Document:

Exhibit
10.1

 

LEASE

 

 

BY
AND BETWEEN

 

 

MENLO
BUSINESS PARK, LLC, LESSOR

 

 

AND

 

 

DEPOMED,
INC., LESSEE

 

 

Menlo
Business Park

1330
O’Brien Drive

Menlo
Park, California

 

 

April 30,
2003

 

 

LEASE
EXTENSION AGREEMENT

 

Building #6

1360 O’Brien Drive

Menlo Park, California
94025

 

THIS LEASE EXTENSION AGREEMENT (this “Agreement”) is
made and entered into on April 30, 2003 by and between MENLO BUSINESS
PARK, LLC, a California limited liability company (“Lessor”), and DEPOMED,
INC., a California corporation (“Lessee”).

 

RECITALS

 

A.                                   Lessor
and Lessee entered into a Lease dated February 4, 2000 (the “Lease”) of
the premises referred to as Building #6 located at 1360 O’Brien Drive, Menlo
Park, California 94025, more particularly described on Exhibit “A” attached to
the Lease and incorporated by reference herein (the “Premises”).  The Premises contain approximately 20,624
rentable square feet of space.

 

B.                                     The
expiration date of the initial term of the Lease is March 14, 2005.  Lessor and Lessee wish to extend the initial
term of the Lease, subject to the terms and conditions set forth herein.

 

AGREEMENT

 

NOW THEREFORE, in
consideration of the mutual covenants contained herein, the parties agree as
follows:

 

1.                                       Defined
Terms.  All capitalized terms and
phrases used but not defined in this Agreement shall have the meanings given to
them in the Lease.

 

2.                                       Extension
of Initial Term.

 

(a)                                  The
initial term of the Lease is hereby extended for a period of thirty-six (36)
calendar months and seventeen (17) days commencing on March 15, 2005 and
ending on April 30, 2008 (the “Extension Term”).  The Extension Term shall be upon all of the same terms and
conditions of the Lease, except that the Monthly Base Rent payable by Lessee to
Lessor during the Extension Term shall be as set forth in Paragraph 3 hereof.

 

(b)                                 The
option to extend provided for in Paragraph 3 of the Lease shall be for a term
of sixty (60) calendar months immediately following the expiration of the
Extension Term and shall otherwise be upon the same terms and conditions as set
forth in Paragraph 3 of the Lease.

 

 

3.                                       Monthly
Base Rent.  Lessee shall pay to
Lessor Monthly Base Rent during the Extension Term, in monthly installments in
advance on a triple net basis in lawful money of the United States, as follows:

 

(a)                                  Commencing
on March 15, 2005 and continuing through April 30, 2006, the sum of
Forty-six Thousand Four Hundred Four Dollars ($46,404) per month ($2.25/square
foot/NNN).

 

(b)                                 Commencing
on May 1, 2006 and continuing on each anniversary of the commencement date
of the Extension Term thereafter during the Extension Term (the “Rental
Adjustment Date”), the Monthly Base Rent shall be adjusted to reflect any increases in the cost of living.  The adjustment shall be calculated upon the
basis of the United States Department of Labor, Bureau of Labor Statistics
Consumer Price Index, all items, for all Urban Consumers - San
Francisco-Oakland-San Jose (1982-84=100), hereafter referred to as the
“Index.”  The Index for said subgroup
published most recently as of the end of the calendar month immediately
preceding the month in which the commencement date of the Extension Term occurs
shall be considered the “base Index.”

 

(c)                                  The
Monthly Base Rent shall be adjusted as of each Rental Adjustment Date to an
amount equal to the product obtained by multiplying Forty-six Thousand Four
Hundred Four Dollars ($46,404) (the Monthly Base Rent for the Premises
commencing on March 15, 2005 referred to in Paragraph 3(a) above), by a
fraction, the numerator of which is the Index most recently published as of the
end of the calendar month immediately preceding each Rental Adjustment Date and
the denominator of which is the base Index; provided that in no event shall the
Monthly Base Rent be increased on any Rental Adjustment Date to an amount less
than three percent (3%) per annum or more than six percent (6%) per annum,
calculated for each individual year from the previous Rental Adjustment Date,
of the Monthly Base Rent payable before such Rental Adjustment Date.

 

(d)                                 When the new Monthly Base Rent
is determined for each Rental Adjustment Date, Lessor shall give Lessee written
notice of the amount of the new Monthly Base Rent and how the new Monthly Base
Rent figure was computed in accordance with subparagraphs 3(b) and 3(c) above.  Lessee shall pay to Lessor retroactively any
unpaid increase in Monthly Base Rent due from and after the Rental Adjustment
Date.  If the Index does not exist on
any Rental Adjustment Date in the same format as referred to in subparagraph
3(b) above, Lessor shall substitute in lieu thereof an index reasonably
comparable to the Index referred to above which is acceptable to Lessee and
which is then published by the Bureau of Labor Statistics, or successor or
similar governmental agency, or if no governmental agency then publishes an
index, Lessor shall substitute therefor any index commonly accepted which is
published by a reputable private organization.

 

2

 

(e)                                  Monthly Base Rent for any
partial month shall be prorated on the basis of the number of calendar days in
such month.

 

4.                                       Additional
Rent; Operating Expenses and Taxes. 
In addition to the Monthly Base Rent payable by Lessee pursuant to
Paragraph 3 above, Lessee shall pay to Lessor during the Extension Term, as
Additional Rent, Operating Expenses and Taxes pursuant to Paragraph 5 of the
Lease.

 

5.                                       Tenant
Improvement Work.

 

(a)                                  Concurrently with the
execution and delivery of this Agreement, Lessor shall provide Lessee with a
tenant improvement allowance of One Hundred Three Thousand One Hundred Twenty
Dollars ($103,120) ($5.00 per rentable square foot) (the “Tenant Improvement
Allowance”) to defray a portion of the cost of the improvements to the Premises
which shall be mutually approved in writing by Lessor and Lessee (“Tenant
Improvement Work”).  The entire cost of
the Tenant Improvement Work in excess of the Tenant Improvement Allowance, if
any, shall be paid by Lessee.  The cost of
obtaining approval by of the City of Menlo Park of a merger of the Building #5
Land (1330 O’Brien Drive) and the Building #6 Land (1360 O’Brien Drive) to be
occupied by Lessee pursuant to the new Lease dated March 26, 2003 between
Lessor and Lessee, and the cost of connecting Building #6 and Building #5
pursuant to plans approved by Lessor and Lessee shall be included in the cost
of the Tenant Improvement Work.  Subject
to Lessor’s prior written approval of the plans and specifications for the
Tenant Improvement Work for both Building #6 and Building #5, Lessee may
combine the Tenant Improvement Allowance for the Premises (Building #6) and the
Tenant Improvement Allowance for 1330 O’Brien Drive (Building #5) and apply the
combined Tenant Improvement Allowance to either Building #6 or Building #5
in its entirety, provided that Lessor shall not be obligated to approve the
plans and specifications for any of such Tenant Improvement Work if, in
Lessor’s judgment, such plans and specifications provide for the performance of
any of such Tenant Improvement Work in a manner that could adversely affect the
leasing of either Building #6 or Building #5 to a future tenant.

 

(b)                                 Lessor
shall enter into a contract with a licensed general contractor for the
construction of the Tenant Improvement Work. 
The general contractor shall be selected jointly by Lessor and Lessee
from a list of approved contractors prepared by the Lessor.  The Tenant Improvement Work shall be
performed pursuant to the plans and specifications approved in writing by
Lessor and Lessee.

 

(c)                                  The
Tenant Improvement Work shall be constructed under the direct supervision of
Tarlton Properties, Inc., as construction manager, at a fee of five percent
(5%) of hard construction costs (i.e., the amounts paid to the general
contractor, subcontractors, vendors, and suppliers for labor and materials for
the construction of the Tenant Improvements) as a cost of the Tenant
Improvement Work.  The general
contractor shall perform the work pursuant to a negotiated fixed fee guaranteed
maximum price 

 

3

 

contract.  The
work shall be performed on an “open book” basis with a post-job audit of all
costs by a representative from both Lessee and Tarlton Properties, Inc.

 

6.                                       Security
Deposit.

 

(a)                                  Lessor
acknowledges that Lessor has received from Lessee and is currently holding the sum of Two Hundred Ninety Thousand Seven Hundred
Ninety-eight and Forty Hundredths Dollars
($290,798.40) in cash (the “Security Deposit”), as
security for Lessee’s faithful performance of Lessee’s obligations under this
Lease.

 

(b)                                 Provided
that (1) no default by Lessee under the Lease of the Premises (Building #6,
1360 O’Brien Drive) or under the new Lease between Lessor and Lessee dated
March 26, 2003 of Building #5, 1330 O’Brien Drive, remains uncured as of
any of the refund dates referred to in clause (3) below, (2) Lessee shall not
have been late by more than five (5) days in the payment of rent under either
the Building #6 Lease or the Building #5 Lease at any time during the twelve
(12) months immediately preceding any of the refund dates referred to in clause
(3) below, and (3) Lessee’s audited balance sheet (or Lessee’s balance sheet
certified by Lessee’s chief financial officer if Lessee is not then issuing
audited statements) as of December 31, 2003, December 31, 2004, December 31,
2005, and December 31, 2006 shows that Lessee has cash and marketable
securities (at current market value) of at least Six Million Dollars
($6,000,000), Lessor shall reduce the Security Deposit by refunding to Lessee
Forty-eight Thousand Four Hundred Sixty-six Dollars ($48,466) of the Security
Deposit on March 15 following each such year-end date (i.e., on
March 15, 2004, March 15, 2005, March 15, 2006, and
March 15, 2007).  The foregoing
condition shall apply separately as to each such year (December 31, 2003,
2004, 2005, and 2006) so that if the amount of cash and marketable securities
is less than the required amount as shown on Lessee’s audited balance sheet for
any year end and therefore Lessee is not entitled to receive the reduction in
the Security Deposit on the following March 15, Lessee shall nevertheless
be entitled to the reduction in the Security Deposit if the condition to such
reduction is satisfied in any subsequent year.

 

7.                                       Holding
Over.  Paragraph 19, Holding Over,
of the Lease is hereby deleted in its entirety and the following is substituted
therefore:

 

“7.                                 Holding
Over.  Lessee
shall vacate the Premises and deliver the same to Lessor upon the expiration or
sooner termination of this Lease.  In
the event of holding over by Lessee after the expiration or termination of this
Lease without Lessor’s prior written consent, such holding over shall be on a
month-to-month tenancy and all of the terms and provisions of this Lease shall
be applicable during such period, except that Lessee shall pay Lessor as
Monthly Base Rent during such holdover an amount equal to the greater of (i)
one hundred fifty percent (150%) of the Monthly Base Rent in effect at the
expiration of the term, or (ii) the then market rent for 

 

4

 

comparable research and development/office space; provided, that if
such holdover is with Lessor’s written consent given by Lessor prior to the
expiration or sooner termination of this Lease, the Monthly Base Rent during
such holdover shall be equal to one hundred twenty-five percent (125%) of the
then market rent for comparable research and development/office space, as
reasonably determined by Lessor.  If
such holdover is without Lessor’s written consent, Lessee shall be liable to
Lessor for all costs, expenses, and consequential damages incurred by Lessor as
a result of such holdover.  The rental
payable during such holdover period shall be payable to Lessor on demand.”

 

8.                                       Damage
or Destruction.  Paragraph 20(a),
Damage or Destruction, of the Lease is hereby deleted in its entirety and the
following substituted therefore:

 

“(a)                            In
the event of a total destruction during the lease term from any cause, of (1)
the Building and Improvements, or (2) the Building and Improvements referred to
as Building #5, 1330 O’Brien Drive, Menlo Park, California (the “1330 O’Brien
Drive Premises”) during the term of Lessee’s Lease of said Premises, either
party may elect to terminate this Lease by giving written notice of termination
to the other party within thirty (30) days after the casualty occurs.  A total destruction shall be deemed to have
occurred for this purpose if the Building and Improvements which are the
subject of this Lease or the Building and Improvements consisting of the 1330
O’Brien Drive Premises are destroyed to the extent of seventy-five percent
(75%) or more of the replacement cost thereof. 
If the Lease is not terminated, Lessor shall repair and restore the
Premises and the 1330 O’Brien Drive Premises (if applicable) in a diligent
manner and this Lease shall continue in full force and effect, except that
Monthly Base Rent and Additional Rent of the Premises which are the subject of
this Lease shall be abated in accordance with Paragraph 20(d) below.

 

9.                                       Real
Estate Brokers.  Lessor shall pay a leasing commission to Tarlton Properties,
Inc., Lessor’s broker, in connection with this Agreement pursuant to a separate
agreement between Lessor and said broker. 
Each party represents and warrants to the other party that it has not
had any dealings with any real estate broker, finder, or other person with
respect to this Agreement other than Tarlton Properties, Inc. who has acted as
exclusive leasing agent for Lessor, and BT Commercial and Technology
Commercial, Inc., who have acted as Lessee’s agents, and each party shall hold
harmless the other party from all damages, expenses, and liabilities resulting
from any claims that may be asserted against the other party by any broker,
finder, or other person with whom the other party has or purportedly has dealt,
other than the above named brokers.

 

5

 

10.                                 Continuing
Effect.  The parties acknowledge
that the Lease remains in full force and effect as amended hereby, and with the
initial term extended as provided herein.

 

IN WITNESS WHEREOF, the
parties have executed this Agreement as of the date set forth above.

