Document:

EXHIBIT
      10.8

     

     

     

     

    LEASE
      AGREEMENT

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      EXHIBIT
        10.8

       

    

    OFFICE
      LEASE TABLE OF CONTENTS

     

    
      	 	 	
              Page

            	 
	
              LEASE
                AGREEMENT

            	 	 	
              2

            	 
	
              RENT

            	 	 	
              3

            	 
	
              PREMISES

            	 	 	
              7

            	 
	
              CONDITION
                OF PREMISES

            	 	 	
              7

            	 
	
              PROJECT
                SERVICES

            	 	 	
              8

            	 
	
              ALTERATIONS
                AND REPAIRS

            	 	 	
              9

            	 
	
              USE
                OF PREMISES

            	 	 	
              12

            	 
	
              INTRABUILDING
                NETWORK CABLES

            	 	 	
              13

            	 
	
              GOVERNMENTAL
                REQUIREMENTS AND BUILDING RULES

            	 	 	
              14

            	 
	
              WAIVER
                OF CLAIMS; INDEMNIFICATION; INSURANCE

            	 	 	
              15

            	 
	
              FIRE
                AND OTHER CASUALTY

            	 	 	
              17

            	 
	
              EMINENT
                DOMAIN

            	 	 	
              18

            	 
	
              RIGHTS
                RESERVED TO LANDLORD

            	 	 	
              18

            	 
	
              TENANT'S
                DEFAULT

            	 	 	
              20

            	 
	
              LANDLORD
                REMEDIES

            	 	 	
              21

            	 
	
              SURRENDER

            	 	 	
              23

            	 
	
              HOLDOVER

            	 	 	
              24

            	 
	
              SUBORDINATION
                TO GROUND LEASES AND MORTGAGES

            	 	 	
              24

            	 
	
              ASSIGNMENT
                AND SUBLEASE

            	 	 	
              25

            	 
	
              CONVEYANCE
                BY LANDLORD

            	 	 	
              27

            	 
	
              ESTOPPEL
                CERTIFICATE

            	 	 	
              27

            	 
	
              LEASE
                DEPOSIT

            	 	 	
              28

            	 
	
              FORCE
                MAJEURE

            	 	 	
              28

            	 
	
              TENANT'S
                PERSONAL PROPERTY AND FIXTURES

            	 	 	
              28

            	 
	
              NOTICES

            	 	 	
              29

            	 
	
              QUIET
                POSSESSION

            	 	 	
              30

            	 
	
              REAL
                ESTATE BROKER

            	 	 	
              30

            	 
	
              MISCELLANEOUS

            	 	 	
              30

            	 
	
              UNRELATED
                BUSINESS INCOME

            	 	 	
              33

            	 
	
              HAZARDOUS
                SUBSTANCES

            	 	 	
              33

            	 
	
              LANDLORD'S
                LEASE UNDERTAKINGS

            	 	 	
              33

            	 
	
              OFFER
                TO LEASE

            	 	 	
              34

            	 
	
              RESERVATION
                OF RIGHTS

            	 	 	
              34

            	 
	
              MODIFICATION
                AND FINANCING CONDITIONS

            	 	 	
              35

            	 

    

     

    
      
        
        

      

      
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      EXHIBIT
        10.8

       

    

    OFFICE
      LEASE

     

    THIS
      OFFICE LEASE (the "Lease") is made as of the 21st day of March, 2007 (dated
      for
      reference purposes only) between SEAGATE
      TELEGRAPH ASSOCIATES, LLC, a California limited liability corporation
(the
      "Landlord"), and NILE
      THERAPEUTICS, a Delaware
      corporation
      as named
      in the Schedule below. The term "Project" means the six story office building
      and other improvements commonly known as 2850 Telegraph Avenue located in the
      City of Berkeley ("City"), County of Alameda ("County"), California, as more
      particularly described in EXHIBIT
      A.
      The
      "Premises" means that portion of the Building described in the SCHEDULE.
      The
      Building in which the Premises are located shall be collectively referred to
      herein as the "Building." The following schedule (the "Schedule") is an integral
      part of this Lease. Terms defined in this Schedule shall have the same meaning
      throughout the Lease.

     

    SCHEDULE

     

    
      	
              1.

            	
              Tenant:
                NILE THERAPEUTICS, a Delaware
                corporation

            

    

     

    Address:
      689 Fifth Avenue, 14th Floor, New York, NY, 10022 (until lease commencement
      date, and thereafter, the Premises).

     

    
      	
              2.

            	
              Premises:
                Approximately 2,332 rentable square feet on the Third Floor of the
                Building located at 2850 Telegraph Avenue, designated as Suite 310,
                Berkeley, CA 94704.

            

    

     

    
      	
              3.

            	
              Permitted
                Use:
                Administrative and general office use, as a therapeutical sales
                office.

            

    

     

    
      	
              4.

            	
              Term:
                Three
                (3) years.

            

    

     

    
      	
              5.

            	
              Commencement
                Date:
                May 1, 2007, or substantial completion of Tenant Improvement Work,
                which
                ever occurs first. Rental Commencement shall be
                May 1,2007.

            

    

     

    
      	
              6.

            	
              Expiration
                Date:
                April 30,2010

            

    

     

    
      	
              7.

            	
              Rent
                and Other Charges Payable by
                Tenant:

            

    

     

    
      	 	
              a.

            	
              Base
                Rent:
                Initially 2,332sf multiplied by $2.61psf, which equals Six Thousand
                Eighty-Seven and 00/100 ($6,087.00) Dollars per month for the first
                month,
                which shall be paid upon Lease execution, and thereafter, payable
                monthly
                as set forth in the schedule below:

            

    

    

    
      	
              FOR
                THE PERIOD

            	 	
              MONTHLY
                BASE RENT

            	
               

            	
              ANNUAL
                BASE RENT

            	 
	
              May
                1,2007 through April 30, 2008

            	 	
              $

            	
              6,087

            	 	
              $

            	
              73,044

            	 
	
              May
                1,2008 through April 30, 2009

            	 	
              $

            	
              6,320

            	 	
              $

            	
              75,840

            	 
	
              May
                1,2009 through April 30, 2010

            	 	
              $

            	
              6,553

            	 	
              $

            	
              78,636

            	 

    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    
      	 	
              b.

            	
              Other
                Periodic Payments:
                Tenant shall be responsible for payment of Tenant's Proportionate
                Share of
                certain charges such as operating costs and taxes in excess of the
                Base
                Year and Additional Rent.

            

    

     

    
      	
              8.

            	
              Tenant's
                Proportionate Share:
                3.39% of Building (based on 68,857 rentable square feet in the
                Building)

            

    

     

    
      	
              9.

            	
              Prepaid
                Rent:
                $6,087.00, representing the first month Base Rent, payable upon Tenant's
                execution of Lease.

            

    

     

    
      	
              10.

            	
              Security
                Deposit:
                Fourteen Thousand and NO/100 ($14,000.00) Dollars, payable upon Tenant's
                execution of Lease, together with the Prepaid Rent will make a total
                amount due along with presentation of the signed lease, in an amount
                equal
                to Twenty Thousand Eighty-Seven and NO/00 ($20,087.00)
                Dollars.

            

    

     

    
      	
              11.

            	
              Parking
                Spaces:
                Four (4) spaces in common with all other tenants in the Property,
                available on an unreserved basis; and charged at prevailing rates,
                which
                may be adjusted by Landlord in its sole discretion, from time to
                time

            

    

     

    
      	
              12.

            	
              Base
                Year:
                2007

            

    

     

    
      	
              13.

            	
              Tenant's
                Real Estate Broker for this Lease: Nick
                Polsky of CB Richard Ellis

            

    

     

    
      	
              14.

            	
              Landlord's
                Real Estate Broker for this Lease:
                Ann Lovi of Collier's International

            

    

     

    
      	
              15.

            	
              Tenant
                Improvement Allowance:
                (Intentionally Deleted)

            

    

    

    EXHIBIT
      A: SITE
      PLAN OF PREMISES

     

    EXHIBIT
      B: RULES
      AND REGULATIONS

     

    EXHIBIT
      C: TENANT
      IMPROVEMENT AGREEMENT AND WORK LETTER

     

    LEASE
      AGREEMENT

     

    On
      the
      terms stated in this Lease, Landlord leases the Premises to Tenant, and Tenant
      leases the Premises from Landlord, for the Term beginning on the Commencement
      Date and ending on the Expiration Date unless extended or sooner terminated
      pursuant to this Lease.

     

    
      	
              A.

            	
              COMMENCEMENT
                DATE.

            

    

     

    The
      commencement date (the "Commencement
      Date")
      for
      this Lease is the date set forth in the Schedule. Tenant agrees and acknowledges
      that the Commencement Date shall not be delayed as a result of any delays which
      may occur in the completion of the "Tenant Improvements," as described in
      Section 4 and the Tenant Improvement Agreement and Work Letter, attached hereto
      as EXHIBIT
      C.
      If
      Landlord does not deliver possession of the Premises by the Commencement Date,
      for any reason whatsoever, then this Lease shall not be void or voidable, and
      Landlord shall not be liable to Tenant for any loss or damage resulting
      therefrom. Furthermore, no delay in delivery of possession shall in any way
      operate to extend the Expiration Date or any other obligation of Landlord or
      Tenant hereunder, provided, however, the Monthly Base Rent shall be waived
      for
      the period between the Commencement Date and the date when Landlord delivers
      possession of the Premises to Tenant. In the event Landlord is unable to deliver
      possession of the Premises within ninety days after the Commencement Date,
      either party may elect to cancel this Lease by giving the other party written
      notice of its election to cancel and the Lease shall be canceled as of the
      date
      of the Notice. If the delay in Commencement is in no way related to Tenant's
      actions or inactions, Landlord shall return any prepaid rent and Security
      Deposit and neither party shall have any further liability under this
      Lease.

     

    
      
        
        

      

      
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              B.

            	
              EXPIRATION
                DATE.

            

    

     

    The
      expiration date (the "Expiration Date") of this Lease is the date set forth
      in
      the Schedule.

     

    
      	
              C.

            	
              EARLY
                OCCUPANCY.

            

    

     

    During
      the period commencing on the date the original of this fully executed Lease
      is
      delivered to Tenant and ending on the Commencement Date (the "Early
      Occupancy Period"),
      Tenant
      shall be permitted to enter the Premises for the purposes of installing certain
      trade fixtures and the Tenant Improvements, provided that Tenant's occupancy
      of
      the Premises during the Early Occupancy Period shall be subject to all of the
      terms, covenants and conditions of this Lease, including, without limitation,
      Tenant's obligations under the Tenant Improvement Agreement, Section 9
      (regarding Tenant's compliance with applicable laws and building rules
      obligation), and Section 10 (regarding Tenant's indemnity and insurance
      obligations), except Tenant's obligation to pay Base Rent shall not commence
      until the earlier of the Commencement Date or the date Tenant commences to
      do
      business in the Premises. Notwithstanding the foregoing, Tenant shall pay for
      all utility costs incurred by Landlord to the extent they relate to Tenant's
      work in the Premises during the Early Occupancy Period. In addition, if Tenant
      occupies any part of the Premises during the Early Occupancy Period for purposes
      of doing business, then Tenant shall pay all Base Rent, Operating Cost Share
      Rent and Tax Share Rent at the rate for the first Lease Year as set forth in
      the
      Schedule prorated for any partial month.

     

    RENT

     

    
      	
              D.

            	
              TYPES
                OF RENT.

            

    

     

    Tenant
      shall pay the following Rent in the form of a check to Landlord at the following
      address (or in such other manner as Landlord may notify Tenant):

     

    SEAGATE
      TELEGRAPH ASSOCIATES, LLC.

    c/o
      SEAGATE PROPERTIES, INC.

    980
      Fifth
      Avenue

    San
      Rafael, CA 94901

     

    (1)
       Base
      Rent
      payable
      in monthly installments in advance, without prior notice or demand, the first
      monthly installment payable concurrently with the execution of this Lease and
      thereafter on or before the first day of each month of the Term in the amount
      set forth on the Schedule.

     

    (2)
       Operating
      Cost Share Rent
      in an
      amount equal to the Tenant's Proportionate Share of the Operating Costs for
      the
      applicable fiscal year of the Lease, in excess of the Base Year, paid monthly
      in
      advance in an estimated amount. Definitions of Operating Costs and Tenant's
      Proportionate Share, and the method for billing and payment of Operating Cost
      Share Rent are set forth in Section 2.B.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (3)
       Tax
      Share Rent
      in an
      amount equal to the Tenant's Proportionate Share of the Taxes for the applicable
      fiscal year of this Lease, in excess of the Base Year, paid monthly in advance
      in an estimated amount. A definition of Taxes and the method for billing and
      payment of Tax Share Rent are set forth in Sections 2.B and 2.C.

     

    (4)
       Additional
      Rent
      in the
      amount of all costs, expenses, liabilities, and amounts which Tenant is required
      to pay under this Lease, excluding Base Rent, Operating Cost Share Rent, and
      Tax
      Share Rent, but including any late charge and any interest for late payment
      of
      any item of rent.

     

    (5)
       Rent
      as used
      in this Lease means Base Rent, Operating Cost Share Rent, Tax Share Rent and
      Additional Rent. Tenant's agreement to pay Rent is an independent covenant.
      All
      payments due from Tenant to Landlord hereunder shall be paid to Landlord,
      without notice, demand, deduction, recoupment, offset or counterclaim, and
      without relief from any valuation or appraisement laws, and in lawful money
      of
      the United States of America in the manner specified in Section 2.

     

    
      	
              E.

            	
              PAYMENT
                OF OPERATING COST SHARE RENT AND TAX SHARE
                RENT.

            

    

     

    (1)
       Payment
      of Estimated Operating Cost Share Rent and Tax Share Rent
      Landlord
      shall estimate the Operating Costs and Taxes of the Project by March 1 of each
      fiscal year, or as soon as reasonably possible thereafter. Landlord may revise
      these estimates whenever it obtains more accurate information, such as the
      final
      real estate tax assessment or tax rate for the Project. Within ten (10) days
      after receiving the original or revised estimate from Landlord, Tenant shall
      pay
      Landlord one-twelfth (l/12th) of Tenant's Proportionate Share, in excess of
      the
      Base Year, of this estimate, multiplied by the number of months that have
      elapsed in the applicable Lease Year (as defined in Section 2.C.(4) hereof)
      to
      the date of such payment including the current month, minus payments previously
      made by Tenant for the months elapsed. On the first day of each month
      thereafter, Tenant shall pay Landlord one-twelfth (l/12th) of Tenant's
      Proportionate Share of this estimate, until a new estimate becomes
      applicable.

     

    (2)
       Correction
      of Operating Cost Share Rent
      Landlord
      shall deliver to Tenant a report for the previous fiscal year (the "Operating
      Cost Report") by May 1st of each Lease Year, or as soon as reasonably possible
      thereafter, setting forth (a) the actual Operating Costs Incurred, (b) the
      amount of Operating Cost Share Rent due from Tenant, and (c) the amount of
      Operating Cost Share Rent paid by Tenant. Within thirty (30) days after such
      delivery, Tenant shall pay to Landlord the amount due minus the amount paid.
      If
      the amount paid exceeds the amount due, Landlord shall apply the excess to
      Tenant's payments of Operating Cost Share Rent next coming due or if the Lease
      has expired, Landlord shall promptly pay any such excess to Tenant and Tenant
      shall promptly pay any amounts then due.

     

    (3)
       Correction
      of Tax Share Rent
      Landlord
      shall deliver to Tenant a report for the previous Lease Year (the "Tax Report")
      by May 1SI of each Lease Year, or as soon as reasonably possible thereafter,
      setting forth (a) the actual Taxes, (b) the amount of Tax Share Rent due from
      Tenant, and (c) the amount of Tax Share Rent paid by Tenant. Within thirty
      (30)
      days after such delivery, Tenant shall pay to Landlord the amount due from
      Tenant minus the amount paid by Tenant. If the amount paid exceeds the amount
      due, Landlord shall apply any excess as a credit against Tenant's payments
      of
      Tax Share Rent next coming due or if the Lease has expired, Landlord shall
      promptly pay any such excess to Tenant and Tenant shall promptly pay any amounts
      then due.

     

    
      
        
        

      

      
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              F.

            	
              DEFINITIONS.

            

    

     

    (1)
       Included
      Operating Costs "Operating Costs"
      means
      any expenses, costs and disbursements of any kind other than Taxes, paid or
      incurred by Landlord in connection with the management, maintenance, operation,
      insurance (including the related deductibles), repair and other related
      activities in connection with any part of the Project and of the personal
      property, fixtures, machinery, equipment, systems and apparatus used in
      connection therewith, including the cost of providing those services required
      to
      be furnished by Landlord under this Lease and a management fee equal to five
      (5%) percent of all Gross Rental derived from the Building ("Gross Rental"
      shall
      mean Base Rent and any Additional Rent payable by tenants). Operating Costs
      shall also include the costs of any capital improvements which are intended
      to
      reduce Operating Costs or improve safety, and those made to keep the Project
      in
      compliance with governmental requirements applicable from time to time or to
      replace existing capital improvements, facilities and equipment within the
      Building or the common areas of the Project, such as the roof membrane, the
      roof, structural elements of the Building, and resurfacing of the parking areas
      (collectively, "Included
      Capital Items");
      provided, that the costs of any Included Capital Item shall be amortized by
      Landlord, together with an amount equal to interest at ten (10%) percent per
      annum, over the estimated useful life of such item and such amortized costs
      are
      only included in Operating Costs for that portion of the useful life of the
      Included Capital Item which falls within the Term, unless the cost of the
      Included Capital Item is less than Ten Thousand ($10,000) Dollars in which
      case
      it shall be expensed in the year in which it was incurred. Operating Costs
      shall
      not include Property Taxes, depreciation on the Building other than depreciation
      on exterior window coverings provided by Landlord and carpeting in public
      corridors and common areas and the personal property referred to above; costs
      of
      tenants' improvements in excess of tenant standard; real estate brokers'
      commissions, attorneys' fees and expenses incurred in connection with
      negotiations or disputes with Building tenants or prospective Building tenants
      and any expense to the extent Landlord receives direct reimbursement by tenants,
      insurers or other third parties. Notwithstanding anything to the contrary
      contained in this Section 2.C.(1), Operating Costs shall only include (i)
      Operating Costs fairly allocable to the Building, and (ii) a proportionate
      share
      (based on the gross rentable area of the Building as a percentage of the gross
      rentable area of all of the buildings in the Project) of all Operating Costs
      which relate to the Project in general and are not fairly allocable to any
      one
      building in the Project. If the Project is not fully occupied during any portion
      of any Lease Year, Landlord may adjust Operating Costs to equal what would
      have
      been incurred by Landlord had the Project been fully occupied. Landlord may
      incorporate such adjustments in its estimates of Operating Costs.

     

    (2)
       Taxes
      "Taxes"
      means
      any and all taxes, assessments and charges of any kind, general or special,
      ordinary or extraordinary, levied against the Project, which Landlord shall
      pay
      or become obligated to pay in connection with the ownership, leasing, renting,
      management, use, occupancy, control or operation of the Project or of the
      personal property, fixtures, machinery, equipment, systems and apparatus used
      in
      connection therewith. Taxes shall include real estate taxes, personal property
      taxes, sewer rents, water rents, special or general assessments, transit taxes,
      ad valorem taxes, and any tax levied by any state, county, municipality or
      other
      governmental authority on the rents hereunder or the interest of Landlord under
      this Lease (the "Rent Tax"). Taxes shall also include all fees and other costs
      and expenses paid by Landlord in reviewing any tax and in seeking a refund
      or
      reduction of any Taxes, whether or not the Landlord is ultimately successful.
      Taxes shall also include any assessments or fees paid to any business park
      owners association, or similar entity, which are imposed against the Project
      pursuant to any Covenants, Conditions and Restrictions ("CC&R's") recorded
      against the Project and any installments of principal and interest required
      to
      pay any existing or future general or special assessments for public
      improvements, services or benefits, and any increases resulting from
      reassessments imposed in connection with any change in ownership or new
      construction. Notwithstanding anything to the contrary contained in this Section
      2.C.(2), Taxes shall include only those Taxes (i) fairly allocable to the
      Building, and (ii) a proportionate share (based on the gross rentable area
      of
      the Building as a percentage of the gross rentable area of all of the buildings
      in the Project) of all Taxes which relate to the Project in general and are
      not
      fairly allocable to any one building in the Project. For any year, the amount
      to
      be included in Taxes (a) from taxes or assessments payable in installments,
      shall be the amount of the installments (with any interest) due and payable
      during such year, and (b) from all other Taxes, shall at Landlord's election
      be
      the amount accrued, assessed, or otherwise imposed for such year or the amount
      due and payable in such year. Any refund or other adjustment to any Taxes by
      the
      taxing authority, shall apply during the year in which the adjustment is made.
      Taxes shall not include any net income (except Rent Tax), capital, stock,
      succession, transfer, franchise, gift, estate or inheritance tax, except to
      the
      extent that such tax shall be imposed in lieu of any portion of
      Taxes.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (3)
       Base
      Year The
      term
      "Base Year" shall mean the Operating Costs and Taxes incurred by Landlord during
      the calendar year as set forth under Section 12 in the Schedule
      hereinabove.

     

    (4)
       Lease
      Year "Lease Year"
      shall
      mean each twelve month period during the term hereof ending on December 31;
      provided that the first Lease Year shall commence upon the commencement of
      the
      term hereof and shall end on the next succeeding December 31, and the last
      Lease
      Year shall end upon the expiration of the term hereof.

     

    
      	
              G.

            	
              COMPUTATION
                OF BASE RENT AND RENT
                ADJUSTMENTS.

