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Exhibit 10.9    
    

 
 

LEASE AGREEMENT    
    
    BY AND BETWEEN    
    
    HMS GATEWAY OFFICE L.P.,
  A Delaware Limited Partnership    
    
    AS
LANDLORD,    
    
    AND    
    
    ADVANCED MEDICINE, INC.,
  a Delaware corporation    
    
    AS TENANT    
    
    DATED JANUARY 1, 2001    

 
 
 

TABLE OF CONTENTS    
    

	 
	 
	 
	 
	 	Page

	Basic Lease Information	 	viii
	

1.	

Demise	
 	

1
	

2.	

Premises	
 	

1
	

 	

2.1.	

Definition of Premises, 951 Gateway Premises, Building, Project, Parking Areas, Common Areas	
 	

1
	

 	

2.2.	

Changes to Common Area	
 	

1
	

3.	

Term	
 	

2
	

4.	

Rent	
 	

2
	

 	

4.1.	

Monthly Base Rent	
 	

2
	

 	

4.2.	

Additional Rent	
 	

2
	

 	

4.3.	

Adjustment to Additional Rent	
 	

5
	

 	

4.4.	

Payment of Additional Rent	
 	

5
	

 	

 	

4.4.1.	

Expense Statement	
 	

5
	

 	

 	

4.4.2.	

Calculation of Additional Rent	
 	

5
	

 	

 	

4.4.3.	

Tenant's Proportionate Share(s)	
 	

5
	

 	

 	

4.4.4.	

Tenant's Audit Rights	
 	

6
	

 	

4.5.	

General Payment Terms	
 	

6
	

5.	

Utility Expenses	
 	

6
	

 	

5.1.	

Tenant's Obligation to Pay	
 	

6
	

 	

5.2.	

Limitation of Landlord's Liability for Interruption of Utilities	
 	

7
	

6.	

Late Charge	
 	

7
	

7.	

Letter of Credit	
 	

8
	

8.	

Possession	
 	

10
	

9.	

Use Of Premises	
 	

11
	

 	

9.1.	

Permitted Use	
 	

11
	

 	

9.2.	

Compliance with Governmental Regulations and Private Restrictions	
 	

11
	

 	

9.3.	

Compliance with Americans with Disabilities Act	
 	

12
	

10.	

Acceptance Of Premises	
 	

13
	

11.	

Surrender	
 	

13
	

 	

11.1.	

Surrender at Expiration or Termination	
 	

13
	

 	

11.2.	

Removal Obligations and Abandonment of Tenant's Property	
 	

13
	

 	

11.3.	

Indemnification	
 	

14
	 	 	 	 	 	 

ii

 

	

12.	

Alterations And Additions	
 	

14
	

 	

12.1.	

Landlord's Consent Required	
 	

14
	

 	

12.2.	

Alterations Permitted Without Landlord's Consent; Removal Requirements	
 	

14
	

 	

12.3.	

Alterations at Tenant's Expense	
 	

14
	

 	

12.4.	

Requirements of Request for Approval:	
 	

15
	

 	

12.5.	

Permits Required; Insurance Required	
 	

15
	

 	

 	

12.5.1.	

Permits	
 	

15
	

 	

 	

12.5.2.	

Insurance	
 	

15
	

 	

12.6.	

Title to Improvements; Removal Rights; Financing	
 	

16
	

 	

12.7.	

Computer, Utility and Telecommunications Equipment	
 	

16
	

 	

12.8.	

Notice and Opportunity to Post Notice of Nonresponsibility	
 	

16
	

13.	

Maintenance and Repairs of Premises	
 	

16
	

 	

13.1.	

Maintenance by Tenant	
 	

16
	

 	

13.2.	

Maintenance by Landlord	
 	

17
	

 	

13.3.	

Landlord's Right to Perform Tenant's Obligations	
 	

17
	

 	

13.4.	

Tenant's Waiver of Rights	
 	

18
	

14.	

Landlord's Insurance	
 	

18
	

15.	

Tenant's Insurance	
 	

18
	

 	

15.1.	

Commercial General Liability Insurance	
 	

18
	

 	

15.2.	

Property Insurance	
 	

18
	

 	

15.3.	

Worker's Compensation Insurance; Employer's Liability Insurance	
 	

19
	

 	

15.4.	

Business Interruption Insurance	
 	

19
	

 	

15.5.	

Insurance Standards and Evidence of Coverage	
 	

19
	

16.	

Indemnification	
 	

19
	

 	

16.1.	

Of Landlord	
 	

19
	

 	

16.2.	