 

	
   

  	
  “Lessor”

  
	
   

  	
   

  
	
   

  	
  MENLO BUSINESS
  PARK, LLC

  
	
   

  	
  a California
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  J.O. Oltmans, II

  
	
   

  	
   

  	
    J.
  O. Oltmans, II, Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  James R. Swartz

  
	
   

  	
   

  	
    James
  R. Swartz, Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “Lessee”

  
	
   

  	
   

  
	
   

  	
  DEPOMED, INC.,

  
	
   

  	
  a California
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  John F. Hamilton

  
	
   

  	
   

  	
    Its

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  John N. Shell

  
	
   

  	
   

  	
    Its

  

 

6Exhibit
10.2

 

LEASE SUMMARY

 

	
  Date of Lease

  	
   

  	
  April 30, 2003

  
	
   

  	
   

  	
   

  
	
  Lessor:

  	
   

  	
  Menlo Business Park,
  LLC,

  
	
   

  	
   

  	
  a California limited
  liability company

  
	
   

  	
   

  	
   

  
	
  Lessee:

  	
   

  	
  DepoMed, Inc., a
  California corporation

  
	
   

  	
   

  	
   

  
	
  Premises:

  	
   

  	
  Building #5, 1330
  O’Brien Drive, Menlo Park, California 94025

  
	
   

  	
   

  	
   

  
	
  Floor Area:

  	
   

  	
  25,366 rentable square feet

  
	
   

  	
   

  	
   

  
	
  Parcel Size:

  	
   

  	
  1.36 acres

  
	
   

  	
   

  	
   

  
	
  Lessee’s Pro Rata

   Share of Operating

   Expenses:

  	
   

  	
  2.39%

  
	
   

  	
   

  	
   

  
	
  Commencement 

   Date:

  	
   

  	
  May 1, 2003

  
	
   

  	
   

  	
   

  
	
  Initial Term:

  	
   

  	
  Sixty (60) months

  
	
   

  	
   

  	
   

  
	
  Option to Extend:

  	
   

  	
  One (1) option to
  extend – sixty (60) months

  
	
   

  	
   

  	
   

  
	
  Monthly Base Rent:

  	
   

  	
  5/1/03 – 7/31/03

  	
  $10,800 ($1.20 x 9,000 sf)

  
	
   

  	
   

  	
  8/1/03 – 10/31/03

  	
  $21,600 ($1.20 x 18,000 sf)

  
	
   

  	
   

  	
  11/1/03 – 4/30/04

  	
  $30,439.20 ($1.20 x 25,366 sf)

  
	
   

  	
   

  	
  Annual
  CPI Adjustment commencing 5/1/04

  	
  (3% minimum – 6% maximum)

  
	
   

  	
   

  	
   

  
	
  Security Deposit:

  	
   

  	
  $34,259.58

  
	
   

  	
   

  	
   

  
	
  Tenant Improvement 

  	
   

  	
   

  
	
   Allowance:

  	
   

  	
  $253,660 ($10 per sq. ft.)

  
	
   

  	
   

  	
   

  
	
  Addresses for Notice:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Lessor:

  	
   

  	
  Menlo Business Park,
  LLC

  
	
   

  	
   

  	
  c/o Tarlton Properties,
  Inc.

  
	
   

  	
   

  	
  955 Alma Street

  
	
   

  	
   

  	
  Palo Alto, California
  94301

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:  John C. Tarlton, President

  
	
   

  	
   

  	
  Telephone:  (650) 330-3600

  
	
   

  	
   

  	
   

  
	
  Lessee:

  	
   

  	
  DepoMed, Inc.

  
	
   

  	
   

  	
  1360 O’Brien Drive

  
	
   

  	
   

  	
  Menlo Park, California
  94025

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  
	
   

  	
   

  	
  Telephone:

  

 

 

TABLE OF CONTENTS

 

	
  Paragraph

  	
   

  
	
   

  	
   

  
	
  1.

  	
  Lease

  
	
  2.

  	
  Initial Term

  
	
  3.

  	
  Option
  to Extend

  
	
  4

  	
  Monthly
  Base Rent

  
	
  5

  	
  Additional
  Rent; Operating Expenses and Taxes

  
	
  6

  	
  Payment
  of Rent

  
	
  7

  	
  Security
  Deposit

  
	
  8

  	
  Use

  
	
  9

  	
  Hazardous
  Materials

  
	
  10.

  	
  Taxes on Lessee’s Property

  
	
  11.

  	
  Insurance

  
	
  12.

  	
  Indemnification

  
	
  13.

  	
  Tenant Improvement Work

  
	
  14.

  	
  Maintenance
  and Repairs; Alterations; Surrender and Restoration

  
	
  15.

  	
  Utilities and Services.

  
	
  16.

  	
  Liens

  
	
  17.

  	
  Assignment and Subletting

  
	
  18.

  	
  Non-Waiver

  
	
  19.

  	
  Holding Over

  
	
  20.

  	
  Damage or Destruction

  
	
  21.

  	
  Eminent
  Domain

  
	
  22.

  	
  Remedies

  
	
  23.

  	
  Lessee’s Personal Property

  
	
  24.

  	
  Notices

  
	
  25.

  	
  Estoppel Certificate

  
	
  26.

  	
  Signage

  
	
  27.

  	
  Real
  Estate Brokers

  
	
  28.

  	
  Subordination; Attornment

  
	
  29.

  	
  No Termination Right

  
	
  30.

  	
  Lessor’s
  Entry

  
	
  31.

  	
  Attorneys’
  Fees

  
	
  32.

  	
  Compliance with
  CC&Rs

  
	
  33.

  	
  Quiet
  Enjoyment

  
	
  34.

  	
  General
  Provisions

  
			

 

	
  SCHEDULE OF
  EXHIBITS

  
	
   

  
	
   

  	
  EXHIBIT “A”

  	
  Legal Description

  
	
   

  	
  EXHIBIT “B”

  	
  Menlo Business Park
  Master Plan

  
	
   

  	
  EXHIBIT “C”

  	
  Floor Plan

  
	
   

  	
  EXHIBIT “D”

  	
  Commencement Memorandum

  
	
   

  	
  EXHIBIT “E”

  	
  Tenant Improvement Work

  
	
   

  	
  EXHIBIT “F”

  	
  Estoppel Certificate

  

 

i

 

L E A S E

 

Building #5

Menlo Business Park

1330 O’Brien Drive

Menlo Park, California

 

THIS LEASE, referred to herein as “this Lease,” is made and entered into
as of April 30, 2003 by and between MENLO BUSINESS PARK, LLC, a
California limited liability company, hereafter referred to as “Lessor,” and
DEPOMED, INC., a California corporation, hereafter referred to as “Lessee” or
“DepoMed.”

 

RECITALS:

 

A.                                   Lessor is the owner of the real property located in
Menlo Business Park, Menlo Park, California, commonly referred to as 1330
O’Brien Drive, Menlo Park, California, more particularly described on Exhibit
“A” attached hereto and incorporated by reference herein, consisting of a
parcel of land containing approximately 1.36 acres, together with all easements
and appurtenances thereto (the “Land”) and the existing building thereon,
referred to as Building #5, 1330 O’Brien Drive, containing approximately 25,366
rentable square feet, and all other improvements located thereon, including 78
on-site parking spaces (collectively, the “Improvements”).  The Land and Improvements are referred to
herein collectively as the “Premises.” 
The Premises are shown on the Menlo Business Park Master Plan attached
hereto as Exhibit “B.”  Building #5
is sometimes referred to herein as “the Building.”  The floor plan of Building #5 is attached hereto as
Exhibit ”C.”

 

B.                                     Lessor
and Lessee wish to enter into this Lease of the Premises upon the terms and
conditions set forth herein.

 

NOW, THEREFORE, the
parties agree as follows:

 

1.                                       Lease.  Lessor hereby leases to Lessee, and Lessee
leases from Lessor the Premises at the rental and upon all of the terms and
conditions set forth herein.

 

2.                                       Initial Term.

 

(a)                                  The initial term of
this Lease (the “initial term”) shall commence on May 1, 2003 (the
“Commencement Date”).  The Commencement
Date shall be confirmed in writing by Lessor and Lessee by the execution and
delivery of the Commencement Memorandum in the form attached hereto as “Exhibit
“D.”

 

(b)                                 The initial term of
this Lease shall expire, unless sooner terminated in accordance with the
provisions hereof, on April 30, 2008.

 

 

3.                                       Option to Extend.

 

(a)                                  Lessor hereby grants to Lessee
one (1) option to extend the term of this Lease for one period of sixty (60)
calendar months immediately following the expiration of the initial term.  Lessee may exercise the foregoing option to
extend by giving written notice of exercise to Lessor at least six (6) months,
but not more than twelve (12) months, prior to the expiration of the initial
term of this Lease, time being of the essence; provided that if Lessee is
currently in a state of uncured default after the expiration of notice and cure
periods, if applicable (referred to herein as “in default”) under this Lease at
the time of exercise of the option or on the commencement date of the option
extension period, such notice shall be void and of no force or effect.  Such option extension period, if exercised,
shall be upon the same terms and conditions as the initial term of this Lease,
including the payment by Lessee of the Operating Expenses pursuant to Paragraph
5, except that (i) the Monthly Base Rent during the option period shall be
determined as set forth in Paragraph 3(c) hereof, (ii) there shall be no
additional option to extend, and (iii) Lessee shall accept the Premises in
their then “as is” condition and Paragraph 13, Tenant Improvement Work, shall
not apply to the option period.  If
Lessee does not exercise the option in a timely manner the option shall lapse,
time being of the essence.

 

(b)                                 The option to extend
granted to Lessee by this Paragraph 3 is granted for the personal benefit of
DepoMed only, and shall be exercisable only by DepoMed or by a “permitted
affiliate” under Paragraph 17(f) below. 
Said option may not be assigned or transferred by said entity to any
assignee or sublessee other than a permitted affiliate.

 

(c)                                  The initial Monthly Base
Rent for the Premises during the option extension period shall be determined
pursuant to the provisions of this subparagraph (c) and, subject to
subparagraph (e) below, shall equal ninety-five percent (95%) of the then
current fair market rental for the Premises on the commencement date of the
option extension period as determined by agreement between the Lessor and
Lessee, if possible, and by the process of appraisal if the parties cannot
reach agreement.

 

If Lessor and Lessee are unable to agree upon the amount equal to
ninety-five percent (95%) of the then current fair market rent for the
Premises, said amount shall be determined by appraisal.  The appraisal shall be performed by one
appraiser if the parties are able to agree upon one appraiser.  If the parties are unable to agree upon one
appraiser, each party shall appoint an appraiser and the two appraisers shall
select a third appraiser.  Each
appraiser selected shall be a member of the American Institute of Real Estate
Appraisers (AIREA) with at least five (5) years of full-time commercial real
estate appraisal experience in the Menlo Park office market.

 

If only one appraiser is selected,
that appraiser shall notify the parties in simple letter form of its
determination of the amount equal to ninety-five percent (95%) of the fair
market Monthly Base Rent for the Premises on the commencement date of the
option extension period within fifteen (15) days following its selection.  Said appraisal 

 

2

 

shall be binding on the parties as
the appraised current ninety-five percent (95%) of the “fair market rental” for
the Premises which shall be based upon the then current rental paid by tenants
for premises in the vicinity of the Premises of similar age, size, quality of
construction and specifications. If multiple appraisers are selected, each
appraiser shall within ten (10) days of being selected make its determination
of the amount equal to ninety-five percent (95%) of the current fair market
Monthly Base Rent for the Premises in simple letter form.  If two (2) or more of the appraisers agree
on said amount, such agreement shall be binding upon the parties.  If multiple appraisers are selected and two
(2) appraisers are unable to agree on said amount, the amount equal to
ninety-five percent (95%) of the fair market Monthly Base Rent for the Premises
shall be determined by taking the mean average of the appraisals; provided,
that any high or low appraisal, differing from the middle appraisal by more
than ten percent (10%) of the middle appraisal, shall be disregarded in
calculating the average.  Said initial
Monthly Base Rent shall be adjusted annually on the anniversary of the
commencement of the option term in the manner determined by the appraisers to
be consistent with the then prevailing market practice for comparable space.

 

If only one appraiser is selected, then each party shall pay one-half
of the fees and expenses of that appraiser. 
If three appraisers are selected, each party shall bear the fees and
expenses of the appraiser it selects and one-half of the fees and expenses of
the third appraiser.

 

(d)                                 Thereafter, provided
that Lessee has previously given timely notice to Lessor of the exercise by
Lessee of the option to extend the term, Lessor and Lessee shall execute an
amendment to this Lease stating that the initial Monthly Base Rent for the
Premises during the option extension period shall be equal to the determination
by appraisal.

 

(e)                                  Notwithstanding anything to
the contrary contained in subparagraph (c) above, in no event shall the Monthly
Base Rent at the commencement of the option extension period be less than the
Monthly Base Rent in effect immediately prior to the commencement of the option
extension period.

 

4.                                       Monthly Base Rent.

 

(a)                                  Commencing on the Commencement
Date and continuing on the first day of each calendar month thereafter during
the initial term, Lessee shall pay to Lessor in monthly installments in advance
Monthly Base Rent in lawful money of the United States as follows:

 

(1)                                  Commencing on May 1, 2003
and continuing through July 31, 2003, the sum of Ten Thousand Eight
Hundred Dollars ($10,800) (9,000 rentable square feet x $1.20/rentable square
foot/month).

 

3

 

(2)                                  Commencing on August 1,
2003 and continuing through October 31, 2003, the sum of Twenty-one
Thousand Six Hundred Dollars ($21,600) (18,000 rentable square feet x
$1.20/rentable square foot/month).

