be required to remove any addition or improvement to the Premises if Landlord has specifically agreed in writing at the time Landlord gave its approval of the improvement or addition in question that such improvement or alteration need not be removed. Tenant shall repair all damage caused by such removal. All items not so removed shall, at Landlord’s option, be deemed to have been abandoned by Tenant and may be appropriated, sold, stored, destroyed, or otherwise disposed of by Landlord without notice to Tenant and without any obligation to account for such items. The provisions of this Section 21 shall survive the end of the Term.

 

22.                       Holding Over

 

If Tenant fails to vacate the Premises at the end of the Term, then Tenant shall be a tenant at sufferance and, in addition to all other damages and remedies to which Landlord may be entitled for such holding over, (a) Tenant shall pay, in addition to the other Rent, Basic Rent equal to the greater of (1) 150% of the Rent payable during the last month of the Term, or (2) 150% of the prevailing rental rate in the Premises for similar space, and (b) Tenant shall otherwise continue to be subject to all of Tenant’s obligations under this Lease. The provisions of this Section 22 shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law. If Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other liabilities to Landlord accruing therefrom, Tenant shall protect, defend,

 

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indemnify and hold Landlord harmless from all loss, costs (including reasonable attorneys’ fees) and liability resulting from such failure, including any claims made by any succeeding tenant founded upon such failure to surrender, and any lost profits to Landlord resulting therefrom.

 

23.                       Certain Rights Reserved by Landlord

 

Provided that the exercise of such rights does not unreasonably interfere with Tenant’s occupancy of the Premises, Landlord shall have the following rights:

 

(a)                                  Building Operations

 

To decorate and to make inspections, repairs, alterations, additions, changes, or improvements, whether structural or otherwise, in and about the Premises, or any part thereof subject to the provisions of Section 7 of this Lease; to enter upon the Premises (after giving Tenant reasonable notice thereof, which may be oral notice, except in cases of real or apparent emergency, in which case no notice shall be required) and, during the continuance of any such work, to temporarily close doors, entryways, public space, and corridors in the Premises; to interrupt or temporarily suspend Premises services and facilities; to change the name of the Premises; and to change the arrangement and location of entrances or passageways, doors, and doorways, corridors, elevators, stairs, restrooms, or other public parts of the Premises;

 

(b)                                 Prospective Purchasers and Lenders

 

To enter the Premises at all reasonable hours to show the Premises to prospective purchasers or lenders;

 

(c)                                  Prospective Tenants

 

At any time during the last 12 months of the Term (or earlier if Tenant has notified Landlord in writing that it does not desire to renew the Term) or at any time following the occurrence of an Event of Default, to enter the Premises at all reasonable hours to show the Premises to prospective tenants.

 

24.                       Intentionally Omitted

 

25.                       Miscellaneous

 

(a)                                  Landlord Transfer

 

Landlord may transfer any portion of the Premises and any of its rights under this Lease. If Landlord assigns its rights under this Lease, then Landlord shall thereby be released from any further obligations hereunder arising after the date of transfer, and the assignee shall be liable for Landlord’s obligations hereunder arising from and after the transfer date.

 

(b)                                 Liability

 

The liability of Landlord (and its partners, shareholders or members) to Tenant (or any person or entity claiming by, through or under Tenant) for any default by Landlord under the terms of this Lease or any matter relating to or arising out of the occupancy or use of the Premises shall be limited to Tenant’s actual direct, but not consequential, damages therefor and shall be recoverable only from the equity interest of Landlord in the Premises, and Landlord (and its partners, shareholders or members) shall not be personally liable for any deficiency. The liability of Tenant to Landlord (or any person or entity claiming by, through or under Landlord) for any default by Tenant under the terms of this Lease or any matter relating to or arising out of the occupancy or use of the Premises shall not be personal obligations of or recoverable from any limited partners, shareholders or members of Tenant.

 

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(c)                                  Brokerage

 

Neither Landlord nor Tenant has dealt with any broker or agent in connection with the negotiation or execution of this Lease, other than Cornish & Carey, who represents Tenant and whose commission shall be paid by Landlord pursuant to a separate written agreement. Tenant and Landlord shall each indemnify the other against all costs, expenses, attorneys’ fees, liens and other liability for commissions or other compensation claimed by any broker or agent claiming the same by, through, or under the indemnifying party.

 

(d)                                 Estoppel Certificates

 

From time to time, Tenant shall furnish to any party designated by Landlord, within ten days after Landlord has made a request therefor, a certificate signed by Tenant confirming and containing such factual certifications and representations as to this Lease as Landlord may reasonably request. Unless otherwise required by Landlord’s Mortgagee or a prospective purchaser or mortgagee of the Premises, the initial form of estoppel certificate to be signed by Tenant is attached hereto as Exhibit E. If Tenant does not deliver to Landlord the certificate signed by Tenant within such time period, Landlord, Landlord’s Mortgagee and any prospective purchaser or mortgagee, may conclusively presume and rely upon the following facts: (1) this Lease is in full force and effect, (2) the terms and provisions of this Lease have not been changed except as otherwise represented by Landlord, (3) not more than one monthly installment of Basic Rent and other charges have been paid in advance, (4) there are no claims against Landlord nor any defenses or rights of offset against collection of Rent or other charges, and (5) Landlord is not in default under this Lease. In such event, Tenant shall be estopped from denying the truth of the presumed facts.

 

(e)                                  Notices

 

All notices and other communications given pursuant to this Lease shall be in writing and shall be (1) mailed by first class, United States Mail, postage prepaid, certified, with return receipt requested, (2) hand delivered to the intended addressee, (3) sent by a nationally recognized overnight courier service, or (4) sent by facsimile transmission during normal business hours followed by a confirmatory letter sent in another manner permitted hereunder, in each instance, addressed to the parties hereto at the address specified in the Basic Lease Information. All notices shall be effective upon delivery to the address of the addressee. The parties hereto may change their addresses by giving notice thereof to the other in conformity with this provision.

 

(f)                                    Separability

 

If any clause or provision of this Lease is illegal, invalid, or unenforceable under present or future laws, then the remainder of this Lease shall not be affected thereby and in lieu of such clause or provision, there shall be added as a part of this Lease a clause or provision as similar in terms to such illegal, invalid, or unenforceable clause or provision as may be possible and be legal, valid, and enforceable.