Of Tenant	
 	

20
	

 	

16.3.	

No Impairment of Insurance	
 	

20
	

17.	

Subrogation	
 	

20
	

18.	

Signs	
 	

20
	

19.	

Free From Liens	
 	

21
	

20.	

Entry By Landlord	
 	

21
	

21.	

Destruction And Damage	
 	

22
	

 	

21.1.	

Damage Covered by Extended Coverage Insurance	
 	

22
	

 	

 	

21.1.1.	

Material Damage; Insured Loss	
 	

22
	 	 	 	 	 	 

iii

 

	

 	

 	

21.1.2.	

Minor Damage; Insured Loss	
 	

22
	

 	

 	

21.1.3.	

Calculation of Restoration Period	
 	

22
	

 	

21.2.	

Uninsured Loss	
 	

23
	

 	

21.3.	

Casualty During Last Twelve Months of Term	
 	

23
	

 	

21.4.	

Tenant's Right to Terminate Lease	
 	

23
	

 	

21.5.	

Rent Abatement	
 	

23
	

 	

21.6.	

Restoration of Base Building Improvements and Tenant Improvements	
 	

23
	

 	

21.7.	

Waiver	
 	

24
	

22.	

Condemnation	
 	

24
	

23.	

Assignment And Subletting	
 	

25
	

 	

23.1.	

Landlord's Consent Required Except for Permitted Transfers	
 	

25
	

 	

23.2.	

Requirements of Request for Consent	
 	

25
	

 	

23.3.	

Criteria To Be Considered in Connection with Request for Consent	
 	

25
	

 	

23.4.	

Permitted Transfers	
 	

26
	

 	

23.5.	

Excess Rent	
 	

26
	

 	

23.6.	

No Release of Tenant	
 	

27
	

 	

23.7.	

Payment of Landlord's Fees	
 	

27
	

 	

23.8.	

No Consent to Further Assignment	
 	

27
	

 	

23.9.	

Constraints Reasonable	
 	

27
	

24.	

Tenant's Default	
 	

27
	

25.	

Landlord's Remedies	
 	

29
	

 	

25.1.	

Termination	
 	

29
	

 	

25.2.	

Continuation of Lease	
 	

30
	

 	

25.3.	

Re-entry	
 	

30
	

 	

25.4.	

Reletting	
 	

30
	

 	

25.5.	

Termination	
 	

31
	

 	

25.6.	

Cumulative Remedies	
 	

31
	

 	

25.7.	

No Surrender	
 	

31
	

26.	

Landlord's Right to Perform Tenant's Obligations	
 	

31
	

 	

26.1.	

Landlord's Right to Perform	
 	

31
	

 	

26.2.	

In Emergencies	
 	

31
	

 	

26.3.	

Tenant's Obligation to Reimburse Landlord	
 	

32
	

27.	

Attorneys' Fees	
 	

32
	

 	

27.1.	

Prevailing Party Entitled to Fees	
 	

32
	 	 	 	 	 	 

iv

 

	

 	

27.2.	

Costs of Collection	
 	

32
	

28.	

Taxes	
 	

32
	

29.	

Effect Of Conveyance	
 	

33
	

30.	

Tenant's Estoppel Certificate	
 	

33
	

31.	

Subordination	
 	

33
	

32.	

Environmental Covenants	
 	

34
	

 	

32.1.	

Disclosure Certificate	
 	

34
	

 	

32.2.	

Tenant's Obligation to Update Disclosure Certificate	
 	

34
	

 	

32.3.	

Definition of Hazardous Materials	
 	

34
	

 	

32.4.	

Definition of Environmental Laws	
 	

35
	

 	

32.5.	

Tenant's Use of Hazardous Materials	
 	

35
	

 	

32.6.	

Tenant's Remediation Obligations	
 	

35
	

 	

32.7.	

Landlord's Inspections	
 	

35
	

 	

32.8.	

Landlord's Right to Remediate	
 	

36
	

 	

32.9.	

Condition of Premises Upon Expiration or Termination	
 	

36
	

 	

32.10.	

Tenant's Indemnification of Landlord	
 	

36
	

 	

32.11.	

Landlord's Indemnification of Tenant	
 	

36
	

 	

32.12.	

Limitation of Tenant's Liability	
 	

37
	

 	

32.13.	

Survival	
 	

37
	

33.	

Notices	
 	

37
	

34.	

Waiver	
 	

37
	

35.	

Holding Over	
 	

37
	

36.	

Successors And Assigns	
 	

38
	

 	

36.1.	