            

    

     

    (1)
       Prorations
      If this
      Lease begins on a day other than the first day of a month, the Base Rent,
      Operating Cost Share Rent and Tax Share Rent shall be prorated for such partial
      month based on the actual number of days in such month. If this Lease begins
      on
      a day other than the first day, or ends on a day other than the last day of
      the
      Lease Year, Operating Cost Share Rent and Tax Share Rent shall be prorated
      for
      the applicable Lease Year.

     

    (2)
       Default
      Interest
      Any sum
      due from Tenant to Landlord not paid when due shall bear interest from the
      date
      due until paid at the lesser of eighteen (18%) percent per annum or the maximum
      rate permitted by law.

     

    (3)
       Books
      and Records
      Landlord
      shall maintain books and records reflecting the Operating Costs and Taxes in
      accordance with its standard operating procedures and practice and generally
      accepted accounting principles. Provided Tenant is not otherwise in default
      under this Lease, Tenant and its certified public accountant shall have the
      right to inspect Landlord's records at Landlord's applicable local office or
      other location designated by Landlord upon at least seventy-two (72) hours
      prior
      written notice during normal business hours during the ninety (90) days
      following the respective delivery of the Operating Cost Report or the Tax
      Report. The results of any such inspection shall be kept strictly confidential
      by Tenant and its agents, and Tenant and its certified public accountant must
      agree, in their contract for such services, to such confidentiality restrictions
      and shall specifically agree that the results shall not be made available to
      any
      other tenant of the Project. Unless Tenant sends to Landlord any written
      exception to either such report within said ninety-day (90) period, such report
      shall be deemed final and accepted by Tenant. Tenant shall pay the amount shown
      on both reports in the manner prescribed in this Lease, whether or not Tenant
      takes any such written exception, without any prejudice to such exception.
      If
      Tenant makes a timely exception, Landlord shall cause its independent certified
      public accountant to issue a final and conclusive resolution of Tenant's
      exception. Tenant shall pay the cost of such certification unless Landlord's
      original determination of annual Operating Costs and Taxes in the aggregate
      overstated the amounts thereof by more than five (5%) percent.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (4)
       Miscellaneous
      So long
      as Tenant is in default of any obligation under this Lease, Tenant shall not
      be
      entitled to any refund of any amount from Landlord. If this Lease is terminated
      for any reason prior to the annual determination of Operating Cost Share Rent
      or
      Tax Share Rent, either party shall pay the full amount due to the other within
      fifteen (15) days after Landlord's notice to Tenant of the amount when it is
      determined. Landlord may commingle any payments made with respect to Operating
      Cost Share Rent or Tax Share Rent, without payment of interest.

     

    PREMISES

     

    The
      exact
      boundaries of the Premises shall extend to the unfinished interior surface
      of
      all perimeter walls, except glazing, which shall be included within the
      Premises, the unfinished surface of all floors, and the underside of the floor
      above the Premises that forms the ceiling of the Premises. Notwithstanding
      the
      foregoing, the Premises shall not be deemed to include the roof, the exterior
      surface of the walls of the Premises, any structural portions of the Building
      or
      any utility installations serving other portions of the Building. Landlord
      reserves to itself the use of the roof, exterior walls and the area beneath
      the
      Premises, together with the right to install, maintain, use, repair and replace
      plumbing, telephone facilities, equipment, machinery, connections, pipes, ducts,
      conduits and wires leading through the Premises and serving other parts of
      the
      Building. The square footage of the Premises shall be determined in accordance
      with the BOMA Standards. Not later than 15 days before the Commencement Date,
      Tenant shall have the right to measure the Premises and determine the rentable
      square footage thereof. If the rentable square footage contained in the Premises
      is more or less than the square footage identified in the Schedule, then the
      Rent and Tenant's Proportionate Share shall be adjusted to reflect the actual
      rentable square footage contained within the Premises.

     

    CONDITION
      OF PREMISES

     

    Tenant
      represents, warrants and covenants to Landlord that, as of the date of this
      Lease, Tenant has conducted its own investigation of the Premises and the
      physical condition thereof, including, without limitation, the accessibility
      and
      location of utilities, the improvements, the presence of Hazardous Substances
      (defined hereinafter), and any other matters which in Tenant's judgment might
      affect or influence Tenant's use of the Premises or Tenant's willingness to
      enter into this Lease. Tenant recognizes that Landlord would not lease the
      Premises except on an "as is" basis and acknowledges that, except as set forth
      in this Lease, Landlord has made no representation of any kind in connection
      with the improvements to, or the physical conditions on, or bearing on the
      use
      of, the Premises. Tenant shall rely solely on Tenant's own inspection and
      examination of such items and not on any representations of Landlord, express
      or
      implied. Landlord shall deliver the Premises to Tenant in the same arrangement
      and condition as the Premises now are, reasonable wear and tear excepted, and
      that Landlord, except as may be expressly agreed by Landlord in writing as
      set
      forth in the Tenant Improvement Agreement and Work Letter (the "Work"), set
      forth herein as Exhibit C attached and made a part hereof, has no obligation
      to
      alter, repair, renovate, or render fit for Tenant's occupancy, any part of
      the
      Premises. Upon execution of this Lease, Tenant shall be deemed fully satisfied
      with the results of Tenant's inspection and examination of all such items.
      Landlord shall be solely responsible for constructing those certain interior
      tenant improvements ("Tenant Improvements") within the Premises in accordance
      with the terms and conditions set forth in the Tenant Improvement Agreement
      and
      Work Letter attached hereto as EXHIBIT C. Tenant agrees and acknowledges that
      Landlord shall have no liability or responsibility whatsoever for the
      construction of the Tenant Improvements, except that Landlord agrees to provide
      as set forth in the Tenant Improvement Agreement and Work Letter.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    PROJECT
      SERVICES

     

    Landlord
      shall furnish services as follows:

     

    
      	
              H.

            	
              HEATING
                AND AIR CONDITIONING.

            

    

     

    During
      the normal business hours of 8:00 a.m. to 6:00 p.m., Monday through Friday,
      Landlord shall furnish heating and air conditioning to provide a comfortable
      temperature, in Landlord's reasonable judgment, for normal business operations,
      except to the extent Tenant fails to take reasonable steps to ensure the
      efficient heating and cooling of the Premises (e.g., keeping all exterior doors,
      windows and blinds closed) or installs equipment which adversely affects the
      temperature maintained by the air conditioning system; provided if the outside
      temperature exceeds 95° degrees F dry bulb, then Tenant acknowledges that the
      temperatures within the Premises may be slightly higher than usual. If Tenant
      installs such equipment, Landlord may reasonably require that Tenant install
      supplementary air conditioning units in the Premises and pay the cost of
      installation, operation and maintenance thereof. Landlord shall furnish heating
      and air conditioning after business hours if Tenant provides Landlord reasonable
      prior notice, and pays Landlord all the then current charges for such additional
      heating or air conditioning. The current hourly charge for after-hours HVAC
      use
      is $35.00 per hour, provided that Landlord reserves the right to change this
      rate at any time during the Term without notice to Tenant.

     

    
      	
              I.

            	
              ELEVATORS.

            

    

     

    If
      the
      Building is equipped with one or more elevators, Landlord shall provide
      passenger elevator service during normal business hours to Tenant in common
      with
      Landlord and all other tenants. Landlord shall provide limited passenger service
      at other times, except in case of an emergency. If the Building is equipped
      with
      a freight elevator, Landlord shall provide freight elevator service at
      reasonable hours at Tenant's request, subject to scheduling by the Landlord
      and
      payment for the service by Tenant.

     

    
      	
              J.

            	
              ELECTRICITY.

            

    

     

    Landlord
      shall provide sufficient electricity to operate normal office equipment. Tenant
      shall not install or operate in the Premises any electrically operated equipment
      or other machinery, other than business machines and equipment normally employed
      for general office use which do not require high electricity consumption for
      operation, without obtaining the prior written consent of Landlord. If any
      or
      all of Tenant's equipment requires electricity consumption in excess of that
      which is necessary to operate normal office equipment, such consumption
      (including consumption for computer or telephone rooms and special HVAC
      equipment) shall be submetered by Landlord at Tenant's expense, and Tenant
      shall
      reimburse Landlord as Additional Rent for the cost of its sub-metered
      consumption based upon Landlord's average cost of electricity. Such Additional
      Rent shall be in addition to Tenant's obligations pursuant to Section 2.A (4)
      to
      pay its Proportionate Share of Operating Costs.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	
              K.

            	
              WATER.

            

    

     

    Landlord
      shall furnish hot and cold tap water for drinking and toilet purposes. Tenant
      shall pay Landlord for water furnished for any other purpose as Additional
      Rent
      at rates fixed by Landlord. Such Additional Rent shall be in addition to
      Tenant's obligations pursuant to Section 2.A (4) to pay its Proportionate Share
      of Operating Costs. Tenant shall take reasonable actions so as to avoid allowing
      water to be wasted.

     

    
      	
              L.

            	
              JANITORIAL
                SERVICE.

            

    

     

    Landlord
      shall furnish janitorial service Monday through Friday as generally provided
      to
      other tenants in the Project and consistent with specifications for other Class
      A office buildings for the City of Berkeley, California. With reasonable prior
      notice from Tenant, Landlord shall also provide additional janitorial service
      on
      weekends or holidays at Tenant's expense, and Tenant shall reimburse Landlord
      as
      Additional Rent for the cost of such additional janitorial services. Such
      Additional Rent shall be in addition to Tenant's obligations pursuant to Section
      2.A (4) to pay its Proportionate Share of Operating Costs.

     

    
      	
              M.

            	
              INTERRUPTION
                OF SERVICES.

            

    

     

    Landlord
      shall not be liable for any failure to furnish, stoppage of, or interruption
      in
      furnishing any of the services or utilities, when such failure is caused by
      accident, breakage, repairs, strikes, lockouts, labor disputes, labor
      disturbances, governmental regulation, civil disturbances, acts of war,
      moratorium or other governmental action, or any other cause beyond Landlord's
      reasonable control, and, in such event, Tenant shall not be entitled to any
      damages nor shall any failure or interruption abate or suspend Tenant's
      obligation to pay Rent required under this Lease or constitute or be construed
      as a constructive or other eviction of Tenant or relieve Tenant from fulfillment
      of any covenant or agreement hereof. Further, in the event any governmental
      authority or public utility promulgates or revises any law, ordinance, rule
      or
      regulation, or issues mandatory controls or voluntary controls relating to
      the
      use or conservation of energy, water, gas, light or electricity, the reduction
      of automobile or other emissions, or the provision of any other utility or
      service, Landlord may take any reasonably appropriate action to comply with
      such
      law, ordinance, rule, regulation, mandatory control or voluntary guideline
      and
      Tenant's obligations hereunder shall not be affected by any such action of
      Landlord. The parties acknowledge that safety and security devices, services
      and
      programs provided by Landlord, if any, while intended to deter crime and ensure
      safety, may not in given instances prevent theft or other criminal acts, or
      ensure safety of persons or property. The risk that any safety or security
      device, service or program may not be effective, or may malfunction, or be
      circumvented by a criminal, is assumed by Tenant with respect to Tenant's
      property and interests, and Tenant shall obtain insurance coverage to the extent
      Tenant desires protection against such criminal acts and other losses, as
      further described in this Lease. Tenant agrees to cooperate in any reasonable
      safety or security program developed by Landlord or required by
      law.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    ALTERATIONS
      AND REPAIRS

     

    
      	
              N.

            	
              LANDLORD'S
                CONSENT AND CONDITIONS.

            

    

     

    Tenant
      shall not make any improvements or alterations to the Premises (the "Work")
      without in each instance submitting plans and specifications for the Work to
      Landlord and obtaining Landlord's prior written consent, which consent may
      be
      withheld in Landlord's sole discretion. Landlord will be deemed to be acting
      reasonably in withholding its consent for any Work which (a) impacts the base
      structural components or systems of the Building, (b) impacts any other tenant's
      premises, or (c) is visible from outside the Premises. Tenant shall pay for
      the
      cost of all Work, including the cost of any and all approvals, permits, fees
      and
      other charges which may be required as a condition of performing such Work.
      The
      following requirements shall apply to all Work:

     

    (1)
       Prior
      to commencement,
      Tenant
      shall furnish to Landlord building permits, and certificates of insurance
      reasonably satisfactory to Landlord.

     

    (2)
       Tenant
      shall perform
      all Work
      so as to maintain peace and harmony among other contractors serving the Project
      and shall avoid interference with other work to be performed or services to
      be
      rendered in the Project.

     

    (3)
       The
      Work
      shall be
      performed in a good and workmanlike manner, meeting the standard for
      construction and quality of materials in the Building, and shall comply with
      all
      insurance requirements and all applicable governmental laws, ordinances and
      regulations ("Governmental Requirements").

     

    (4)
       Tenant
      shall perform
      all Work
      so as to minimize or prevent disruption to other tenants, and Tenant shall
      comply with all reasonable requests of Landlord in response to complaints from
      other tenants.

     

    (5)
       Tenant
      shall perform
      all Work
      in compliance with any "Policies, Rules and Procedures for Construction
      Projects" which may be in effect at the time the Work is performed. As of the
      date of this Lease, there are no Policies, Rules and Procedures for Construction
      Projects which have been established for this Project.

     

    (6)
       Tenant
      shall reimburse
      Landlord
      any and all costs and expenses incurred by Landlord in connection with the
      construction of the Work, including, without limitation, utilities, trash
      removal, and temporary barricades, and the review of any plans and
      specifications. Tenant shall permit Landlord to supervise all Work. Landlord
      may
      charge a supervisory fee not to exceed fifteen percent (15%) of labor,
      materials, and all other costs of the Work whether or not Landlord's employees
      or contractors perform the Work.

     

    (7)
       Upon
      completion,
      Tenant
      shall furnish Landlord with full and final statutory waivers of liens, as-built
      plans and specifications, and receipted bills covering all labor and materials,
      and all other close-out documentation relating to the Work, including any other
      information required under any "Policies, Rules and Procedures for Construction
      Projects" which may be in effect at such time.

    
       

      (8)
         Notwithstanding
        anything
        to the
        contrary contained in this Lease, Landlord's approval of any contractors,
        subcontractors, engineers, architects, suppliers, plans or specifications
        submitted pursuant hereto shall not be deemed a warranty as to the adequacy
        of
        the design, workmanship, quality of materials or compliance with any applicable
        laws.

       

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (9)
       Landlord
      may require
      Tenant
      to provide Landlord at Tenant's sole cost and expense a completion and
      performance bond in an amount equal to the estimated cost of the Work to insure
      Landlord against any liability for mechanic's or materialmens' liens and to
      insure the completion of the Work.

     

    
      	
              O.

            	
              REPAIRS.

            

    

     

    If
      any
      part of the mechanical, electrical or other systems in the Premises (e.g.,
      HVAC,
      life safety or automatic fire extinguisher/sprinkler system) shall be damaged,
      Tenant shall promptly notify Landlord, and Landlord shall repair such damage.
      Landlord may also at any reasonable time make any repairs or alterations which
      Landlord deems necessary for the safety or protection of the Project, or which
      Landlord is required to make by any court or pursuant to any Governmental
      Requirement. Tenant shall at its expense make all other repairs necessary to
      keep the Premises, and Tenant's fixtures and personal property, in good order,
      condition and repair in compliance with all applicable Governmental
      Requirements; to the extent Tenant fails to do so, Landlord may make such
      repairs itself. The cost of any repairs made by Landlord on account of Tenant's
      default, or on account of the misuse or neglect by Tenant or its invitees,
      contractors or agents anywhere in the Project, shall become Additional Rent
      payable by Tenant on demand. It is a condition precedent to all Landlord's
      obligations to repair and maintain that Tenant shall have notified Landlord
      of
      the need of such repairs or maintenance. Tenant waives the provisions of
      Sections 1941 and 1942 of the California Civil Code and any similar or successor
      law regarding Tenant's right to make repairs and deduct the cost of such repairs
      from the Rent due under this Lease.

     

    
      	
              P.

            	
              NO
                LIENS.

            

    

     

    Tenant
      has no authority to cause or permit any lien or encumbrance of any kind to
      affect Landlord's interest in the Project; any such lien or encumbrance shall
      attach to Tenant's interest only. If any mechanic's lien shall be filed or
      claim
      of lien made for work or materials furnished to Tenant, then Tenant shall at
      its
      expense within ten (10) days thereafter either discharge or contest the lien
      or
      claim. If Tenant contests the lien or claim, then Tenant shall (i) within such
      ten (10) day period, provide Landlord adequate security for the lien or claim,
      (ii) contest the lien or claim in good faith by appropriate proceedings that
      operate to stay its enforcement, and (iii) pay promptly any final adverse
      judgment entered in any such proceeding. If Tenant does not comply with these
      requirements, Landlord may discharge the lien or claim, and the amount paid,
      as
      well as attorney's fees and other expenses incurred by Landlord, shall become
      Additional Rent payable by Tenant on demand.

     

    
      	
              Q.

            	
              OWNERSHIP
                OF IMPROVEMENTS.

            

    

     

    All
      Work
      as defined in this Section 6, partitions, hardware, and all other improvements
      and all fixtures except trade fixtures, constructed in the Premises by either
      Landlord or Tenant, (i) shall become Landlord's property upon termination
      without compensation to Tenant, or (ii) shall at Landlord's option be removed
      in
      accordance with Section 6.E below.

     

    
      	
              R.

            	
              REMOVAL
                UPON TERMINATION.

            

    

     

    Upon
      the
      termination of this Lease or Tenant's right of possession Tenant shall remove
      from the Premises and Project its trade fixtures, furniture, moveable equipment
      and other personal property, any improvements which Landlord elects pursuant
      to
      Section 6.E shall be removed by Tenant, and any improvements to any portion
      of
      the Project other than the Premises. If Tenant does not timely remove such
      property, then Tenant shall be conclusively presumed to have, at Landlord's
      election (i) conveyed such property to Landlord without compensation or (ii)
      abandoned such property, and Landlord may dispose of or store any part thereof
      in any manner at Tenant's sole cost, without waiving Landlord's right to claim
      from Tenant all expenses arising out of Tenant's failure to remove the property,
      and without liability to Tenant or any other person. Landlord shall have no
      duty
      to be a bailee of any such personal property. If Landlord elects abandonment,
      Tenant shall pay to Landlord, upon demand, any expenses incurred for
      disposition.

    
       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

    

    USE
      OF PREMISES

     

    
      	
              S.

            	
              LIMITATION
                ON USE.

            

    

     

    Tenant
      shall use the Premises only for the Permitted Use stated in the Schedule. Any
      material change in the character of Tenant's business or use shall constitute
      a
      default under this Lease. Nothing contained in this Lease shall grant to Tenant
      the exclusive right to conduct within the Building the business to be conducted
      by Tenant within the Premises or otherwise limit the right of Landlord to lease
      space in the Building to any other tenants as it deems proper. Tenant shall
      not
      conduct or permit to be conducted in the Premises any sale by auction, or any
      fire, distress or bankruptcy sale, or use or allow the Premises to be used
      for
      any improper, immoral, unlawful or objectionable purpose, or cause, maintain
      or
      permit any nuisance in, or about the Premises or commit or suffer to be
      committed any waste in or upon the Premises. Tenant shall not allow any use
      of
      the Premises which will negatively affect the cost of coverage of Landlord's
      insurance on the Project. Tenant shall not allow any inflammable or explosive
      liquids or materials to be kept on the Premises. Tenant shall not allow any
      use
      of the Premises which would cause the value or utility of any part of the
      Premises to diminish or would interfere with any other tenant or with the
      operation of the Project by Landlord. Tenant shall not permit any nuisance
      or
      waste upon the Project, or allow any offensive noise or odor in or around the
      Project. At the end of each business day, or more frequently if necessary,
      Tenant shall deposit all garbage and other trash (excluding any inflammable,
      explosive and/or hazardous materials) in trash bins or containers approved
      by
      Landlord in locations designated by Landlord from time to time. If any
      governmental authority shall deem the Premises to be a "place of public
      accommodation" under the Americans with Disabilities Act or any other comparable
      law as a result of Tenant's use, Tenant shall either modify its use to cause
      authority to rescind its designation or to be responsible for any alterations,
      structural or otherwise, required to be made to the Building or the Premises
      under such laws.

     

    
      	
              T.

            	
              SIGNS.

            

    

     

    Tenant
      shall not place on any portion of the Premises any sign, placard, lettering,
      banner, displays or other advertising or communicative material which is visible
      from the exterior of the Building without the prior written approval of
      Landlord. Any approved signs shall strictly conform to all Governmental
      Restrictions, any CC&R's recorded against the Project, and any sign criteria
      which may be established by Landlord and in effect at the time, and shall be
      installed (and removed upon the Expiration Date) at Tenant's expense. Tenant,
      at
      its sole cost and expense, shall maintain such signs in good condition and
      repair, (including the repair of any damage caused to the Building and/or
      Project upon the removal of such signs). Landlord current Signage Standards
      are
      on file and available upon request from the Landlord's corporate office, and
      are
      subject to change from time to time. Notwithstanding the foregoing, Landlord,
      at
      its cost, shall include Tenant's name in the lobby directory for the
      Building.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    
      	
              U.

            	
              PARKING.

            

    

     

    Landlord
      shall provide Tenant up to the number of parking stalls specified in the
      Schedule on an unreserved basis in Landlord's parking facilities (the "Parking
      Facilities"). The parking stalls are charged to Tenant at the prevailing rates
      which may be adjusted from time to time by Landlord in its sole discretion.
      The
      use of the Parking Facilities shall be in common with other tenants of the
      Project upon a first-come, first-served basis and on other reasonable,
      nondiscriminatory terms and conditions, as may from time to time be established
      by Landlord. Tenant agrees to cooperate with Landlord and other tenants in
      the
      Project in the use of the Parking Facilities. Access to the surface parking
      lot
      and underground parking garage shall be subject to control by Landlord. Landlord
      reserves the right in its sole discretion to alter, change or improve the
      Parking Facilities. Landlord shall not be liable to Tenant, nor shall this
      Lease
      be affected, if any parking is impaired by moratorium, initiative, referendum,
      law, ordinance, regulation or order passed, issued or made by any governmental
      or quasi-governmental body. Landlord assumes no liability for damage or
      injuries, theft, collision, fire or damage of Tenant, its employees, customers
      and invitees and/or their vehicles and Landlord shall not be responsible for
      articles left in vehicles or for damages for loss of use of any vehicle. Tenant
      waives any and all claims against Landlord for any injury to or death of any
      person or damage to or destruction of property in or about the Parking
      Facilities, including, without limitation, loss of use of any one or all of
      the
      Parking Facilities.