 

(g)                                 Amendments; Binding Effect

 

This Lease may not be amended except by instrument in writing signed by Landlord and Tenant. No provision of this Lease shall be deemed to have been waived by Landlord unless such waiver is in writing signed by Landlord, and no custom or practice which may evolve between the parties in the administration of the terms hereof shall waive or diminish the right of Landlord to insist upon the performance by Tenant in strict accordance with the terms hereof. The terms and conditions contained in this Lease shall inure to the benefit of and be binding upon the parties hereto, and upon their respective successors in interest and legal representatives, except as otherwise herein expressly provided. This Lease is for the sole benefit of Landlord and Tenant, and, other than Landlord’s Mortgagee, no third party shall be deemed a third party beneficiary hereof.

 

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(h)                                 Quiet Enjoyment

 

Provided Tenant has performed all of its obligations hereunder, Tenant shall peaceably and quietly hold and enjoy the Premises for the Term, without hindrance from Landlord or any party claiming by, through, or under Landlord, but not otherwise, subject to the terms and conditions of this Lease.

 

(i)                                     No Merger

 

There shall be no merger of the leasehold estate hereby created with the fee estate in the Premises or any part thereof if the same person acquires or holds, directly or indirectly, this Lease or any interest in this Lease and the fee estate in the leasehold Premises or any interest in such fee estate.

 

(j)                                     No Offer

 

The submission of this Lease to Tenant shall not be construed as an offer, and Tenant shall not have any rights under this Lease unless Landlord executes a copy of this Lease and delivers it to Tenant.

 

(k)                                  Entire Agreement

 

This Lease constitutes the entire agreement between Landlord and Tenant regarding the subject matter hereof and supersedes all oral statements and prior writings relating thereto. Except for those set forth in this Lease, no representations, warranties, or agreements have been made by Landlord or Tenant to the other with respect to this Lease or the obligations of Landlord or Tenant in connection therewith. Notwithstanding, Landlord and Tenant acknowledge that the terms of the License Agreement is not superseded hereby and shall survive the execution and delivery of this Lease. The normal rule of construction that any ambiguities be resolved against the drafting party shall not apply to the interpretation of this Lease or any exhibits or amendments hereto.

 

(l)                                     Waiver of Jury Trial

 

IN GRAFTON PARTNERS L.P. V. SUPERIOR COURT, 36 CAL.4TH 944 (2005), THE CALIFORNIA SUPREME COURT RULED THAT CONTRACTUAL, PRE-DISPUTE JURY TRIAL WAIVERS ARE UNENFORCEABLE. THE PARTIES, HOWEVER, ANTICIPATE THAT THE CALIFORNIA LEGISLATURE MAY ENACT LEGISLATION TO PERMIT SUCH WAIVERS IN CERTAIN CASES. IN ANTICIPATION OF SUCH LEGISLATION, LANDLORD AND TENANT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE, AS OF THE EFFECTIVE DATE OF SUCH LEGISLATION AND TO THE EXTENT PERMITTED BY APPLICABLE REQUIREMENTS, THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS LEASE OR ANY DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER PARTY ARISING OUT OF OR RELATED IN ANY MANNER WITH THE PREMISES (INCLUDING WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS LEASE OR ANY CLAIMS OR DEFENSES ASSERTING THAT THIS LEASE WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR LANDLORD TO ENTER INTO AND ACCEPT THIS LEASE. LANDLORD AND TENANT AGREE TO TAKE ALL FURTHER ACTION REQUIRED TO EFFECTUATE THEIR WAIVER UNDER SUCH LEGISLATION, INCLUDING EXECUTING ADDITIONAL DOCUMENTS SATISFYING ALL REQUIREMENTS THEREOF. Landlord and Tenant agree and intend that this paragraph constitutes a written consent to waiver of trial by jury within the meaning of California Code of Civil Procedure Section 631(d)(2). Each party hereby authorizes and empowers the other to file this Subparagraph (m) and this Lease with the clerk or judge of any court of competent jurisdiction as a written consent to waiver of jury trial.

 

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(m)                               Governing Law

 

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

 

(n)                                 Recording

 

Tenant shall not record this Lease or any memorandum of this Lease without the prior written consent of Landlord, which consent may be withheld or denied in the sole and absolute discretion of Landlord, and any recordation by Tenant shall be a material breach of this Lease. Tenant grants to Landlord a power of attorney to execute and record a release releasing any such recorded instrument of record that was recorded without the prior written consent of Landlord.

 

(o)                                 Water or Mold Notification

 

To the extent Tenant or its agents or employees discover any water leakage, water damage or mold in or about the Premises, Tenant shall promptly notify Landlord thereof in writing.

 

(p)                                 Joint and Several Liability

 

If Tenant is comprised of more than one party, each such party shall be jointly and severally liable for Tenant’s obligations under this Lease. All unperformed obligations of Tenant hereunder not fully performed at the end of the Term shall survive the end of the Term, including payment obligations with respect to Rent and all obligations concerning the condition and repair of the Premises.

 

(q)                                 Financial Reports

 

Within fifteen (15) days after Landlord’s request, Tenant will furnish Tenant’s most recent audited financial statements (including any notes to them) to Landlord, or, if no such audited statements have been prepared, such other financial statements (and notes to them) as may have been prepared by an independent certified public accountant or, failing those, Tenant’s internally prepared financial statements. If Tenant is a publicly traded corporation, Tenant may satisfy its obligations hereunder by providing to Landlord Tenant’s most recent annual and quarterly reports. Tenant will discuss its financial statements with Landlord and, following the occurrence of an Event of Default hereunder, will give Landlord access to Tenant’s books and records in order to enable Landlord to verify the financial statements. Landlord will not disclose any aspect of Tenant’s financial statements that Tenant designates to Landlord as confidential except (1) to Landlord’s agents and advisers (and only in the event such persons have agreed to keep such financial statements confidential on the terms contained herein, and the purpose therefor is solely to evaluate Tenant’s creditworthiness), (2) to Landlord’s Mortgagee or prospective mortgagees or purchasers of the Premises (and only in the event such persons have agreed to keep such financial statements confidential on the terms contained herein, and the purpose therefor is solely to evaluate Tenant’s creditworthiness in evaluating whether to make a loan to Landlord or purchase the Premises), (3) in litigation between Landlord and Tenant, and/or (4) if required by court order. Tenant shall not be required to deliver the financial statements required under this Section 25(q) more than once in any 12-month period unless requested by Landlord’s Mortgagee or a prospective buyer or lender of the Premises or an Event of Default occurs.