Binding on Successors, Etc	
 	

38
	

 	

36.2.	

Landlord's Right to Sell	
 	

38
	

37.	

Time	
 	

38
	

38.	

Brokers	
 	

38
	

39.	

Limitation Of Liability	
 	

38
	

40.	

Financial Statements	
 	

39
	

41.	

Rules And Regulations	
 	

39
	

42.	

Mortgagee Protection	
 	

39
	

 	

42.1.	

Modifications for Lender	
 	

39
	

 	

42.2.	

Rights to Cure	
 	

39
	

43.	

Entire Agreement	
 	

40
	 	 	 	 	 	 

v

 

	

44.	

Interest	
 	

40
	

45.	

Interpretation	
 	

40
	

46.	

Representations And Warranties	
 	

40
	

 	

46.1.	

Of Tenant	
 	

40
	

 	

46.2.	

Of Landlord	
 	

41
	

47.	

Security	
 	

41
	

 	

47.1.	

Landlord Not Obligated to Provide Security	
 	

41
	

 	

47.2.	

Tenant's Obligation to Comply with Security Measures	
 	

41
	

48.	

Jury Trial Waiver	
 	

41
	

49.	

Option to Renew	
 	

42
	

 	

49.1.	

Commencement Dates	
 	

42
	

 	

49.2.	

Renewal Option is Personal; Non-Transferable	
 	

42
	

 	

49.3.	

Tenant's Notice of Exercise	
 	

42
	

 	

49.4.	

Monthly Base Rent During Renewal Term	
 	

42
	

 	

 	

49.4.1	

Fair Market Rent Definition	
 	

43
	

 	

 	

49.4.2.	

Determination of Fair Market Rent	
 	

43
	

 	

 	

49.4.3.	

Arbitrator Qualifications	
 	

43
	

 	

 	

49.4.4.	

Fees and Costs of Arbitrators	
 	

43
	

 	

 	

49.4.5.	

Arbitration Period Base Rent	
 	

43
	

50.	

Parking	
 	

44
	

 	

50.1.	

Grant of Parking License	
 	

44
	

 	

50.2.	

No Assignment of Parking License	
 	

44
	

 	

50.3.	

Visitor Parking	
 	

44
	

51.	

Right of First Offer	
 	

44
	

 	

51.1.	

Offer Notice	
 	

44
	

 	

51.2.	

Election Notice	
 	

45
	

 	

51.3.	

Purchase and Sale Agreement	
 	

45
	

 	

51.4.	

Failure to Exercise or Sign Agreement	
 	

45
	

 	

51.5.	

Net Operating Income	
 	

45
	

 	

51.6.	

Landlord's Sale to Affiliate; Survival of Option	
 	

45
	

 	

51.7.	

Concurrent Exercise of Rights of First Offer with respect to 901 Gateway Boulevard and 951 Gateway Boulevard	
 	

46
	

52.	

Memorandum of Lease	
 	

46
	

53.	

Tenant Improvements and Tenant Improvement Allowance	
 	

46

vi

 

	Exhibit	 	 
	
 A	
 	

Site Plan
	

B	
 	

Additional Operational Guidelines
	

C	
 	

Rules and Regulations
	

D	
 	

Hazardous Materials Disclosure Certificate
	

E	
 	

Tenant's Property
	

F	
 	

Memorandum of Lease
	

G	
 	

Tenant Improvements

vii

 
 
 

LEASE AGREEMENT    
    
    BASIC LEASE INFORMATION    
    

	Lease Date:	 	January 1, 2001
	

Landlord:	
 	

HMS Gateway Office, L.P. a Delaware limited partnership
	

Landlord's Address:	
 	

c/o Hines Interests Limited Partnership

101 California Street, Suite 1000

San Francisco, California 94111-5848

Attn: Tom Kruggel
	

 	
 	
All notices sent to Landlord under this Lease shall be sent to the above address, with copies to:
	

 	
 	

Hines

651 Gateway Boulevard, Suite 1140

South San Francisco, California 94080

Attn: Catherine Fogelman
	

Tenant:	
 	

Advanced Medicine, Inc.,

a Delaware corporation
	

Tenant's Contact Person:	
 	

Marty Glick
	

Tenant's Address:	
 	

901 Gateway Boulevard

South San Francisco, California 94080
	

Premises Square Footage:	
 	

One hundred ten thousand four hundred twenty eight (110,428) square feet.
	

Premises Address:	
 	

901 Gateway Boulevard

South San Francisco, California
	

Project:	
 	

Parcel A as shown on the Final Parcel Map 99-095 dated March 2000, prepared by Kier & Wright, together with all improvements constructed thereon.
	