 

(3)                                  Commencing on November 1,
2003 and continuing through April 30, 2004, the sum of Thirty Thousand
Four Hundred Thirty-nine and Twenty Hundredths Dollars ($30,439.20) (25,366
rentable square feet x $1.20/rentable square foot/month).  Commencing on November 1, 2003 and
continuing for the remainder of the initial term, Monthly Base Rent shall be
calculated based on the entire 25,366 rentable square feet of the Premises.

 

(b)                                 Upon the execution and
delivery of this Lease by Lessor and Lessee, Lessee shall pay to Lessor the sum
of Ten Thousand Eight Hundred Dollars ($10,800) representing the initial
Monthly Base Rent for the entire Premises.

 

(c)                                  The Monthly Base Rent
shall be adjusted as of each anniversary of the Commencement Date during the
initial term, commencing with the first anniversary of the Commencement Date
and continuing on each anniversary of the Commencement Date thereafter during
the initial lease term (the “Rental Adjustment Date”) to reflect any increases
in the cost of living.  The adjustment
shall be calculated upon the basis of the United States Department of Labor,
Bureau of Labor Statistics Consumer Price Index, all items,  for all Urban Consumers - San
Francisco-Oakland-San Jose (1982-84=100), hereafter referred to as the
“Index.”  The Index for said subgroup
published most recently as of the end of the calendar month immediately
preceding the month in which the Commencement Date occurs shall be considered
the “base Index.”

 

(d)                                 The Monthly Base Rent
shall be adjusted as of each Rental Adjustment Date to an amount equal to the
product obtained by multiplying $30,439.20 (the Monthly Base Rent for the
Premises commencing on November 1, 2003 referred to in Paragraph 4(a)(3))
by a fraction, the numerator of which is the Index most recently published as
of the end of the calendar month immediately preceding each Rental Adjustment
Date and the denominator of which is the base Index; provided that in no event
shall the Monthly Base Rent be increased on any Rental Adjustment Date to an
amount less than three percent (3%) per annum or more than six percent (6%) per
annum, calculated for each individual year from the previous Rental Adjustment
Date, of the Monthly Base Rent payable before such Rental Adjustment Date.

 

(e)                                  When the new Monthly
Base Rent is determined for each Rental Adjustment Date, Lessor shall give Lessee
written notice of the amount of the new Monthly Base Rent and how the new
Monthly Base Rent figure was computed in accordance with subparagraphs 4(c) and
4(d) above.  Lessee shall pay to Lessor
retroactively any unpaid increase in Monthly Base Rent due from and after the
Rental Adjustment Date.  If the Index
does not exist on any Rental Adjustment Date in the same format as referred to
in subparagraph (b), Lessor shall substitute in lieu thereof an index reasonably
comparable to the Index referred to above which is acceptable to Lessee and 

 

4

 

which is then
published by the Bureau of Labor Statistics, or successor or similar
governmental agency, or if no governmental agency then publishes an index,
Lessor shall substitute therefor any index commonly accepted which is published
by a reputable private organization.

 

5.                                       Additional Rent; Operating Expenses
and Taxes.

 

(a)                                  In addition to the
Monthly Base Rent payable by Lessee pursuant to Paragraph 4, Lessee shall pay
to Lessor, as “Additional Rent,” (i) the operating expenses of the
Premises, and (ii) Lessee’s pro rata share of the operating expenses of
Menlo Business Park of which the Premises are a part, in accordance with
Paragraph 5(b) hereof, and (iii) real property taxes and assessments
levied or assessed against the Premises in accordance with Paragraph 5(c)
hereof.  Lessee’s pro rata share of the
operating expenses of Menlo Business Park is 2.39% based upon the ratio of the
number of square feet of the Land to the total number of square feet of land in
Menlo Business Park.  The operating
expenses of Menlo Business Park currently include maintenance of the common
areas of Menlo Business Park, parking lot lighting (cost of electricity and
maintenance of the fixtures), maintenance of the network conduit, all landscape
maintenance and irrigation of Menlo Business Park, Lessor’s insurance coverages
of Menlo Business Park, and security patrol. 
The operating expenses of Menlo Business Park may include other items
from time to time during the term of this Lease.  Monthly Base Rent and Additional Rent are referred to herein
collectively as “rent.”

 

(b)                                 “Operating Expenses,”
as used herein, shall include all direct costs incurred by Lessor in the of
management, operation, maintenance, repair and replacement of the Premises,
including the cost of all maintenance, repairs, and restoration of the Premises
performed by Lessor pursuant to Paragraphs 14(b) and 14(c) hereof, as
determined by generally accepted accounting principles (unless excluded by this
Lease), including, but not limited to:

 

Personal property taxes related to the Premises; any parking taxes or
parking levies imposed on the Premises in the future by any governmental
agency; a pro rata portion of the management fee charged for the management and
operation of Menlo Business Park, in an amount equal to three percent (3%) of
the total gross income received by Lessor from the operation of Menlo Business
Park (including Monthly Base Rent and Additional Rent received from tenants);
water and sewer charges; waste disposal; insurance premiums for insurance
coverages maintained by Lessor pursuant to Paragraph 11(b) hereof; license,
permit, and inspection fees; charges for electricity, heating, air
conditioning, gas, and any other utilities (including, without limitation, any
temporary or permanent utility surcharge or other exaction); security;
maintenance, repair, and replacement of the roof membrane; painting and
repairing, interior and exterior; maintenance and replacement of floor and
window coverings; repair, maintenance, and replacement of air-conditioning,
heating, mechanical and electrical systems, elevators, plumbing and sewage
systems; janitorial service; landscaping, gardening, and tree trimming;
glazing; repair, maintenance, cleaning, sweeping, striping, and resurfacing of 

 

5

 

the parking area;
exterior Building lighting and parking lot lighting; supplies, materials,
equipment and tools in the maintenance of the Premises; costs for accounting
services incurred in the calculation of Operating Expenses and Taxes as defined
herein; and the cost of any other capital expenditures for any improvements or
changes to the Building which are required by laws, ordinances, or other
governmental regulations adopted after the Commencement Date, or for any items
or capital expenditures voluntarily made by Lessor which are intended to and
have the effect of reducing Operating Expenses; provided, however, that except
for capital improvements required because of Lessee’s specific use of the
Premises, if Lessor is required to or voluntarily makes such capital
improvements, Lessor shall amortize the cost of said improvements over the
useful life of said improvements (together with interest on the unamortized
balance at the rate equal to the effective rate of interest on Lessor’s bank
line of credit at the time of completion of said improvements, but in no event
in excess of twelve percent (12%) per annum) as an Operating Expense in accordance
with generally accepted accounting principles, except that with respect to
capital improvements made to save Operating Expenses such amortization shall
not be at a rate greater than the actual savings in Operating Expenses.  Operating Expenses shall also include any
other expense or charge, whether or not described herein not specifically
excluded by other provisions of this Lease, which in accordance with generally
accepted accounting principles would be considered an expense of managing,
operating, maintaining, and repairing the Premises.

 

(c)                                  Real property taxes
and assessments upon the Premises, during each lease year or partial lease year
during the term of this Lease are referred to herein as “Taxes.”

 

As used herein, “Taxes” shall mean:

 

(1)                                  all real estate
taxes, assessments and any other taxes levied or assessed against the Premises
including the Land, the Building, and all improvements located thereon,
including any increase in Taxes resulting from a reassessment following any
transfer of ownership of the Premises or any interest therein or following any
improvements to the Premises after the Commencement Date; and

 

(2)                                  all other taxes which
may be levied in lieu of real estate taxes, assessments, and other fees,
charges, and levies, general and special, ordinary and extraordinary,
unforeseen as well as foreseen, of any kind and nature by any authority having
the direct or indirect power to tax, including without limitation any
governmental authority or any improvement or other district or division
thereof, for public improvements, services, or benefits which are assessed,
levied, confirmed, imposed, or become a lien (i) upon the Premises, and/or
any legal or equitable interest of Lessor in any part thereof; or
(ii) upon this transaction or any document to which Lessee is a party
creating or transferring any interest in the Premises; and (iii) any tax or
excise, however described, imposed in addition to, or in substitution partially
or totally of, any tax previously included within the definition of “Taxes” or
any tax the nature of which was previously included in the definition “Taxes.”

 

6

 

Not included within the definition of “Taxes” are any net income,
profits, transfer, franchise, estate or inheritance taxes imposed by any
governmental authority.  “Taxes” also
shall not include penalties or interest charges assessed on delinquent Taxes so
long as Lessee is not in default in the payment of Monthly Base Rent or
Additional Rent.

 

With respect to any assessments which may be levied against or upon the
Premises, or the Land, which under the laws then in force may be evidenced by
improvement or other bonds, or may be paid in annual installments, only the
amount of such annual installment (with appropriate proration of any partial
year) and statutory interest shall be included within the computation of the
annual Taxes levied against the Premises, the Building and Improvements
thereon, and the Land.

 

(d)                                 The following costs
(“Costs”) shall be excluded from the definition of Operating Expenses:

 

(1)                                  Costs occasioned by
the act, omission or violation of law by Lessor, or its respective agents,
employees or contractors;

 

(2)                                  Costs for which
Lessor receives reimbursement from others, including reimbursement from
insurance;

 

(3)                                  Interest, charges and
fees incurred on debt or payments on any deed of trust or ground lease on the
Premises;

 

(4)                                  Advertising or
promotional costs or other costs incurred by Lessor in procuring tenants for
the Premises or other portions of Menlo Business Park;

 

(5)                                  Costs incurred in
repairing, maintaining or replacing any structural elements of the Building for
which Lessor is responsible pursuant to Paragraph 14(a) hereof;

 

(6)                                  Any wages, bonuses or
other compensation of employees above the grade of building manager and any
executive salary of any officer or employee of Lessor, including fringe
benefits other than insurance plans and tax-qualified benefit plans, or any
fee, profit or compensation retained by Lessor or its affiliates for management
and administration of the Premises in excess of the management fee referred to
in Paragraph 5(b) of this Lease;

 

(7)                                  General office
overhead and general and administrative expenses of Lessor, except as
specifically provided in Paragraph 5(b); and

 

(8)                                  Leasing expenses and
broker commissions payable by Lessor.

 

Lessor shall at all times use its best efforts to operate the Premises
in an economically reasonable manner at costs not disproportionately higher
than those 

 

7

 

experienced by
other comparable premises in the market area in which the Premises are located
(Menlo Park).

 

(e)                                  At the Commencement
Date, and as close as reasonably possible to the end of each calendar year
thereafter, Lessor shall notify Lessee of the Operating Expenses estimated by
Lessor for the calendar year 2003, and for each following calendar year.  Concurrent with such notice, Lessor shall
provide a description of such Operating Expenses and Taxes.  Commencing on the Commencement Date, and on
the first (1st) day of each calendar month thereafter, Lessee shall
pay to Lessor, as Additional Rent, one-twelfth (1/12th) of the estimated
Operating Expenses and Taxes.  If at any
time during any such calendar year, it appears to Lessor that the Operating
Expenses or Taxes for such year will vary from Lessor’s estimate, Lessor may,
by written notice to Lessee, revise Lessor’s estimate for such year and the
Additional Rent and Taxes payments by Lessee for such year shall thereafter be
based upon such revised estimate. 
Lessor shall furnish to Lessee with such revised estimate written
verification showing that the actual Operating Expenses or Taxes are greater
than Lessor’s estimate.  The increase in
the monthly installments of Additional Rent and Taxes resulting from Lessor’s
revised estimate shall not be retroactive, but the Additional Rent and Taxes
for each calendar year shall be subject to adjustment between Lessor and Lessee
after the close of the calendar year, as provided below.

 

Within approximately ninety (90) days after the expiration of each
calendar year of the term, Lessor shall furnish Lessee a statement certified by
a responsible employee or agent of Lessor (the “Operating Statement”) with
respect to such year, prepared by an employee or agent of Lessor, showing
Operating Expenses and Taxes broken down by component expenses, Base Taxes and
Base Operating Expenses of the Premises broken down by component expenses, and
the total payments made by Lessee on the basis of any previous estimate of such
Operating Expenses and Taxes, all in sufficient detail for verification by
Lessee.  Unless Lessee raises any
objections to the Operating Statement within ninety (90) days after receipt of
the same, such statement shall conclusively be deemed correct and Lessee shall
have no right thereafter to dispute such statement or any item therein or the
computation of Operating Expenses and/or Taxes.  Lessee or its accountants shall have the right to inspect and
audit Lessor’s books and records with respect to this Lease once each Lease
Year to verify actual Operating Expenses and/or Taxes.  Lessor’s books and records shall be kept in
accord with generally accepted accounting principles.  If Lessee’s audit of the Operating Expenses and/or Taxes for any
year reveals a net overcharge of more than five percent (5%), Lessor promptly
shall reimburse Lessee for the cost of the audit; otherwise, Lessee shall bear
the cost of Lessee’s audit.  If Lessee
objects to Lessor’s Operating Statement, Lessee shall continue to pay on a
monthly basis the Operating Expenses and/or Taxes based upon the prior year’s
Operating Statement until the dispute is resolved.

 

If the Operating Expenses and Taxes for the year as finally determined
exceeds the total payments made by Lessee based on Lessor’s estimates, Lessee
shall pay to Lessor the deficiency, within thirty (30) days after the receipt
of Lessor’s Operating 

 

8

 

Statement.  If the total payments made by Lessee based
on Lessor’s estimate of the Operating Expenses and/or Taxes exceed the
Operating Expenses and/or Taxes, Lessee’s extra payment, plus the cost of the
audit if charged to Lessor, shall be credited against payments of Monthly Base
Rent and Additional Rent next due hereunder.