 

(r)                                    Landlord’s Fees

 

Whenever Tenant requests Landlord to take any action not required of it hereunder or give any consent required or permitted under this Lease, Tenant will reimburse Landlord for Landlord’s reasonable, out-of-pocket costs payable to third parties and incurred by Landlord in reviewing the proposed action or consent, including reasonable attorneys’, engineers’ or architects’ fees, within thirty (30) days after Landlord’s delivery to Tenant of a statement of such costs. Tenant will be obligated to make such reimbursement without regard to whether Landlord consents to any such proposed action.

 

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(s)                                  Telecommunications

 

Except as may be otherwise provided in Exhibit B,Tenant acknowledges that Landlord shall not be required to provide or arrange for any telecommunications systems, including voice, video, data, Internet, and any other services provided over wire, fiber optic, microwave, wireless, and any other transmission systems (“Telecommunications Services”) at the Premises. Further, Tenant acknowledges that Landlord shall have no liability to any Tenant Party in connection with the installation, operation or maintenance of Telecommunications Services or any equipment or facilities relating thereto. Tenant, at its cost and for its own account, shall be solely responsible for obtaining all Telecommunications Services other than as provided as part of the Furniture, if any.

 

(t)                                    Confidentiality

 

Tenant acknowledges that the terms and conditions of this Lease are to remain confidential for Landlord’s benefit, and may not be disclosed by Tenant to anyone, by any manner or means, directly or indirectly, without Landlord’s prior written consent; provided however that Landlord’s consent shall not be required to disclose the terms and conditions of this Lease to (i) the employees and partners of Tenant, (ii) Tenant’s attorneys’, bankers, accountants, financial advisors, or other financial institutions, (iii) any governmental entities in order to comply with applicable laws relating to disclosure requirements, or (iv) pursuant to any subpoena or court order. The consent by Landlord to any disclosures shall not be deemed to be a waiver on the part of Landlord of any prohibition against any future disclosure. Notwithstanding anything herein to the contrary and except as reasonably necessary to comply with any applicable federal and state securities laws, each party (and each employee, representative, or other agent of such party) may disclose to any and all persons, without limitation of any kind, the U.S. federal and state income tax treatment and tax structure of this Lease and all materials of any kind (including opinions or other tax analyses) that are provided to such party relating to such U.S. federal and state income tax treatment and tax structure. For this purpose, “tax structure” is any fact that may be relevant to understanding the U.S. federal or state income tax treatment of this Lease.

 

(u)                                 Authority

 

Tenant (if a corporation, partnership or other business entity) hereby represents and warrants to Landlord that Tenant is a duly formed and existing entity qualified to do business in the state in which the Premises are located, that Tenant has full right and authority to execute and deliver this Lease, and that each person signing on behalf of Tenant is authorized to do so. Tenant shall, within thirty (30) days after execution of this Lease, deliver to Landlord certified copies of documents evidencing Tenant’s formation, qualification, good standing and authorization of this Lese, and if Tenant fails to do so, Landlord at its sole election may elect to terminate this Lease. Landlord hereby represents and warrants to Tenant that Landlord is a duly formed and existing entity qualified to do business in the state in which the Premises are located, that Landlord has full right and authority to execute and deliver this Lease, and that each person signing on behalf of Landlord is authorized to do so.

 

(v)                                 Security Service

 

Tenant acknowledges and agrees that, while Landlord may (but shall not be obligated to) patrol the Premises, Landlord is not providing any security services with respect to the Premises and that Landlord shall not be liable to Tenant for, and Tenant waives any claim against Landlord with respect to, any loss by theft or any other damage suffered or incurred by Tenant in connection with any unauthorized entry into the Premises or any other breach of security with respect to the Premises.

 

(w)                               Intentionally Omitted

 

(x)                                   Prohibited Persons and Transactions

 

Tenant represents and warrants that neither Tenant nor any of its affiliates, nor any of their respective partners, members, shareholders or other equity owners, and none of their respective employees, officers, directors, representatives or agents is, nor will they become, 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

 

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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 governmental action and is not and will not Transfer this Lease to, contract with or otherwise engage in any dealings or transactions or be otherwise associated with such persons or entities.

 

(y)                                 List of Exhibits

 

All exhibits and attachments attached hereto are incorporated herein by this reference.

 

Exhibit A – Outline of Premises

Exhibit B – Landlord’s Work

Exhibit C – Intentionally Omitted

Exhibit D – Form of Confirmation of Commencement Date Letter

Exhibit E – Form of Tenant Estoppel Certificate

Exhibit F – Operating Costs and Taxes

Exhibit G – Insurance

Exhibit H – Description of Furniture

 

26.                       Environmental Requirements

 

(a)                                  Hazardous Materials

 

Landlord recognizes that Tenant intends on using Hazardous Materials in connection with its operations on the Premises. Unless permitted by Law or otherwise in accordance with Environmental Requirements, Tenant shall not permit or cause any Tenant Party to bring any Hazardous Materials upon the Premises or transport, store, use, generate, manufacture, dispose, or release any Hazardous Materials on or from the Premises. Tenant, at its sole cost and expense, shall operate its business in the Premises in strict compliance with all Environmental Requirements and all requirements of this Lease. Tenant shall complete and certify to disclosure statements as requested by Landlord from time to time relating to Tenant’s transportation, storage, use, generation, manufacture, or release of Hazardous Materials on the Premises, and Tenant shall promptly deliver to Landlord a copy of any notice of violation relating to the Premises of any Environmental Requirement.

 

(b)                                 Environmental Requirements

 

The term “Environmental Requirements” means all Laws regulating or relating to health, safety, or environmental conditions on, under, or about the Premises or the environment including the following: the Comprehensive Environmental Response, Compensation and Liability Act; the Resource Conservation and Recovery Act; the Clean Air Act; the Clean Water Act; the Toxic Substances Control Act and all state and local counterparts thereto, including local zoning ordinances and the Building’s H 6 occupancy classification, and any common or civil law obligations including nuisance or trespass, and any other requirements of Section 13 of this Lease. The term “Hazardous Materials” means and includes any substance, material, waste, pollutant, or contaminant that is or could be regulated under any Environmental Requirement or that may adversely affect human health or the environment, including any solid or hazardous waste, hazardous substance, asbestos, petroleum (including crude oil or any fraction thereof, natural gas, synthetic gas, polychlorinated biphenyls (PCBs), and radioactive material). For purposes of Environmental Requirements, to the extent authorized by law, Tenant is and shall be deemed to be the responsible party, including the “owner” and “operator” of Tenant’s “facility” and the “owner” of all Hazardous Materials brought on the Premises by a Tenant Party and the wastes, by-products, or residues generated, resulting, or produced therefrom.