Building (if not the same as the Project):	
 	

901 Gateway Boulevard

South San Francisco, California
	

Tenant's Proportionate Share of Project	
 	

100%
	

Tenant's Proportionate Share of	
 	

100%
	

Length of Term:	
 	

One hundred thirty five (135) months
	

Commencement Date:	
 	

January 1, 2001
	

Expiration Date:	
 	

March 31, 2012
	

Monthly Base Rent:	
 	

1.	

Monthly Base Rent for the period commencing January 1, 2001 and ending March 31, 2001 shall be $269,405.71;
	

 	
 	

2.	

Monthly Base Rent for the period commencing April 1, 2001 and ending March 31, 2002 shall be $275,534.46;
	

 	
 	

3.	

Monthly Base Rent for the period commencing April 1, 2002 and ending March 31, 2003 shall be $281,847.08;
	 	 	 	 

viii

 

	

 	
 	

4.	

Monthly Base Rent for the period commencing April 1, 2003 and ending March 31, 2004 shall be $288,349.07;
	

 	
 	

5.	

Monthly Base Rent for the period commencing April 1, 2004 and ending March 31, 2005 shall be $295,046.13;
	

 	
 	

6.	

Monthly Base Rent for the period commencing April 1, 2005 and ending March 31., 2006 shall be $301,944.09;
	

 	
 	

7.	

Monthly Base Rent for the period commencing April 1, 2006 and ending March 31, 2007 shall be $309,049.00;
	

 	
 	

8.	

Monthly Base Rent for the period commencing April 1, 2007 and ending March 31, 2008 shall be $316,367.05;
	

 	
 	

9.	

Monthly Base Rent for the period commencing April 1, 2008 and ending March 31, 2009 shall be $323,904.65;
	

 	
 	

10.	

Monthly Base Rent for the period commencing April 1, 2009 and ending March 31, 2010 shall be $331,668.37;
	

 	
 	

11.	

Monthly Base Rent for the period commencing April 1, 2010 through March 31, 2011 shall be $339,665.00;
	

 	
 	

12.	

Monthly Base Rent for the period commencing April 1, 2011 and ending March 31, 2012 shall be $347,901.53.
	

Letter of Credit:	
 	

Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000), subject to reduction in accordance with Paragraph 7(d) hereof.
	

Permitted Use:	
 	

General office and research and development activities associated with biotechnology/pharmaceutical services. All uses must be in accordance with all applicable Laws.
	

Unreserved Parking Spaces:	
 	

Two Hundred Ninety Three (293) non-exclusive and undesignated parking spaces.
	

 	
 	

Except as otherwise provided in this Lease to the contrary, the foregoing parking calculation shall remain fixed.
	

Tenant Improvement Allowance:	
 	

Nine Million Three Hundred Eighty-Six Thousand Three Hundred Eighty Dollars ($9,386,380) of which Landlord has paid Seven Million Seven Hundred Twenty-Nine Thousand Nine Hundred Sixty Dollars ($7,729,960) as of the date of this Lease, leaving a
remaining Tenant Improvement Allowance to be paid of One Million Six Hundred Fifty-Six Thousand Four Hundred Twenty Dollars ($1,656,420), which shall be paid on the later to occur of (i) January 1, 2001, or (ii) five (5) business days following the
mutual execution and delivery of this Lease.

ix

 
 

LEASE AGREEMENT    
    

        THIS LEASE AGREEMENT is made and entered into by and between Landlord and Tenant on the Lease Date. The defined terms used in this Lease which are defined in the
Basic Lease Information attached to this Lease Agreement ("Basic Lease Information") shall have the meaning and definition given them in the Basic Lease Information. The Basic Lease Information, the
exhibits, the addendum or addenda described in the Basic Lease Information, and this Lease Agreement are and shall be construed as a single instrument and are referred to herein as the "Lease". 

 
 

O P E R A T I V E  P R O V I S I O N S    
    

1.     DEMISE  

        In consideration for the rents and all other charges and payments payable by Tenant, and for the agreements, terms and conditions to be performed by Tenant in
this Lease, LANDLORD DOES HEREBY LEASE TO TENANT, AND TENANT DOES HEREBY HIRE AND TAKE FROM LANDLORD, the Premises described below (the "Premises"), upon the agreements, terms and conditions of this
Lease for the Term hereinafter stated. 