     

    
      	
              V.

            	
              PROHIBITION
                AGAINST USE OF ROOF AND STRUCTURE OF
                BUILDING.

            

    

     

    Tenant
      shall be prohibited from using any all or any portion of the roof of the
      Building or any portion of the structure of the Building during the Tenancy
      of
      this Lease (or any extensions thereof) for any purposes.

     

    INTRABUILDING
      NETWORK CABLES

     

    Notwithstanding
      anything contained in this Lease to the contrary, Landlord and Tenant agree
      as
      follows:

     

    
      	
              W.

            	
              TENANT'S
                RESPONSIBILITY.

            

    

     

    At
      its
      sole cost and expense, Tenant agrees to install, maintain, and repair all
      telecommunication cabling, wiring, and risers in the Premises or through the
      Building to Tenant's telephone panel as may be required to for Tenant's use
      of
      the Premises. Any costs incurred by Landlord caused by such installation or
      to
      comply with governmental laws, rules, and regulations in connection with such
      installation, will be for the account of Tenant, and within ten (10) days Tenant
      will pay all invoices for those costs as Additional Rent. Tenant shall also
      be
      responsible, at Tenant's sole cost and expense, for any of Tenant's telephones,
      telecopiers, computers, routers, telephone switching, telephone panels and
      related equipment.

     

    
      	
              X.

            	
              LANDLORD'S
                RIGHT OF ENTRY.

            

    

     

    In
      addition to Landlord's other rights of entry under this Lease, Landlord has
      the
      right to enter the Premises to install, maintain, and repair telecommunications
      cabling, wiring, and risers for the benefit of other tenants of the
      Building.

     

    
      	
              Y.

            	
              ALTERATIONS
                BY TENANT.

            

    

     

    Regardless
      of Tenant's other rights under the Lease to make alterations to the Premises,
      Tenant may not alter or modify the telecommunication cabling, wiring, and risers
      located in the Premises or throughout the Building or otherwise without
      Landlord's prior written consent, which consent may be withheld in Landlord's
      sole discretion.

    
       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

    

    
      	
              Z.

            	
              SERVICE
                PROVIDER.

            

    

     

    Tenant
      agrees that the installation, maintenance, and repair of Tenant's
      telecommunications cabling, wiring and risers in the Premises or through the
      Building will be done by Landlord's approved service provider or any other
      independent contractor that Landlord may approve in writing in advance, which
      approval shall not be unreasonably withheld.

     

    
      	
              AA.

            	
              INDEMNIFICATION.

            

    

     

    Tenant
      agrees to indemnify, release, defend, and hold Landlord harmless against any
      damages, claims, or other liability resulting from the installation, repair,
      or
      maintenance, of Tenant's telecommunications calling, wiring and risers in the
      Premises or through the Building including, but not limited to, the costs of
      repair, the costs of handling complaints from other tenants in the Building,
      and
      any damages resulting from the interruption in service to other tenants in
      the
      Building. Tenant releases Landlord from any losses, claims, injuries, damages,
      or other liability, including, but not limited to, consequential damages,
      whether to persons or property and no matter how caused, in any way connected
      with the interruption of telecommunications services to the Premises due to
      the
      failure of any telecommunications cabling, wiring, or risers. Tenant expressly
      waives any right to claim that the interruption of such services constitutes
      grounds for a claim of abatement of rent, of constructive eviction, or for
      termination of this Lease.

     

    GOVERNMENTAL
      REQUIREMENTS AND BUILDING RULES

     

    Tenant
      shall comply with all Governmental Requirements applying to its use, repair
      and
      maintenance of the Premises. Landlord and Tenant acknowledge and agree that
      Tenant's obligation to comply with the legal requirements as provided herein
      is
      a material part of the bargained for consideration under this Lease. Tenant's
      obligation hereunder shall include, without limitation, the responsibility
      of
      Tenant to make substantial repairs and alterations to the Premises (including
      any Improvements), regardless of, among other factors, the relationship of
      the
      cost of curative action to the rental under this Lease, the length of the then
      remaining term of this Lease, the relative benefit of the repairs to Tenant,
      the
      degree in which the curative action may interfere with Tenant's use or enjoyment
      of the Premises, the likelihood that Landlord or Tenant contemplated the
      particular Governmental Requirements involved, and whether the Governmental
      Requirements involved are related to Tenant's particular use of the Premises.
      No
      occurrence or situation arising during the term hereof, nor any present or
      future Governmental Requirements, whether foreseen or unforeseen, and however
      extraordinary, shall relieve Tenant from its obligations hereunder, or shall
      give Tenant any right to terminate this Lease in whole or in part or to
      otherwise seek redress against Landlord. Tenant waives any rights now or
      hereafter conferred upon it by any existing or future law to terminate this
      Lease, to receive any abatement, diminution, reduction or suspension of payment
      of rent, or to compel Landlord to make any repairs to comply with any such
      Governmental Requirements, on account of any such occurrence or situation.
      Tenant shall also comply with all reasonable rules for the Project which may
      be
      established and amended from time to time by Landlord. The present rules and
      regulations are contained in EXHIBIT B. Failure by another tenant to comply
      with
      the rules or failure by Landlord to enforce them shall not relieve Tenant of
      its
      obligation to comply with the rules or make Landlord responsible to Tenant
      in
      any way. Landlord shall use reasonable efforts to apply the rules and
      regulations uniformly with respect to Tenant and any other tenants in the
      Project under leases containing rules and regulations similar to this Lease.
      All
      Work, alterations, repairs or improvements performed by Tenant shall comply
      with
      the provisions of Section 6 of this Lease and any applicable "Policies, Rules
      and Regulations for Construction Projects" which may be reasonably established
      by Landlord and in effect at the time. Notwithstanding the foregoing, Landlord
      shall be responsible for all ADA compliance costs required to be incurred in
      connection with the common areas of the Project, except that Tenant shall be
      solely responsible for all ADA compliance costs which are required to be
      incurred in connection with the common areas of the Project as a result of
      Tenant's particular use or activities (e.g., alterations or repairs). Tenant
      shall be solely responsible for all ADA compliance costs which are required
      to
      be incurred within the Premises during the Term. Landlord makes no
      representations or warranties regarding the Project's or the Premises'
      compliance with the ADA.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    WAIVER
      OF CLAIMS; INDEMNIFICATION; INSURANCE

     

    
      	
              BB.

            	
              WAIVER
                OF CLAIMS.

            

    

     

    To
      the
      extent permitted by law, Tenant waives any claims it may have against Landlord
      or its officers, directors, employees or agents for business interruption or
      damage to property sustained by Tenant as the result of any act or omission
      of
      Landlord, its agents or employees. To the extent permitted by law, Landlord
      waives any claims it may have against Tenant or its officers, directors,
      employees or agents for loss of rents or damage to property sustained by
      Landlord as the result of any act or omission of Tenant, its agents or
      employees.

     

    
      	
              CC.

            	
              INDEMNIFICATION.

            

    

     

    Except
      for Landlord's or its agent's, employees or contractors willful misconduct
      or
      active negligence, Tenant shall indemnify, defend, and hold Landlord harmless
      from any and all claims, liability, damage or loss, and from and against any
      and
      all costs and expenses, including reasonable attorneys' fees, arising out of:
      (a) any injury to or death of any person or damage to or destruction of any
      property, from any cause whatsoever occurring in or about the Premises or the
      Building or the Project, and, if occurring in or about any portion of the common
      areas or elsewhere in or about the Building or the Project, when such injury
      or
      damage shall be caused in whole or in part by the act, neglect, default or
      omission of any duty by Tenant, its agents, employees or invitees or otherwise
      by any conduct, or (b) transactions of any of said persons in or about or
      concerning the Premises, including any failure of Tenant to observe or perform
      any of its obligations. The provisions of this Section 10.B shall survive the
      termination of this Lease.

     

    Except
      for Tenant's or its employees, agents, contractors or invitees willful
      misconduct or active negligence, Landlord shall indemnify, defend, and hold
      Tenant harmless from any and all claims, liability, damage or loss, and from
      and
      against any and all costs and expenses, including reasonable attorneys' fees,
      arising out of: any injury to or death of any person or damage to or destruction
      of any property, occurring in or about the Building or the Project, when such
      injury or damage shall be caused in whole or in part by the willful misconduct
      or active negligence of Landlord, its agents, employees or
      contractors.

     

    
      	
              DD.

            	
              TENANT'S
                INSURANCE.

            

    

    

    Tenant
      shall maintain insurance as follows:

     

    (1)
       Commercial
      General Liability Insurance,
      with
      (a) contractual liability including the indemnification provisions contained
      in
      this Lease, (b) a severability of interest endorsement, (c) limits of not less
      than One Million Dollars ($1,000,000) combined single limit per occurrence
      and
      not less than Two Million Dollars ($2,000,000) in the aggregate for bodily
      injury, sickness or death, and property damage, and umbrella coverage of not
      less than Three Million Dollars ($3,000,000).

    
       

      
        
          
          

        

        
          15
            

          
            

          

        

        
          
          

        

      

       

    

    (2)
       Property
      Insurance against
      "All
      Risks" of physical loss covering the replacement cost of all Improvements.
      Tenant waives all rights of subrogation, and Tenant's property insurance shall
      include a waiver of subrogation in favor of Landlord.

     

    (3)
       Workers'
      Compensation
      or
      similar insurance in form and amounts required by law, and Employer's Liability
      with not less than the following limits:

     

    Each
      Accident $500,000

    Disease
      -
      Policy Limit $500,000

    Disease
      -
      Each Employee $500,000

     

    (4)
       Such
      insurance
      which
      Tenant is required to maintain shall contain a waiver of subrogation provision
      in favor of Landlord and its agent. If in the opinion of Landlord's insurance
      advisor, based on a substantial increase in recovered liability claims, the
      aforesaid amounts of coverage are no longer adequate, then such coverage shall
      be proportionately increased. Tenant's insurance shall be primary and not
      contributory to that carried by Landlord, its agents, or mortgagee. Landlord,
      and if any, Landlord's building manager or agent, mortgagee and ground lessor
      shall be named as additional insureds. The company or companies writing any
      insurance which Tenant is required to maintain under this Lease, as well as
      the
      form of such insurance, shall at all times be subject to Landlord's approval,
      and any such company shall be licensed to do business in the State of
      California. Such insurance companies shall have a A.M. Best rating of A VI
      or
      better. Should this Lease be canceled due to damage or destruction to or
      condemnation of the Premises and Tenant is thus relieved of its obligation
      to
      restore or rebuild the improvements on the Premises, any insurance proceeds
      for
      damage to the Premises, including all fixtures and leasehold improvements
      thereon, shall belong to Landlord, free and clear of any claims by Tenant.
      

     

    (5)
       Tenant
      shall cause
      any
      contractor of Tenant performing work on the Premises to maintain insurance
      as
      follows, with such other terms, coverages and insurers, as Landlord shall
      reasonably require from time to time:

     

    (a) Commercial
      General Liability Insurance,
      including contractor's liability coverage, contractual liability coverage,
      completed operations coverage, broad form property damage endorsement, and
      contractor's protective liability coverage, to afford protection with limits,
      for each occurrence, of not less than One Million Dollars ($ 1,000,000) with
      respect to personal injury, death or property damage.

     

    (b) Workers'
      Compensation
      or
      similar insurance in form and amounts required by law, and Employer's Liability
      with not less than the following limits:

     

    Each
      Accident $500,000

    Disease
      -
      Policy Limit $500,000

    Disease
      -
      Each Employee $500,000

     

    Such
      insurance shall contain a waiver of subrogation provision in favor of Landlord
      and its agents. Tenant's contractor's insurance shall be primary and not
      contributory to that carried by Tenant, Landlord, their agents or mortgagees.
      Tenant and Landlord, and if any, Landlord, mortgagee or ground lessor shall
      be
      named as additional insured on Tenant's contractor, insurance
      policies.

    
       

      
        
          
          

        

        
          16
            

          
            

          

        

        
          
          

        

      

       

    

    
      	
              EE.

            	
              INSURANCE
                CERTIFICATES.

            

    

     

    Tenant
      shall deliver to Landlord certificates evidencing all required insurance no
      later than five (5) days prior to the Commencement Date and each renewal date.
      Each certificate will provide for thirty (30) days prior written notice of
      cancellation to Landlord and Tenant. E.

     

    
      	
              FF.

            	
              LANDLORD'S
                INSURANCE.

            

    

     

    Landlord
      shall maintain "All-Risk" property insurance at replacement cost, including
      loss
      of rents, on the Building, and Commercial General Liability insurance policies
      covering the common areas of the Project, each with such terms, coverages and
      conditions as are normally carried by reasonably prudent owners of properties
      similar to the Project. The cost of any premium for Landlord's insurance shall
      be included as part of the Operating Costs. With respect to property insurance,
      Landlord and Tenant mutually waive all rights of subrogation, and the respective
      "All-Risk" coverage property insurance policies carried by Landlord and Tenant
      shall contain enforceable waiver of subrogation endorsements.

     

    FIRE
      AND OTHER CASUALTY

     

    
      	
              GG.

            	
              TERMINATION.

            

    

     

    If
      a fire
      or other casualty causes substantial damage to the Building or the Premises,
      and
      sufficient insurance proceeds will be available to Landlord to cover the cost
      of
      any restoration to the Building and Premises, Landlord shall engage a registered
      architect to certify within one (1) month of the casualty to both Landlord
      and
      Tenant the amount of time needed to restore the Building and the Premises to
      tenantability, using standard working methods without the payment of overtime
      and other premiums. If the time needed exceeds twelve (12) months from the
      beginning of the restoration, or two (2) months therefrom if the restoration
      would begin during the last twelve (12) months of the Lease, then in the case
      of
      the Premises, either Landlord or Tenant may terminate this Lease, and in the
      case of the Building, Landlord may terminate this Lease, by notice to the other
      party within ten (10) days after the notifying party's receipt of the
      architect's certificate. If sufficient insurance proceeds will not be available
      to Landlord to cover the cost of any restoration to the Building or the
      Premises, Landlord may terminate this Lease by written notice to Tenant. Any
      termination pursuant to this Section 11 .A shall be effective thirty (30) days
      from the date of such termination notice and Rent shall be paid by Tenant to
      that date, with a reasonable abatement of Rent for any portion of the space
      which has been untenantable after the casualty.

     

    
      	
              HH.

            	
              RESTORATION.

            

    

     

    If
      a
      casualty causes damage to the Building or the Premises but this Lease is not
      terminated for any reason, then subject to the rights of any mortgagees or
      ground lessors, Landlord shall obtain the applicable insurance proceeds and
      diligently restore the Building and the Premises subject to current Governmental
      Requirements. Landlord's obligation, should it elect or be obligated to repair
      or rebuild, shall be limited to the basic Premises, the building-standard tenant
      improvements, or the basic Building, as the case may be, and Tenant shall,
      at
      Tenant's expense, replace or fully repair its damaged improvements (including
      any Tenant Improvements in excess of the building standard), personal property
      and fixtures. Rent shall be abated on a per diem basis during the restoration
      for any portion of the Premises which is untenantable, except to the extent
      that
      the casualty was caused by the negligence or intentional misconduct of Tenant,
      its agents or employees. Tenant shall not be entitled to any compensation or
      damages from Landlord for loss of the use of the Premises, damage to Tenant's
      personal property and trade fixtures or any inconvenience occasioned by such
      damage, repair or restoration. Tenant hereby waives the provisions of Section
      1932, Subdivision 2, and Section 1933, Subdivision 4, of the California Civil
      Code, and the provisions of any similar law hereinafter enacted.

    
       

      
        
          
          

        

        
          17
            

          
            

          

        

        
          
          

        

      

       

      EMINENT
        DOMAIN

    

     

    If
      a part
      of the Project is taken by eminent domain or deed in lieu thereof which is
      so
      substantial that the Premises cannot reasonably be used by Tenant for the
      operation of its business, then either party may terminate this Lease effective
      as of the date of the taking. If any substantial portion of the Project is
      taken
      without affecting the Premises, then Landlord may terminate this Lease as of
      the
      date of such taking. Rent shall abate from the date of the taking in proportion
      to any part of the Premises taken, provided Tenant can terminate this Lease
      if
      any material portion of the Premises is taken such that the conduct of Tenant's
      business activities is not reasonably possible. The entire award for a taking
      of
      any kind shall be paid to Landlord, and Tenant shall have no right to share
      in
      the award. All obligations accrued to the date of the taking shall be performed
      by each party.

     

    RIGHTS
      RESERVED TO LANDLORD

     

    Landlord
      may exercise at any time any of the following rights respecting the operation
      of
      the Project without liability to the Tenant of any kind:

     

    
      	
              II.

            	
              NAME.

            

    

     

    To
      change
      the name of all or any of the Buildings or the Project, or the street address
      of
      the Buildings or the suite number(s) of the Premises.

     

    
      	
              JJ.

            	
              SIGNS.

            

    

     

    To
      install, modify and/or maintain any signs on the exterior and in the interior
      of
      the Buildings or on the Project, and to approve at its sole discretion, prior
      to
      installation, any of Tenant's signs in the Premises visible from the common
      areas or the exterior of the Building.

     

    
      	
              KK.

            	
              WINDOW
                TREATMENTS.

            

    

     

    To
      approve, at its discretion, prior to installation, any shades, blinds,
      ventilators or window treatments of any kind, as well as any lighting within
      the
      Premises that may be visible from the exterior of the Building or any interior
      common area.

     

    
      	
              LL.

            	
              KEYS.

            

    

     

    To
      retain
      and use at any time passkeys to enter the Premises or any door within the
      Premises. Tenant shall be required to obtain Landlord's consent, which consent
      shall not be unreasonably withheld, to install additional security measures
      in
      the Premises (i.e. card reader), at Tenant's sole cost and expense; provided,
      however, that the installation and use of such security measures shall not
      interfere with Landlord's ability to access the Premises in
      emergencies.

     

    
      	
              MM.

            	
              ACCESS.

            

    

     

    To
      have
      access to the Premises with twenty-four (24) hour prior notice (except in the
      case of an emergency in which case Landlord shall have the right to immediate
      access) to inspect the Premises, and to perform its obligations, or make
      repairs, alterations, additions or improvements, as permitted by this Lease.
      Landlord may make repairs required of Landlord under the terms hereof or repairs
      to any adjoining space or utility services or make repairs, alterations or
      additions to any other portion of the Building or Project, provided, however,
      that all such work shall be done as promptly as reasonably possible, and so
      as
      to cause as little interference to Tenant as reasonably possible. Tenant hereby
      waives any claims for damages for any injury or inconvenience to or interference
      with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises
      or any other loss occasioned by such entry.

    
       

      
        
          
          

        

        
          18
            

          
            

          

        

        
          
          

        

      

       

    

    
      	
              NN.

            	
              PREPARATION
                FOR REOCCUPANCY.

            

    

     

    To
      decorate, remodel, repair, alter or otherwise prepare the Premises for
      reoccupancy at any time after Tenant abandons the Premises, without relieving
      Tenant of any obligation to pay Rent.

     

    
      	
              OO.

            	
              HEAVY
                ARTICLES.

            

    

     

    To
      approve the weight, size, placement and time and manner of movement within
      the
      Building of any safe, central filing system or other heavy article of Tenant's
      property. Tenant shall move its property entirely at its own risk.

     

    
      	
              PP.

            	
              SHOW
                PREMISES.

            

    

     

    To
      show
      the Premises to, prospective purchasers, brokers, lenders, mortgagees,
      investors, rating agencies or others at any reasonable time, provided that
      Landlord gives prior notice to Tenant and does not materially interfere with
      Tenant's use of the Premises; and to show the Premises to prospective tenants
      during the last six (6) months of the Term, provided that Landlord gives at
      least twenty-four (24) hour notice to Tenant and does not materially interfere
      with Tenant's use of the Premises.

     

    
      	
              QQ.

            	
              RELOCATION
                OF TENANT.

            

    

     

    To
      relocate the Tenant, upon thirty (30) days' prior written notice, from all
      or
      part of the Premises (the "Old Premises") to another area in the Project (the
      "New Premises"), provided that:

     

    (1)
       The
      size
      of the
      New Premises is at least equal to the size of the Old Premises;

     

    (2)
       Landlord pays
      the cost
      of moving the Tenant, including reasonable cost of telecommunications wiring,
      stationery and cost of moving Tenant's furnishings and improving the New
      Premises to the standard of the Old Premises. Tenant shall cooperate with
      Landlord in all reasonable ways to facilitate the move, including supervising
      the movement of files or fragile equipment, designating new locations for
      furniture, equipment and new telephone and electrical outlets, and determining
      the color of paint in the New Premises.

     

    
      	
              RR.

            	
              USE
                OF LOCKBOX.

            

    

     

    To
      designate a lockbox collection agent for collections of amounts due Landlord.
      In
      that case, the date of payment of Rent or other sums shall be the date of the
      agent's receipt of such payment or the date of actual collection if payment
      is
      made in the form of a negotiable instrument thereafter dishonored upon
      presentment. However, Landlord may reject any payment for all purposes as of
      the
      date of receipt or actual collection by mailing to Tenant within a reasonable
      time after such receipt or collection a check equal to the amount sent by
      Tenant.

     

    
      	
              SS.

            	
              REPAIRS
                AND ALTERATIONS.