 

(c)                                  Removal of Hazardous Materials

 

Before the scheduled termination of the Lease, Tenant, at its sole cost and expense, shall remove all Hazardous Materials used, stored, disposed of or otherwise released by a Tenant Party onto or from the Premises (except for Hazardous Material existing on the Premises prior to the date hereof and not otherwise present as a result

 

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of Tenant’s or a Tenant Party’s entry onto the Premises prior thereto pursuant to the License Agreement), in a manner and to a level reasonably satisfactory to Landlord, but in no event to a level and in a manner less than that which complies with all Environmental Requirements and does not limit any future uses of the Premises or require the recording of any deed restriction or notice regarding the Premises. If the removal work required of Tenant hereunder is not completed by the scheduled expiration of the Term, then the Term shall be automatically extended, and Tenant shall remain obligated to comply with all terms and conditions this Lease, until such work is completed. Additionally, in the event that Hazardous Materials are released in, on or about the Premises by a Tenant Party during the Term of this Lease or the term of the License Agreement (that is, as opposed to those stored and used or intended for use in Tenant’s operations on the Premises) (collectively “Released Hazardous Material”), Tenant shall use commercially reasonable efforts to remove the Released Hazardous Material at any time during the period of this Lease upon reasonable written request by Landlord or if required by a governmental agency, or in the absence of a specific request by Landlord or governmental agency, before Tenant’s right to possession of the Premises terminates or expires. If Tenant fails to perform such work within a reasonable time period or in the time period provided by such applicable governmental agency or before Tenant’s right to possession would terminate or expire but for the second sentence of this subparagraph (whichever is earlier), Landlord may at its discretion, and without waiving any other remedy available under this Lease or at law or equity (including an action to compel Tenant to perform such work), provide Tenant with a Failure Notice as provided in Subparagraph 6(c) of this Lease and perform such work at Tenant’s cost as provided therein. Such work performed by Landlord is on behalf of Tenant and Tenant remains the owner, generator, operator, transporter, and/or arranger of the Hazardous Materials for purposes of Environmental Requirements. Tenant agrees not to enter into any agreement with any person, including any governmental authority, regarding the removal of Released Hazardous Material without the written approval of the Landlord, which approval shall not be unreasonably withheld.

 

(d)                                 Tenant’s Indemnity

 

Tenant shall indemnify, defend, and hold Landlord harmless from and against any and all losses (including diminution in value of the Premises and loss of rental income from the Premises), claims, demands, actions, suits, damages, expenses (including remediation, removal, repair, corrective action, or cleanup expenses), and costs (including reasonable attorneys’ fees, consultant fees or expert fees and including removal or management of any asbestos brought onto the Premises or disturbed in breach of the requirements of this Section 26, regardless of whether such removal or management is required by Law) which are brought or recoverable against, or suffered or incurred by Landlord as a result of any release of Hazardous Materials by a Tenant Party or any breach of the requirements under this Section 26 by a Tenant Party regardless of whether Tenant had knowledge of such noncompliance. The obligations of Tenant under this Section 26 shall survive any expiration or termination of this Lease.

 

(e)                                  Inspections and Tests

 

Landlord shall have access to, and a right to perform inspections and tests of, the Premises to determine Tenant’s compliance with Environmental Requirements, its obligations under this Section 26, or the environmental condition of the Premises. Access to the Premises shall be granted to Landlord upon Landlord’s prior notice to Tenant and at such times so as to minimize, so far as may be reasonable under the circumstances, any disturbance to Tenant’s operations. Such inspections and tests shall be conducted at Landlord’s expense, unless such inspections or tests reveal that Tenant has not complied with any Environmental Requirement, in which case Tenant shall reimburse Landlord for the reasonable cost of such inspection and tests. Landlord’s receipt of or satisfaction with any environmental assessment in no way waives any rights that Landlord holds against Tenant. Tenant shall promptly notify Landlord of any communication or report that Tenant makes to any governmental authority regarding any possible violation of Environmental Requirements or release or threat of release of any Hazardous Materials onto or from the Premises. Tenant shall, within five days of receipt thereof, provide Landlord with a copy of any documents or correspondence received from any governmental agency or other party relating to a possible violation of Environmental Requirements or claim or liability associated with the release or threat of release of any Hazardous Materials onto or from the Premises.

 

28

 

(f)                                    Tenant’s Financial Assurance in the Event of a Breach

 

In addition to all other rights and remedies available to Landlord under this Lease or otherwise, Landlord may, in the event of a breach of the requirements of this Section 26 that is not cured within 30 days following notice of such breach by Landlord, require Tenant to provide reasonable financial assurances (such as insurance, escrow of funds or third party guarantee) in an amount and form satisfactory to Landlord. The requirements of this Section 26 are in addition to and not in lieu of any other provision in this Lease.

 

(g)                                 Landlord’s Indemnity

 

Landlord shall indemnify, defend, and hold Tenant harmless from and against any and all losses, claims, demands, actions, suits, damages, expenses (including remediation, removal, repair, corrective action, or cleanup expenses), and costs (including actual attorneys’ fees, consultant fees or expert fees) which are brought or recoverable against, or suffered or incurred by Tenant as a result of any release of Hazardous Materials at or about the Premises at any time prior to the commencement of this Lease (other than by a Tenant Party, by reason of its entry onto the Premises under the License Agreement or otherwise) regardless of whether Landlord had knowledge of such earlier release. The obligations of Landlord under this Section 26 shall survive any expiration or termination of this Lease.

 

(h)                                 Tenant’s Inventory of Hazardous Materials

 

Prior to the Commencement Date and semi-annually during the Term, Tenant shall provide Landlord with information relating to the use of Hazardous Materials at the Premises by Tenant and its permitees and their compliance with Environmental Requirements relating thereto. All such information shall be in a form and in sufficient detail as is reasonably acceptable to Landlord, and all such information shall be certified by an authorized representative of Tenant to be true, correct and complete in all material respects. Further, Tenant shall maintain books and records throughout the Term, in accordance with best practices and all applicable governmental requirements, of its use of Hazardous Materials at the Premises and, upon reasonable advance notice from Landlord where Landlord has knowledge of or a reasonable suspicion that a release of Hazardous Materials on or about the Premises has occurred, Tenant shall make such books and records available to Landlord for inspection and reproduction as reasonably requested by Landlord from time to time.