2.     PREMISES  

 2.1    Definition of Premises, 951 Gateway Premises, Building, Project, Parking Areas, Common Areas  

        (a)   The
"Premises" demised by this Lease consist of that certain three (3) story building (the "Building") shown on the Site Plan attached hereto as  Exhibit A, which Building is to be located in that
certain real estate development (the "Project") specified in the Basic Lease Information.
Subject to the provisions of this Lease, Landlord shall have the right to revise the definition of "Project" from time to time as Landlord develops and improves the Project and surrounding real
property now or hereafter owned by Landlord or its Affiliates (as hereinafter defined), or sells to third parties portions of the Project or such adjacent properties. If at any time during the Term,
Tenant is leasing, in accordance with the terms and conditions of this Lease, less than the entire Building, the "Premises" shall be deemed to include only that portion of the Building then leased by
Tenant pursuant to this Lease. Tenant shall have the non-exclusive right (in common with the other tenants, Landlord and any other person granted use by Landlord) to use the Common Areas
(as hereinafter defined), except that, with respect to the Project's parking areas (the "Parking Areas"), Tenant shall have only the rights set forth in Paragraph 50 below. No easement for
light or air is incorporated in the Premises. For purposes of this Lease, the term "Common Areas" shall mean all areas and facilities (i) outside the Premises and/or outside other buildings
occupied or intended to be occupied by tenants, and (ii) either within the exterior boundary line of the Project or within the exterior boundary lines of properties abutting the Project, which
areas and facilities are from time to time provided and designated by Landlord for the nonexclusive use of Landlord, Tenant and other tenants of the Project or of the properties abutting the Project
and their respective employees, guests and invitees, including, without limitation, the Parking Areas. 

        (b)   Concurrently
herewith, Landlord and Tenant are entering into a Lease Agreement, dated as of even date herewith, covering certain premises (the "951 Gateway Lease") to be
hereafter developed by Landlord and to be known as 951 Gateway Boulevard, South San Francisco, California (the "951 Gateway Premises"). 

 2.2    Changes to Common Area  

        (a)   Landlord
has the right, in its sole and absolute discretion, from time to time, to: (i) make changes to the Common Areas, including, without limitation, changes
in the location, size, shape and number of driveways, entrances, parking spaces (provided, however, Landlord shall not have the right, except as otherwise provided herein, to reduce the total number
of parking spaces below the number allocated to Tenant in the Basic Lease Information), Parking Areas, ingress, egress, direction of 

 

driveways,
entrances, corridors and walkways; (ii) close temporarily any of the Common Areas for maintenance or construction purposes so long as reasonable access to the Premises remains
available; (iii) add additional buildings and improvements to the Common Areas or remove existing buildings or improvements therefrom; (iv) use the Common Areas while engaged in making
additional improvements, repairs or alterations to the Project or any portion thereof so long as reasonable access to the Premises and the loading area serving the Premises remains available; and
(v) do and perform any other acts or make any other changes in, to or with respect to the Common Areas and the Project as Landlord may, in its sole and absolute discretion, deem to be
appropriate. 

        (b)   Notwithstanding
the terms of Paragraph 2.2(a) above, Tenant understands and acknowledges that Landlord will during the Term be developing the Project and other
lands owned by Landlord for other tenants or occupants, including, without limitation, for Tenant as the future occupant of the 951 Gateway Premises, and that from time to time, whether during periods
of construction or otherwise, Landlord may be unable to provide the full number of parking spaces allocated to Tenant under this Lease in the Parking Areas. During such periods, Landlord shall have
the right to provide parking to Tenant on properties reasonably proximate to the Project (the "Adjacent Properties") or through the use of valets or parking attendants on the Parking Areas or the
Adjacent Properties, provided only that Tenant shall at all times have parking for the number of automobiles contemplated under this Lease. 

3.     TERM  

        The term of this Lease (the "Term") shall commence on January 1, 2001 (the "Commencement Date") and shall expire on March 31, 2012 (the "Expiration
Date"). 

4.     RENT  

 4.1    Monthly Base Rent.  

        Commencing on the Commencement Date, Tenant shall pay to Landlord, in advance on the first day of each month, without further notice or demand and without offset
or deduction, the monthly installments of rent specified in the Basic Lease Information (the "Monthly Base Rent"). If the expiration or termination of the Term of this Lease is not the last day of a
calendar month, a prorated installment of Rent based on a per diem calculation shall be paid for the fractional calendar month during which the Term expires or terminates. 