 

Notwithstanding the termination of this Lease, within thirty (30) days
after Lessee’s receipt of Lessor’s Operating Statement or the completion of
Lessee’s audit regarding the Operating Expenses and/or Taxes for the calendar
year in which this Lease terminates, Lessee shall pay to Lessor or shall
receive from Lessor, as the case may be, an amount equal to the difference
between the Operating Expenses and/or Taxes for such year, as finally
determined, and the amount previously paid by Lessee on account thereof
(prorated to the expiration date or the termination date of this Lease).

 

6.                                       Payment of Rent.

 

(a)                                  All rent shall be due
and payable in lawful money of the United States of America at the address of
Lessor set forth in Paragraph 24, “Notices,” without deduction or offset and
without prior demand or notice, unless otherwise specified herein.  Monthly Base Rent and Additional Rent shall
be payable monthly, in advance, on the first day of each calendar month.  Lessee’s obligation to pay rent for any
partial month at the commencement of the initial term, for the partial month
immediately prior to the Rental Adjustment Date (if the Rental Adjustment Date
is other than the first day of the calendar month), and for any partial month
at the expiration or termination of the lease term shall be prorated on the
basis of a thirty (30) day month.

 

(b)                                 If any installment of
Monthly Base Rent, Additional Rent or any other sum due from Lessee is not
received by Lessor within five (5) days after the same is due, Lessee shall pay
to Lessor an additional sum equal to five percent (5%) of the amount overdue as
a late charge.  The parties agree that
this late charge represents a fair and reasonable estimate of the costs that
Lessor will incur by reason of the late payment by Lessee.  Acceptance of any late charge shall not
constitute a waiver of Lessee’s default with respect to the overdue
amount.  Any amount not paid within ten
(10) days after Lessee’s receipt of written notice that such amount is due
shall bear interest from the date due until paid at the lesser rate of (1) the
prime rate of interest as published in the “Wall Street Journal,” plus five
percent (5%) or (2) the maximum rate allowed by law (the “Interest Rate”), in
addition to the late payment charge.

 

Initials:  Lessor
                  Lessee

 

7.                                       Security Deposit.

 

(a)                                  Lessee
shall deposit with Lessor upon execution hereof the sum of Thirty-four Thousand
Two Hundred Fifty-nine and Fifty-eight Hundredths
Dollars ($34,259.58) (the “Security Deposit”), as
security for Lessee’s faithful performance of Lessee’s obligations under this
Lease.  If Lessee fails to pay Monthly
Base Rent or 

 

9

 

Additional Rent or charges due hereunder, or otherwise defaults under
this Lease (as defined in Paragraph 22), Lessor may use, apply or retain all or
any portion of said Security Deposit to the extent reasonably necessary to cure
the default, for the payment of any amount due Lessor, and to reimburse or
compensate Lessor for any liability, cost, expense, loss or damage (including
attorneys’ fees) which Lessor may suffer or incur by reason thereof.  If Lessor uses or applies all or any portion
of the Security Deposit, Lessee shall within ten (10) days after written
request therefor deposit moneys with Lessor sufficient to restore the Security
Deposit to the original amount required by this Lease.  Lessor shall not be required to keep all or
any part of the Security Deposit separate from its general accounts.

 

(b)                                 Lessor shall, at the expiration or earlier termination of the
term hereof and after Lessee has vacated the Premises, return to Lessee (or, at
Lessor’s option, to the last assignee, if any, of Lessee’s interest herein),
that portion of the Security Deposit not used or applied by Lessor, provided
that there is then no uncured event of default by Lessee hereunder and there is
then no unsatisfied claim by Lessor against Lessee for damages in the event
this Lease has been terminated.  No part of the Security Deposit shall be considered to be held
in trust, to bear interest or other increment for its use, or to be prepayment
for any moneys to be paid by Lessee under this Lease.

 

8.                                       Use.  Lessee shall use and occupy the Premises for
general office uses, bio-pharmaceutical research and development and
manufacturing, warehousing, and for such other uses which are permitted by
applicable zoning ordinances and the covenants, conditions, and restrictions
for Menlo Business Park and which are reasonably approved by Lessor in writing,
and for no other use or purpose without Lessor’s prior written consent.  Use of the Premises for the manufacture of
integrated circuits or the manufacture of other electronic components is
expressly prohibited.  Any use of the
Premises by Lessee or by any sublessee or assignee approved by Lessor pursuant
to Paragraph 17 shall comply with the provisions of this Paragraph 8.

 

9.                                       Hazardous Materials.

 

(a)                                  The term “Hazardous
Materials” as used in this Lease shall include any substance defined as a
“hazardous substance,” “toxic substance,” “industrial process waste,” or
“special waste” in any Environmental Laws as hereafter defined. Hazardous
Materials shall include, but not be limited to, petroleum, gasoline, natural
gas, natural gas liquids, liquified natural gas, synthetic gas, and/or crude
oil or any products, by-products or fractions thereof.

 

(b)                                 Lessor represents and
warrants that to the best of John C. Tarlton’s current actual knowledge as of
the date of this Lease (i) no Hazardous Materials are currently present in
the Building or at the Premises or the soil, surface water, or groundwater
thereof, (ii) no underground storage tanks are present at the Premises,
and (iii) no action, proceeding or claim is pending or threatened
regarding the Building or the Premises concerning any Hazardous Materials or
pursuant to any Environmental Law.  

 

10

 

Lessor further
represents and warrants that Lessor has delivered to Lessee prior to the date
of this Lease true, correct and complete copies of all studies, audits,
reports, investigations, inspections, and correspondence in Lessor’s possession
regarding the presence or absence of Hazardous Materials in, on, under or about
the Premises or the Building and/or the compliance or non-compliance of the
Premises or the Building with Environmental Laws.

 

(c)                                  Lessee shall not
engage in any activity in or on the Premises which constitutes a Reportable Use
of Hazardous Materials without the express prior written consent of Lessor and
timely compliance (at Lessee’s expense) with all Environmental Laws.  “Reportable Use” shall mean (i) the
installation or use of any above or below ground storage tank, (ii) the
generation, possession, storage, use, transportation, or disposal of Hazardous
Materials that require a permit from, or with respect to which a report,
notice, registration or business plan is required to be filed with, any
governmental authority, and/or (iii) the presence at the Premises of Hazardous
Materials with respect to which any Environmental Law requires that a notice be
given to persons entering or occupying the Premises or neighboring
properties.  Notwithstanding the
foregoing, Lessee may use any ordinary and customary materials reasonably
required to be used in the normal course of Lessee’s agreed use of the
Premises, so long as such use is in compliance with all Environmental Laws, is
not a Reportable Use, and does not expose the Premises or neighboring property
to any meaningful risk of contamination or damage or expose Lessor to any
liability therefor.  In addition, Lessor
may condition its consent to any Reportable Use upon receiving such additional
assurances as Lessor reasonably deems necessary to protect itself, the public,
the Premises and/or the environment against damage, contamination, injury
and/or liability, including, but not limited to, the installation (and removal
on or before Lease expiration or termination) of protective modifications (such
as concrete encasements) and/or increasing the Security Deposit.

 

(d)                                 “Environmental Laws”
shall mean and include any Federal, State, or local statute, law, ordinance,
code, rule, regulation, order, or decree regulating, relating to, or imposing
liability or standards of conduct concerning, any hazardous, toxic, or dangerous
waste, substance, element, compound, mixture or material, as now or at any time
hereafter in effect including, without limitation, California Health and Safety
Code §§25100 et seq., §§25300 et seq., Sections 25281(f) and 25501 of the
California Health and Safety Code, Section 13050 of the Water Code, the Federal
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. §§9601 et seq. (“CERCLA”), the Superfund Amendments and
Reauthorization Act, 42 U.S.C. §§9601 et seq., the Federal Toxic Substances
Control Act, 15 U.S.C. §§2601 et seq., the Federal Resource Conservation and
Recovery Act as amended, 42 U.S.C. §§6901 et seq., the Federal Hazardous
Material Transportation Act, 49 U.S.C. §§1801 et seq., the Federal Clean Air
Act, 42 U.S.C. §7401 et seq., the Federal Water Pollution Control Act, 33
U.S.C. §1251 et seq., the River and Harbors Act of 1899, 33 U.S.C. §§401 et
seq., and all rules and regulations of the EPA, the California Environmental
Protection Agency, or any other state or federal department, board or any other
agency or governmental board or entity having 

 

11

 

jurisdiction over
the environment, as any of the foregoing have been, or are hereafter amended.

 

(e)                                  If Lessee knows, or
has reasonable cause to believe, that Hazardous Materials have come to be
located in, on, under or about the Premises, other than as previously consented
to by Lessor, Lessee shall immediately give written notice of such fact to Lessor
and provide Lessor with a copy of any report, notice, claim or other
documentation which it has concerning the presence of such Hazardous Materials.

 

(f)                                    Lessee and Lessee’s
agents, employees, and contractors shall not cause any Hazardous Materials to be
discharged into the plumbing or sewage system of the Building or into or onto
the Land underlying or adjacent to the Building in violation of any
Environmental Laws.  Lessee shall
promptly, at Lessee’s expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination caused by Lessee or caused by any of Lessee’s
employees, agents, or contractors, and for the maintenance, security and/or
monitoring of the Premises or neighboring properties if such contamination is
caused by a release or emission of any Hazardous Materials by Lessee or by any
of Lessee’s employees, agents, or contractors.

 

(g)                                 Lessee shall
indemnify, defend and hold Lessor harmless from any and all claims, damages,
fines, judgments, penalties, costs, liabilities or losses (including, without
limitation, any and all sums paid for settlement of claims, attorneys’ fees,
consultant and expert fees) arising during or after the term (as such may be
extended) from or in connection with the presence of Hazardous Materials in or
on the Premises, the Building or Menlo Business Park as a result of Lessee’s
breach of the foregoing covenant, or as a result of the negligence, willful
misconduct or other acts of Lessee, Lessee’s employees, agents, contractors or
invitees.  Without limitation of the
foregoing, this indemnification shall include any and all costs incurred due to
any investigation of the site or any cleanup, removal or restoration mandated
by a federal, state or local agency or political subdivision.  The foregoing indemnity shall survive the
expiration or earlier termination of this Lease.

 

(h)                                 Lessor shall
indemnify, defend and hold Lessee harmless from any and all claims, damages,
fines, judgments, penalties, costs, liabilities or losses (including, without
limitation, any and all sums paid for settlement of claims, attorneys’ fees,
consultant and expert fees) arising before, during or after the term (as such
may be extended) from or in connection with the presence of Hazardous Materials
in or on the Premises, the Building or Menlo Business Park, unless the (1)
Hazardous Materials are present in whole or in part as a result of the breach
of this Lease by Lessee, or the negligence, willful misconduct, or other acts
of Lessee, Lessee’s employees, agents, contractors or invitees; or (2) such
Hazardous Materials have flowed, diffused, migrated, or percolated into, onto,
or under the Premises, the Building, or Menlo Business Park from other property
after the Commencement Date.  Without
limitation of the foregoing, this indemnification shall include any and all
costs incurred due to any investigation of the site 

 

12

 

or any cleanup,
removal or restoration mandated by a federal, state or local agency or
political subdivision, except to the extent the Hazardous Materials are present
as a result of the negligence, willful misconduct or other acts of Lessee,
Lessee’s agents, employees, contractors or invitees. The foregoing indemnity
shall survive the expiration or earlier termination of this Lease.

 

10.                                 Taxes on Lessee’s Property.  Lessee shall pay before delinquency any and
all taxes, assessments, license fees, and public charges levied, assessed, or
imposed and which become payable during the initial lease term and any
extension thereof upon Lessee’s equipment, fixtures, furniture, and personal
property installed or located in the Premises.

 

11.                                 Insurance.

 

(a)                                  Lessee shall, at
Lessee’s sole cost and expense, provide and keep in force commencing with the
Commencement Date of the initial lease term and continuing during the initial
lease term and the option extension period if exercised, a general commercial
liability insurance policy with a recognized casualty insurance company
qualified to do business in California, insuring against any and all liability
occasioned by any occurrence in, on, about, or related to the Premises, or
arising out of the condition, use, occupancy, alteration or maintenance of the
Premises, and covering the contractual liability referred to in Paragraph 12(a)
of this Lease, having a combined single limit for both bodily injury and
property damage in an amount not less than Five Million Dollars
($5,000,000).  All such insurance
carried by Lessee shall be in a form reasonably satisfactory to Lessor and its
mortgage lender and shall be carried with companies that have a general
policyholder’s rating of not less than “A” and a financial rating of not less
than Class “X” in the most current edition of Best’s Insurance Reports; shall
provide that such policies shall not be subject to material alteration or
cancellation except after at least thirty (30) days’ prior written notice to
Lessor; and shall be primary as to Lessor. 
Prior to the Commencement Date and upon renewal of such policies not
less than fifteen (15) days prior to the expiration of the term of such
coverage, Lessee shall deliver to Lessor certificates of insurance confirming
such coverage, together with evidence of the payment of the premium therefor,
naming Lessor and Lessor’s property manager as additional insureds.  If Lessee fails to procure and maintain the
insurance required hereunder, Lessor may, but shall not be required to, order
such insurance at Lessee’s expense and Lessee shall reimburse Lessor for all
costs incurred by Lessor with respect thereto. 
Lessee’s reimbursement to Lessor for such amounts shall be deemed
Additional Rent, and shall include all sums disbursed, incurred or deposited by
Lessor, including Lessor’s costs, expenses and reasonable attorneys’ fees with
interest thereon at the Interest Rate.