 

(i)                                     Landlord’s Disclosure

 

Prior to the Commencement Date, Landlord shall provide Tenant with reasonable evidence that no Hazardous Materials residue requiring any action under Environmental Requirements exists with the internal piping present within the Premises. Further, Landlord shall cause to be prepared, at Landlord’s cost, a Phase I Environmental Assessment (an “ESA”) in accord with current industry standards, and shall provide a copy thereof to Tenant upon receipt, for the purpose of establishing evidence of the existence or non-existence, to the extent consistent with the investigation therein undertaken, of Hazardous Materials in, at or under the Premises as of the date of the ESA. If any sampling is otherwise undertaken in connection with the ESA, Landlord shall also provide to Tenant copies of the results of such sampling. Landlord shall also make available to Tenant any other written information in Landlord’s possession and control, now or in the future, relating to the presence or suspected presence of, or the investigation or assessment of the existence of, Hazardous Materials in, on or about the Premises.

 

27.                       Parking

 

Tenant shall have the exclusive right to use the surface parking facilities located at the Premises without charge during the Term. Landlord shall not be responsible for enforcing Tenant’s parking rights against third parties.

 

29

 

28.                       Furniture

 

(a)                                            Landlord hereby leases to Tenant the items of personal property identified as the Furniture in Exhibit H hereto (the “Furniture”).  The term of this lease of the Furniture shall commence on the Commencement Date, and shall be co-terminus with this Lease. Subject to the terms of Exhibit B, possession of the Furniture shall be delivered to Tenant on the Commencement Date and shall be returned to Landlord upon the expiration or earlier termination of this Lease.

 

(b)                                           Tenant accepts the Furniture in its “as is” “where is” condition and Tenant acknowledges that Landlord makes no warranty as to the condition of the Furniture or its present or future suitability for Tenant’s purposes.

 

(c)                                            The Furniture shall be held at all times during the term hereof at the sole risk of Tenant from injury, loss or destruction with the obligation of restoration or reimbursement to Landlord. Further, Tenant agrees to either self insure or procure and maintain throughout the term of this Lease insurance covering the Furniture against all risk of physical loss, theft, damage and destruction, the costs of which shall be borne by Tenant. Such insurance shall be procured in commercially reasonable amounts agreed to by the parties from time to time in their good faith, reasonable discretion. Such insurance shall provide for payment for loss to Landlord (or if self insured, Tenant shall pay such loss amounts to Landlord) and the proceeds thereof shall be made available to Tenant for repair or replacement of the Furniture during the Term of this Lease. Tenant shall not take any steps or allow to be invalidated the insurance acquired by Tenant hereunder.

 

(d)                                           Upon the termination of this Lease, Tenant shall return the Furniture to Landlord in the same condition as when received, ordinary wear and tear excepted, conditioned on the obligations set forth in the next sentence having been accomplished. Tenant is responsible for performing all maintenance, repair and cleaning of the Furniture, which may be necessary to maintain the Furniture in the condition in which it was initially provided to Tenant. If at any time Tenant determines that it no longer wishes to use and lease any of the Furniture, then Tenant will provide Landlord notice thereof and Landlord may either remove such Furniture at Landlord’s sole cost or permit Tenant to dispose of such Furniture as Tenant deems appropriate, at Tenant’s cost, and in either event, have such Furniture excluded from the obligations under and no longer be subject to the terms and conditions of this Lease. The notice shall provide that Landlord shall have thirty (30) days to either notify Tenant of its election to remove and to remove such Furniture or to notify Tenant of its election to abandon such Furniture, and after receipt of such abandonment notice or lapse of thirty (30) days without notice, Tenant may dispose of such Furniture as it deems appropriate without any obligation to reimburse Landlord for such property.

 

(e)                                            The Furniture shall at all times be and remain the exclusive property of Landlord, and Tenant shall have no title therein. The Furniture or any of Tenant’s rights under this Lease shall not be assigned or transferred by Tenant to any person, firm or corporation without the prior written consent of Landlord and any attempted assignment or transfer in violation hereof shall, at the option of Landlord, be void. Tenant covenants that: (i) Tenant will not assign, pledge, loan, mortgage, or part with possession of any of the Furniture, or in any other manner attempt to dispose of it, or permit its use by others or suffer any liens or legal process to be incurred or levied thereon; (ii) Tenant will not make any alterations or permit any alterations to be made on or to the Furniture without the written consent of Landlord (or as otherwise contemplated in Exhibit B hereto); and (iii) Tenant will keep and maintain the Furniture at the Premises.

 

(f)                                              Landlord shall, during the term of this Lease, pay and discharge all license fees, assessments and sales, use, property and other tax or taxes now or hereafter imposed by any state, Federal or local government upon the ownership, leasing, renting, sale, possession or use of the Furniture, the costs of which shall be borne by Tenant.

 

30

 

LANDLORD AND TENANT EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES ARE SUITABLE FOR TENANT’S INTENDED COMMERCIAL PURPOSE, AND TENANT’S OBLIGATION TO PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE PREMISES OR THE PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT, WITHOUT ABATEMENT, DEMAND, SETOFF OR DEDUCTION, NOTWITHSTANDING ANY BREACH BY LANDLORD OF ITS DUTIES OR OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR IMPLIED. NOTWITHSTANDING, NO SUCH PAYMENT BY TENANT SHALL RELIEVE LANDLORD OF ANY OF ITS OBLIGATIONS SET FORTH IN THIS LEASE, AND TENANT SHALL NOT BE PRECLUDED FROM ENFORCING ANY OF ITS RIGHTS OR REMEDIES UNDER THIS LEASE OR AT LAW AGAINST LANDLORD IN THE EVENT OF ANY BREACH BY LANDLORD HEREUNDER.

 

This Lease is executed on the respective dates set forth below, but for reference purposes, this Lease shall be dated as of the date first above written. If the execution date is left blank, this Lease shall be deemed executed as of the date first written above.

 

 

	
LANDLORD:
    	
 
    	
NOVELLUS SYSTEMS, INC., a California   corporation
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Jeffrey C Benzing
    
	
 
    	
 
    	
Name:
    	
Jeffrey C Benzing
    
	
 
    	
 
    	
Title:
    	
Executive Vice President, CAO
    
	
 
    	
 
    	
Execution Date:
    	
May 11, 2010
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
TENANT:
    	
 
    	
INTERMOLECULAR, INC., a Delaware   corporation
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Peter Eidelman
    
	
 
    	
 
    	
Name: Peter Eidelman
    
	
 
    	
 
    	
Title: Chief Financial Officer
    
	
 
    	
 
    	
Execution Date:
    	
 
    
					

 

31

 

EXHIBIT A

 

OUTLINE OF PREMISES

 

A, Page 32

 

EXHIBIT B

 

LANDLORD’S WORK

 

Acceptance of Premises. Subject to the obligations of Landlord to deliver the Premises in the condition set forth in the Lease, including the removal of all Hazardous Materials as required therein, Tenant accepts the Premises in their “AS-IS” condition on the date that Tenant first enters or occupies the Premises pursuant to the Lease.