 4.2    Additional Rent  

        This Lease is intended to be a triple-net Lease with respect to Landlord; and subject to Paragraph 13.2 below, the Base Rent owing hereunder is
(1) to be paid by Tenant absolutely net of all costs and expenses relating to Landlord's ownership and operation of the Project and the Building, and (2) not to be reduced, offset or
diminished, directly or indirectly, by any cost, charge or expense payable hereunder by Tenant or by others in connection with the Premises, the Building and/or the Project or any part thereof. The
provisions of this Paragraph 4.2 for the payment of Tenant's Proportionate Share(s) of Expenses (as hereinafter defined) are intended to pass on to Tenant its share of all such costs and
expenses. In addition to the Base Rent, Tenant shall pay to Landlord, in accordance with this Paragraph 4, Tenant's Proportionate Share(s) of all costs and expenses paid or incurred by Landlord
in connection with the ownership, operation, maintenance, management and repair of the Premises, the Building and/or the Project or any part thereof (collectively, the "Expenses"), including, without
limitation, all the following items (the "Additional Rent"): 

        1.    Taxes and Assessments.    All real estate taxes and assessments, which shall include any form of tax,
assessment, fee, license fee, business license fee, levy, penalty (if a result of Tenant's delinquency), or tax (other than net income, estate, succession, inheritance, transfer or franchise taxes),
imposed by 

2

 

any
authority having the direct or indirect power to tax, or by any city, county, state or federal government or any improvement or other district or division thereof, whether such tax is
(i) determined by the area of the Premises, the Building and/or the Project or any part thereof, or the Rent and other sums payable hereunder by Tenant or by other tenants, including, but not
limited to, any gross income or excise tax levied by any of the foregoing authorities with respect to receipt of Rent and/or other sums due under this Lease; (ii) upon any legal or equitable
interest of Landlord in the Premises, the Building and/or the Project or any part thereof, (iii) upon this transaction or any document to which Tenant is a party creating or transferring any
interest in the Premises, the Building and/or the Project; (iv) levied or assessed in lieu of, in substitution for, or in addition to, existing or additional taxes against the Premises, the
Building and/or the Project, whether or not now customary or within the contemplation of the parties; or (v) surcharged against the parking area. Tenant and Landlord acknowledge that
Proposition 13 was adopted by the voters of the State of California in the June, 1978 election and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such
purposes as fire protection, street, sidewalk, road, utility construction and maintenance, refuse removal and for other governmental services which may formerly have been provided without charge to
property owners or occupants. It is the intention of the parties that all new and increased assessments, taxes, fees, levies and charges due to any cause whatsoever are to be included within the
definition of real property taxes for purposes of this Lease. "Taxes and assessments" shall also include legal and consultants' fees, costs and disbursements incurred in connection with proceedings to
contest, determine or reduce taxes, Landlord specifically reserving the right, but not the obligation, to contest by appropriate legal proceedings the amount or validity of any taxes. In the event
Landlord elects not to contest the real property taxes and assessments levied against the Building with respect to any calendar year during the Term, and if Tenant demonstrates to Landlord's
reasonable satisfaction that such a contest would likely result in a reduction of such taxes and assessments, then Tenant shall have the right to retain a consultant to prosecute such contest, subject
to Landlord's reasonable approval of the identity of such consultant. Such contest shall be conducted at Tenant's sole cost and expense, provided that if Tenant prevails in such contest, the
reasonable fees and costs of Tenant's consultants shall, to the extent of any actual savings resulting from such contest, be equitably shared by Tenant and other tenant(s) who receive the benefit of
such savings. Tenant shall have the right to deduct from its payments of Additional Rent the shares of such fees and costs to be charged to other tenants, as reasonably determined by Landlord, and
Landlord shall cause such amounts to be billed or charged to the other benefited tenant(s). 

        2.    Insurance.    All insurance premiums for the Building and/or the Project or, subject to clause (i) of the
paragraph immediately following Paragraph 4.2(8) below, any part thereof, including premiums for "all risk" fire and extended coverage insurance, commercial general liability insurance, rent
loss or abatement insurance, earthquake insurance, flood or surface water coverage, and other insurance as Landlord deems necessary in its sole discretion, and any deductibles paid under policies of
any such insurance. 

        3.    Utilities.    The cost of all Utilities (as hereinafter defined) serving the Premises, the Building and the
Common Areas that are not separately metered to Tenant, any assessments or charges for Utilities or
similar purposes included within any tax bill for the Building or the Common Areas, including, without limitation, entitlement fees, allocation unit fees, and/or any similar fees or charges and any
penalties (if a result of Tenant's delinquency) related thereto, and any amounts, taxes, charges, surcharges, assessments or impositions levied, assessed or imposed upon the Building or the Common
Areas, or any part thereof, or upon Tenant's use and occupancy thereof, as a result of any rationing of Utility services or restriction on Utility use affecting the Building and/or the Common Areas,
as contemplated in Paragraph 5 below (collectively, "Utility Expenses"). 