            

    

     

    To
      make
      repairs or alterations to the Project and in doing so transport any required
      material through the Premises, to close entrances, doors, corridors, elevators
      and other facilities in the Project, to open any ceiling in the Premises, or
      to
      temporarily suspend services or use of common areas in the Building. Landlord
      may reasonably perform any such repairs or alterations during ordinary business
      hours, except that Tenant may require any work in the Premises to be done after
      business hours if Tenant pays Landlord for overtime and any other expenses
      incurred. Landlord may do or permit any work on any nearby building, land,
      street, alley or way.

    
       

      
        
          
          

        

        
          19
            

          
            

          

        

        
          
          

        

      

       

    

    
      	
              TT.

            	
              LANDLORD'S
                AGENTS.

            

    

     

    If
      Tenant
      is in default under this Lease, possession of Tenant's funds or negotiation
      of
      Tenant's negotiable instrument by any of Landlord's agents shall not waive
      any
      breach by Tenant or any remedies of Landlord under this Lease.

     

    
      	
              UU.

            	
              BUILDING
                SERVICES.

            

    

     

    To
      install, use and maintain through the Premises, pipes, conduits, wires and
      ducts
      serving the Building, provided that such installation, use and maintenance
      does
      not unreasonably interfere with Tenant's use of the Premises.

     

    
      	
              VV.

            	
              USE
                OF ROOF.

            

    

     

    To
      permit
      Landlord (or any entity selected by Landlord) to install, operate, maintain
      and
      repair any satellite dish, antennae, equipment, or other facility on the roof
      of
      the Building or to use the roof of the Building in any other manner, provided
      that such installation, operation, maintenance, repair or use does not
      unreasonably interfere with Tenant's use of the Premises.

     

    
      	
              WW.

            	
              OTHER
                ACTIONS.

            

    

     

    To
      take
      any other action which Landlord deems reasonable in connection with the
      operation, maintenance or preservation of the Building and the
      Premises.

     

    TENANT'S
      DEFAULT

     

    Any
      of
      the following shall constitute a default by Tenant:

     

    
      	
              XX.

            	
              RENT
                DEFAULT.

            

    

     

    Tenant
      fails to pay any Rent when due after any statutory notice period;

     

    
      	
              YY.

            	
              ASSIGNMENT/SUBLEASE
                OR HAZARDOUS SUBSTANCES
                DEFAULT.

            

    

     

    Tenant
      defaults in its obligations under Section 19 Assignment and Sublease or Section
      30 Hazardous Substances;

     

    
      	
              ZZ.

            	
              OTHER
                PERFORMANCE DEFAULT.

            

    

     

    Tenant
      fails to perform any other obligation to Landlord under this Lease, and this
      failure continues for ten (10) days after written notice from Landlord, except
      that if Tenant begins to cure its failure within the ten (10) day period but
      cannot reasonably complete its cure within such period, then, so long as Tenant
      continues to diligently attempt to cure its failure, the ten (10) day period
      shall be extended to sixty (60) days, or such lesser period as is reasonably
      necessary to complete the cure;

     

    
      	
              AAA.

            	
              CREDIT
                DEFAULT.

            

    

     

    One
      of
      the following credit defaults occurs:

     

    (1)
       Tenant
      commences
      any
      proceeding under any law relating to bankruptcy, insolvency, reorganization
      or
      relief of debts, or seeks appointment of a receiver, trustee, custodian or
      other
      similar official for the Tenant or for any substantial part of its property,
      or
      any such proceeding is commenced against Tenant and either remains undismissed
      for a period of thirty (30) days or results in the entry of an order for relief
      against Tenant which is not fully stayed within seven (7) days after
      entry;

    
       

      
        
          
          

        

        
          20
            

          
            

          

        

        
          
          

        

      

       

    

    (2)
       Tenant
      becomes
      insolvent or bankrupt, does not generally pay its debts as they become due,
      or
      admits in writing its inability to pay its debts, or makes a general assignment
      for the benefit of creditors;

     

    (3)
       Any
      third party
      obtains
      a levy or attachment under process of law against Tenant's leasehold interest
      and such levy or attachment is not lifted or otherwise removed within fifteen
      (15) days.

     

    
      	
              BBB.

            	
              VACATION
                OR ABANDONMENT DEFAULT.

            

    

     

    Tenant
      vacates or abandons the Premises.

     

    LANDLORD
      REMEDIES

     

    Upon
      a
      default, Landlord shall have the following remedies, in addition to all other
      rights and remedies provided by law or otherwise provided in this Lease, to
      which Landlord may resort cumulatively or in the alternative:

     

    
      	
              CCC.

            	
              TERMINATION
                OF LEASE OR POSSESSION.

            

    

     

    If
      Tenant
      defaults, Landlord may elect by notice to Tenant either to terminate this Lease
      or to terminate Tenant's possession of the Premises without terminating this
      Lease. In either case, Tenant shall immediately vacate the Premises and deliver
      possession to Landlord, and Landlord may repossess the Premises and may, at
      Tenant's sole cost, remove any of Tenant's signs and any of its other property,
      without relinquishing its right to receive Rent or any other right against
      Tenant. In the latter case, this Lease shall continue in full force and effect
      as long as Landlord does not terminate this Lease, and Landlord shall have
      the
      right to collect Rent when due.

     

    
      	
              DDD.

            	
              POSSESSION
                TERMINATION DAMAGES.

            

    

     

    If
      Landlord elects to terminate Tenant's possession without terminating this Lease
      and Landlord takes possession of the Premises itself, then Landlord may re-let
      for Tenant's account all or any portion of the Premises for such rent, length
      of
      time and other terms as Landlord in its sole discretion shall determine, without
      any obligation to do so prior to renting other vacant areas in the Building.
      Tenant shall be liable immediately to Landlord for all costs Landlord incurs
      in
      re-letting the Premises or any part thereof, including, without limitation,
      broker's commissions, expenses of cleaning and redecorating the Premises
      required by the reletting and like costs. Tenant shall pay to Landlord the
      Rent
      and other sums due under this Lease on the date the Rent is due, less the rent
      and other sums received by Landlord from any releasing of the Premises. No
      act
      by Landlord other than giving written notice to Tenant shall terminate this
      Lease. Acts of maintenance, efforts to relet the Premises or the appointment
      of
      a receiver on Landlord's initiative to protect Landlord's interest under this
      Lease shall not constitute a termination of Tenant's right to
      possession.

     

    
      	
              EEE.

            	
              LEASE
                TERMINATION DAMAGES.

            

    

     

    If
      Landlord elects to terminate this Lease, then this Lease shall terminate on
      the
      date for termination set forth in such notice. Tenant shall immediately vacate
      the Premises and deliver possession to Landlord, and Landlord may repossess
      the
      Premises and may, at Tenant's sole cost, remove any of Tenant's signs and any
      of
      its other property, without relinquishing its right to receive Rent or any
      other
      right against Tenant. On termination, Landlord has the right to recover from
      Tenant as damages:

    
       

      
        
          
          

        

        
          21
            

          
            

          

        

        
          
          

        

      

       

    

    (1)
       The
      worth
      at the
      time of award of unpaid Rent and other sums due and payable which had been
      earned at the time of termination; plus

     

    (2)
       The
      worth
      at the
      time of award of the amount by which the unpaid Rent and other sums due and
      payable which after termination until the time of award exceeds the amount
      of
      such Rent loss that Tenant proves could have been reasonably avoided;
      plus

     

    (3)
       The
      worth
      at the
      time of award of the amount by which the unpaid Rent and other sums due and
      payable for the balance of the Term after the time of award exceeds the amount
      of such Rent loss that Tenant proves could be reasonably avoided;
      plus

     

    (4)
       Any
      other amount
      necessary to compensate Landlord for all the detriment proximately caused by
      Tenant's failure to perform Tenant's obligations under this Lease, or which,
      in
      the ordinary course of things, would be likely to result therefrom, including,
      without limitation, any costs or expenses incurred by Landlord: (i) in retaking
      possession of the Premises; (ii) in maintaining, repairing, preserving,
      restoring, replacing, cleaning, altering or rehabilitating the Premises or
      any
      portion thereof, including such acts for re-letting to a new tenant or tenants;
      (iii) for leasing commissions; or (iv) for any other costs necessary or
      appropriate to re-let the Premises; plus 

     

    (5)
       At
      Landlord's election,
      such
      other amounts in addition to or in lieu of the foregoing as may be permitted
      from time to time by the laws of the State of California. The "worth at the
      time
      of award" of the amounts referred to in Sections 15.C (1) and 15.C (2) is
      computed by allowing interest at the maximum rate permitted by law on the unpaid
      rent and other sums due and payable from the termination date through the date
      of award. The "worth at the time of award" of the amount referred to in Section
      15.C (3) is computed by discounting such amount at the discount rate of the
      Federal Reserve Bank of San Francisco at the time of award plus one percent
      (1%). Tenant waives redemption or relief from forfeiture under California Code
      of Civil Procedure Sections 1174 and 1179, or under any other present or future
      law, in the event Tenant is evicted or Landlord takes possession of the Premises
      by reason of any default of Tenant hereunder.

     

    
      	
              FFF.

            	
              CONTINUATION
                OF LEASE.

            

    

     

    In
      the
      event Tenant breaches this Lease and abandons the Premises and Landlord does
      not
      elect to terminate this Lease by reason of such breach and abandonment, this
      Lease shall continue in full force and effect, and in addition to any other
      rights and remedies Landlord may have, Landlord shall have all of the rights
      and
      remedies of a landlord provided by Section 1951.4 of the California Civil Code,
      including the right to recover rent as it falls due. Without any obligation
      to
      Tenant to do so, Landlord may also re-let the Premises as the agent of Tenant
      and for Tenant's account for such term, which may extend beyond the term of
      this
      Lease, and upon such other reasonable terms and conditions as Landlord may
      deem
      appropriate. Landlord may do all things reasonably necessary for such
      re-letting, including repair, remodeling and renovating of the Premises, and
      Tenant shall reimburse Landlord on demand for all reasonable costs incurred
      by
      Landlord in connection therewith. In the event Landlord re-lets the Premises,
      Landlord shall apply any sums received upon such re-letting in the following
      order of priority: (1) to the payment of any indebtedness other than rent due
      hereunder from Tenant to Landlord, (2) the payment of all reasonable legal
      expenses and other related costs incurred by Landlord following Tenant's
      default, (3) to the payment of all costs incurred by Landlord in restoring
      the
      Premises to good order and repair, or in remodeling, renovating or otherwise
      preparing the Premises for reletting, (4) to the payment of all costs
      (including, without limitation, any brokerage commissions) incurred by Landlord
      in reletting the Premises, (5) to the payment of rent due and unpaid hereunder,
      and (6) the balance, if any, to the payment of future rent as the same may
      become due hereunder. Notwithstanding any determination by Landlord not to
      elect
      to terminate this Lease, Landlord may at any time elect to terminate this Lease
      for any previous breach or default hereunder by Tenant which remains uncured
      or
      for any subsequent breach or default.

    
       

      
        
          
          

        

        
          22
            

          
            

          

        

        
          
          

        

      

       

    

    
      	
              GGG.

            	
              LANDLORD'S
                REMEDIES CUMULATIVE.

            

    

     

    All
      of
      Landlord's remedies under this Lease shall be in addition to all other remedies
      Landlord may have at law or in equity. Waiver by Landlord of any breach of
      any
      obligation by Tenant shall be effective only if it is in writing, and shall
      not
      be deemed a waiver of any other breach, or any subsequent breach of the same
      obligation. Landlord's acceptance of payment by Tenant shall not constitute
      a
      waiver of any breach by Tenant, and if the acceptance occurs after Landlord's
      notice to Tenant, or termination of the Lease or of Tenant's right to
      possession, the acceptance shall not affect such notice or termination.
      Acceptance of payment by Landlord after commencement of a legal proceeding
      or
      final judgment shall not affect such proceeding or judgment. Landlord may
      advance such monies and take such other actions for Tenant's account as
      reasonably may be required to cure or mitigate any default by Tenant. Tenant
      shall immediately reimburse Landlord for any such advance, and such sums shall
      bear interest at the default interest rate until paid.

     

    
      	
              HHH.

            	
              WAIVER
                OF TRIAL BY JURY.

            

    

     

    EACH
      PARTY WAIVES TRIAL BY JURY IN THE EVENT OF ANY LEGAL PROCEEDING BROUGHT BY
      THE
      OTHER IN CONNECTION WITH THIS LEASE. EACH PARTY SHALL BRING ANY ACTION AGAINST
      THE OTHER IN CONNECTION WITH THIS LEASE IN A FEDERAL OR STATE COURT LOCATED
      TN
      CALIFORNIA, CONSENTS TO THE JURISDICTION OF SUCH COURTS, AND WAIVES ANY RIGHT
      TO
      HAVE ANY PROCEEDING TRANSFERRED FROM SUCH COURTS ON THE GROUND OF IMPROPER
      VENUE
      OR INCONVENIENT FORUM. LANDLORD AND TENANT EACH HEREBY WAIVE TRIAL BY JURY
      IN
      ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE
      OTHER
      IN CONNECTION WITH THIS LEASE OR THE PREMISES.

     

    
      	
              III.

            	
              LITIGATION
                COSTS.

            

    

     

    Tenant
      shall pay Landlord's reasonable attorneys' fees and other costs in enforcing
      this Lease, whether or not suit is filed.

     

    SURRENDER

     

    Upon
      the
      expiration or earlier termination of this Lease for any reason, Tenant shall
      surrender the Premises to Landlord in its condition existing as of the
      Commencement Date, normal wear and tear and damage by fire or other casualty
      excepted, with all interior walls repaired and repainted if marked or damaged,
      all carpets shampooed and cleaned, all broken, marred or nonconforming
      acoustical ceiling tiles replaced, all windows washed, the HVAC, plumbing and
      electrical systems and lighting in good order and repair, including replacement
      of any burned out or broken light bulb or ballasts, and all floors cleaned
      and
      waxed, all to the reasonable satisfaction of Landlord. Tenant shall remove
      from
      the Premises all Tenant's personal property and all of Tenant's alterations
      required to be removed pursuant to Section 6.E, and restore the Premises to
      its
      condition prior to their installation. If Tenant fails to remove any alterations
      and/or Tenant's personal property, and such failure continues after the
      termination of this Lease, Landlord may retain or dispose of such property
      and
      all rights of Tenant with respect to it shall cease, or Landlord may place
      all
      or any portion of such property in public storage for Tenant's account. Tenant
      shall be liable to Landlord for costs of removal of any such alterations and
      Tenant's personal property and storage and transportation costs of same, and
      the
      cost of repairing and restoring the Premises, together with interest at the
      Interest Rate from the date of expenditure by Landlord. If the Premises are
      not
      so surrendered at the termination of this Lease, Tenant shall indemnify Landlord
      against all loss or liability, including attorneys' fees and costs, resulting
      from delay by Tenant in so surrendering the Premises.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    HOLDOVER

    

    Tenant
      shall have no right to holdover possession of the Premises after the expiration
      or termination of this Lease without Landlord's prior written consent which
      Landlord may withhold in its sole and absolute discretion. If, however, Tenant
      retains possession of any part of the Premises after the Term, Tenant shall
      become a month-to-month tenant for the entire Premises upon all of the terms
      of
      this Lease as might be applicable to such month-to-month tenancy, except that
      Tenant shall pay all of the Base Rent, Operating Cost Share Rent and Tax Share
      Rent at one hundred fifty (150%) percent of the rate in effect immediately
      prior
      to such holdover, computed on a monthly basis for each full or partial month
      Tenant remains in possession. Tenant shall also pay Landlord all of Landlord's
      direct and consequential damages resulting from Tenant's holdover. No acceptance
      of Rent or other payments by Landlord under these holdover provisions shall
      operate as a waiver of Landlord's right to regain possession or any other of
      Landlord's remedies.

     

    SUBORDINATION
      TO GROUND LEASES AND MORTGAGES

     

    
      	
              JJJ.

            	
              SUBORDINATION.

            

    

     

    This
      Lease shall be subordinate to any present or future ground lease or mortgage
      respecting the Project, and any amendments to such ground lease or mortgage,
      at
      the election of the ground lessor or mortgagee as the case may be, effected
      by
      notice to Tenant in the manner provided in this Lease. The subordination shall
      be effective upon such notice, but at the request of Landlord or ground lessor
      or mortgagee, Tenant shall within ten (10) days of the request, execute and
      deliver to the requesting party any reasonable documents provided to evidence
      the subordination. At any time that the Project is made subject to any ground
      lease or mortgage, Landlord shall use commercially reasonable efforts to cause
      the mortgagee or ground lessor to deliver to Tenant a non-disturbance agreement
      reasonably acceptable to Tenant, providing that so long as Tenant is not in
      default under the Lease after the expiration of any applicable notice and cure
      periods, Tenant may remain in possession of the Premises under the terms of
      this
      Lease, even if the ground lessor should terminate the ground lease or if the
      mortgagee or its successor should acquire Landlord's title to the
      Project.

     

    
      	
              KKK.

            	
              TERMINATION
                OF GROUND LEASE OR FORECLOSURE OF
                MORTGAGE.

            

    

     

    If
      any
      ground lease is terminated or mortgage foreclosed or deed in lieu of foreclosure
      given and the ground lessor, mortgagee, or purchaser at a foreclosure sale
      shall
      thereby become the owner of the Project, Tenant shall attorn to such ground
      lessor or mortgagee or purchaser without any deduction or setoff by Tenant,
      and
      this Lease shall continue in effect as, a direct lease between Tenant and such
      ground lessor, mortgagee or purchaser. The ground lessor or mortgagee or
      purchaser shall be liable as Landlord only during the time such ground lessor
      or
      mortgagee or purchaser is the owner of the Project. At the request of Landlord,
      ground lessor or mortgagee, Tenant shall execute and deliver within ten (10)
      days of the request any document furnished by the requesting party to evidence
      Tenant's agreement to attorn.

    
       

      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    
       

      
        	
                LLL.

              	
                DEFINITIONS.

              

      

       

      As
        used
        in this Section 18.C, "mortgage" shall include "trust deed" and "deed of
        trust",
        "mortgagee" shall include '"trustee," "beneficiary" and the mortgagee of
        any
        ground lessee, and "ground lessor", "mortgagee", and "purchaser at a foreclosure
        sale" shall include, in each case, all of its successors, and assigns, however
        remote.

       

    

    ASSIGNMENT
      AND SUBLEASE

     

    
      	
              MMM.

            	
              IN
                GENERAL.

            

    

     

    Tenant
      shall not, without the prior consent of Landlord in each case, (i) make or
      allow
      any assignment or transfer, by operation of law or otherwise, of any part of
      Tenant's interest in this Lease, (ii) grant or allow any lien or encumbrance,
      by
      operation of law or otherwise, upon any part of Tenant's interest in this Lease,
      (iii) sublet any part of the Premises, or (iv) permit anyone other than Tenant
      and its employees to occupy any part of the Premises. Tenant shall remain
      primarily liable for all of its obligations under this Lease, notwithstanding
      any assignment or transfer. No consent granted by Landlord shall be deemed
      to be
      a consent to any subsequent assignment or transfer, lien or encumbrance,
      sublease or occupancy. Tenant shall pay all of Landlord's attorneys' fees and
      other expenses incurred in connection with any consent requested by Tenant
      or in
      reviewing any proposed assignment or subletting. Any assignment or transfer,
      grant of lien or encumbrance, or sublease or occupancy without Landlord's prior
      written consent shall be void. If Tenant shall assign this Lease or sublet
      the
      Premises in its entirety any rights of Tenant to renew this Lease, extend the
      Term or to lease additional space in the Project shall be extinguished thereby
      and will not be transferred to the assignee or subtenant, all such rights being
      personal to the Tenant named herein.

     

    "Assign"
      or
"Assignment"
      As used
      in this paragraph, the term "assign" or "assignment" shall include the
      following:

     

    (1)
       If
      Tenant is a corporation:
      (1) any
      dissolution, merger, consolidation, or other reorganization of Tenant; (2)
      a
      sale of more than 50% of the value of the assets of Tenant; or (3) if Tenant
      is
      a corporation with fewer than 35 shareholders, a sale or other transfer of
      more
      than 50%, at any one time or in the aggregate, of such party's capital stock
      of
      Tenant.

     

    
      	
              NNN.

            	
              LANDLORD'S
                CONSENT.

            

    

     

    Landlord
      will not unreasonably withhold its consent to any proposed assignment or
      subletting. It shall be reasonable for Landlord to withhold its consent to
      any
      assignment or sublease if (i) Tenant is in default under this Lease, (ii) the
      proposed assignee or sublessee is a tenant in the Project or an affiliate of
      such a tenant or a party that Landlord has identified as a prospective tenant
      in
      the Project, (iii) the financial responsibility, nature of business, and
      character of the proposed assignee or subtenant are not all reasonably
      satisfactory to Landlord, (iv) in the reasonable judgment of Landlord the
      purpose for which the assignee or subtenant intends to use the Premises (or
      a
      portion thereof) is not in keeping with Landlord's standards for the Building
      or
      are in violation of the terms of this Lease or any other leases in the Project,
      (v) the proposed assignee or subtenant is a government entity, or (vi) the
      proposed sublease is for less than the entire Premises or for less than the
      remaining Tenancy of the Lease. The foregoing shall not exclude any other
      reasonable basis for Landlord to withhold its consent.

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    
      	
              OOO.

            	
              PROCEDURE.