 

·                                          Landlord shall leave all furniture located in the Building in place (including without limitation, cubicles, chairs, tables, office furniture, conference tables, lab tables and chairs), which furniture is further described in Exhibit H to the Lease. Notwithstanding, Landlord reserves the right to remove up to one hundred thirty (130) 7X7 cubicle workstations currently located in Area B2, and Landlord agrees to replace such workstations with equal or better quality cubicles with telecom and data cabling prior to occupancy by Tenant of Area B2. Tenant shall provide at least thirty (30) days written notice to Landlord prior to its occupying Area B2 and requiring the replacement of such workstations.

 

·                                          Landlord shall leave all support equipment located in the Building in place and provide Tenant, within thirty (30) days of the Commencement Date, with a list of all vendors currently contracted (including but not limited to chemical suppliers, bulk chemical suppliers for the caustic injection on the scrubbers, and the AWN, etc.). Landlord shall also leave all remaining dry pumps (including but not limited to QDP40’s and IH1000’s among others and all rack support currently in place) as separately agreed in writing by the parties, the point of use scrubber, a 300mm PVD TiN Chamber (Blanket) with platform, or PVD equipment (as agreed to by the parties, and if previously removed, returned or replaced) and all other equipment currently existing at the Premises in place and as installed as separately agreed in writing by the parties.

 

·                                          Landlord shall provide prompt and reasonable support transition for all facility information, including but not limited to (1) prints regarding the construction of the Building and the Building Systems, (2) operation manuals for all of the gas systems, alarm systems, mda systems, fire alarm systems, and other systems serving the Building, (3) leaving on site any specialty tools associated with the systems, (4) leaving on site at the Premises any additional floor tiles for the raised floor systems, which floor tile shall only be used or incorporated into the Building, (5) copies of existing permits relating to the use, occupation and operation of the Premises, including waste water discharge, emergency generators and air permits, and (6) equipment repair records relating to all such equipment at Premises.

 

·                                          Landlord shall leave and not disturb the under floor process piping in place at the Premises.

 

·                                          An inventory of all equipment and tools shall be agreed, reduced to writing and acknowledged as correct by the parties as soon as reasonably possible after the Commencement Date and all such equipment and tools shall be subject to the terms of Section 28 of the Lease as if they were Furniture.

 

B, Page 33

 

EXHIBIT C

 

INTENTIONALLY OMITTED

 

C, Page 34

 

EXHIBIT D

 

CONFIRMATION OF COMMENCEMENT DATE

 

June 10, 2010

 

Peter Eidelman

Intermolecular

2865 Zanker Rd.

San Jose, CA 95134

 

Re:                               Lease Agreement (the “Lease”) dated May 1l, 2010, between, Novellus Systems, Inc., a California corporation (“Landlord”)  and Intermolecular, Inc., a Delaware corporation (“Tenant”). Capitalized terms used herein but not defined shall be given the meanings assigned to them in the Lease.

 

Ladies and Gentlemen:

 

Landlord and Tenant agree as follows:

 

1.                                       Condition of Premises

 

Subject to the obligations of Landlord to deliver the Premises in the condition required under the Lease, Tenant has accepted the Premises in their as-is condition as of the below referenced Commencement Date, which is the date Tenant first entered or occupied the Premises pursuant to the Lease. Furthermore, Tenant acknowledges that the Premises are suitable for the Permitted Use.

 

2.                                       Commencement Date

 

The Commencement Date of the Lease is May 14, 2010.

 

3.                                       Expiration Date

 

The Term is scheduled to expire on the last day of the 84th full calendar month of the Term, which date is May 31, 2017,

 

4.                                       Ratification

 

Tenant hereby ratifies and confirms its obligations under the Lease, and represents and warrants to Landlord that it has no defenses thereto. Additionally, Tenant further confirms and ratifies that, as of the date hereof, (a) the Lease is and remains in good standing and in full force and effect, and (b) Tenant has no claims, counterclaims, set-offs or defenses against Landlord arising out of the Lease or in any way relating thereto or arising out of any other transaction between Landlord and Tenant.

 

5.                                       Binding Effect; Governing Law

 

Except as modified hereby, the Lease shall remain in full effect and this letter shall be binding upon Landlord and Tenant and their respective successors and assigns. If any inconsistency exists or arises between the terms of this letter and the terms of the Lease, the terms of this letter shall prevail. This letter shall be governed by the laws of the state in which the Premises are located.

 

D-35

 

Please indicate your agreement to the above matters by signing this letter in the space indicated below and returning an executed original to us.

 

	
 
    	
 
    	
Sincerely,
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Novellus Systems, Inc., a California   corporation
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Randy R McFarland
    
	
 
    	
 
    	
Name:
    	
Randy R McFarland
    
	
 
    	
 
    	
Title:
    	
Director Corp Facilities and Real Estate
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Agreed and accepted:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Intermolecular, Inc., a Delaware   corporation
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Peter Eidelman
    	
 
    	
 
    
	
Name:
    	
Peter Eidelman
    	
 
    	
 
    
	
Title:
    	
CFO
    	
 
    	
 
    

 

D-2

 

EXHIBIT E

 

FORM OF TENANT ESTOPPEL CERTIFICATE

 

The undersigned is the Tenant under the Lease (defined below) between                              , a                        corporation, as Landlord, and the undersigned as Tenant, for the Premises located at 3011 North First Street, San Jose, California, and hereby certifies as follows:

 

1.                                       The Lease consists of the original Lease Agreement dated as of                     , 2010 between Tenant and Landlord[‘s predecessor-in-interest] and the following amendments or modifications thereto (if none, please state “none”):

 

The documents listed above are herein collectively referred to as the  “Lease”  and represent the entire agreement between the parties with respect to the Premises. All capitalized terms used herein but not defined shall be given the meaning assigned to them in the Lease.

 

2.                                       The Lease is in full force and effect and has not been modified, supplemented or amended in any way except as provided in Section 1 above.

 

3.                                       The Term commenced on                    , 2010 and the Term expires, excluding any renewal or termination options, on                        , 2017, and Tenant has no option to purchase all or any part of the Premises or, except as expressly set forth in the Lease, any option to terminate or cancel the Lease.