        4.    Common Area Expenses.    All costs to operate, maintain, repair, replace, supervise, insure and administer the
Common Areas, including supplies, materials, labor and equipment used in or related to 

3

 

the
operation and maintenance of the Common Areas, including parking areas (including, without limitation, all costs of resurfacing and restriping parking areas), signs and directories on the Building
and/or the Project, landscaping (including maintenance contracts and fees payable to landscaping consultants), amenities, sprinkler systems, sidewalks, walkways, driveways, curbs, lighting systems and
security services, if any, provided by Landlord for the Common Areas. 

        5.    Parking Charges.    Any parking charges or other costs levied, assessed or imposed by, or at the direction of,
or resulting from statutes or regulations, or interpretations thereof, promulgated by any governmental authority or insurer in connection with the use or occupancy of the Building or the Project. 

        6.    Maintenance and Repair Costs.    Except for costs which are the responsibility of Landlord pursuant to
Paragraph 13.2 below, all costs to maintain, repair, and replace the Premises, the Building and/or the Common Areas or any part thereof, including, without limitation, (i) all costs paid
under maintenance, management and service agreements such as contracts for janitorial, security and refuse removal, (ii) all costs to maintain, repair and replace the roof coverings of the
Building, (iii) all costs to maintain, repair and replace the heating, ventilating, air conditioning, plumbing, sewer, drainage, electrical, fire protection, life safety and security systems
and other mechanical and electrical systems and equipment serving the Premises, the Building and/or the Common Areas or any part thereof (collectively, the "Systems"), all to the extent that Landlord
or any of Landlord's agents, advisors, employees, partners, shareholders, directors, invitees or independent contractors (collectively, "Landlord's Agents") perform such tasks. 

        7.    Life Safety Costs.    All costs to install, maintain, repair and replace all life safety systems, including,
without limitation, all fire alarm systems, serving the Premises, the Building and/or the Common Areas or any part thereof (including all maintenance contracts and fees payable to life safety
consultants) whether such systems are or shall be required by Landlord's insurance carriers, Laws (as hereinafter defined) or otherwise, all to the extent that Landlord or Landlord's Agents perform
such tasks. 

        8.    Management and Administration.    All costs for management and administration of the Premises, the Building
and/or the Project or any part thereof, including, without limitation, a property management fee equal to two percent (2%) of the annual Rent derived from the Building, accounting, auditing, billing,
postage, legal and accounting costs and fees for licenses and permits related to the ownership and operation of the Project (but specifically excluding any salaries and benefits of employees of
Landlord or the property manager of the Building). 

        9.    Gateway Operational Expenses.    All charges, assessments, costs or fees levied by any association or entity of
which the Project or any part thereof is a member or to which the Project or any part thereof is subject (including, without limitation, the Gateway Property Owners' Association), or levied under or
imposed by any reciprocal easement agreement, joint operating agreement or other document, instrument or agreement to which the Project or any part thereof is subject. 

        Notwithstanding
anything in this Paragraph 4.2 to the contrary, (i) Tenant shall not be responsible for the payment of any Expenses which relate to or benefit solely
another building within the Project occupied or intended to be occupied by tenants or for which Landlord receives full reimbursement from other tenants, and (ii) with respect to all sums
payable by Tenant as Additional Rent under this Paragraph 4.2 for the replacement of any item or the construction of any new item in connection with the physical operation of the Premises, the
Building or the Project (i.e., HVAC, roof membrane or coverings and parking area) which is a capital item the replacement of which would be capitalized under generally accepted accounting principles
consistently applied, Tenant shall be required to pay only the prorata share of the cost of the item falling due within the Term (including any Renewal Term) based upon the amortization of the same
over the useful life of such item, as reasonably 

4

 

determined
by Landlord. Such share shall be paid by Tenant on a monthly basis throughout the Term (rather than in a lump sum when incurred by Landlord). 

 4.3    Adjustment to Additional Rent  

        Notwithstanding any other provision herein to the contrary, if the Building is not fully occupied during any year of the Term, an adjustment shall be made in
computing Additional Rent for such year so that Additional Rent shall be computed as though the Building had been fully occupied during such year; provided, however, that in no event shall Landlord
collect in total, from Tenant and all other tenants of the Building, an amount greater than one hundred percent (100%) of the actual Expenses during any year of the Term. 