 

(b)                                 Lessor shall obtain
and carry in Lessor’s name, as insured, as an Operating Expense of the Premises
as provided in Paragraph 5(b), during the lease term, “all risk” property
insurance coverage (with rental loss insurance coverage for a period of one
year), flood insurance, public liability and property damage insurance, and
insurance against such other risks or casualties as Lessor shall determine,
including, but not limited to, insurance coverages required of Lessor by the
beneficiary of any deed of trust which 

 

13

 

encumbers the
Property, including earthquake insurance coverage insuring Lessor’s interest in
the Premises (including the Tenant Improvement Work performed pursuant to
Paragraph 13 and any other leasehold improvements to the Premises
constructed by Lessor or by Lessee with Lessor’s prior written approval) in an
amount not less than the full replacement cost of the Building and all other
Improvements from time to time.  The
proceeds of any such insurance shall be payable solely to Lessor and Lessee
shall have no right or interest therein. 
Lessor shall have no obligation to insure against loss by Lessee to Lessee’s
leasehold improvements installed at Lessee’s expense, or Lessee’s equipment,
fixtures, furniture, or other personal property of Lessee in or about the
Premises occurring from any cause whatsoever. 
Lessor’s public liability insurance shall provide for contractual
liability referred to in Paragraph 12(b) of this Lease.

 

(c)                                  Notwithstanding
anything to the contrary contained in this Lease, the parties release each
other, and their respective authorized representatives, employees, officers,
directors, shareholders, managers, members, assignees, subtenants, and property
managers, from any claims for damage to any person or to the Premises and to
the fixtures, personal property, leasehold improvements and alterations of
either Lessor or Lessee in or on the Premises that are caused by or result from
risks required by this Lease to be insured against or actually insured against
under any property insurance policies carried by the parties and in force at
the time of any such damage, whichever is greater. This waiver applies whether
or not the loss is due to the negligent acts or omissions of Lessor or Lessee
or their respective officers, directors, employees, agents, contractors, or
invitees.

 

(d)                                 Each party shall cause
each property insurance policy obtained by it to provide that the insurance
company waives all right of recovery by way of subrogation against either party
in connection with the above waiver and any damage covered by any policy;
provided, however, that such provision or endorsement shall not be required if
the applicable policy of insurance permits the named insured to waive rights of
subrogation on a blanket basis, in which case the blanket waiver shall be
acceptable.  Neither party shall be
liable to the other for any damage caused by fire or any of the risks insured
against under any insurance policy required by this Lease.

 

12.                                 Indemnification.

 

(a)                                  Lessee waives all
claims against Lessor for damages to property, or to goods, wares, and
merchandise stored in, upon, or about the Premises, and for injuries to persons
in, upon, or about the Premises from any cause arising at any time, except as
may be caused by the negligence or willful misconduct of Lessor or its
employees, agents or contractors. 
Lessee shall indemnify, defend, and hold harmless Lessor from claims,
suits, actions, or liabilities for personal injury, death or for loss or damage
to property that arise from (1) any activity, work, or thing done or permitted
by Lessee in or about the Premises, (2) for bodily injury or damage to property
which arises in or about the Land, the Building, or the Improvements to the
extent the injury or damage to property results from the negligent acts or
omissions of Lessee, its employees, agents or contractors, and (3) 

 

14

 

based on any event
of default by Lessee in the performance of any obligation on Lessee’s part to
be performed under this Lease.

 

(b)                                 Lessor shall
indemnify, defend, and hold harmless Lessee from claims, suits, actions, or
liabilities for personal injury, death or for loss or damage to property that
arise from (1) any activity, work, or thing done, permitted or suffered by
Lessor in or about the Premises, (2) for bodily injury or damage to property
which arises in or about the Land, the Building or the Improvements to the
extent the injury or damage to property results from the negligent acts or
omissions of Lessor, its employees, agents or contractors, and (3) based on any
breach or default by Lessor in the performance of any obligation on Lessor’s
part to be performed under this Lease.

 

(c)                                  In the absence of
comparative or concurrent negligence on the part of Lessee or Lessor, their
respective agents, affiliates, and subsidiaries, or their respective officers,
directors, members, employees or contractors, the foregoing indemnities by
Lessee and Lessor shall also include reasonable costs, expenses and attorneys’
fees incurred in connection with any indemnified claim or incurred by the
indemnitee in successfully establishing the right to indemnity.  The indemnitor shall have the right to
assume the defense of any claim subject to the foregoing indemnities with
counsel reasonably satisfactory to the indemnitee.  The indemnitee agrees to cooperate fully with the indemnitor and
its counsel in any matter where the indemnitor elects to defend, provided the
indemnitor shall promptly reimburse the indemnitee for reasonable costs and
expenses incurred in connection with its duty to cooperate.

 

The foregoing indemnities are conditioned upon the indemnitee providing
prompt notice to the indemnitor of any claim or occurrence that is likely to
give rise to a claim, suit, action or liability that will fall within the scope
of the foregoing indemnities, along with sufficient details that will enable
the indemnitor to make a reasonable investigation of the claim.

 

When the claim is caused by the joint negligence or willful misconduct of
Lessee and Lessor or by the indemnitor party and a third party unrelated to the
indemnitor party (except indemnitor’s agents, officers, employees or invitees),
the indemnitor’s duty to indemnify and defend shall be proportionate to the
indemnitor’s allocable share of joint negligence or willful misconduct.

 

(d)                                 Lessor shall not be
liable to Lessee for any damage because of any act or negligence of any other
owner or occupant of adjoining or contiguous property, nor for overflow,
breakage, or leakage of water, steam, gas, or electricity from pipes, wires, or
otherwise in the Premises or the Building, except to the extent caused by negligence
or willful misconduct of Lessor or Lessor’s employees, agents, or
contractors.  Except as otherwise herein
provided, Lessee will pay for damage to the 

 

15

 

Premises caused by
the misuse or neglect of the Premises by Lessee or its employees, agents, or
contractors, including, but not limited to, the breakage of glass in the
Premises.  Any damage to the Premises
caused by other tenants of Menlo Business Park shall be paid for by such other
tenants or by Lessor.

 

13.                                 Tenant Improvement Work.

 

(a)                                  Lessor shall provide
Lessee with a tenant improvement allowance of Two Hundred Fifty-Three Thousand
Six Hundred Sixty Dollars ($253,660) ($10.00 per rentable square foot) (the
“Tenant Improvement Allowance”) to defray a portion of the cost of the
improvements to the Premises which shall be mutually approved in writing by
Lessor and Lessee (“Tenant Improvement Work”). 
The entire cost of the Tenant Improvement Work in excess of the Tenant
Improvement Allowance, if any, shall be paid by Lessee.  The cost of obtaining approval by of the
City of Menlo Park of a merger of the Building #5 Land (1330 O’Brien Drive) and
the Building #6 Land (1360 O’Brien Drive) occupied by Lessee pursuant to the
existing Lease dated February 4, 2000 between Lessor and Lessee, and the
cost of connecting Building #5 and Building #6 pursuant to plans approved by
Lessor and Lessee shall be included in the cost of the Tenant Improvement
Work.  Subject to Lessor’s prior written
approval of the plans and specifications for the Tenant Improvement Work for
both Building #5 and Building #6, Lessee may combine the Tenant Improvement
Allowance for the Premises (Building #5) and the Tenant Improvement Allowance
for 1360 O’Brien Drive (Building #6) and apply the combined Tenant Improvement
Allowance to either Building #5 or Building #6 in its entirety, provided that
Lessor shall not be obligated to approve the plans and specifications for any
of such Tenant Improvement Work if, in Lessor’s judgment, such plans and
specifications provide for the performance of any of such Tenant Improvement
Work in a manner that could adversely affect the leasing of either Building #5
or Building #6 to a future tenant.

 

(b)                                 Lessor shall enter
into a contract with a licensed general contractor for the construction of the
Tenant Improvement Work.  The general
contractor shall be selected jointly by Lessor and Lessee from a list of
approved contractors prepared by the Lessor. 
The Tenant Improvement Work shall be performed pursuant to the plans and
specifications approved in writing by Lessor and Lessee.

 

(c)                                  The Tenant
Improvement Work shall be constructed under the direct supervision of Tarlton
Properties, Inc., as construction manager, at a fee of five percent (5%) of
hard construction costs (i.e., the amounts paid to the general
contractor, subcontractors, vendors, and suppliers for labor and materials for
the construction of the Tenant Improvements) as a cost of the Tenant
Improvement Work.  The general contractor
shall perform the work pursuant to a negotiated fixed fee guaranteed maximum
price contract.  The work shall be
performed on an “open book” basis with a post-job audit of all costs by a
representative from both Lessee and Tarlton Properties, Inc.

 

(d)                                 Lessor shall deliver the
Premises to Lessee on the Commencement Date with all Building systems and
subsystems in good working condition.

 

16

 

(e)                                  Subject to completion of the
Tenant Improvement Work, Lessee waives all right to make repairs at the expense
of Lessor, or to deduct the costs thereof from the rent, and Lessee waives all
rights under Section 1941 and 1942 of the Civil Code of the State of
California.  At the termination of this
Lease, Lessee shall surrender the Premises in a clean and good condition,
except for ordinary wear and tear and except for damage caused by casualty, the
elements, acts of God, a taking by eminent domain, alterations or other
improvements made by Lessee with Lessor’s prior written consent which Lessee is
not required to remove as a condition to Lessor’s approval of such alterations
or improvements.

 

14.                                 Maintenance and Repairs;
Alterations; Surrender and Restoration.

 

(a)                                  Lessor shall, at
Lessor’s sole expense, keep in good order, condition, and repair and replace
when necessary, the structural elements of the roof (excluding the roof
membrane), and the structural elements of the foundation and exterior walls
(except the interior faces thereof), of the Building, and other structural elements
of the Building and the Premises as “structural elements” are defined in
building codes applicable to the Building, excluding any alterations,
structural or otherwise, made by Lessee to the Building which are not approved
in writing by Lessor prior to the construction or installation thereof by
Lessee.  Lessor shall perform and
construct, and Lessee shall not be responsible for performing or constructing,
any repairs, maintenance, or improvements (1) required as a result of any
casualty damage (not caused by the willful or negligent acts or omissions of
Lessee) or as a result of any taking pursuant to the exercise of the power of
eminent domain, or (2) for which Lessor has a right of reimbursement from
third parties based on construction or other warranties, contractor guarantees,
or insurance claims.

 

(b)                                 Lessor shall provide
or cause to be provided and shall supervise the performance of, as an Operating
Expense of the Premises pursuant to Paragraph 5(b) hereof, all services and
work relating to the operation, maintenance, repair, and replacement, as
needed, of the Premises, including the HVAC, mechanical, electrical, and
plumbing systems in the Building; the interior of the Building; the roof
membrane; the outside areas of the Premises; the janitorial service for the
Building; landscaping, tree trimming, resurfacing and restriping of the parking
lot, repairing and maintaining the walkways; exterior building painting,
exterior building lighting, parking lot lighting, and exterior security patrol.  In the event Lessee provides Lessor with
written notice of the need for any repairs, Lessor shall commence any such
repairs promptly following receipt by Lessor of such notice and Lessor shall
diligently prosecute such repairs to completion.  Notwithstanding the foregoing, Lessee shall have the option, at
its discretion, to operate, maintain, and repair, as needed, the HVAC systems
in the Building and to provide janitorial services to the Premises, all at its
expense and under its discretion. 
Lessee shall engage contractors for the maintenance, repair and
replacement of the HVAC systems from a list of not less than three contractors
that shall have been reasonably approved by Lessor.

 

17

 

(c)                                  Subject to the
foregoing and except as provided elsewhere in this Lease, Lessee shall at all
times use and occupy the Premises in a manner which keeps the Premises in good
and safe order, condition, and repair. 
Lessor shall execute and maintain in full force and effect throughout
the term as an Operating Expense of the Premises pursuant to Paragraph 5(b) a
service contract with a recognized air conditioning service company.  Lessor may, if Lessor determines that it is
necessary to do so, obtain on a semi-annual basis an inspection report of the
HVAC system from a separate HVAC service firm designated by Lessor for the
purpose of monitoring the performance of the HVAC maintenance and repair work
performed by the HVAC service firm which performs the regular repair and
maintenance.  The cost of such
inspection report shall be an Operating Expense pursuant to Paragraph 5.  Subject to the release of claims and waiver
of subrogation contained in Paragraphs 11(c) and 11(d), if Lessor is required
to make any repairs to the Premises by reason of Lessee’s negligent acts or
omissions, Lessor may add the cost of such repairs to the next installment of
rent which shall thereafter become due, and Lessee shall promptly pay the same
upon receipt of an invoice therefor.

 

(d)                                 Lessee may, from time
to time, at its own cost and expense and without the consent of Lessor make
nonstructural alterations to the interior of the Premises the cost of which in
any one instance is Ten Thousand Dollars ($10,000) or less, and the aggregate
cost of all such work during the term of this Lease does not exceed Fifty
Thousand Dollars ($50,000), provided Lessee first notifies Lessor in writing of
any such nonstructural alterations. 
Otherwise, Lessee shall not make any additional alterations,
improvements, or additions to the Premises without delivering to Lessor a
complete set of plans and specifications for such work and obtaining Lessor’s
prior written consent thereto.  If any
nonstructural alterations to the interior of the Premises exceed Ten Thousand
Dollars ($10,000) in cost in any one instance, or exceed the aggregate cost of
Fifty Thousand Dollars ($50,000) during the term of this Lease, Lessee shall
employ, at Lessee’s expense, Tarlton Properties, Inc. as construction manager
for such alterations at a fee equal to five percent (5%) of hard construction
costs.  Lessor may condition its consent
to Lessee agreeing in writing to remove any such alterations prior to the
expiration of the lease term and Lessee agreeing to restore the Premises to its
condition prior to such alterations at Lessee’s expense.  Lessor shall advise Lessee in writing at the
time consent is granted whether Lessor reserves the right to require Lessee to
remove any alterations from the Premises prior to the termination of this
Lease.