 

4.                                       Tenant currently occupies the Premises described in the Lease and Tenant has not transferred, assigned, or sublet any portion of the Premises nor entered into any license or concession agreements with respect thereto except as follows (if none, please state “none”):

 

5.                                       All monthly installments of Basic Rent, all Additional Rent and all monthly installments of estimated Additional Rent have been paid when due through                     . The current monthly installment of Basic Rent is $                      .

 

6.                                       All conditions of the Lease to be performed by Landlord necessary to the enforceability of the Lease have been satisfied and Landlord is not in default thereunder. In addition, Tenant has not delivered any notice to Landlord regarding a default by Landlord thereunder.

 

7.                                       As of the date hereof, there are no existing defenses or offsets, or, to the undersigned’s knowledge, claims or any basis for a claim, that the undersigned has against Landlord and no event has occurred and no condition exists, which, with the giving of notice or the passage of time, or both, will constitute a default under the Lease.

 

8.                                       No payment has been paid more than 30 days in advance and no security deposit has been delivered to Landlord except as provided in the Lease.

 

If Tenant is a corporation, partnership or other business entity, each individual executing this Estoppel Certificate on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do 

 

E-37

 

business in the state in which the Premises are located and that Tenant has full right and authority to execute and deliver this Estoppel Certificate and that each person signing on behalf of Tenant is authorized to do so.

 

9.                                       There are no actions pending against Tenant under any bankruptcy or similar laws of the United States or any state.

 

10.                                 Other than in compliance with all applicable Laws and in the ordinary course of the use of the Premises, the undersigned has not used or stored any Hazardous Materials in or about the Premises.

 

11.                                 All tenant improvement work to be performed by Landlord under the Lease has been completed in accordance with the Lease and has been accepted by the undersigned and all reimbursements and allowances due to the undersigned under the Lease in connection with any tenant improvement work have been paid in full.

 

Tenant acknowledges that this Estoppel Certificate may be delivered to Landlord, Landlord’s Mortgagee or to a prospective mortgagee or prospective purchaser, and their respective successors and assigns, and acknowledges that Landlord, Landlord’s Mortgagee and/or such prospective mortgagee or prospective purchaser will be relying upon the statements contained herein in disbursing loan advances or making a new loan or acquiring the property of which the Premises are a part and that receipt by it of this certificate is a condition of disbursing loan advances or making such loan or acquiring such property.

 

Executed as of                              , 2010.

 

	
TENANT:
    	
 
    
	
 
    	
a
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
				

 

E-38

 

EXHIBIT F

 

OPERATING COSTS

 

1.                                       During the Term, Tenant shall pay to Landlord Tenant’s Proportionate Share (as defined in the Basic Lease Information) of the annual Operating Costs (defined below). Landlord may make a good faith estimate of Operating Costs for any calendar year or part thereof during the Term. During each calendar year or partial calendar year of the Term, Tenant shall pay to Landlord, in advance concurrently with each monthly installment of Basic Rent, an amount equal to the estimated Tenant’s Proportionate Share of Operating Costs for such calendar year or part thereof divided by the number of months therein. From time to time, Landlord may estimate and re-estimate the amount of Operating Costs to be due by Tenant and deliver a copy of the estimate or re-estimate to Tenant. Thereafter, the monthly installments of Tenant’s Proportionate Share of Operating Costs payable by Tenant shall be appropriately adjusted in accordance with the estimations so that, by the end of the calendar year in question, Tenant shall have paid all of Tenant’s Proportionate Share of Operating Costs as estimated by Landlord. Any amounts paid based on such an estimate shall be subject to adjustment as herein provided when actual Operating Costs are available for each calendar year.

 

2.                                       The term “Operating Costs” means (a) all expenses and disbursements (subject to the limitations set forth below), including a portion of capital expenditures (which shall be computed by amortization over the useful life of such capital expenditure), that Landlord incurs in connection with the ownership, operation, and maintenance of the parking lot and landscaping located on the Premises, all to the extent set forth in Section 6 of the Lease as Landlord’s obligation thereunder, including the repair, replacement, and general maintenance thereof, including the paving (but not sealing or other maintenance of the surface) of parking areas and roads, alleys and driveways on the Premises, sweeping, mowing and snow removal therefrom (the “Parking and Landscaping Costs”), (b) Taxes, and (c) Insurance Costs, determined in accordance with sound accounting principles consistently applied, and may include the following costs: (a) Landlord’s reasonable allocation of wages and salaries of off-site employees who perform a portion of their services in connection with the maintenance, repair and replacement of the Premises as set forth in Section 6 of the Lease, including taxes, insurance and benefits relating thereto; (b) any service and maintenance contracts with independent contractors for the maintenance, repair, or replacement of the Premises as set forth in Section 6 of the Lease, (c) all supplies and materials used in the maintenance, repair, and replacement of the Premises as set forth in Section 6 of the Lease; and (d) any utilities (including fuel, gas, electricity, water, sewer, and other services) incurred by Landlord in connection with the maintenance, repair and replacement of the Premises as set forth in Section 6 of the Lease, as reasonably determined by Landlord.

 

Operating Costs shall not include costs for (1) Landlord’s obligations to maintain the Building’s Structure as and to the extent set forth in Section 6(a); (2) repair, replacements and general maintenance paid by proceeds of insurance or by Tenant or other third parties; (3) interest, amortization or other payments on loans to Landlord; (4) depreciation; or (5) legal expenses for services, other than those that benefit the Premises generally (e.g., tax disputes).

 

3.                                       Tenant shall also pay Tenant’s Proportionate Share of the Taxes for each year and partial year falling within the Term. Tenant shall pay Tenant’s Proportionate Share of Taxes in the same manner as provided above for Tenant’s Proportionate Share of Operating Costs.  “Taxes” means taxes, assessments, and governmental charges or fees whether federal, state, county or municipal, and whether they be by taxing districts or authorities presently taxing or by others, subsequently created or otherwise, and any other taxes and assessments (including non-governmental assessments for common charges under a restrictive covenant or other private agreement that are not treated as part of Operating Costs) now or hereafter attributable to the Premises (or its operation), excluding, however, penalties and interest thereon and federal and state taxes on income (if the present method of taxation changes so that in lieu of or in addition to the whole or any part of any Taxes, there is levied on Landlord a capital tax directly on the rents received therefrom or a franchise tax, assessment, or charge based, in whole or in part, upon such rents for the Premises, then all such taxes, assessments, or charges, or the part thereof so based, shall be deemed to be included within the term “Taxes” for purposes hereof). Taxes shall include the reasonable costs of consultants retained in an effort to lower taxes and all costs incurred in disputing any taxes or in seeking to lower the tax valuation of the Premises. For property tax purposes, Tenant waives all rights to protest or appeal the appraised value of the Premises and all rights to receive notices of reappraisement.