            

    

     

    Tenant
      shall notify Landlord of any proposed assignment or sublease at least thirty
      (30) days prior to its proposed effective date. The notice shall include the
      name and address of the proposed assignee or subtenant, its corporate affiliates
      in the case of a corporation and its partners in a case of a partnership, an
      execution copy of the proposed assignment or sublease, and sufficient
      information to permit Landlord to determine the financial responsibility and
      character of the proposed assignee or subtenant. As a condition to any effective
      assignment of this Lease, the assignee shall execute and deliver in form
      satisfactory to Landlord at least fifteen (15) days prior to the effective
      date
      of the assignment, an assumption of all of the obligations of Tenant under
      this
      Lease. As a condition to any effective sublease, subtenant shall execute and
      deliver in a form satisfactory to Landlord at least fifteen (15) days prior
      to
      the effective date of the sublease, an agreement to comply with all of Tenant's
      obligations under this Lease, and at Landlord's option, an agreement (except
      for
      the economic obligations which subtenant will undertake directly to Tenant)
      to
      attorn to Landlord under the terms of the sublease in the event this Lease
      terminates before the sublease expires.

     

    
      	
              PPP.

            	
              EXCESS
                PAYMENTS.

            

    

     

    If
      Tenant
      shall assign this Lease or sublet any part of the Premises for consideration
      in
      excess of the prorata portion of Rent applicable to the space subject to the
      assignment or sublet, then Tenant shall pay to Landlord as Additional Rent,
      seventy-five (75%) percent of any such excess immediately upon receipt; provided
      that prior to sharing such portion of excess rent with Landlord, Tenant shall
      be
      first entitled to reimburse itself for all reasonable leasing commissions,
      attorneys' fees and tenant improvements costs which were specifically and
      reasonably incurred in connection with such assignment of this Lease or sublet
      of the Premises.

     

    
      	
              QQQ.

            	
              RECAPTURE.

            

    

     

    For
      any
      proposed sublease which would sublet a portion of the Premises for the remainder
      of the Term, or assignment which would assign this Lease for the remainder
      of
      the Term, Landlord may, by giving written notice to Tenant within thirty (30)
      days after receipt of Tenant's notice of assignment or subletting, terminate
      this Lease with respect to the space described in Tenant's notice, as of the
      effective date of the proposed assignment or sublease and all obligations under
      this Lease as to such space shall expire except as to any obligations that
      expressly survive any termination of this Lease.

     

    
      	
              RRR.

            	
              EFFECTIVENESS
                OF CONSENT.

            

    

     

    Provided
      Landlord has consented to such assignment or subletting, Tenant shall be free
      to
      assign this Lease or sublet the Premises, subject to the following conditions:
      (1) at the time of the transfer, Tenant is not in default under the Lease or
      would not be in default under the Lease but for the pendency of any grace or
      cure period; (2) the assignment or subletting shall be on the same terms set
      forth in the notice given by Tenant to Landlord; (3) assignment or sublease
      shall be valid and no sublessee shall take possession of the Premises until
      an
      executed counterpart of the assignment or sublease has been delivered to
      Landlord; and no assignee or sublessee shall have a right further to
      sublet.

    
       

      
        
          
          

        

        
          26
            

          
            

          

        

        
          
          

        

      

       

    

    
      	
              SSS.

            	
              TENANT'S
                WAIVER.

            

    

     

    Tenant
      shall not be entitled to, and Tenant hereby waives any right it may have to
      make
      any claim for, money damages (nor shall Tenant claim any money damages by way
      of
      set-off, counterclaim or defense) based upon any claim or assertion by Tenant
      that Landlord has unreasonably withheld or unreasonably delayed its consent
      or
      approval to a proposed assignment or subletting or as provided for herein.
      Tenant's sole remedy shall be an action or proceeding to enforce any provision
      hereof, or for specific performance, injunction or declaratory judgment. Tenant
      acknowledges that Tenant's rights hereunder satisfy the conditions set forth
      in
      Section 1951.4 of the California Civil Code with respect to the availability
      to
      Landlord of certain remedies for a default by Tenant under this Lease, and
      which
      provides, in part: "The 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)."

     

    
      	
              TTT.

            	
              CONTINUING
                LIABILITY OF TENANT.

            

    

     

    Regardless
      of Landlord's consent, no subletting or assignment shall release Tenant of
      Tenant's obligation or alter the primary liability of Tenant to pay the rental
      and to perform all other obligations to be performed by Tenant hereunder. The
      acceptance of rental by Landlord from another person shall not be deemed to
      be a
      waiver by Landlord of any provision hereof. Consent to one assignment or
      subletting shall not be deemed consent to any subsequent assignment or
      subletting. In the event of default by any assignee of Tenant or any successor
      of Tenant in the performance of any of the terms hereof, Landlord may proceed
      directly against Tenant without the necessity of exhausting remedies against
      such assignee or successor. Landlord may consent to subsequent assignments
      or
      subletting of this Lease or amendments or modifications to this Lease with
      assignees of Tenant, without notifying Tenant, or any successor of Tenant,
      and
      without obtaining its or their consent thereto, and such action shall not
      relieve Tenant of liability under this Lease.

     

    CONVEYANCE
      BY LANDLORD

     

    If
      Landlord shall at any time transfer its interest in the Project or this Lease,
      Landlord shall be released of any obligations occurring after such transfer,
      except the obligation to return to Tenant any security deposit not delivered
      to
      its transferee, and Tenant shall look solely to Landlord's successors for
      performance of such obligations. This Lease shall not be affected by any such
      transfer.

     

    ESTOPPEL
      CERTIFICATE

     

    Each
      party shall, within ten (10) business days of receiving a request from the
      other
      party, execute, acknowledge in recordable form, and deliver to the other party
      or its designee a certificate stating, subject to a specific statement of any
      applicable exceptions, that the Lease as amended to date is in full force and
      effect, that the Tenant is paying Rent and other charges on a current basis,
      and
      that to the best of the knowledge of the certifying party, the other party
      has
      committed no uncured defaults and has no offsets or claims. The certifying
      party
      may also be required to state the date of commencement of payment of Rent,
      the
      Commencement Date, the Expiration Date, the Base Rent, the current Operating
      Cost Share Rent and Tax Share Rent estimates, the status of any improvements
      required to be completed by Landlord, the amount of any security deposit, and
      such other matters as may be reasonably requested. Failure to deliver such
      statement within the time required shall be conclusive evidence against the
      non-certifying party that this Lease, with any amendments identified by the
      requesting party, is in full force and effect, that there are no uncured
      defaults by the requesting party, that not more than one month's Rent has been
      paid in advance, that the non certifying party has not paid any security
      deposit, and that the non-certifying party has no claims or offsets against
      the
      requesting party.

    
       

      
        
          
          

        

        
          27
            

          
            

          

        

        
          
          

        

      

       

    

    LEASE
      DEPOSIT

     

    Tenant
      shall deposit with Landlord on the date Tenant executes and delivers this Lease
      to Landlord, the cash sums set forth in the Schedule for both Prepaid Rent
      and
      Security Deposit (collectively, the "Lease Deposit"). The Prepaid Rent shall
      be
      applied by Landlord against the first full month's Base Rent payment obligation
      hereunder. The Security Deposit shall be held by Landlord as security for the
      performance of all of its obligations in the amount set forth on the Schedule.
      If Tenant is in default under this Lease more than two (2) times within any
      Lease Year, irrespective of whether such default is cured, then, without
      limiting Landlord's other rights or remedies available under this Lease, at
      law
      or in equity, the Security Deposit shall automatically be increased by an amount
      equal to three (3) times the original Security Deposit. If Tenant defaults
      under
      this Lease, Landlord may apply all or any part of the Lease Deposit for the
      payment of any Rent or other sum in default, the repair of any damage to the
      Premises caused by Tenant or the payment of any other amount which Landlord
      may
      spend or become obligated to spend by reason of Tenant's default or to
      compensate Landlord for any other loss or damage which Landlord may suffer
      by
      reason of Tenant's default to the full extent permitted by law. Tenant hereby
      waives any restriction on the use or application of the Security Deposit by
      Landlord as set forth in California Civil Code Section 1950.7. To the extent
      any
      portion of the Security Deposit is used, Tenant shall within five (5) days
      after
      demand from Landlord restore the Security Deposit to its full amount. No trust
      relationship is created herein between Landlord and Tenant with respect to
      the
      security deposit. Landlord may keep the Security Deposit in its general funds
      and shall not be required to pay interest to Tenant on the deposit amount.
      If
      Tenant shall perform all of its obligations under this Lease and return the
      Premises to Landlord at the end of the Term, Landlord shall return all of the
      remaining Security Deposit to Tenant within thirty (30) days after the end
      of
      the Term provided, however, that Landlord may retain the Security Deposit as
      security for the payment of any adjustment in rent or additional rent following
      an expiration or termination of the Lease, and, upon such adjustment apply
      the
      retained Security Deposit against the amount due Landlord. The Security Deposit
      shall not serve as an advance payment of Rent or a measure of Landlord's damages
      for any default under this Lease. If Landlord transfers its interest in the
      Project or this Lease, Landlord may transfer the Security Deposit to its
      transferee. Upon such transfer, Landlord shall have no further obligation to
      return the Security Deposit to Tenant, and Tenant's right to the return of
      the
      Security Deposit shall apply solely against Landlord's transferee.

     

    FORCE
      MAJEURE

     

    Landlord
      shall not be in default under this Lease to the extent Landlord is unable to
      perform any of its obligations on account of any prevention, delay, stoppage
      due
      to strikes, lockouts, inclement weather, labor disputes, inability to obtain
      labor materials, fuels, energy or reasonable substitutes therefor, governmental
      restrictions, regulations: controls, actions or inaction, civil commotion,
      fire
      or other acts of God, national emergency, or any other cause of any kind beyond
      the reasonable control of Landlord (except financial inability) (collectively
      "Force Majeure").

     

    TENANT'S
      PERSONAL PROPERTY AND FIXTURES

     

    In
      addition to any statutory lien granted to lessors under California law, Landlord
      shall have, at all times, and Tenant hereby grants and agrees to grant Landlord,
      a valid security interest to secure payment of all rental and all other sums
      payable under this Lease upon all goods, equipment, fixtures, furniture,
      improvements, inventory, chattel, and other personal property of Tenant
      presently, or which may hereafter be, situated within the Premises or used
      in
      connection therewith wherever located, whether now owned or hereafter acquired,
      and all proceeds therefrom, including, without limitation, insurance proceeds
      (collectively "Personal Property"). Landlord may, in addition to any other
      remedies provided elsewhere herein or allowed by law, all of which are
      cumulative, enter upon the Premises and take possession of any and all Personal
      Property of Tenant situated within the Premises, without liability for trespass
      or conversion, and sell the same at public or private sale, with or without
      having such property at the sale, after giving Tenant reasonable notice of
      the
      time and place of any public sale or of the time after which any private sale
      is
      to be made, at which sale the Landlord or its assigns may purchase such Personal
      Property unless otherwise prohibited by law. Landlord shall only be required
      to
      give notice if required by law. The requirement of notice shall be met if such
      notice is given in the manner prescribed in this Lease at least five (5) days
      before the time of sale. The proceeds from any such disposition, less any and
      all expenses connected with the taking of possession, holding and selling of
      the
      Personal Property (including, without limitation, reasonable attorneys' fees
      and
      legal expenses) shall be applied as a credit against the indebtedness secured
      by
      the security interest granted in this Section. Any surplus shall be paid to
      Tenant or as otherwise required by law, and Tenant shall pay any deficiencies
      forthwith. Contemporaneous with the execution of this Lease, and at any other
      time during the Lease Term if requested by Landlord, Tenant shall execute and
      deliver to Landlord, uniform commercial code financing statements (UCC-1) in
      sufficient form so that when properly filed, the security interest hereby given
      shall thereupon be perfected. If requested hereafter by Landlord, Tenant shall
      also execute and deliver to Landlord uniform commercial code financing statement
      change instruments in sufficient form to reflect any proper amendment or
      modification in or extension of the aforesaid contract lien and security
      interest hereby granted. Landlord shall, in addition to all of its rights
      hereunder, also have all of the rights and remedies of a secured party under
      the
      California Commercial Code.

    
       

      
        
          
          

        

        
          28
            

          
            

          

        

        
          
          

        

      

       
NOTICES

     

    All
      notices, consents, approvals and similar communications to be given by one
      party
      to the other under this Lease, shall be given in writing, mailed or personally
      delivered as follows:

     

    
      	
              To
                LANDLORD as follows: 

            	
              SEAGATE
                TELEGRAPH ASSOCIATES, LLC

              c/o
                SEAGATE PROPERTIES, INC.

              980
                Fifth Avenue

              San
                Rafael, CA 94901

              Attention:
                Property Manager

            
	 	 
	
              or
                to such other person at such other address as Landlord may designate
                by
                notice to Tenant.

            
	 
	
              To
                TENANT as follows:

            	
              NILE
                THERAPEUTICS, A DELAWARE CORPORATION

              689
                Fifth Avenue

              14th
                Floor

              New
                York, NY 10022

              Attention:
                Allan Gordon/Daron Evans

            
	 	 
	
              With
                a copy to:

            	
              NILE
                THERAPEUTICS, A DELAWARE CORPORATION 2850 Telegraph Avenue; Suite
                310

              Berkeley,
                CA 94704

              Attention:
                Allan Gordon/Daron Evans

            
	 	 

    

    or
      to
      such other person at such other address as Tenant may designate by notice to
      Landlord. Mailed notices shall be sent by United States certified or registered
      mail, or by a reputable national overnight courier service, postage prepaid.
      Mailed notices shall be deemed to have been given on the earlier of actual
      delivery or three (3) business days after posting in the United States Mail
      in
      the case of registered or certified mail, and one business day in the case
      of
      overnight courier.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    QUIET
      POSSESSION

     

    So
      long
      as Tenant shall perform all of its obligations under this Lease, Tenant shall
      enjoy peaceful and quiet possession of the Premises against any party claiming
      through the Landlord, subject to the terms of this Lease.

     

    REAL
      ESTATE BROKER

     

    Tenant
      represents to Landlord that Tenant has not dealt with any real estate broker
      with respect to this Lease except for any brokers) listed in the Schedule,
      and
      no other broker is in any way entitled to any broker's fee or other payment
      in
      connection with this Lease. Tenant shall indemnify and defend Landlord against
      any claims by any other broker or third party for any payment of any kind in
      connection with this Lease.

     

    MISCELLANEOUS

     

    
      	
              UUU.

            	
              SUCCESSORS
                AND ASSIGNS.

            

    

     

    Subject
      to the limits on Tenant's assignment contained in Section 19, the provisions
      of
      this Lease shall be binding upon and inure to the benefit of all successors
      and
      assigns of Landlord and Tenant.

     

    
      	
              VVV.

            	
              DATE
                PAYMENTS ARE DUE.

            

    

     

    Except
      for payments to be made by Tenant under this Lease which are due upon demand,
      Tenant shall pay to Landlord any amount for which Landlord renders a statement
      of account within fifteen (15) days of Tenant's receipt of Landlord's
      statement.

     

    Meaning
      of "Landlord",
      "Re-Entry”,
      "Including" and
      "Affiliate"

     

    The
      term
      "Landlord" means only the owner of the Project and the lessor's interest in
      this
      Lease from time to time. The words "re-entry" and "re-enter" are not restricted
      to their technical legal meaning. The words "including" and similar words shall
      mean "without limitation." The word "affiliate" shall mean a person or entity
      controlling, controlled by or under common control with the applicable entity.
      "Control" shall mean the power directly or indirectly, by contract or otherwise,
      to direct the management and policies of the applicable entity.

     

    
      	
              WWW.

            	
              TIME
                OF THE ESSENCE

            

    

     

    Time
      is
      of the essence of each provision of this Lease.

     

    
      	
              XXX.

            	
              NO
                OPTION.

            

    

     

    This
      document shall not be effective for any purpose until it has been executed
      and
      delivered by both parties; execution and delivery by one party shall not create
      any option or other right in the other party.

     

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    
      	
              YYY.

            	
              SEVERABILITY.

            

    

     

    The
      unenforceability of any provision of this Lease shall not affect any other
      provision.

     

    
      	
              ZZZ.

            	
              GOVERNING
                LAW.

            

    

     

    This
      Lease shall be governed in all respects by the laws of the state in which the
      Project is located, without regard to the principles of conflicts of
      laws.

     

    
      	
              AAAA.

            	
              LEASE
                MODIFICATION.

            

    

     

    Tenant
      agrees to clarify this Lease in any way requested by a mortgagee which does
      not
      cause increased expense to Tenant or otherwise adversely affect Tenant's
      interests under this Lease.

     

    
      	
              BBBB.

            	
              NO
                ORAL MODIFICATION.

            

    

     

    No
      modification of this Lease shall be effective unless it is a written
      modification signed by both parties.

     

    
      	
              CCCC.

            	
              LANDLORD'S
                RIGHT TO CURE.

            

    

     

    If
      Landlord breaches any of its obligations under this Lease, Tenant shall notify
      Landlord in writing and shall take no action respecting such breach so long
      as
      Landlord promptly begins to cure the breach and diligently pursues such cure
      to
      its completion. Landlord may cure any default by Tenant; any expenses incurred
      shall become Additional Rent due from Tenant on demand by Landlord.

     

    
      	
              DDDD.

            	
              CAPTIONS.

            

    

     

    The
      captions used in this Lease shall have no effect on the construction of this
      Lease.

     

    
      	
              EEEE.

            	
              AUTHORITY.

            

    

     

    Landlord
      and Tenant each represents to the other that it has full power and authority
      to
      execute and perform this Lease.

     

    
      	
              FFFF.

            	
              LANDLORD'S
                ENFORCEMENT OF REMEDIES.

            

    

     

    Landlord
      may enforce any of its remedies under this Lease either in its own name or
      through an agent.

     

    
      	
              GGGG.

            	
              ENTIRE
                AGREEMENT.

            

    

     

    This
      Lease, together with all Appendices, constitutes the entire agreement between
      the parties. No representations or agreements of any kind have been made by
      either parry which are not contained in this Lease.

     

    
      	
              HHHH.

            	
              LANDLORD'S
                TITLE.

            

    

     

    Landlord's
      title shall always be paramount to the interest of the Tenant, and nothing
      in
      this Lease shall empower Tenant to do anything which might in any way impair
      Landlord's title.

     

    
      	
              IIII.

            	
              LIGHT
                AND AIR RIGHTS.

            

    

     

    Landlord
      does not grant in this Lease any rights to light and air in connection with
      Project. Landlord reserves to itself, the Land, the Building below the improved
      floor of each floor of the Premises, the Building above the ceiling of each
      floor of the Premises, the exterior of the Premises and the areas on the same
      floor outside the Premises, along with the areas within the Premises required
      for the installation and repair of utility lines and other items required to
      serve other tenants of the Building.

    
       

      
        
          
          

        

        
          31
            

          
            

          

        

        
          
          

        

      

       

    

    
      	
              JJJJ.

            	
              SINGULAR
                AND PLURAL.

            

    

     

    Wherever
      appropriate in this Lease, a singular term shall be construed to mean the plural
      where necessary, and a plural term the singular. For example, if at any time
      two
      parties shall constitute Landlord or Tenant, then the relevant term shall refer
      to both parties together.

     

    
      	
              KKKK.

            	
              NO
                RECORDING BY TENANT.

            

    

     

    Tenant
      shall not record in any public records any memorandum or any portion of this
      Lease.

     

    
      	
              LLLL.

            	
              EXCLUSIVITY.

            

    

     

    Landlord
      does not grant to Tenant in this Lease any exclusive right except the right
      to
      occupy its Premises.

     

    
      	
              MMMM.

            	
              NO
                CONSTRUCTION AGAINST DRAFTING
                PARTY.

            

    

     

    The
      rule
      of construction that ambiguities are resolved against the drafting party shall
      not apply to this Lease.

     

    
      	
              NNNN.

            	
              SURVIVAL.

            

    

     

    All
      obligations of Landlord and Tenant under this Lease shall survive the
      termination of this Lease.

     

    
      	
              OOOO.

            	
              RENT
                NOT BASED ON INCOME.

            

    

     

    No
      Rent
      or other payment in respect of the Premises shall be based in any way upon
      net
      income or profits from the Premises. Tenant may not enter into or permit any
      sublease or license or other agreement in connection with the Premises which
      provides for a rental or other payment based on net income or
      profit.

     

    
      	
              PPPP.

            	
              BUILDING
                MANAGER AND SERVICE
                PROVIDERS.

            

    

     

    Landlord
      may perform any of its obligations under this Lease through its employees or
      third parties hired by the Landlord.

     

    
      	
              QQQQ.

            	
              LATE
                CHARGE AND INTEREST ON LATE
                PAYMENTS.

            

    

     

    Without
      limiting the provisions of Section 14.A, if Tenant fails to pay any installment
      of Rent or other charge to be paid by Tenant pursuant to this Lease within
      five
      (5) business days after the same becomes due and payable, then Tenant shall
      pay
      a late charge equal to the greater of five percent (5%) of the amount of such
      payment or $250. In addition, interest shall be paid by Tenant to Landlord
      on
      any late payments of Rent from the date due until paid at the rate provided
      in
      Section 2.D (2). Such late charge and interest shall constitute Additional
      Rent
      due and payable by Tenant to Landlord upon the date of payment of the delinquent
      payment referenced above.

     

    
      	
              RRRR.

            	
              TENANT'S
                FINANCIAL STATEMENTS.

            

    

     

    Within
      ten (10) days after Landlord's written request therefor, Tenant shall deliver
      to
      Landlord the current financial statements of Tenant, and financial statements
      of
      the two (2) years prior to the current financial statements year, with an
      opinion of a certified public accountant, including a balance sheet and profit
      and loss statement for the most recent prior year, all prepared in accordance
      with generally accepted accounting principles consistently applied.

     

    
      	
              SSSS.

            	
              ATTORNEY'S
                FEES.

            

    

     

    If
      either
      party defaults in the performance of any terms, covenants, agreements or
      conditions contained in this Lease and Landlord places enforcement of this
      Lease
      or the collection of rent due or to become due hereunder, or recovery of
      possession of the Premises in the hands of any attorney, or either party files
      suit upon the same, the non prevailing parry agrees to pay the prevailing
      party's reasonable attorneys' fees and expenses.