 

All alterations, trade fixtures and personal property installed in the
Premises solely at Lessee’s expense (“Lessee’s Property) shall during the term
of this Lease remain Lessee’s property and Lessee shall be entitled to all
depreciation, amortization and other tax benefits with respect thereto.  Upon the expiration or sooner termination of
this Lease all alterations, fixtures and improvements to the Premises, whether
made by Lessor or installed by Lessee at Lessee’s expense, shall be surrendered
by Lessee with the Premises and shall become the property of Lessor.

 

(e)                                  Lessee, at Lessee’s
sole cost and expense, shall promptly and properly observe and comply with all
present and future orders, regulations, rules, laws, 

 

18

 

and ordinances of
all governmental agencies or authorities, and the Board of Fire
Underwriters.  Any structural changes or
repairs or other repairs or changes of any nature which would be considered a
capital expenditure under generally accepted accounting principles to the
Premises shall be made by Lessor at Lessee’s expense if such structural repairs
or changes are required by reason of the specific nature of the use of the
Premises by Lessee.  If such structural
changes or repairs are not required by reason of the specific nature of
Lessee’s use of the Premises, the cost of such structural changes or repairs
shall be treated as an Operating Expense and amortized in accordance with the
provisions of Paragraph 5(b).

 

(f)                                    Lessee shall
surrender the Premises by the last day of the lease term or any earlier
termination date in accordance with Paragraph 13(h) and this Paragraph 14(f),
with all of the improvements to the Premises, parts, and surfaces thereof clean
and free of debris and in good operating order, condition, and state of repair,
ordinary wear and tear excepted. 
“Ordinary wear and tear” shall not include any damage or deterioration
that would have been prevented by good maintenance practice or by Lessee performing
all of its obligations under this Lease. 
The obligations of Lessee shall include the repair of any damage
occasioned by the installation, maintenance, or removal of Lessee’s trade
fixtures, furnishings, equipment, and alterations, and the restoration by
Lessee of the Premises to its condition upon completion of the Tenant
Improvement Work (1) if Lessor’s consent thereto was conditioned upon such
removal and restoration upon expiration or sooner termination of the Lease term
pursuant to Paragraph 14(d), or (2) if Lessee made any such alterations,
additions, or improvements without obtaining Lessor’s prior written consent in
breach of Paragraph 14(d) and within a reasonable time after the
expiration or sooner termination of the Lease term Lessor gives written notice
to Lessee requiring Lessee to perform such removal and restoration.  Prior to the expiration of the term of the
this Lease or any earlier termination date, Lessee shall, at Lessee’s expense,
obtain a closure report from the San Mateo County Health Department with
respect to any Hazardous Materials used, stored, or released by Lessee on or
about the Premises.  Any removal and
remediation of Hazardous Materials by Lessee shall be certified by the San
Mateo County Health Department and a copy of such certification shall be
delivered to Lessor.

 

15.                                 Utilities and Services.

 

(a)                                  Lessor shall contract
for and pay for, and Lessee shall reimburse Lessor therefor pursuant to
Paragraph 5(e) as an Operating Expense, all electricity, gas, water, heat and
air conditioning service, janitorial service, refuse pick-up, sewer charges,
and all other utilities or services supplied to or consumed by Lessee, its
agents, employees, contractors, and invitees on or about the Premises,
excluding telephone service to the Building for which Lessee shall contract and
pay directly.  Furthermore, Lessee shall
have the option to contract directly for janitorial services to the Premises
pursuant to Paragraph 14(b).

 

19

 

(b)                                 Lessor shall not be
liable to Lessee for any interruption or failure of any utility services to the
Building or the Premises which is not caused by the negligence or willful acts
of Lessor, or Lessor’s employees, agents, or contractors. Lessee shall not be
relieved from the performance of any covenant or agreement in this Lease
because of any such failure.  Unless
such failure is caused by the negligence or willful acts or omissions of Lessor
or Lessor’s employees, agents, or contractors, or by Lessor’s breach in the
performance of Lessor’s express obligations hereunder, Lessor shall make all
repairs to the Premises required to restore such services to the Premises and
the cost thereof shall be payable by Lessee pursuant to Paragraph 5(e) as a
current Operating Expense, or as a capital improvement which is amortized over
its useful life (together with interest thereon) as an Operating Expense in
accordance with generally accepted accounting principles as described in
Paragraph 5(b).

 

16.                                 Liens.  Lessee agrees to keep the Premises free from
all liens arising out of any work performed, materials furnished, or
obligations incurred by Lessee.  Lessee
shall give Lessor at least ten (10) days prior written notice before commencing
any work of improvement on the Premises, the contract price for which exceeds
Ten Thousand Dollars ($10,000).  Lessor
shall have the right to post notices of non-responsibility with respect to any
such work.  If Lessee shall, in good
faith, contest the validity of any such lien, claim or demand, then Lessee
shall, at its sole expense, defend and protect itself, Lessor and the Premises
against the same, and shall pay and satisfy any such adverse judgment that may
be rendered thereon before the enforcement thereof against the Lessor or the
Premises.  If Lessor shall require,
Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in an
amount equal to one and one-half times the amount of such contested claim or
demand, indemnifying Lessor against liability for the same, as required by law
for the holding of the Premises free from the effect of such lien or claim.

 

17.                                 Assignment and Subletting.

 

(a)                                  Except as otherwise
provided in this Paragraph 17, Lessee shall not assign this Lease, or any
interest, voluntarily or involuntarily, and shall not sublet the Premises or
any part thereof, or any right or privilege appurtenant thereto, or suffer any
other person (the agents and servants of Lessee excepted) to occupy or use the
Premises, or any portion thereof, without the prior written consent of Lessor
in each instance pursuant to the terms and conditions set forth below, which
consent shall not be unreasonably withheld, subject to the following
provisions.

 

(b)                                 Prior to
any assignment or sublease which Lessee desires to make, Lessee shall
provide to Lessor the name and address of the proposed assignee or sublessee,
and true and complete copies of all documents relating to Lessee’s prospective
agreement to assign or sublease, a copy of a current financial statement for
such proposed assignee or sublessee, and Lessee shall specify all consideration
to be received by Lessee for such assignment or sublease in the form of lump
sum payments, installments of rent, or otherwise.  For purposes of this Paragraph 17, the term “consideration” shall
include all money or other consideration to be received by Lessee for such
assignment or sublease.  

 

20

 

Within ten (10)
days after the receipt of such documentation and other information, Lessor
shall (1) notify Lessee in writing that Lessor elects to consent to the
proposed assignment or sublease subject to the terms and conditions hereinafter
set forth; or (2) notify Lessee in writing that Lessor refuses such consent,
specifying reasonable grounds for such refusal.

 

In deciding whether to consent to any proposed assignment or sublease,
Lessor may take into account reasonable conditions, including, but not limited
to, the following, have been satisfied:

 

(1)                                  In Lessor’s
reasonable judgment, the proposed assignee or subtenant is engaged in such a
business, that the Premises, or the relevant part thereof, will be used in such
a manner which complies with Paragraph 8 hereof entitled “Use” and Lessee or
the proposed assignee or sublessee submits to Lessor documentary evidence
reasonably satisfactory to Lessor that such proposed use constitutes a
permitted use of the Premises pursuant to the ordinances and regulations of the
City of Menlo Park;

 

(2)                                  The proposed assignee
or subtenant is a reputable entity or individual with sufficient financial net
worth so as to reasonably indicate that it will be able to meet its obligations
under this Lease or the sublease in a timely manner; and

 

(3)                                  The proposed
assignment or sublease is approved by Lessor’s mortgage lender if such lender
has the right to approve or disapprove proposed assignments or subleases.  Lessor shall use its good faith efforts to
obtain such approval from its lender within ten (10) days after Lessor is
requested to do so.

 

(c)                                  As a condition to
Lessor’s granting its consent to any assignment or sublease, (1) Lessor may
require that Lessee pay to Lessor, as and when received by Lessee, fifty
percent (50%) of the amount of any excess of the consideration to be received
by Lessee in connection with said assignment or sublease over and above the
rental amount fixed by this Lease and payable by Lessee to Lessor, after
deducting only (i) the unamortized cost of the Tenant Improvement Work
paid for by Lessee which remains on the Premises at the effective date of the
assignment or on the commencement date of the sublease which are then in a
serviceable condition and useable by the assignee or sublessee and not
demolished or removed by the assignee or sublessee, (ii) a standard leasing
commission payable by Lessee in consummating such assignment or sublease, and
(iii) reasonable attorneys’ fees incurred by Lessee and Lessor in negotiating
and reviewing the assignment or sublease documentation, all of which costs
shall be subject to Lessor’s reasonable approval; and (2) Lessee and the
proposed assignee or sublessee shall demonstrate to Lessor’s reasonable
satisfaction that each of the criteria referred to in subparagraph (b) above is
satisfied.

 

(d)                                 Each assignment or
sublease agreement to which Lessor has consented shall be an instrument in
writing in form satisfactory to Lessor, and shall be executed by both Lessee
and the assignee or sublessee, as the case may be.  Each such assignment or sublease agreement shall recite that it
is and shall be subject and 

 

21

 

subordinate to the
provisions of this Lease, that the assignee or sublessee accepts such
assignment or sublease, that Lessor’s consent thereto shall not constitute a
consent to any subsequent assignment or subletting by Lessee or the assignee or
sublessee, and, except as otherwise set forth in a sublease approved by Lessor,
agrees to perform all of the obligations of Lessee hereunder (to the extent
such obligations relate to the portion of the Premises assigned or subleased),
and that the termination of this Lease shall, at Lessor’s sole election,
constitute a termination of every such assignment or sublease.

 

(e)                                  In the event
Lessor shall consent to an assignment or sublease, Lessee shall nonetheless
remain primarily liable for all obligations and liabilities of Lessee under
this Lease, including but not limited to the payment of rent.

 

(f)                                    Notwithstanding the
foregoing, Lessee may, without Lessor’s prior written consent and without any
participation by Lessor in assignment and subletting proceeds, sublet a portion
or the entire Premises or assign this Lease to a subsidiary, affiliate,
division or corporation controlled or under common control with Lessee
(“affiliate”), or to a successor corporation related to Lessee by merger,
consolidation or reorganization, or to a purchaser of Lessee’s entire business
operations conducted on the Premises, provided that any such assignee or
sublessee shall have a current verifiable net worth at least equal to that of
Lessee as of the date of the execution of this Lease.  Lessee’s foregoing rights to assign this Lease shall be subject
to the following conditions:  (1) Lessee
shall not be in default hereunder past any applicable cure period; (2) in
the case of an assignment or subletting to an affiliate, Lessee shall remain
liable to Lessor hereunder; and (3) the transferee or successor entity shall
expressly assume in writing Lessee’s obligations hereunder.

 

(g)                                 Neither the sale nor
transfer of Lessee’s capital stock in any private financing raising equity
capital or in a public offering pursuant to an effective registration statement
filed by Lessee with the Securities and Exchange Commission, or the sale or
transfer of Lessee’s securities at any time after Lessee’s securities are
publicly traded, shall be deemed an assignment, subletting, or other transfer
of this Lease or the Premises, provided, that in the event of the sale,
transfer or issuance of Lessee’s securities in connection with a merger,
consolidation, or reorganization, the conditions set forth in Paragraph 17(f)
shall apply.

 

(h)                                 Subject to the
provisions of this Paragraph 17 any assignment or sublease without Lessor’s
prior written consent shall at Lessor’s election be void.  The consent by Lessor to any assignment or
sublease shall not constitute a waiver of the provisions of this Paragraph 17,
including the requirement of Lessor’s prior written consent, with respect to
any subsequent assignment or sublease. 
If Lessee shall purport to assign this Lease, or sublease all or any
portion of the Premises, or permit any person or persons other than Lessee to
occupy the Premises, without Lessor’s prior written consent (if such consent is
required hereunder), Lessor may collect rent from the person or persons then or
thereafter occupying the Premises and apply the net amount collected to the
rent reserved herein, but no such collection shall be deemed a waiver of
Lessor’s rights and 

 

22

 

remedies under
this Paragraph 17, or the acceptance of any such purported assignee, sublessee,
or occupant, or a release of Lessee from the further performance by Lessee of
covenants on the part of Lessee herein contained.

 

(i)                                     Lessee shall not
hypothecate or encumber its interest under this Lease or any rights of Lessee
hereunder, or enter into any license or concession agreement respecting all or
any portion of the Premises, without Lessor’s prior written consent which
consent Lessor may grant or withhold in Lessor’s absolute discretion without
any liability to Lessee.  Lessee’s
granting of any such encumbrance, license, or concession agreement shall
constitute an assignment for purposes of this Paragraph 17.

 

(j)                                     In the event of
any sale or exchange of the Premises by Lessor and assignment of this Lease by
Lessor, Lessor shall, upon providing Lessee with written confirmation that
Lessor has delivered any Security Deposit held by Lessor to Lessor’s successor
in interest, be and hereby is entirely relieved of all liability under any and
all of Lessor’s covenants and obligations contained in or derived from this
Lease with respect to the period commencing with the consummation of the sale
or exchange and assignment.

 

(k)                                  Lessee hereby
acknowledges that the foregoing terms and conditions are reasonable and,
therefore, that Lessor has the remedy described in California Civil Code
Section 1951.4 (Lessor may continue the Lease in effect after Lessee’s breach
and abandonment and recover rent as it becomes due, if Lessee has the right to
sublet or assign, subject only to reasonable limitations).