 

F-39

 

4.                                       By April 1 of each calendar year, or as soon thereafter as practicable, Landlord shall furnish to Tenant a statement of Operating Costs and Taxes for the previous year (the “Operating Costs and Tax Statement”). If Tenant’s estimated payments of Operating Costs or Taxes under Paragraph 1 above for the year covered by the Operating Costs and Tax Statement exceeded Tenant’s actual payments of such items as indicated in the Operating Costs and Tax Statement, then Landlord shall promptly credit or reimburse Tenant for such excess; likewise, if Tenant’s estimated payments of Operating Costs or Taxes under Paragraph 1 above for such year are less than Tenant’s actual payment of such items as indicated in the Operating Costs and Tax Statement, then Tenant shall promptly pay Landlord such deficiency.

 

F-40

 

EXHIBIT G

 

INSURANCE

 

1.                                       Tenant’s Insurance

 

Effective as of the earlier of (a) the date Tenant enters or occupies the Premises, or (b) the Commencement Date, and continuing throughout the Term, Tenant shall maintain the following insurance policies: (1) commercial general liability insurance in amounts of $1,000,000 per occurrence, $2,000,000 in the aggregate and $5,000,000 umbrella coverage, or such other amounts as Landlord may from time to time reasonably require (and, if the use and occupancy of the Premises include any activity or matter that is or may be excluded from coverage under a commercial general liability policy, Tenant shall obtain such endorsements to the commercial general liability policy or otherwise obtain insurance to insure all liability arising from such activity or matter in such amounts as Landlord may reasonably require), insuring Tenant, Landlord, Landlord’s property management company and Landlord’s asset management company against all liability for injury to or death of a person or persons or damage to property arising from the use and occupancy of the Premises, (2) insurance covering the full value of all alterations and improvements and betterments in the Premises, naming Landlord and Landlord’s Mortgagee as additional loss payees as their interests may appear, (3) insurance covering the full value of all furniture, trade fixtures and personal property (including property of Tenant or others) in the Premises or otherwise placed in the Premises by or on behalf of a Tenant Party, (4) contractual liability insurance sufficient to cover Tenant’s indemnity obligations hereunder (but only if such contractual liability insurance is not already included in Tenant’s commercial general liability insurance policy), (5) worker’s compensation insurance, and (6) business interruption insurance. Tenant’s insurance shall provide primary coverage to Landlord when any policy issued to Landlord provides duplicate or similar coverage, and in such circumstance Landlord’s policy will be excess over Tenant’s policy. Tenant shall furnish to Landlord certificates of such insurance and such other evidence satisfactory to Landlord of the maintenance of all insurance coverages required hereunder at least ten (10) days prior to the earlier of the Commencement Date or the date Tenant enters or occupies the Premises, and at least fifteen (15) days prior to each renewal of said insurance, and Tenant shall obtain a written obligation on the part of each insurance company to notify Landlord at least thirty (30) days before cancellation or a material change of any such insurance policies. All such insurance policies shall be in form reasonably satisfactory to Landlord and issued by companies licensed to do business in the state in which the Premises is located and having an A.M. Best rating of at least A:X (or the equivalent of such rating) or otherwise approved in writing by Landlord. If Tenant fails to comply with the foregoing insurance requirements or to deliver to Landlord the certificates or evidence of coverage required herein, Landlord, in addition to any other remedy available pursuant to this Lease or otherwise, may, but shall not be obligated to, obtain such insurance and Tenant shall pay to Landlord on demand the premium costs thereof, plus an administrative fee of 15% of such cost.

 

2.                                       Landlord’s Insurance.

 

Throughout the Term of this Lease, Landlord shall maintain, as a minimum, the following insurance policies: (a) insurance on the Premises (including all improvements thereto, but excluding any fixtures, equipment and personal property at the Premises) under an “All Risks of Physical Loss” policy, which shall include, without limitation, coverage for loss or damage by water, flood, earthquake, terrorism, subsidence and sprinklers, in an amount equal to 100% of the full replacement cost; (b) property insurance for the Premises replacement value, less a commercially-reasonable deductible if Landlord so chooses; (c) loss of rental income for not less than twelve (12) months; and (d) commercial general liability insurance in an amount of not less than $2,000,000. Landlord may, but is not obligated to, maintain such other insurance and additional coverages as it may deem necessary. The cost of all insurance carried by Landlord with respect to the Premises shall be included in Insurance Costs. The foregoing insurance policies and any other insurance carried by Landlord shall be for the sole benefit of Landlord and under Landlord’s sole control, and Tenant shall have no right or claim to any proceeds thereof or any other rights thereunder.

 

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3.                                       Cost of Landlord’s Insurance.

 

Tenant shall pay Tenant’s Proportionate Share of the cost of the property and liability insurance, including any deductibles, carried by Landlord from time to time with respect to the Premises (including other improvements and Landlord’s personal property used in connection therewith), which may include fire and extended coverage insurance (including extended and broad form coverage risks, mudslide, land subsidence, volcanic eruption, flood, earthquake, terrorism and rent loss insurance) and comprehensive general public liability insurance and excess liability insurance, in such amounts and containing such terms as Landlord deems necessary or desirable (collectively, “Insurance Costs”). During each month of the Term, Tenant shall make a monthly payment to Landlord equal to 1/12th of Tenant’s Proportionate Share of Insurance Costs that will be due and payable for that particular year. Each payment of Insurance Costs shall be due and payable at the same time as, and in the same manner as, provided above for Basic Rent. The initial monthly payment of Insurance Costs is based upon Landlord’s good faith estimate of Tenant’s Proportionate Share of the estimated Insurance Costs for the remainder of the first calendar year. The monthly payment of Insurance Costs is subject to increase or decrease as determined by Landlord to reflect accurately Tenant’s Proportionate Share of estimated Insurance Costs. If, following Landlord’s receipt of the bill for the insurance premiums for a calendar year, Landlord determines that Tenant’s total payments of Insurance Costs are less than Tenant’s Proportionate Share of actual Insurance Costs, Tenant shall pay to Landlord the difference upon demand; if Tenant’s total payments of Insurance Costs are more than Tenant’s Proportionate Share of actual Insurance Costs, Landlord shall retain such excess and credit it to Tenant’s future payments of Insurance Costs (unless such adjustment is at the end of the Term, in which event Landlord shall refund such excess to Tenant).

 

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EXHIBIT H

 

DESCRIPTION OF FURNITURE

 

H-43

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