    
       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

       

    

    UNRELATED
      BUSINESS INCOME

     

    If
      Landlord is advised by its counsel at any time that any part of the payments
      by
      Tenant to Landlord under this Lease may be characterized as unrelated business
      income under the United States Internal Revenue Code and its regulations, then
      Tenant shall enter into any amendment proposed by Landlord to avoid such income,
      so long as the amendment does not require Tenant to make more payments or accept
      fewer services from Landlord, than this Lease provides.

     

    HAZARDOUS
      SUBSTANCES

    

    Tenant
      shall not cause or permit any Hazardous Substances to be brought upon, produced,
      stored, used, discharged or disposed of in or near the Project unless Landlord
      has consented to such storage or use in its sole discretion. Any handling,
      transportation, storage, treatment, disposal or use of any Hazardous Substances
      in or about the Project by Tenant, its agents, employees, contractors or
      invitees shall strictly comply with all applicable Governmental Requirements.
      Tenant shall indemnify, defend and hold Landlord harmless from and against
      any
      liabilities, losses, claims, damages, penalties, fines, attorneys' fees and
      court costs, remediation costs, investigation costs and any other expenses
      which
      result from or arise out of the use, storage, treatment, transportation,
      release, or disposal of any Hazardous Substances on or about the Project by
      Tenant, its agents, employees, contractors or invitees. If any lender or
      governmental agency shall require testing for Hazardous Substances in the
      Premises, Tenant shall pay for such testing if the requirement for the testing
      arises from the Tenant's use or activities on or around the
      Project.

     

    
      	
              TTTT.

            	
              HAZARDOUS
                SUBSTANCES.

            

    

     

    "Hazardous
      Substances"
      means
      any hazardous or toxic substances, materials or waste which are or become
      regulated by any local government authority, the State of California or the
      United States government, including those substances described in the
      Comprehensive Environmental Response, Compensation and Liability Act of 1980,
      as
      amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery
      Act, as amended, 42 U.S.C. Section 6901 et seq., defined as a "hazardous waste,"
      "extremely hazardous waste" or "restricted hazardous waste" under Sections
      25115, 25117 or 25122.7, or listed pursuant to Section 25140 of the California
      Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control),
      defined as a "hazardous substance" under Section 25316 of the California Health
      and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous
      Substance Account Act), defined as a "hazardous material," "hazardous substance"
      or "hazardous waste" under Section 25501 of the California Health and Safety
      Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans
      and
      Inventory), defined as a "hazardous substance" under Section 25281 of the
      California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage
      of Hazardous Substances), petroleum, or any fraction thereof, methyl tertiary
      butyl ether (MTBE), asbestos, polychlorinated biphenyls, any other applicable
      federal, state or local law, and the regulations adopted under these
      laws.

     

    LANDLORD'S
      LEASE UNDERTAKINGS

     

    Notwithstanding
      anything to the contrary contained in this Lease or in any exhibits, Riders
      or
      addenda hereto attached (collectively the "Lease Documents"), it is expressly
      understood and agreed by and between the parties hereto that: (a) the recourse
      of Tenant or its successors or assigns against Landlord with respect to the
      alleged breach by or on the part of Landlord of any representation, warranty,
      covenant, undertaking or agreement contained in any of the Lease Documents
      or
      otherwise arising out of Tenant's use of the Premises or the Building
      (collectively, "Landlord's Lease Undertaking") shall extend only to Landlord's
      interest in the real estate of which the Premises demised under the Lease
      Documents are a part ("Landlord's Real Estate") and not to any other assets
      of
      Landlord or its beneficiaries; and (b) no personal liability or personal
      responsibility of any sort with respect to any of Landlord's Lease Undertakings
      or any alleged breach thereof is assumed by, or shall at any time be asserted
      or
      enforceable against, Landlord, SEAGATE PROPERTIES, INC., or against any of
      their
      respective directors, officers, employees, agents, constituent partners,
      members, managers, beneficiaries, trustees or representatives. Tenant
      acknowledges that this Lease may be executed by certain officers of SEAGATE
      PROPERTIES, INC., not individually but solely on behalf of, and as the
      authorized nominee and agent for, Landlord, and Tenant and all persons dealing
      with Landlord waive any right to bring a cause of action against the individuals
      executing this Lease on behalf of Landlord and must look solely to the
      Landlord's Real Estate for the enforcement of any claim against
      Landlord.

    
       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

       

    

    OFFER
      TO LEASE

    

    The
      submission of this Lease to Tenant or its broker or other agent, does not
      constitute an offer to Tenant to lease the Premises. This Lease shall have
      no
      force and effect until (a) it is executed and delivered by Tenant to Landlord,
      and (b) it is fully reviewed, executed and delivered by Landlord to Tenant;
      provided, however, that upon execution of this Lease by Tenant and delivery
      to
      Landlord, such execution and delivery by Tenant shall, in consideration of
      the
      time and expense incurred by Landlord in reviewing the Lease and Tenant's
      credit, constitute an offer by Tenant to Lease the Premises upon the terms
      and
      conditions set forth herein (which offer to Lease shall be irrevocable for
      twenty (20) business days following the date of delivery).

     

    RESERVATION
      OF RIGHTS

     

    Landlord
      reserves the following rights exercisable without notice (except as otherwise
      expressly provided to the contrary in this Lease) and without being deemed
      an
      eviction or disturbance of Tenant's use or possession of the Premises or giving
      rise to any claim for set-off or abatement of Rent: (a) to change the name
      or
      street address of the Building; (b) to install, affix and maintain all signs
      on
      the exterior and/or interior of the Building; (c) to designate and/or approve
      prior to installation, all types of signs, window shades, blinds, drapes,
      awnings or other similar items, and all internal lighting that may be visible
      from the exterior of the Premises and, notwithstanding the provisions of Section
      9, the design, arrangement, style, color and general appearance of the portion
      of the Premises visible from the exterior, and contents thereof, including,
      without limitation, furniture, fixtures, art work, wall coverings, carpet and
      decorations, and all changes, additions and removals thereto, shall, at all
      times have the appearance of Premises having the same type of exposure and
      used
      for substantially the same purposes that are generally prevailing in comparable
      office buildings in the area; (d) to change the location of any other tenant,
      the arrangement, size, character, use or location of entrances or passageways,
      doors, doorways, corridors, elevators, escalators, stairs, landscaping, toilets
      or any other parts of the Building, or to change common area to tenant space
      and
      tenant space to common area; (e) to grant any party the exclusive right to
      conduct any business or render any service in the Building, provided such
      exclusive right shall not operate to prohibit Tenant from using the Premises
      for
      the purposes permitted under this Lease; (f) to prohibit the placement of
      vending or dispensing machines of any kind in or about the Premises other than
      for use by Tenant's employees; (g) to prohibit the placement of video or other
      electronic games in the Premises; (h) to have access for Landlord and other
      tenants of the Building to any mail chutes and boxes located in or on the
      Premises according to the rules of the United States Post Office and to
      discontinue any mail chute business in the Building; (i) to close the Building
      after normal business hours, except that Tenant and its employees and invitees
      shall be entitled to admission at all times under such rules and regulations
      as
      Landlord prescribes for security purposes; (j) to install, operate and maintain
      security systems which monitor, by close circuit television or otherwise, all
      persons entering or exiting the Building; (k) to install and maintain pipes,
      ducts, conduits, wires and structural elements located in the Premises which
      serve other parts or other tenants of the Building; and (1) to retain at all
      times master keys or pass keys to the Premises. None of the foregoing shall
      result in any liability of Landlord to Tenant.

    
       

      
        
          
          

        

        
          34
            

          
            

          

        

        
          
          

        

      

       

    

    MODIFICATION
      AND FINANCING CONDITIONS

     

    Landlord
      may obtain financing for the Building, portions thereof, and the operation
      thereof, secured by mortgages or deeds of trust encumbering the Building. If
      any
      mortgage lender should require, as a condition to such financing, or pursuant
      to
      rights of approval set forth in the mortgage or deed of trust encumbering the
      Building, any modification of the terms or conditions of this Lease, Tenant
      agrees to execute such modification or amendment, provided that, such
      modification or amendment (a) shall not increase the rental or Tenant's share
      of
      any costs additional to minimum rent, (b) shall not materially interfere with
      Tenant's use or occupancy of the Premises, and (c) shall not materially increase
      Tenant's obligation hereunder.

     

    (This
      space intentionally left blank) (Signatures on next page)

    
      
        
        

      

      
        35
          

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have executed this Lease dated March 21,
      2007, by and between SEAGATE
      TELEGRAPH ASSOCIATES, LLC,
      a
      California limited liability corporation, and NILE THERAPEUTICS, a Delaware
      corporation, for the above referenced and described Property located at 2850
      Telegraph Avenue, Suite 310, Berkeley, California 94704.

     

    
      	
              LANDLORD:

            	
              TENANT:

            
	 	 
	
              SEAGATE
                TELEGRAPH ASSOCIATES, LLC,

              a
                California limited liability corporation

               

              BY:
                SEAGATE 2850 ASSOCIATES, LLC

               

              ITS:
                GENERAL PARTNER

               

              By:.
                /s/ John R. Conely

               

              Name:
                John R. Conely

               

              Its:
                Managing Member

               

              Date:
                March 29, 2007

            	
              NILE
                THERAPEUTICS, 

              a
                Delaware corporation

               

               

               

               

              By:.
                /s/ Allan Gordon

               

              Name:
                Allan Gordon

               

              Its:
                CEO 

               

              By:
                /s/ Daron Evans

               

              Name:
                Daron Evans

               

              Its:
                COO

               

              Date:
                March 27, 2007

            

    

    
      
        
        

      

      
        36
          

        
          

        

      

      
        
        

      

    

    

      Exhibit
        10.8

       

    

    EXHIBIT
      A

     

    SITE
      PLAN
      OF PREMISES

     

    This
      Exhibit A is attached to and made a part of that certain Lease dated March
      21,
      2007, by and between SEAGATE TELEGRAPH ASSOCIATES, LLC, a California limited
      liability corporation, as Landlord, and NILE THERAPEUTICS, a Delaware
      corporation, as Tenant, in the Building commonly referred to as 2850 Telegraph
      Avenue, Berkeley, California 94704.

     

    Insert
      Graphic

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    Exhibit
      10.8

     

    EXHIBIT
      B

     

    RULES
      AND
      REGULATIONS

     

    This
      Exhibit B is attached to and made a part of that certain Lease dated March
      21,
      2007, by and between SEAGATE TELEGRAPH ASSOCIATES, LLC, a California limited
      liability corporation, as Landlord, and NILE THERAPEUTICS, a Delaware
      corporation, as Tenant, in the Building commonly referred to 2850 Telegraph
      Avenue, Berkeley, California 94704.

     

    1. Tenant
      shall not place anything, or allow anything to be placed near the glass of
      any
      window, door, partition or wall, which may, in Landlord's j udgment, appear
      unsightly from outside of the Project.

     

    2. The
      Project directory, if any, shall be used by Landlord to display names and
      locations of tenants in the Project. No tenant shall use or make any changes
      to
      such directories without Landlord's prior written consent.

     

    3. The
      sidewalks, halls, passages, exits, entrances, elevators and stairways shall
      not
      be obstructed by Tenant or used by Tenant for any purposes other than for
      ingress to and egress from the Premises, unless Tenant is the sole occupant
      of
      the Building. Tenant shall lend its full cooperation to keep such areas free
      from all obstruction and in a clean and sightly condition and shall move all
      supplies, furniture and equipment as soon as received directly to the Premises
      and move all such items and waste being taken from the Premises (other than
      waste customarily removed by employees of the Building) directly to the shipping
      platform at or about the time arranged for removal therefrom. Neither Tenant
      nor
      any employee or invitee of Tenant shall go upon the roof of the
      Project.

     

    4. The
      toilet rooms, urinals, wash bowls and other apparatuses shall not be used for
      any purposes other than that for which they were constructed, and no foreign
      substance of any kind whatsoever shall be thrown therein, and to the extent
      caused by Tenant or its employees or invitees, the expense of any breakage,
      stoppage or damage resulting from the violation of this rule shall be borne
      by
      Tenant.

     

    5. Tenant
      shall not cause any unnecessary janitorial labor or services by reason of
      Tenant's carelessness or indifference in the preservation of good order and
      cleanliness.

     

    6. Tenant
      shall not install or operate any refrigerating, heating or air conditioning
      apparatus, or carry on any mechanical business without the prior written consent
      of Landlord; use the Premises for housing, lodging or sleeping purposes; or
      permit preparation or warming of food in the Premises (warming of coffee and
      individual meals with employees and guests excepted). Tenant shall not occupy
      or
      use the Premises or permit the Premises to be occupied or used for any purpose,
      act or thing which is in violation of any Governmental Requirement or which
      may
      be dangerous to persons or property.

     

    7. Tenant
      shall not bring upon, use or keep in the Premises or the Project any kerosene,
      gasoline or inflammable or combustible fluid or material, or any other articles
      deemed hazardous to persons or property, or use any method of heating or air
      conditioning other than that supplied by Landlord.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    8. Landlord
      shall have sole power to direct electricians as to where and how telephone
      and
      other wires are to be introduced. No boring or cutting for wires is to be
      allowed without the consent of Landlord. The location of telephones, call boxes
      and other office equipment affixed to the Premises shall be subject to the
      approval of Landlord.

     

    9. No
      additional locks shall be placed upon any doors, windows or transoms in or
      to
      the Premises. Tenant shall not change existing locks or the mechanism thereof.
      Upon termination of the lease, Tenant shall deliver to Landlord all keys and
      passes for offices, rooms, parking lot and toilet rooms which shall have been
      furnished Tenant.

     

    In
      the
      event of the loss of keys so furnished, Tenant shall pay Landlord therefor.
      Tenant shall not make, or cause to be made, any such keys and shall order all
      such keys solely from Landlord and shall pay Landlord for any keys in addition
      to the two sets of keys originally furnished by Landlord for each
      lock.

     

    10. Tenant
      shall not install linoleum, tile, carpet or other floor covering so that the
      same shall be affixed to the floor of the Premises in any manner except as
      approved by Landlord.

     

    11. No
      furniture, packages, supplies, equipment or merchandise will be received in
      the
      Project or carried up or down in the freight elevator, except between such
      hours
      and in such freight elevator as shall be designated by Landlord. Tenant shall
      not take or permit to be taken in or out of other entrances of the Building,
      or
      take or permit on other elevators, any item normally taken in or out through
      the
      trucking concourse or service doors or in or on freight elevators.

     

    12. Without
      the prior written consent of Landlord, Tenant shall not use the name of the
      Project or any picture of the Project in connection with, or in promoting or
      advertising the business of, Tenant, except Tenant may use the address of the
      Project as the address of its business.

     

    13. Tenant
      shall cooperate fully with Landlord to assure the most effective operation
      of
      the Premises' or the Project's heating and air conditioning, and shall refrain
      from attempting to adjust any controls, other than room thermostats installed
      for Tenant's use. Tenant shall keep all corridor and exterior doors and windows
      closed, and during periods which outside temperatures exceed 90 degrees F dry
      bulb. Tenant shall close all blinds and turn off any unnecessary
      equipment.

     

    14. Tenant
      assumes full responsibility for protecting the Premises from theft, robbery
      and
      pilferage, which may arise from a cause other than Landlord's negligence, which
      includes keeping doors locked and other means of entry to the Premises closed
      and secured.

     

    15. Peddlers,
      solicitors and beggars shall be reported to the office of the Project or as
      Landlord otherwise requests.

     

    16. Tenant
      shall not advertise the business, profession or activities of Tenant conducted
      in the Project in any manner which violates the letter or spirit of any code
      of
      ethics adopted by any recognized association or organization pertaining to
      such
      business, profession or activities.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    17. No
      bicycle (except in those areas which may be designated for bicycles by Landlord)
      or other vehicle and no animals or pets shall be allowed in the Premises, halls,
      freight docks, or any other parts of the Building except that blind persons
      may
      be accompanied by "seeing eye" dogs. Tenant shall not make or permit any noise,
      vibration or odor to emanate from the Premises, or do anything therein tending
      to create, or maintain, a nuisance, or do any act tending to injure the
      reputation of the Building.

     

    18. Tenant
      acknowledges that Building security problems may occur which may require the
      employment of extreme security measures in the day-to-day operation of the
      project accordingly:

     

    (a) Landlord
      may, at any time, or from time to time, or for regularly scheduled time periods,
      as deemed advisable by Landlord and/or its agents, in their sole discretion,
      require that persons entering or leaving the Project or the Property identify
      themselves to watchmen or other employees designated by Landlord, by
      registration, identification or otherwise.

     

    (b) Tenant
      agrees that it and its employees will cooperate fully with Project employees
      in
      the implementation of any and all security procedures.

     

    (c) Such
      security measures shall be the sole responsibility of Landlord, and Tenant
      shall
      have no liability for any action taken by Landlord in connection therewith,
      it
      being understood that Landlord is not required to provide any security
      procedures and shall have no liability for such security procedures or the
      lack
      thereof.

     

    19. Tenant
      shall not do or permit the manufacture, sale, purchase, use or gift of any
      fermented, intoxicating or alcoholic beverages without obtaining written consent
      of Landlord.

     

    20. Tenant
      shall not disturb the quiet enjoyment of any other tenant.

     

    21. Landlord
      may retain a pass key to the Premises and be allowed admittance thereto at
      all
      times to enable its representatives to examine the Premises from time to time
      and to exhibit the same and Landlord may place and keep on the windows and
      doors
      of the Premises at any time signs advertising the Premises for
      Rent.

     

    22. No
      equipment, mechanical ventilators, awnings, special shades or other forms of
      window covering shall be permitted either inside or outside the windows of
      the
      Premises without the prior written consent of Landlord, and then only at the
      expense and risk of Tenant, and they shall be of such shape, color, material,
      quality, design and make as may be approved by Landlord.

     

    23. Tenant
      shall not during the term of this Lease canvas or solicit other tenants of
      the
      Building for any purpose.

     

    24. Tenant
      shall not install or operate any phonograph, musical or sound-producing
      instrument or device, radio receiver or transmitter, TV receiver or transmitter,
      or similar device in the Building or Project Common Areas, nor install or
      operate any antenna, aerial, wires or other equipment inside or outside the
      Building, nor operate any electrical device from which may emanate electrical
      waves which may interfere with or impair radio or television broadcasting or
      reception from or in the Building or elsewhere, without in each instance the
      prior written approval of Landlord. The use thereof, if permitted, shall be
      subject to control by Landlord to the end that others shall not be
      disturbed.

    
       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

    

    25. Tenant
      shall promptly remove all rubbish and waste from the Premises.

     

    26. Tenant
      shall not exhibit, sell or offer for sale, Rent or exchange in the Premises
      or
      at the Project any article, thing or service, except those ordinarily embraced
      within the use of the Premises specified in Section 7 of this Lease, without
      the
      prior written consent of Landlord.

     

    27. If
      required by Landlord, Tenant shall list all furniture, equipment and similar
      articles Tenant desires to remove from the Premises or the Building and deliver
      a copy of such list to Landlord and procure a removal permit from Landlord
      (or
      the Project manager) authorizing Building employees to permit such articles
      to
      be removed.

     

    28. Tenant
      shall not overload any floors in the Premises or any public corridors or
      elevators in the Building.

     

    29. Tenant
      shall not do any painting in the Premises, or mark, paint, cut or drill into,
      drive nails or screws into, or in any way deface any part of the Premises or
      the
      Building, outside or inside, without the prior written consent of
      Landlord.

     

    30. Whenever
      Landlord's consent, approval or satisfaction is required under these Rules,
      then
      unless otherwise stated, any such consent, approval or satisfaction must be
      obtained in advance, such consent or approval may be granted or withheld in
      Landlord's sole discretion, and Landlord's satisfaction shall be determined
      in
      its sole judgment.

     

    31. Tenant
      and its employees shall cooperate in all fire drills conducted by Landlord
      in
      the Building.

     

    

    Tenant
      Initials: _____________

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      C

     

    TENANT
      IMPROVEMENT AGREEMENT AND WORK LETTER

     

    This
      Tenant Improvement Agreement and Work Letter ("Work Letter") is executed
      simultaneously with that certain Office Lease, dated for reference purposes,
      March 21, 2007, (the "Lease") between NILE THERAPEUTICS, a Delaware corporation
      as "Tenant", and SEAGATE TELEGRAPH ASSOCIATES, LLC, a California limited
      liability corporation, as "Landlord", relating to demised premises ("Premises")
      at the building commonly known as 2850 Telegraph Avenue (the "Building"), which
      Premises are more fully identified in the Lease. Capitalized terms used herein,
      unless otherwise defined in this Work Letter, shall have the respective meanings
      ascribed to them in the Lease Letter.

     

    For
      and
      in consideration of the agreement to lease the Premises and the mutual covenants
      contained herein and in the Lease, Landlord and Tenant hereby agree as
      follows:

     

    
      	
              1.

            	
              Landlord,
                at its sole cost and expense (subject to the terms and provisions
                of
                Section 2 below) shall perform improvements to the Premises in accordance
                with the following work list (the "Work List") using Building standard
                methods, materials and finishes. The improvements to be performed
                in
                accordance with the Work List are hereinafter referred to as the
                "Landlord
                Work". Landlord shall enter into a direct contract for the Landlord
                Work
                with a general contractor selected by Landlord. In addition, Landlord
                shall have the right to select and/or approve of any subcontractors
                used
                in connection with the Landlord
                Work.

            

    

     

    WORK
      LIST

     

    1. Reuse
      existing Building standard carpet presently in-place within the
      Premises;

     

    2. Provide
      and install demising wall between Suite 310 and Suite 300;

     

    3. Provide
      interior full height walls to create six private perimeter offices as generally
      and approximately depicted on the Hook's Design Plan dated 3-20-07, attached
      as
      Exhibit C-l;

     

    4. Provide
      and install six Building Standard interior office doors and frames with building
      standard hardware and passage sets, no locks.