 

18.                                 Non-Waiver.

 

(a)                                  No waiver of any
provision of this Lease shall be implied by any failure of Lessor to enforce
any remedy for the violation of that provision, even if that violation
continues or is repeated.  Any waiver by
Lessor of any provision of this Lease must be in writing.

 

(b)                                 No receipt of Lessor of a
lesser payment than the rent required under this Lease shall be considered to
be other than on account of the earliest rent due, and no endorsement or
statement on any check or letter accompanying a payment or check shall be
considered an accord and satisfaction. 
Lessor may accept checks or payments without prejudice to Lessor’s right
to recover all amounts due and pursue all other remedies provided for in this
Lease.

 

Lessor’s receipt of monies from Lessee after giving notice to Lessee
terminating this Lease shall in no way reinstate, continue, or extend the Lease
term or affect the termination notice given by Lessor before the receipt of
those monies.  After serving notice
terminating this Lease, filing an action, or obtaining final judgment for
possession of the Premises, Lessor may receive and collect any rent, and the
payment of that rent shall not waive or affect such prior notice, action, or
judgment.

 

23

 

19.                                 Holding
Over.  Lessee shall vacate the
Premises and deliver the same to Lessor upon the expiration or sooner
termination of this Lease.  In the event
of holding over by Lessee after the expiration or termination of this Lease
without Lessor’s prior written consent, such holding over shall be on a
month-to-month tenancy and all of the terms and provisions of this Lease shall
be applicable during such period, except that Lessee shall pay Lessor as
Monthly Base Rent during such holdover an amount equal to the greater of (i)
one hundred fifty percent (150%) of the Monthly Base Rent in effect at the
expiration of the term, or (ii) the then market rent for comparable research
and development/office space; provided, that if such holdover is with Lessor’s
written consent given by Lessor prior to the expiration or sooner termination
of this Lease, the Monthly Base Rent during such holdover shall be equal to one
hundred twenty-five percent (125%) of the then market rent for comparable
research and development/office space, as reasonably determined by Lessor.  If such holdover is without Lessor’s written
consent, Lessee shall be liable to Lessor for all costs, expenses, and
consequential damages incurred by Lessor as a result of such holdover.  The rental payable during such holdover
period shall be payable to Lessor on demand.

 

20.                                 Damage or Destruction.

 

(a)                                  In the event of a
total destruction during the lease term from any cause, of (1) the Building and
Improvements, or (2) the Building and Improvements referred to as Building #6,
1360 O’Brien Drive, Menlo Park, California (the “1360 O’Brien Drive Premises”)
during the term of Lessee’s Lease of said Premises, either party may elect to
terminate this Lease by giving written notice of termination to the other party
within thirty (30) days after the casualty occurs.  A total destruction shall be deemed to have occurred for this
purpose if the Building and the Improvements which are the subject of this
Lease or the Building and Improvements consisting of the 1360 O’Brien Drive
Premises are destroyed to the extent of seventy-five percent (75%) or more of
the replacement cost thereof.  If the
Lease is not terminated, Lessor shall repair and restore the Premises and the
1360 O’Brien Drive Premises (if applicable) in a diligent manner and this Lease
shall continue in full force and effect, except that Monthly Base Rent and
Additional Rent of the Premises which are the subject of this Lease shall be
abated in accordance with Paragraph 20(d) below.

 

(b)                                 In the event of a partial
destruction of the Building or the Premises to an extent not exceeding fifty
percent (50%) of the replacement cost thereof and if the damage thereto can be
repaired, reconstructed, or restored within a period of one hundred twenty
(120) days from the date of such casualty, and if the casualty is from a cause
which is insured under Lessor’s “all risk” property insurance, or is insured
under any other coverage then carried by Lessor, Lessor shall forthwith repair
the same, and this Lease shall continue in full force and effect, except that
Monthly Base Rent and Additional Rent shall be abated in accordance with
Paragraph 20(d) below.  If any of the
foregoing conditions is not met, Lessor shall have the option of either
repairing and restoring the Building and Improvements, or terminating this
Lease by giving written notice of termination to Lessee within thirty (30) days
after the casualty, subject to the provisions of 

 

24

 

Paragraph 20(c).  Notwithstanding the foregoing, Lessor shall
not have the right to terminate this Lease if the cost to repair the damage to
the Building or to restore the Premises would cost less than five percent (5%)
of the replacement cost of the Building, regardless of whether or not the
casualty is insured.  Notwithstanding
the foregoing, if the casualty is uninsured, the cost to restore the Premises
exceeds five percent (5%) of the replacement cost, and Lessor elects to
terminate this Lease, Lessee may nullify the effect of such termination by
giving Lessor written notice within ten (10) days after receipt by Lessee of
Lessor’s notice of termination that Lessee elects to restore the Premises at
Lessee’s sole cost, in which event this Lease shall remain in effect, provided
that Rent abatement shall not extend beyond the date that the restoration is
completed, or one hundred twenty (120) days after the casualty, whichever
occurs first.

 

(c)                                  In the event of a
partial destruction of the Building and Improvements of the Premises to an extent
equal to or exceeding twenty-five percent (25%) but less than seventy-five
percent (75%) of the replacement cost thereof, or if the damage thereto cannot
be repaired, reconstructed, or restored within a period of one hundred twenty
(120) days from the date of such casualty, either Lessor or Lessee may
terminate this Lease (but not the Lease of the 1360 O’Brien Drive Premises) by
giving written notice of termination to the other within thirty (30) days after
the casualty.

 

Furthermore, if such casualty is from a cause which is not insured
under Lessor’s “all risk” property insurance, or is not insured under any other
insurance carried by Lessor, Lessor may elect to repair and restore the
Building and Improvements (provided that Lessee has not elected to terminate
this Lease pursuant to the first sentence of this Paragraph 20(c)), or Lessor
may terminate this Lease by giving written notice of termination to
Lessee.  Lessor’s election to repair and
restore the Building and Improvements or to terminate this Lease, shall be made
and written notice thereof shall be given to Lessee within thirty (30) days
after the casualty.  Notwithstanding the
foregoing, (1) if Lessor has not obtained all necessary governmental permits for
the restoration and commenced construction of the restoration within one
hundred twenty (120) days after the casualty, Lessee may terminate this Lease
by written notice to Lessor given at any time prior to the actual commencement
of construction of the restoration; or (2) if Lessor elects to repair and
restore the Building and Improvements under subparagraph (b) or (c) above, but
the repairs and restoration are not substantially completed within one hundred
eighty (180) days after the casualty, Lessee may terminate this Lease by
written notice to Lessor given within thirty (30) days after the expiration of
said period of one hundred eighty (180) days after the casualty.

 

If this Lease is not terminated by Lessor or Lessee pursuant to the
foregoing provisions, Lessor shall complete the repairs in a diligent manner
and this Lease shall continue in full force and effect, except that Monthly
Base Rent and Additional Rent shall be abated in accordance with Paragraph
20(d) below.

 

(d)                                 Subject to the
limitation in Paragraph 20(b) above which applies if Lessee elects to restore
the Premises at Lessee’s expense, in the event of repair, 

 

25

 

reconstruction, or
restoration as provided herein, the Monthly Base Rent and Additional Rent shall
be abated proportionally in the ratio which the Lessee’s use of the Premises is
impaired during the period of such repair, reconstruction, or restoration, from
the date of the casualty until such repair, reconstruction or restoration is
completed.

 

(e)                                  With respect to any
destruction of the Premises which Lessor is obligated to repair, or may elect
to repair, under the terms of this Paragraph 20, the provisions of Section
1932, Subdivision 2, and of Section 1933, Subdivision 4, of the Civil Code of
the State of California are waived by the parties.  Lessor’s obligation to repair and restore the Premises shall
include the Tenant Improvement Work referred to in Paragraph 13 and any other
leasehold improvements constructed thereafter by Lessor or by Lessee with
Lessor’s prior written consent. 
Lessor’s time for completion of the repairs and restoration of the
Premises shall be extended by a period equal to any delays caused by strikes,
labor disputes, unavailability of materials, inclement weather, acts of God, or
other causes beyond Lessor’s control.

 

(f)                                    In the event of
termination of this Lease pursuant to any of the provisions of this Paragraph
20, the monthly rent shall be apportioned on a per diem basis and shall be paid
to the date of the casualty.  In no
event shall Lessor be liable to Lessee for any damages resulting to Lessee from
the occurrence of such casualty, or from the repairing or restoration of the
Building and Improvements, or from the termination of this Lease as provided
herein, nor shall Lessee be relieved thereby from any of Lessee’s obligations
hereunder, except to the extent and upon the conditions expressly set forth in
this Paragraph 20.

 

21.                                 Eminent Domain.

 

(a)                                  If the whole or any
substantial part of the Building or the Premises shall be taken or condemned by
any competent public authority for any public use or purpose, the term of this
Lease shall end upon the earlier to occur of the date when the possession of
the part so taken shall be required for such use or purpose or the vesting of
title in such public authority.  Rent
shall be apportioned as of the date of such termination.  Lessee shall be entitled to receive any
damages awarded by the court for (i) leasehold improvements installed at
Lessee’s expense or other property owned by Lessee, and (ii) reasonable costs
of moving by Lessee to another location in San Mateo County or surrounding
areas within the San Francisco Bay Area. 
The entire balance of the award shall be the property of Lessor.

 

(b)                                 If there is a partial
taking of the Premises by eminent domain which is not a substantial part of the
Building and the balance of the Premises remains reasonably suitable for
continued use and occupancy by Lessee in Lessee’s reasonable judgment for the
purposes referred to in Paragraph 8, Lessor shall complete any necessary
repairs in a diligent manner and this Lease shall remain in full force and
effect with a just and proportionate abatement of the Monthly Base Rent and
Additional Rent, to reflect the number of square feet of the Premises taken and
the number of square feet remaining.  If

 

26

 

after a partial
taking, the Premises and parking are not reasonably suitable for Lessee’s
continued use and occupancy for the uses permitted herein, Lessee may terminate
this Lease effective on the earlier of the date title vests in the public
authority or the date possession is taken. 
Subject to the provisions of Paragraph 21(a), the entire award for such
taking shall be the property of Lessor.

 

22.                                 Remedies.  If Lessee fails to make any payment of rent
or any other sum due under this Lease for ten (10) days after receipt by Lessee
of written notice from Lessor; or if Lessee fails to deliver to Lessor a
renewal Letter of Credit which complies with Paragraph 7(b) within the time
period referred to in Paragraph 7(b); or if Lessee breaches any other term of
this Lease for thirty (30) days after receipt by Lessee of written notice from
Lessor (unless such default is incapable of cure within thirty (30) days and
Lessee commences cure within thirty (30) days and diligently prosecutes the
cure to completion within a reasonable time); or if Lessee’s interest herein,
or any part thereof, is assigned or transferred, either voluntarily or by
operation of law (except as expressly permitted by other provisions of this
Lease); or if Lessee makes a general assignment for the benefit of its
creditors; or if this Lease is rejected (i) by a bankruptcy trustee for Lessee,
(ii) by Lessee as debtor in possession, or (iii) by failure of Lessee as a
bankrupt debtor to act timely in assuming or rejecting this Lease; then any of
such events shall constitute an event of default and breach of this Lease by
Lessee and Lessor may, at its option, elect the remedies specified in either
subparagraph (a) or (b) below.  Any such
rejection of this Lease referred to above shall not cause an automatic
termination of this Lease.  Whenever in
this Lease reference is made to a default by Lessee, such reference shall refer
to an event of default as defined in this Paragraph 22.

 

(a)                                  Lessor may repossess
the Premises and remove all persons and property therefrom.  If Lessor repossesses the Premises because
of a breach of this Lease, this Lease shall terminate and Lessor may recover
from Lessee:

 

(1)                                  the worth at the time
of award of the unpaid rent which had been earned at the time of termination
including interest thereon at a rate equal to the discount rate established by
the Federal Reserve Bank of San Francisco for member banks, plus one percent
(1%), or the maximum legal rate of interest, whichever is less, from the time
of termination until paid;

 

(2)                                  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 award exceeds the amount of such rental
loss that Lessee proves could have been reasonably avoided, including interest
thereon at a rate equal to the Federal discount rate plus one percent (1%) per
annum, or the maximum legal rate of interest, whichever is less, from the time
of termination until paid;

 

(3)                                  the worth at the time
of award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of such rental loss for the same
period that Lessee proves could be reasonably avoided discounted 

 

27

 

at the discount
rate established by the Federal Reserve Bank of San Francisco for member banks
at the time of the award plus one percent (1%); and

 

(4)                                  any other amount
necessary to compensate Lessor for all the detriment proximately caused by
Lessee’s breach or by Lessee’s failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom.

 

(b)                                 If Lessor does not
repossess the Premises, then this Lease shall continue in effect for so long as
Lessor does not terminate Lessee’s right to possession and Lessor may enforce
all of its rights and remedies under this Lease, including the right to recover
the rent and other sums due from Lessee hereunder.  For the purposes of this Paragraph 22, the following do not
constitute a repossession of the Premises by Lessor or a termination of the
Lease by Lessor:

 

(1)                                  Acts of maintenance
or preservation by Lessor or efforts by Lessor to relet the Premises; or

 

(2)                                  The appointment of a
receiver by Lessor to protect Lessor’s interests under this Lease.

 

(c)                                  Lessor’s failure to
perform or observe any of its obligations under this Lease or to correct a
breach of any warranty or representation made in this Lease within thirty (30)
days after receipt of written notice from Lessee setting forth in reasonable
detail the nature and extent of the failure referencing pertinent Lease
provisions or if more than thirty (30) days is required to cure the breach,
Lessor’s failure to begin curing within the thirty (30) day period and
diligently prosecute the cure to completion, shall constitute a default.  If Lessor commits a default, Lessee’s remedy
shall be to institute an action against Lessor for damages or for equitable
relief, but Lessee shall not have the right to rent abatement, to offset
against rent, or to terminate this Lease in the event of any default by Lessor.