     

    5. Provide
      18-inch glass side-lites at corner office and the adjacent those private offices
      along south window line.

     

    6. Provide
      approximately 24 lineal feet of 48-inch high low wall partition in entry
      area.

     

    7. Provide
      ring and string telephone outlets in each office, open office and Break
      Room.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    8. Provide
      Building Standard electrical distribution per code minimum in each office,
      Open
      Office, and Break Room;

     

    9. Provide
      six lineal foot of upper and lower cabinet with sink in Break Room;

     

    10. Provide
      Building Standard paint, one coat, to match existing wall colors. Any color
      changes to be Tenant additional charge.

     

    
      	
              2.

            	
              All
                other work and upgrades, subject to Landlord's approval, shall be
                at
                Tenant's sole cost and expense, plus any applicable state sales or
                use tax
                thereon, payable upon demand as Additional Rent. Tenant shall be
                responsible for any Tenant Delay in completion of the Premises resulting
                from any such other work and upgrades as requested or performed by
                Tenant.

            

    

     

    
      	
              3.

            	
              Landlord's
                supervision or performance of any work for or on behalf of Tenant
                shall
                not be deemed to be a representation by Landlord that such work complies
                with applicable insurance requirements, building codes, ordinances,
                laws
                or regulations or that the improvements constructed will be adequate
                for
                Tenant's use.

            

    

     

    
      	
              4.

            	
              Tenant
                acknowledges that the Landlord Work may be performed by Landlord
                in the
                Premises during Building Service Hours subsequent to the Commencement
                Date; Landlord and Tenant agree to cooperate with each other in order
                to
                enable the Landlord Work to be performed in a timely manner and with
                as
                little inconvenience to the operation of Tenant's business as is
                reasonably possible. Notwithstanding anything herein to the contrary,
                any
                delay in the completion of the Landlord Work or inconvenience suffered
                by
                Tenant during the performance of the Landlord Work shall not delay
                the
                Commencement Date; nor shall it subject Landlord to any liability
                for any
                loss or damage resulting therefrom or entitle Tenant to any credit,
                abatement or adjustment of Rent or other sums payable under the
                Lease.

            

    

     

    
      	
              5.

            	
              This
                Exhibit shall not be deemed applicable to any additional space added
                to
                the Premises at any time or from time to time, whether by any options
                under the Lease or otherwise, or to any portion of the original Premises
                or any additions to the Premises in the event of a renewal or extension
                of
                the original Term of the Lease, whether by any options under the
                Lease or
                otherwise, unless expressly so provided in the Lease or any amendment
                or
                supplement to the Lease.

            

    

     

    (Signatures
      on next page)

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      the
      parties hereto have executed this Tenant Improvement Agreement and Work Letter
      as of the date first above written.

     

    
      	
              LANDLORD:

            	
              TENANT:

            
	 	 
	
              SEAGATE
                TELEGRAPH ASSOCIATES, LLC,

              a
                California limited liability corporation

               

              
                BY:
                  SEAGATE 2850 ASSOCIATES, LLC

                 

                ITS:
                  GENERAL PARTNER

                 

                By:.
                  /s/ John R. Conely

                 

                Name:
                  John R. Conely

                 

                Its:
                  Managing Member

                 

                Date:
                  March 29, 2007

              

            	
              NILE
                THERAPEUTICS, 

              a
                Delaware corporation

               

               

               

              
                By:.
                  /s/ Allan Gordon

                 

                Name:
                  Allan Gordon

                 

                Its:
                  CEO 

                 

                By:
                  /s/ Daron Evans

                 

                Name:
                  Daron Evans

                 

                Its:
                  COO

                 

                Date:
                  March 27, 2007

              

            

    

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    Exhibit
      10.8

     

    EXHIBIT
      C-l

     

    SCOPE
      OF
      WORK/INITIAL PLANS

     

    Landlord
      shall construct Tenant Improvements, which will be constructed in compliance
      with all applicable codes and regulations, using Building Standard materials
      and
      Building Standard finishes, consistent with that which is presently in the
      Premises, per the attached floorplan, which has been prepared by Landlord's
      architect, and which are mutually agreeable to Landlord and Tenant.

     

    Insert
      Graphic

     

    2850
      TELEGRAPH AVE.

    SUITE
      314

    BERKELEY,
      CA 

     

    
      
        
        

      

      
        1Exhibit
      10.9

    

    Effective
      as of September 17,
      2007          

     

    NILE
      THERAPEUTICS, INC.

    

    Amended
      and Restated 2005 Stock Option Plan

    

    1. Purpose.
      The
      purpose of the Amended and Restated 2005 Stock Option Plan (the “Plan”)
      of
      Nile Therapeutics, Inc. (the “Company”)
      is to
      increase shareholder value and to advance the interests of the Company by
      furnishing a variety of economic incentives (“Incentives”)
      designed to attract, retain and motivate employees, directors and consultants.
      Incentives may consist of opportunities to purchase or receive shares of Common
      Stock, $0.001 par value, of the Company (“Common
      Stock”),
      monetary payments or both on terms determined under this Plan.

    

    2. Certain
      Transactions.
      Pursuant to a merger agreement dated August 15, 2007 (the “Merger
      Agreement”),
      between SMI Products, Inc. (“SMI”),
      Nile
      Merger Sub., Inc., a Delaware corporation and wholly-owned subsidiary of SMI
      (“Nile
      Merger Sub”),
      and
      Nile Therapeutics, Inc. (“Old
      Nile”),
      on
      September 17, 2007, Nile Merger Sub merged with and into Old Nile, with Old
      Nile
      remaining as the surviving entity and a wholly-owned operating subsidiary of
      SMI. On September 17, 2007, Old Nile merged with and into SMI with SMI remaining
      as the surviving corporation to that merger (both mergers, together, the
“Mergers”).
      Pursuant to the Mergers, and in accordance with Sections 13.6 of this Plan,
      each
      share of the common stock then subject to the Plan was substituted with 2.71
      shares of common stock of SMI, par value $0.001 per share (the “SMI
      Common Stock”).
      In
      connection with the Mergers, SMI changed its corporate name to “Nile
      Therapeutics, Inc.”, and this plan was assumed by the Company. 

    

    3. Administration.
      

    

    3.1 The
      Plan
      shall be administered by a committee of the Board of Directors of the Company
      (the “Committee”).
      The
      Committee shall consist of not less than two directors of the Company who shall
      be appointed from time to time by the board of directors of the Company. Each
      member of the Committee shall be a “non-employee director” within the meaning of
      Rule 16b-3 of the Exchange Act of 1934, as amended (together with the rules
      and
      regulations promulgated thereunder, the “Exchange
      Act”),
      and
      an “outside director” as defined in Section 162(m) of the Internal Revenue Code
      of 1986, as amended (the “Code”).
      The
      Committee shall have complete authority to determine all provisions of all
      Incentives awarded under the Plan (as consistent with the terms of the Plan),
      to
      interpret the Plan, and to make any other determination which it believes
      necessary and advisable for the proper administration of the Plan. The
      Committee’s decisions and matters relating to the Plan shall be final and
      conclusive on the Company and its participants. No member of the Committee
      will
      be liable for any action or determination made in good faith with respect to
      the
      Plan or any Incentives granted under the Plan. The Committee will also have
      the
      authority under the Plan to amend or modify the terms of any outstanding
      Incentives in any manner; provided, however, that the amended or modified terms
      are permitted by the Plan as then in effect and that any recipient on an
      Incentive adversely affected by such amended or modified terms has consented
      to
      such amendment or modification. No amendment or modification to an Incentive,
      however, whether pursuant to this Section 3 or any other provisions of the
      Plan,
      will be deemed to be a re-grant of such Incentive for purposes of this Plan.
      If
      at any time there is no Committee, then for purposes of the Plan the term
“Committee” shall mean the Company’s Board of Directors.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Effective
          as of September 17,
          2007          

      

       

    

    3.2 In
      the
      event of (i) any reorganization, merger, consolidation, recapitalization,
      liquidation, reclassification, stock dividend, stock split, combination of
      shares, rights offering, extraordinary dividend or divestiture (including a
      spin-off) or any other similar change in corporate structure or shares,
      (ii) any purchase, acquisition, sale or disposition of a significant amount
      of assets or a significant business, (iii) any change in accounting
      principles or practices, or (iv) any other similar change, in each case
      with respect to the Company or any other entity whose performance is relevant
      to
      the grant or vesting of an Incentive, the Committee (or, if the Company is
      not
      the surviving corporation in any such transaction, the board of directors of
      the
      surviving corporation) may, without the consent of any affected participant,
      amend or modify the vesting criteria of any outstanding Incentive that is based
      in whole or in part on the financial performance of the Company (or any
      subsidiary or division thereof) or such other entity so as equitably to reflect
      such event, with the desired result that the criteria for evaluating such
      financial performance of the Company or such other entity will be substantially
      the same (in the sole discretion of the Committee or the board of directors
      of
      the surviving corporation) following such event as prior to such event;
      provided, however, that the amended or modified terms are permitted by the
      Plan
      as then in effect. 

    

    4. Eligible
      Participants.
      Employees of the Company or its subsidiaries (including officers and employees
      of the Company or its subsidiaries), directors and consultants, advisors or
      other independent contractors who provide services to the Company or its
      subsidiaries (including members of the Company’s scientific advisory board)
      shall become eligible to receive Incentives under the Plan when designated
      by
      the Committee. Participants may be designated individually or by groups or
      categories (for example, by pay grade) as the Committee deems appropriate.
      Participation by officers of the Company or its subsidiaries and any performance
      objectives relating to such officers must be approved by the Committee.
      Participation by others and any performance objectives relating to others may
      be
      approved by groups or categories (for example, by pay grade) and authority
      to
      designate participants who are not officers and to set or modify such targets
      may be delegated. 

    5. Types
      of Incentives.
      Incentives under the Plan may be granted in any one or a combination of the
      following forms: (a) incentive stock options and non-statutory stock options
      (Section 7); (b) stock appreciation rights (“SARs”)
      (Section 8); (c) stock awards (Section 9); (d) restricted stock (Section 9);
      and
      (e) performance shares (Section 10).

    

    6. Shares
      Subject to the Plan.

    

    6.1. Number
      of Shares.
      Subject
      to adjustment as provided in Section 13.6, the number of shares of Common Stock
      which may be issued under the Plan shall not exceed 2,000,000 shares of Common
      Stock. Shares of Common Stock that are issued under the Plan or that are subject
      to outstanding Incentives will be applied to reduce the maximum number of shares
      of Common Stock remaining available for issuance under the Plan. 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Effective
          as of September 17,
          2007          

      

       

    

    6.2. Cancellation.
      To the
      extent that cash in lieu of shares of Common Stock is delivered upon the
      exercise of an SAR pursuant to Section 8.4, the Company shall be deemed, for
      purposes of applying the limitation on the number of shares, to have issued
      the
      greater of the number of shares of Common Stock which it was entitled to issue
      upon such exercise or on the exercise of any related option. In the event that
      a
      stock option or SAR granted hereunder expires or is terminated or canceled
      unexercised or unvested as to any shares of Common Stock, such shares may again
      be issued under the Plan either pursuant to stock options, SARs or otherwise.
      In
      the event that shares of Common Stock are issued as restricted stock or pursuant
      to a stock award and thereafter are forfeited or reacquired by the Company
      pursuant to rights reserved upon issuance thereof, such forfeited and reacquired
      shares may again be issued under the Plan, either as restricted stock, pursuant
      to stock awards or otherwise. The Committee may also determine to cancel, and
      agree to the cancellation of, stock options in order to make a participant
      eligible for the grant of a stock option at a lower price than the option to
      be
      canceled.

    

    7. Stock
      Options.
      A stock
      option is a right to purchase shares of Common Stock from the Company. The
      Committee may designate whether an option is to be considered an incentive
      stock
      option or a non-statutory stock option. To the extent that any incentive stock
      option granted under the Plan ceases for any reason to qualify as an “incentive
      stock option” for purposes of Section 422 of the Code, such incentive stock
      option will continue to be outstanding for purposes of the Plan but will
      thereafter be deemed to be a non-statutory stock option. Each stock option
      granted by the Committee under this Plan shall be subject to the following
      terms
      and conditions:

    

    7.1. Price.
      The
      option price per share shall be determined by the Committee, subject to
      adjustment under Section 13.6.

    

    7.2. Number.
      The
      number of shares of Common Stock subject to the option shall be determined
      by
      the Committee, subject to adjustment as provided in Section 13.6. The number
      of
      shares of Common Stock subject to a stock option shall be reduced in the same
      proportion that the holder thereof exercises a SAR if any SAR is granted in
      conjunction with or related to the stock option. No individual may receive
      options to purchase more than 1,000,000 shares in any year. 

     

    7.3. Duration
      and Time for Exercise.
      Subject
      to earlier termination as provided in Section 13.4, the term of each stock
      option shall be determined by the Committee but shall not exceed ten years
      and
      one day from the date of grant. Each stock option shall become exercisable
      at
      such time or times during its term as shall be determined by the Committee
      at
      the time of grant. The Committee may accelerate the exercisability of any stock
      option. Subject to the foregoing and with the approval of the Committee, all
      or
      any part of the shares of Common Stock with respect to which the right to
      purchase has accrued may be purchased by the Company at the time of such accrual
      or at any time or times thereafter during the term of the option.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Effective
          as of September 17,
          2007          

      

       

    

    7.4. Manner
      of Exercise.
      Subject
      to the conditions contained in this Plan and in the agreement with the recipient
      evidencing such option, a stock option may be exercised, in whole or in part,
      by
      giving written notice to the Company, specifying the number of shares of Common
      Stock to be purchased and accompanied by the full purchase price for such
      shares. The exercise price shall be payable (a) in United States dollars upon
      exercise of the option and may be paid by cash; uncertified or certified check;
      bank draft; (b) at the discretion of the Committee, by delivery of shares of
      Common Stock that are already owned by the participant in payment of all or
      any
      part of the exercise price, which shares shall be valued for this purpose at
      the
      Fair Market Value on the date such option is exercised; or (c) at the discretion
      of the Committee, by instructing the Company to withhold from the shares of
      Common Stock issuable upon exercise of the stock option shares of Common Stock
      in payment of all or any part of the exercise price and/or any related
      withholding tax obligations, which shares shall be valued for this purpose
      at
      the Fair Market Value or in such other manner as may be authorized from time
      to
      time by the Committee. The shares of Common Stock delivered by the participant
      pursuant to Section 7.4(b) must have been held by the participant for a period
      of not less than six months prior to the exercise of the option, unless
      otherwise determined by the Committee. Prior to the issuance of shares of Common
      Stock upon the exercise of a stock option, a participant shall have no rights
      as
      a shareholder. Except as otherwise provided in the Plan, no adjustment will
      be
      made for dividends or distributions with respect to such stock options as to
      which there is a record date preceding the date the participant becomes the
      holder of record of such shares, except as the Committee may determine in its
      discretion.

    

    7.5. Incentive
      Stock Options.
      Notwithstanding anything in the Plan to the contrary, the following additional
      provisions shall apply to the grant of stock options which are intended to
      qualify as Incentive Stock Options (as such term is defined in Section 422
      of
      the Code):

    

    (a) The
      aggregate Fair Market Value (determined as of the time the option is granted)
      of
      the shares of Common Stock with respect to which Incentive Stock Options are
      exercisable for the first time by any participant during any calendar year
      (under the Plan and any other incentive stock option plans of the Company or
      any
      subsidiary or parent corporation of the Company) shall not exceed $100,000.
      The
      determination will be made by taking incentive stock options into account in
      the
      order in which they were granted. 

    

    (b) Any
      Incentive Stock Option certificate authorized under the Plan shall contain
      such
      other provisions as the Committee shall deem advisable, but shall in all events
      be consistent with and contain all provisions required in order to qualify
      the
      options as Incentive Stock Options.

    (c) All
      Incentive Stock Options must be granted within ten years from the earlier of
      the
      date on which this Plan was adopted by board of directors or the date this
      Plan
      was approved by the Company’s shareholders. 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Effective
          as of September 17,
          2007          

      

       

    

    (d) Unless
      sooner exercised, all Incentive Stock Options shall expire no later than 10
      years after the date of grant. No Incentive Stock Option may be exercisable
      after ten (10) years from its date of grant (five (5) years from its date of
      grant if, at the time the Incentive Stock Option is granted, the Participant
      owns, directly or indirectly, more than 10% of the total combined voting power
      of all classes of stock of the Company or any parent or subsidiary corporation
      of the Company).

    

    (e) The
      exercise price for Incentive Stock Options shall be not less than 100% of the
      Fair Market Value of one share of Common Stock on the date of grant with respect
      to an Incentive Stock Option; provided that the exercise price shall be 110%
      of
      the Fair Market Value if, at the time the Incentive Stock Option is granted,
      the
      participant owns, directly or indirectly, more than 10% of the total combined
      voting power of all classes of stock of the Company or any parent or subsidiary
      corporation of the Company.

    

    8. Stock
      Appreciation Rights.
      An SAR
      is a right to receive, without payment to the Company, a number of shares of
      Common Stock, cash or any combination thereof, the amount of which is determined
      pursuant to the formula set forth in Section 8.4. An SAR may be granted (a)
      with
      respect to any stock option granted under this Plan, either concurrently with
      the grant of such stock option or at such later time as determined by the
      Committee (as to all or any portion of the shares of Common Stock subject to
      the
      stock option), or (b) alone, without reference to any related stock option.
      Each
      SAR granted by the Committee under this Plan shall be subject to the following
      terms and conditions:

    

    8.1. Number;
      Exercise Price.
      Each
      SAR granted to any participant shall relate to such number of shares of Common
      Stock as shall be determined by the Committee, subject to adjustment as provided
      in Section 13.6. In the case of an SAR granted with respect to a stock option,
      the number of shares of Common Stock to which the SAR pertains shall be reduced
      in the same proportion that the holder of the option exercises the related
      stock
      option. The exercise price of an SAR will be determined by the Committee, in
      its
      discretion, at the date of grant but may not be less than 100% of the Fair
      Market Value of one share of Common Stock on the date of grant.

    

    8.2. Duration.
      Subject
      to earlier termination as provided in Section 13.4, the term of each SAR shall
      be determined by the Committee but shall not exceed ten years and one day from
      the date of grant. Unless otherwise provided by the Committee, each SAR shall
      become exercisable at such time or times, to such extent and upon such
      conditions as the stock option, if any, to which it relates is exercisable.
      The
      Committee may in its discretion accelerate the exercisability of any
      SAR.

    

    8.3. Exercise.
      An SAR
      may be exercised, in whole or in part, by giving written notice to the Company,
      specifying the number of SARs which the holder wishes to exercise. Upon receipt
      of such written notice, the Company shall, within 90 days thereafter, deliver
      to
      the exercising holder certificates for the shares of Common Stock or cash or
      both, as determined by the Committee, to which the holder is entitled pursuant
      to Section 8.4.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Effective
          as of September 17,
          2007          

      

    

    8.4. Payment.
      Subject
      to the right of the Committee to deliver cash in lieu of shares of Common Stock
      (which, as it pertains to officers and directors of the Company, shall comply
      with all requirements of the Exchange Act), the number of shares of Common
      Stock
      which shall be issuable upon the exercise of an SAR shall be determined by
      dividing:

    

    (a) the
      number of shares of Common Stock as to which the SAR is exercised multiplied
      by
      the amount of the appreciation in such shares (for this purpose, the
“appreciation” shall be the amount by which the Fair Market Value of the shares
      of Common Stock subject to the SAR on the exercise date exceeds (1) in the
      case
      of an SAR related to a stock option, the exercise price of the shares of Common
      Stock under the stock option or (2) in the case of an SAR granted alone, without
      reference to a related stock option, an amount which shall be determined by
      the
      Committee at the time of grant, subject to adjustment under Section 13.6);
      by

    

    (b) the
      Fair
      Market Value of a share of Common Stock on the exercise date.

    

    In
      lieu
      of issuing shares of Common Stock upon the exercise of a SAR, the Committee
      may
      elect to pay the holder of the SAR cash equal to the Fair Market Value on the
      exercise date of any or all of the shares which would otherwise be issuable.
      No
      fractional shares of Common Stock shall be issued upon the exercise of an SAR;
      instead, the holder of the SAR shall be entitled to receive a cash adjustment
      equal to the same fraction of the Fair Market Value of a share of Common Stock
      on the exercise date or to purchase the portion necessary to make a whole share
      at its Fair Market Value on the date of exercise.

    

    9. Stock
      Awards and Restricted Stock.
      A stock
      award consists of the transfer by the Company to a participant of shares of
      Common Stock, without other payment therefor, as additional compensation for
      services to the Company. The participant receiving a stock award will have
      all
      voting, dividend, liquidation and other rights with respect to the shares of
      Common Stock issued to a participant as a stock award under this Section 9
      upon
      the participant becoming the holder of record of such shares. A share of
      restricted stock consists of shares of Common Stock which are sold or
      transferred by the Company to a participant at a price determined by the
      Committee (which price shall be at least equal to the minimum price required
      by
      applicable law for the issuance of a share of Common Stock) and subject to
      restrictions on their sale or other transfer by the participant, which
      restrictions and conditions may be determined by the Committee as long as such
      restrictions and conditions are not inconsistent with the terms of the Plan.
      The
      transfer of Common Stock pursuant to stock awards and the transfer and sale
      of
      restricted stock shall be subject to the following terms and
      conditions:

    

    9.1. Number
      of Shares.
      The
      number of shares to be transferred or sold by the Company to a participant
      pursuant to a stock award or as restricted stock shall be determined by the
      Committee.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Effective
          as of September 17,
          2007          

      

       

    

    9.2. Sale
      Price.
      The
      Committee shall determine the price, if any, at which shares of restricted
      stock
      shall be sold or granted to a participant, which may vary from time to time
      and
      among participants and which may be below the Fair Market Value of such shares
      of Common Stock at the date of sale.

     

    9.3. Restrictions.
      All
      shares of restricted stock transferred or sold hereunder shall be subject to
      such restrictions as the Committee may determine, including, without limitation
      any or all of the following:

    

    (a) a
      prohibition against the sale, transfer, pledge or other encumbrance of the
      shares of restricted stock, such prohibition to lapse at such time or times
      as
      the Committee shall determine (whether in annual or more frequent installments,
      at the time of the death, disability or retirement of the holder of such shares,
      or otherwise);

    

    (b) a
      requirement that the holder of shares of restricted stock forfeit, or (in the
      case of shares sold to a participant) resell back to the Company at his or
      her
      cost, all or a part of such shares in the event of termination of his or her
      employment or consulting engagement during any period in which such shares
      are
      subject to restrictions; or

    

    (c) such
      other conditions or restrictions as the Committee may deem
      advisable.

    

    9.4. Escrow.
      In
      order to enforce the restrictions imposed by the Committee pursuant to Section
      9.3, the participant receiving restricted stock shall enter into an agreement
      with the Company setting forth the conditions of the grant. Shares of restricted
      stock shall be registered in the name of the participant and deposited, together
      with a stock power endorsed in blank, with the Company. Each such certificate
      shall bear a legend in substantially the following form:

    

    The
      transferability of this certificate and the shares of Common Stock represented
      by it are subject to the terms and conditions (including conditions of
      forfeiture) contained in the 2005 Stock Option Plan of Nile Therapeutics, Inc.,
      (the “Company”), and an agreement entered into between the registered owner and
      the Company. A copy of the 2005 Stock Option Plan and the agreement is on file
      in the office of the secretary of the Company.

    

    9.5. End
      of
      Restrictions.
      Subject
      to Section 13.5, at the end of any time period during which the shares of
      restricted stock are subject to forfeiture and restrictions on transfer, such
      shares will be delivered free of all restrictions to the participant or to
      the
      participant’s legal representative, beneficiary or heir.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Effective
          as of September 17,
          2007          

      

       

    

    9.6. Shareholder.
      Subject
      to the terms and conditions of the Plan, each participant receiving restricted
      stock shall have all the rights of a shareholder with respect to shares of
      stock
      during any period in which such shares are subject to forfeiture and
      restrictions on transfer, including without limitation, the right to vote such
      shares. Dividends paid in cash or property other than Common Stock with respect
      to shares of restricted stock shall be paid to the participant currently. Unless
      the Committee determines otherwise in its sole discretion, any dividends or
      distributions (including regular quarterly cash dividends) paid with respect
      to
      shares of Common Stock subject to the restrictions set forth above will be
      subject to the same restrictions as the shares to which such dividends or
      distributions relate. In the event the Committee determines not to pay dividends
      or distributions currently, the Committee will determine in its sole discretion
      whether any interest will be paid on such dividends or distributions. In
      addition, the Committee in its sole discretion may require such dividends and
      distributions to be reinvested (and in such case the participant consents to
      such reinvestment) in shares of Common Stock that will be subject to the same
      restrictions as the shares to which such dividends or distributions
      relate.

    

    10. Performance
      Shares.
      A
      performance share consists of an award which shall be paid in shares of Common
      Stock, as described below. The grant of a performance share shall be subject
      to
      such terms and conditions as the Committee deems appropriate, including the
      following:

    

    10.1. Performance
      Objectives.
      Each
      performance share will be subject to performance objectives for the Company
      or
      one of its operating units to be achieved by the participant before the end
      of a
      specified period. The number of performance shares granted shall be determined
      by the Committee and may be subject to such terms and conditions, as the
      Committee shall determine. If the performance objectives are achieved, each
      participant will be paid in shares of Common Stock or cash as determined by
      the
      Committee. If such objectives are not met, each grant of performance shares
      may
      provide for lesser payments in accordance with formulas established in the
      award.

    

    10.2. Not
      Shareholder.
      The
      grant of performance shares to a participant shall not create any rights in
      such
      participant as a shareholder of the Company, until the payment of shares of
      Common Stock with respect to an award.

    

    10.3. No
      Adjustments.
      No
      adjustment shall be made in performance shares granted on account of cash
      dividends which may be paid or other rights which may be issued to the holders
      of Common Stock prior to the end of any period for which performance objectives
      were established.

    

    10.4. Expiration
      of Performance Share.
      If any
      participant’s employment or consulting engagement with the Company is terminated
      for any reason other than normal retirement, death or disability prior to the
      achievement of the participant’s stated performance objectives, all the
      participant’s rights on the performance shares shall expire and terminate unless
      otherwise determined by the Committee. In the event of termination of employment
      or consulting by reason of death, disability, or normal retirement, the
      Committee, in its own discretion may determine what portions, if any, of the
      performance shares should be paid to the participant.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Effective
          as of September 17,
          2007          

      

    

     

    11. Change
      of Control.

    

    11.1 Change
      in Control.
      For
      purposes of this Section 11, a “Change
      in Control”
of
      the
      Company will mean the following:

     

    (a) the
      sale,
      lease, exchange or other transfer, directly or indirectly, of substantially
      all
      of the assets of the Company (in one transaction or in a series of related
      transactions) to a person or entity that is not controlled by the Company;
      

     

    (b) the
      approval by the shareholders of the Company of any plan or proposal for the
      liquidation or dissolution of the Company;

     

    (c) any
      person becomes after the effective date of the Plan the “beneficial owner” (as
      defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of (i)
      20% or more, but not 50% or more, of the combined voting power of the Company’s
      outstanding securities ordinarily having the right to vote at elections of
      directors, unless the transaction resulting in such ownership has been approved
      in advance by the Continuing Directors (as defined below), or (ii) 50% or more
      of the combined voting power of the Company’s outstanding securities ordinarily
      having the right to vote at elections of directors (regardless of any approval
      by the Continuing Directors); provided that a traditional institution or venture
      capital financing transaction shall be excluded from this
      definition;

     

    (d) a
      merger
      or consolidation to which the Company is a party if the shareholders of the
      Company immediately prior to effective date of such merger or consolidation
      have
“beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act),
      immediately following the effective date of such merger or consolidation, of
      securities of the surviving corporation representing (i) 50% or more, but less
      than 80%, of the combined voting power of the surviving corporation’s then
      outstanding securities ordinarily having the right to vote at elections of
      directors, unless such merger or consolidation has been approved in advance
      by
      the Continuing Directors, or (ii) less than 50% of the combined voting
      power of the surviving corporation’s then outstanding securities ordinarily
      having the right to vote at elections of directors (regardless of any approval
      by the Continuing Directors); or

     

    (e) after
      the
      date the Company’s securities are first sold in a registered public offering,
      the Continuing Directors cease for any reason to constitute at least a majority
      of the Board. 

     

    11.2 Continuing
      Directors.
      For
      purposes of this Section 11, “Continuing
      Directors”
of
      the
      Company will mean any individuals who are members of the Board on the effective
      date of the Plan and any individual who subsequently becomes a member of the
      Board whose election, or nomination for election by the Company’s shareholders,
      was approved by a vote of at least a majority of the Continuing Directors
      (either by specific vote or by approval of the Company’s proxy statement in
      which such individual is named as a nominee for director without objection
      to
      such nomination).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Effective
          as of September 17,
          2007          

      

       

    

    11.3 Acceleration
      of Incentives.
      Without
      limiting the authority of the Committee under the Plan, if a Change in Control
      of the Company occurs whereby the acquiring entity or successor to the Company
      does not assume the Incentives or replace them with substantially equivalent
      incentive awards, then, unless otherwise provided by the Committee in its sole
      discretion in the agreement evidencing an Incentive at the time of grant, then
      as of the date of the Change of Control (a) all outstanding options and SARs
      will vest and will become immediately exercisable in full and will remain
      exercisable for the remainder of their terms, regardless of whether the
      participant to whom such options or SARs have been granted remains in the employ
      or service of the Company or any subsidiary of the Company or any acquiring
      entity or successor to the Company; (b) the restrictions on all shares of
      restricted stock awards shall lapse immediately; and (c) all performance shares
      shall be deemed to be met and payment made immediately.

     

    11.4 Cash
      Payment for Options.
      If a
      Change in Control of the Company occurs, then the Committee, if approved by
      the
      Committee in its sole discretion either in an agreement evidencing an option
      at
      the time of grant or at any time after the grant of an option, and without
      the
      consent of any participant affected thereby, may determine that:

     

    (a) some
      or
      all participants holding outstanding options will receive, with respect to
      some
      or all of the shares of Common Stock subject to such options, as of the
      effective date of any such Change in Control of the Company, cash in an amount
      equal to the excess of the Fair Market Value of such shares immediately prior
      to
      the effective date of such Change in Control of the Company over the exercise
      price per share of such options; and

     

    (b) any
      options as to which, as of the effective date of any such Change in Control,
      the
      Fair Market Value of the shares of Common Stock subject to such options is
      less
      than or equal to the exercise price per share of such options, shall terminate
      as of the effective date of any such Change in Control.

    
       

        If
          the
          Committee makes a determination as set forth in subparagraph (a) of this
          Section
          11.4, then as of the effective date of any such Change in Control of the
          Company
          such options will terminate as to such shares and the participants formerly
          holding such options will only have the right to receive such cash payment(s).
          If the Committee makes a determination as set forth in subparagraph (b)
          of this
          Section 11.4, then as of the effective date of any such Change in Control
          of the
          Company such options will terminate, become void and expire as to all
          unexercised shares of Common Stock subject to such options on such date,
          and the
          participants formerly holding such options will have no further rights
          with
          respect to such options.

      

    

    

    12. Per-Person
      Limitation on Options, SARs and Performance Shares.
      The
      number of shares of Common Stock with respect to which Options, SARs and
      performance shares may be granted under the Plan during any year to an
      individual participant shall not exceed 1,000,000 Shares, subject to adjustment
      as provided in Section 13.6.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Effective
          as of September 17,
          2007          

      

    

     

    13. General.

    

    13.1. Effective
      Date.
      The
      Plan became effective upon approval by the Company’s board of directors on
      August 10, 2005, and was amended and restated on September 17, 2007.

    

    13.2. Duration.
      The
      Plan shall remain in effect until all Incentives granted under the Plan have
      either been satisfied by the issuance of shares of Common Stock or the payment
      of cash or been terminated under the terms of the Plan and all restrictions
      imposed on shares of Common Stock in connection with their issuance under the
      Plan have lapsed. No Incentives may be granted under the Plan after the tenth
      anniversary of the date the Plan is approved by the shareholders of the
      Company.

    

    13.3. Non-transferability
      of Incentives.
      Except,
      in the event of the holder’s death, by will or the laws of descent and
      distribution to the limited extent provided in the Plan or the Incentive, unless
      approved by the Committee, no stock option, SAR, restricted stock or performance
      award may be transferred, pledged or assigned by the holder thereof, either
      voluntarily or involuntarily, directly or indirectly, by operation of law or
      otherwise, and the Company shall not be required to recognize any attempted
      assignment of such rights by any participant. During a participant’s lifetime,
      an Incentive may be exercised only by him or her or by his or her guardian
      or
      legal representative.

    

    13.4. Effect
      of Termination or Death.
      In the
      event that a participant ceases to be an employee of or consultant to the
      Company, or the participants other service with the Company is terminated,
      for
      any reason, including death, any Incentives may be exercised or shall expire
      at
      such times as may be determined by the Committee in its sole discretion in
      the
      agreement evidencing an Incentive. Notwithstanding the other provisions of
      this
      Section 13.4, upon a participant’s termination of employment or other
      service with the Company and all subsidiaries, the Committee may, in its sole
      discretion (which may be exercised at any time on or after the date of grant,
      including following such termination), cause options and SARs (or any part
      thereof) then held by such participant to become or continue to become
      exercisable and/or remain exercisable following such termination of employment
      or service and Restricted Stock Awards, Performance Shares and Stock Awards
      then
      held by such participant to vest and/or continue to vest or become free of
      transfer restrictions, as the case may be, following such termination of
      employment or service, in each case in the manner determined by the Committee;
      provided, however, that no Incentive may remain exercisable or continue to
      vest
      beyond its expiration date. Any Incentive Stock Option that remains unexercised
      more than one (1) year following termination of employment by reason of death
      or
      disability or more than three (3) months following termination for any reason
      other than death or disability will thereafter be deemed to be a Non-Statutory
      Stock Option. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Effective
          as of September 17,
          2007          

      

       

    

    13.5. Additional
      Conditions.
      Notwithstanding anything in this Plan to the contrary: (a) the Company may,
      if
      it shall determine it necessary or desirable for any reason, at the time of
      award of any Incentive or the issuance of any shares of Common Stock pursuant
      to
      any Incentive, require the recipient of the Incentive, as a condition to the
      receipt thereof or to the receipt of shares of Common Stock issued pursuant
      thereto, to deliver to the Company a written representation of present intention
      to acquire the Incentive or the shares of Common Stock issued pursuant thereto
      for his or her own account for investment and not for distribution; and (b)
      if
      at any time the Company further determines, in its sole discretion, that the
      listing, registration or qualification (or any updating of any such document)
      of
      any Incentive or the shares of Common Stock issuable pursuant thereto is
      necessary on any securities exchange or under any federal or state securities
      or
      blue sky law, or that the consent or approval of any governmental regulatory
      body is necessary or desirable as a condition of, or in connection with the
      award of any Incentive, the issuance of shares of Common Stock pursuant thereto,
      or the removal of any restrictions imposed on such shares, such Incentive shall
      not be awarded or such shares of Common Stock shall not be issued or such
      restrictions shall not be removed, as the case may be, in whole or in part,
      unless such listing, registration, qualification, consent or approval shall
      have
      been effected or obtained free of any conditions not acceptable to the Company.
      Notwithstanding any other provision of the Plan or any agreements entered into
      pursuant to the Plan, the Company will not be required to issue any shares
      of
      Common Stock under this Plan, and a participant may not sell, assign, transfer
      or otherwise dispose of shares of Common Stock issued pursuant to any Incentives
      granted under the Plan, unless (a) there is in effect with respect to such
      shares a registration statement under the Securities Act of 1933, as amended
      (the “Securities
      Act”),
      and
      any applicable state or foreign securities laws or an exemption from such
      registration under the Securities Act and applicable state or foreign securities
      laws, and (b) there has been obtained any other consent, approval or permit
      from any other regulatory body which the Committee, in its sole discretion,
      deems necessary or advisable. The Company may condition such issuance, sale
      or
      transfer upon the receipt of any representations or agreements from the parties
      involved, and the placement of any legends on certificates representing shares
      of Common Stock, as may be deemed necessary or advisable by the Company in
      order
      to comply with such securities law or other restrictions.

    

    13.6. Adjustment.
      In the
      event of any merger, consolidation or reorganization of the Company with any
      other corporation or corporations, there shall be substituted for each of the
      shares of Common Stock then subject to the Plan, including shares subject to
      restrictions, options, or achievement of performance share objectives, the
      number and kind of shares of stock or other securities to which the holders
      of
      the shares of Common Stock will be entitled pursuant to the transaction. In
      the
      event of any recapitalization, reclassification, stock dividend, stock split,
      combination of shares or other similar change in the corporate structure of
      the
      Company or shares of the Company, the exercise price of an outstanding Incentive
      and the number of shares of Common Stock then subject to the Plan, including
      shares subject to restrictions, options or achievements of performance shares,
      shall be adjusted in proportion to the change in outstanding shares of Common
      Stock in order to prevent dilution or enlargement of the rights of the
      participants. In the event of any such adjustments, the purchase price of any
      option, the performance objectives of any Incentive, and the shares of Common
      Stock issuable pursuant to any Incentive shall be adjusted as and to the extent
      appropriate, in the discretion of the Committee, to provide participants with
      the same relative rights before and after such adjustment.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Effective
          as of September 17,
          2007          

      

    

    

    13.7. Incentive
      Plans and Agreements.
      Except
      in the case of stock awards or cash awards, the terms of each Incentive shall
      be
      stated in a plan or agreement approved by the Committee. The Committee may
      also
      determine to enter into agreements with holders of options to reclassify or
      convert certain outstanding options, within the terms of the Plan, as Incentive
      Stock Options or as non-statutory stock options and in order to eliminate SARs
      with respect to all or part of such options and any other previously issued
      options.

    

    13.8. Withholding.

    

    (a) The
      Company shall have the right to (i) withhold and deduct from any payments made
      under the Plan or from future wages of the participant (or from other amounts
      that may be due and owing to the participant from the Company or a subsidiary
      of
      the Company), or make other arrangements for the collection of, all legally
      required amounts necessary to satisfy any and all foreign, federal, state and
      local withholding and employment-related tax requirements attributable to an
      Incentive, or (ii) require the participant promptly to remit the amount of
      such
      withholding to the Company before taking any action, including issuing any
      shares of Common Stock, with respect to an Incentive. At any time when a
      participant is required to pay to the Company an amount required to be withheld
      under applicable income tax laws in connection with a distribution of Common
      Stock or upon exercise of an option or SAR, the participant may satisfy this
      obligation in whole or in part by electing (the “Election”)
      to
      have the Company withhold from the distribution shares of Common Stock having
      a
      value up to the amount required to be withheld. The value of the shares to
      be
      withheld shall be based on the Fair Market Value of the Common Stock on the
      date
      that the amount of tax to be withheld shall be determined (“Tax
      Date”).

    

    (b) Each
      Election must be made prior to the Tax Date. The Committee may disapprove of
      any
      Election, may suspend or terminate the right to make Elections, or may provide
      with respect to any Incentive that the right to make Elections shall not apply
      to such Incentive. An Election is irrevocable.

    (c) If
      a
      participant is an officer or director of the Company within the meaning of
      Section 16 of the Exchange Act, then an Election is subject to the following
      additional restrictions:

    

    (1) No
      Election shall be effective for a Tax Date which occurs within six months of
      the
      grant or exercise of the award, except that this limitation shall not apply
      in
      the event death or disability of the participant occurs prior to the expiration
      of the six-month period.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Effective
          as of September 17,
          2007          

      

       

    

    (2) The
      Election must be made either six months prior to the Tax Date or must be made
      during a period beginning on the third business day following the date of
      release for publication of the Company’s quarterly or annual summary statements
      of sales and earnings and ending on the twelfth business day following such
      date.

    

    13.9. No
      Continued Employment, Engagement or Right to Corporate Assets.
      No
      participant under the Plan shall have any right, because of his or her
      participation, to continue in the employ of the Company for any period of time
      or to any right to continue his or her present or any other rate of
      compensation. Nothing contained in the Plan shall be construed as giving an
      employee, a consultant, such persons’ beneficiaries or any other person any
      equity or interests of any kind in the assets of the Company or creating a
      trust
      of any kind or a fiduciary relationship of any kind between the Company and
      any
      such person.

    

    13.10. Deferral
      Permitted.
      Payment
      of cash or distribution of any shares of Common Stock to which a participant
      is
      entitled under any Incentive shall be made as provided in the Incentive. Payment
      may be deferred at the option of the participant if provided in the
      Incentive.

    

    13.11. Amendment
      of the Plan.
      The
      Board may amend, suspend or discontinue the Plan at any time; provided, however,
      that no amendments to the Plan will be effective without approval of the
      shareholders of the Company if shareholder approval of the amendment is then
      required pursuant to Section 422 of the Code or the rules of any stock exchange
      or Nasdaq or similar regulatory body. No termination, suspension or amendment
      of
      the Plan may adversely affect any outstanding Incentive without the consent
      of
      the affected participant; provided, however, that this sentence will not impair
      the right of the Committee to take whatever action it deems appropriate under
      Section 13.6 of the Plan. 

    

      13.12. Definition
        of Fair Market Value. For purposes of this Plan, the “Fair Market Value” of a
        share of Common Stock at a specified date shall, unless otherwise expressly
        provided in this Plan, be the amount which the Committee or the board of
        directors of the Company determines in good faith in the exercise of its
        reasonable discretion to be 100% of the fair market value of such a share
        as of
        the date in question; provided, however, that notwithstanding the foregoing,
        if
        such shares are listed on a U.S. securities exchange or are quoted on the
        Nasdaq
        National Market System or Nasdaq SmallCap Stock Market (“Nasdaq”), then Fair
        Market Value shall be determined by reference to the last sale price of a
        share
        of Common Stock on such U.S. securities exchange or Nasdaq on the applicable
        date. If such U.S. securities exchange or Nasdaq is closed for trading on
        such
        date, or if the Common Stock does not trade on such date, then the last sale
        price used shall be the one on the date the Common Stock last traded on such
        U.S. securities exchange or Nasdaq.

    

    13.13 Breach
      of Confidentiality, Assignment of Inventions, or Non-Compete
      Agreements.
      Notwithstanding anything in the Plan to the contrary, in the event that a
      participant materially breaches the terms of any confidentiality, assignment
      of
      inventions, or non-compete agreement entered into with the Company or any
      subsidiary of the Company, whether such breach occurs before or after
      termination of such participant’s employment or other service with the Company
      or any subsidiary, the Committee in its sole discretion may immediately
      terminate all rights of the participant under the Plan and any agreements
      evidencing an Incentive then held by the participant without notice of any
      kind.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Effective
          as of September 17,
          2007          

      

       

    

    13.13 Governing
      Law.
      The
      validity, construction, interpretation, administration and effect of the Plan
      and any rules, regulations and actions relating to the Plan will be governed
      by
      and construed exclusively in accordance with the laws of the State of Minnesota,
      notwithstanding the conflicts of laws principles of any
      jurisdictions.

    

    13.14 Successors
      and Assigns.
      The
      Plan will be binding upon and inure to the benefit of the successors and
      permitted assigns of the Company and the participants in the Plan.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}]]