 

(d)                                 Lessor shall have no
security interest or lien on any item of Lessee’s furniture, equipment and other
personal property which is not affixed to the Building (“Lessee’s Personal
Property”).  Within ten (10) days
following Lessee’s request, Lessor shall execute documents reasonably
acceptable to Lessee to evidence Lessor’s waiver of any right, title, lien or
interest in Lessee’s Personal Property and giving any lender holding a security
interest or lien on Lessee’s Personal Property reasonable rights of access to
the Premises to remove such Lessee’s Personal Property, provided that such
lender expressly agrees in such document for the benefit of Lessor to repair at
such lender’s expense any damage caused by such removal.

 

23.                                 Lessee’s Personal Property.  If any personal property of Lessee remains
on the Premises after (1) Lessor terminates this Lease pursuant to Paragraph 22
above following an event of default by Lessee, or (2) after the expiration of
the Lease term or after 

 

28

 

the termination of
this Lease pursuant to any other provisions hereof, Lessor shall give written
notice thereof to Lessee pursuant to applicable law.  Lessor shall thereafter release, store, and dispose of any such
personal property of Lessee in accordance with the provisions of applicable law.

 

24.                                 Notices.  All notices, statements, demands, requests,
or consents given hereunder by either party to the other shall be in writing
and shall be personally delivered or sent by United States mail, registered or
certified, return receipt requested, postage prepaid, and addressed to the parties
as follows:

 

	
  Lessor:

  	
   

  	
  Menlo Business
  Park, LLC

  
	
   

  	
   

  	
  c/o Tarlton
  Properties, Inc.

  
	
   

  	
   

  	
  955 Alma Street

  
	
   

  	
   

  	
  Palo Alto,
  California 94301

  
	
   

  	
   

  	
   

  
	
  Lessee:

  	
   

  	
  DepoMed, Inc.

  
	
   

  	
   

  	
  1360 O’Brien
  Drive

  
	
   

  	
   

  	
  Menlo Park,
  California  94025

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  

 

or to such other
address as either party may have furnished to the other as a place for the
service of notice.  Notices shall be
deemed given upon receipt or attempted delivery where delivery is not accepted.  As of the Commencement Date of this Lease,
Lessee’s address for purposes of notice shall be the Premises.

 

25.                                 Estoppel Certificate.  Lessee and Lessor shall within fifteen (15)
days following request by the other party (the “Requesting Party”), execute and
deliver to the Requesting Party an Estoppel Certificate substantially in the
form attached hereto as Exhibit “F” (1) certifying that this Lease has not been
modified and certifying that this Lease is in full force and effect, or, if
modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect; (2) stating the date to
which the rent and other charges are paid in advance, if at all; (3) stating
the amount of any Security Deposit held by Lessor; and (4) acknowledging that
there are not, to the responding party’s knowledge, any uncured defaults on the
part of the Requesting Party hereunder, or if there are uncured defaults on the
part of the Requesting Party, stating the nature of such uncured defaults.

 

26.                                 Signage.  Lessor shall provide to Lessee space for Lessee’s
sign on the monument sign for the Building located in the landscaped median in
front of the Building.  Lessee may also
place Lessee’s vinyl lettering signage at the glass door entrances to the
Building.  All of Lessee’s signage shall
comply with the Menlo Park sign ordinances and regulations and shall be subject
to Lessor’s approval as to the location, size and design thereof.  The cost of the installation of the vinyl
lettering on the monument sign and at the 

 

29

 

glass door
entrance shall be paid by Lessee.  Any
additional signage shall be subject to Lessor’s prior approval and, if
approved, shall be installed at Lessee’s expense.

 

27.                                 Real Estate Brokers.  Lessor shall pay a leasing commission to Tarlton
Properties, Inc., Lessor’s broker, pursuant to a separate agreement between
Lessor and said broker.  Each party
represents and warrants to the other party that it has not had any dealings
with any real estate broker, finder, or other person with respect to this Lease
other than Tarlton Properties, Inc. who has acted as exclusive leasing agent
for Lessor, and BT Commercial and Technology Commercial, Inc., who have acted
as Lessee’s agents, and each party shall hold harmless the other party from all
damages, expenses, and liabilities resulting from any claims that may be
asserted against the other party by any broker, finder, or other person with
whom the other party has or purportedly has dealt, other than the above named
brokers.

 

28.                                 Subordination; Attornment.

 

(a)                                  This Lease, without
any further instrument, shall at all times be subject and subordinate to any
and all mortgages and deeds of trust which may now or hereafter affect Lessor’s
estate in the real property of which the Premises form a part, and to all
advances made or hereafter to be made upon the security thereof, and to all
renewals, modifications, consolidations, replacements and extensions
thereof.  Lessor shall use reasonable
efforts to cause the beneficiary of any deed of trust executed by Lessor as
trustor after the date hereof to execute a recognition and non-disturbance
agreement in a form reasonably satisfactory to Lessor, Lessee and such
beneficiary which (i) provides that this Lease shall not be terminated so long
as Lessee is not in default under this Lease, and (ii) that upon acquiring
title to the Premises by foreclosure or otherwise such holder shall recognize
all of Lessee’s rights hereunder which accrue thereafter.

 

(b)                                 In confirmation of
such subordination, Lessee shall promptly execute any certificate or other
instrument which Lessor may deem proper to evidence such subordination, without
expense to Lessor; provided, however, that if any person or persons purchasing
or otherwise acquiring the real property of which the Premises form a part by
any sale, sales and/or other proceedings under such mortgages and/or deeds of
trust, shall elect to continue this Lease in full force and effect in the same
manner and with like effect as if such person or persons had been named as Lessor
herein, then this Lease shall continue in full force and effect as aforesaid,
and Lessee hereby attorns and agrees to attorn to such person or persons.

 

(c)                                  If Lessee is notified
in writing of Lessor’s default under any deed of trust affecting the Premises
and if Lessee is instructed in writing by the party giving notice to make
Lessee’s rental payments to beneficiary Lessee shall comply with such request
without liability to Lessor until Lessee receives written confirmation that
such default has been cured by Lessor and that the deed of trust has been
reinstated.

 

30

 

29.                                 No Termination Right.  Lessee shall not have the right to terminate
this Lease as a result of any default by Lessor and Lessee’s remedies in the
event of a default by Lessor shall be limited to the remedy set forth in
Paragraph 22(c).  Lessee expressly
waives the defense of constructive eviction.

 

30.                                 Lessor’s Entry. 
Except in the case of an emergency and except for permitted entry during
Lessee’s normal working hours, Lessor and Lessor’s agents shall provide Lessee
with at least twenty-four (24) hours’ notice prior to entry of the
Premises.  Such entry by Lessor and
Lessor’s agents shall not impair Lessee’s operations more than reasonably necessary.  Lessor and Lessor’s agents shall at all
times be accompanied by Lessee during any such entry except in case of
emergency and except for janitorial work. 
Lessor may enter the Premises without prior notice to Lessee if Lessee
has vacated the Premises.

 

31.                                 Attorneys’ Fees.  If any action at law or in equity shall be brought to recover any
rent under this Lease, or for or on account of any breach of or to enforce or
interpret any of the provisions of this Lease or for recovery of the possession
of the Premises, the prevailing party shall be entitled to recover from the
other party costs of suit and reasonable attorneys’ fees, the amount of which
shall be fixed by the court and shall be made a part of any judgment rendered.

 

32.                                 Compliance with CC&Rs.  During the term of this Lease and any option
extension period, Lessee shall comply, at Lessee’s expense, with all of the
covenants, conditions, and restrictions affecting the Premises which are
recorded in the Official Records of San Mateo County, California, and which are
in effect as of the date of this Lease.

 

33.                                 Quiet Enjoyment.  Upon payment by Lessee of the rent for the Premises and the
observance and performance of all of the covenants, conditions, and provisions
on Lessee’s part to be observed and performed under this Lease, Lessee shall
have quiet enjoyment and possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.

 

34.                                 General Provisions.

 

(a)                                  Nothing contained in
this Lease shall be deemed or construed by the parties hereto or by any third
person to create the relationship of principal and agent or of partnership or
of joint venture of any association between Lessor and Lessee, and neither the
method of computation of rent nor any other provisions contained in this Lease
nor any acts of the parties hereto shall be deemed to create any relationship
between Lessor and Lessee other than the relationship of landlord and tenant.

 

(b)                                 Each and all of the
provisions of this Lease shall be binding upon and inure to the benefit of the
parties hereto, and except as otherwise specifically provided elsewhere in this
Lease, their respective heirs, executors, administrators, successors, and 

 

31

 

assigns, subject
at all times, nevertheless, to all agreements and restrictions contained
elsewhere in this Lease with respect to the assignment, transfer, encumbering,
or subletting of all or any part of Lessee’s interest in this Lease.

 

(c)                                  The captions of the
paragraphs of this Lease are for convenience only and shall not be considered
or referred to in resolving questions of interpretation or construction.

 

(d)                                 This Lease is and
shall be considered to be the only agreement between the parties hereto and
their representatives and agents.  All
negotiations and oral agreements acceptable to both parties have been merged
into and are included herein.  There are
no other representations or warranties between the parties and all reliance
with respect to representations is solely upon the representations and
agreements contained in this instrument.

 

(e)                                  The laws of the State
of California shall govern the validity, performance, and enforcement of this
Lease.  Notwithstanding which of the
parties may be deemed to have prepared this Lease, this Lease shall not be
interpreted either for or against Lessor or Lessee, but this Lease shall be
interpreted in accordance with the general tenor of the language in an effort
to reach an equitable result.

 

(f)                                    Time is of the
essence with respect to the performance of each of the covenants and agreements
contained in this Lease.

 

(g)                                 Lessee hereby
expressly waives any and all rights of redemption granted by or under any
present or future law in the event of Lessee being evicted or dispossessed for
any cause, or in the event of Lessor obtaining possession of the Premises by
reason of the breach by Lessee of any of the covenants and conditions of the
Lease or otherwise.  The rights given to
Lessor herein are in addition to any rights that may be given to Lessor by any
statute or otherwise.

 

(h)                                 Recourse by Lessee for
breach of this Lease by Lessor shall be expressly limited to Lessor’s interest
in the Premises and the rents, issues and profits therefrom, and in the event
of any such breach or default by Lessor Lessee hereby waives the right to
proceed against any other assets of Lessor or against any other assets of any
manager or member of Lessor.

 

(i)                                     Any provision or
provisions of this Lease which shall be found to be invalid, void or illegal by
a court of competent jurisdiction, shall in no way affect, impair, or
invalidate any other provisions hereof, and the remaining provisions hereof
shall nevertheless remain in full force and effect.

 

(j)                                     This Lease may be
modified in writing only, signed by the parties in interest at the time of such
modification.

 

32

 

(k)                                  Each party represents
to the other that the person signing this Lease on its behalf is properly
authorized to do so, and in the event this Lease is signed by an agent or other
third party on behalf of either Lessor or Lessee, written authority to sign on
behalf of such party in favor of the agent or third party shall be provided to
the other party hereto either prior to or simultaneously with the return to
such other party of a fully executed copy of this Lease.

 

(l)                                     No binding
agreement between the parties with respect to the Premises shall arise or
become effective until this Lease has been duly executed by both Lessee and
Lessor and a fully executed copy of this Lease has been delivered to both
Lessee and Lessor.

 

(m)                               Lessor and Lessee
acknowledge that the terms and conditions of this Lease constitute confidential
information of Lessor and Lessee. 
Neither party shall disseminate orally or in written form a copy of this
Lease, lease proposals, lease drafts, or other documentation containing the
terms, details or conditions contained herein to any third party without
obtaining the prior written consent of the other party, except to the attorneys,
accountants, or other authorized business representatives or agents of the
parties, or except to the extent required to comply with applicable laws.  Neither Lessor nor Lessee shall make any
public announcement of the consummation of this Lease transaction without the
prior approval of the other party.

 

(n)                                 The rights and
remedies that either party may have under this Lease or at law or in equity,
upon any breach, are distinct, separate and cumulative and shall not be deemed
inconsistent with each other, and no one of them shall be deemed to be
exclusive of any other.

 

(o)                                 Except as provided in
Paragraph 19, Lessor and Lessee waive any claim for consequential damages which
one may have against the other for breach of or failure to perform or observe
the requirements and obligations created by this Lease.

 

(p)                                 Lessor and Lessee each
agree to and they hereby do waive trial by jury in any action, proceeding or
counterclaim brought by either of the parties hereto against the other on any
matters whatsoever arising out of or in any way connected with this Lease, the
relationship of Lessor and Lessee, Lessee’s use or occupancy of the Premises
and/or any claim of injury or damage, and any statutory remedy.

 

(q)                                 This Lease shall not
be recorded.

 

33

 

IN WITNESS WHEREOF, the Lessor and Lessee have duly executed this Lease as
of the date first set forth herein.

 

	
   

  	
  “Lessor”

  
	
   

  	
   

  
	
   

  	
  MENLO BUSINESS PARK, LLC

  
	
   

  	
  a California limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ J.O. Oltmans, II

  
	
   

  	
   

  	
  J. O. Oltmans, II, Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ James R. Swartz

  
	
   

  	
   

  	
  James R. Swartz, Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “Lessee”

  
	
   

  	
   

  
	
   

  	
  DEPOMED, INC.,

  
	
   

  	
  a California corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ John F. Hamilton

  
	
   

  	
   

  	
  Its

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ John N. Shell

  
	
   

  	
   

  	
  Its

  

 

34

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