 4.4    Payment of Additional Rent.  

 4.4.1.    Expense Statement  

        Upon the Commencement Date, Landlord shall submit to Tenant an estimate of monthly Additional Rent for the period between the Commencement Date and the following
December 31 and Tenant shall pay such estimated Additional Rent on a monthly basis, in advance, on the first day of each month. Tenant shall continue to make said monthly payments until
notified by Landlord of a change therein. By April 1 of each calendar year, Landlord shall endeavor to provide to Tenant a statement (the "Expense Statement") showing the actual Additional Rent
due to Landlord for the prior calendar year, to be prorated during the first year from the Commencement Date. If the total of the monthly payments of Additional Rent that Tenant has made for the prior
calendar year is less than the actual Additional Rent chargeable to Tenant for such prior calendar year, then Tenant shall pay the difference in a lump sum within ten (10) days after receipt of
such statement from Landlord. Any overpayment by Tenant of Additional Rent for the prior calendar year shall be credited towards the Additional Rent next due. 

 4.4.2.    Calculation of Additional Rent  

        Landlord's then-current annual operating and capital budgets for the Building and the Project shall be used for purposes of calculating Tenant's
monthly payment of estimated Additional Rent for the current year. Landlord shall make the final determination of Additional Rent for the year in which this Lease terminates as soon as possible after
termination of such year. Even though the Term has expired and Tenant has vacated the Premises, Tenant shall remain liable for payment of any amount due to Landlord in excess of the estimated
Additional Rent previously paid by Tenant, and, conversely, Landlord shall promptly return to Tenant any overpayment. Failure of Landlord to submit statements as called for herein shall not be deemed
a waiver of Tenant's obligation to pay Additional Rent as herein provided. 

 4.4.3.    Tenant's Proportionate Share(s)  

        With respect to Expenses which Landlord allocates to the Building, Tenant's "Proportionate Share" shall be the percentage set forth in the Basic Lease Information
as Tenant's Proportionate Share of the Building, as adjusted by Landlord from time to time for a remeasurement of or changes in the physical size of the Premises or the Building. With respect to
Expenses which Landlord allocates to the Project, Tenant's "Proportionate Share" shall be the percentage set forth in the Basic Lease Information as Tenant's Proportionate Share of the Project as
adjusted by Landlord from time to time in connection with the construction of additional buildings within the Project or a remeasurement of or changes in the physical size of the Premises or the
Project, whether such changes in size are due to an addition to or a sale or conveyance of a portion of the Project or otherwise. Notwithstanding the foregoing, 

5

 

Landlord
may equitably adjust Tenant's Proportionate Share(s) for all or part of any item of expense or cost reimbursable by Tenant that relates to a repair, replacement, or service that benefits only
the Premises or only a portion of the Building and/or the Project or that varies with the occupancy of the Building and/or the Project; provided, however, that Tenant's prorata allocation of any such
Expense shall not be disproportionate to any other tenant's prorata allocation of such Expense. 

 4.4.4.    Tenant's Audit Rights  

        Provided Tenant is not in Default under the terms of this Lease, Tenant, at its sole cost and expense, shall have the right within sixty (60) days after
the delivery of each Expense Statement to review and audit Landlord's books and records regarding such Expense Statement for the sole purpose of determining the accuracy of such Expense Statement.
Such review or audit shall be performed by a nationally recognized accounting firm that calculates its fees with respect to hours actually worked and that does not discount its time or rate (as
opposed to a calculation based upon percentage of recoveries or other incentive arrangement), shall take place during normal business hours in the office of Landlord or Landlord's property manager and
shall be completed within three (3) business days after the commencement thereof. If Tenant does not so review or audit Landlord's books and records, Landlord's Expense Statement shall be final
and binding upon Tenant. In the event that Tenant determines on the basis of its review of Landlord's books and records that the amount of Expenses paid by Tenant pursuant to this Paragraph 4
for the period covered by such Expense Statement is less than or greater than the actual amount properly payable by Tenant under the terms of this Lease, Tenant shall promptly pay any deficiency to
Landlord or, if Landlord concurs with the results of Tenant's audit, Landlord shall promptly refund any excess payment to Tenant, as the case may be. Landlord shall pay for any reasonable audit
expenses if such excess payment exceeds the aggregate Expenses in Landlord's Expense Statement by seven percent (7%). 

 4.5    General Payment Terms  

        The Base Rent, Additional Rent and all other sums payable by Tenant to Landlord hereunder, including, without limitation, any Late Charges, as defined below,
assessed pursuant to Paragraph 6 below, and any interest assessed pursuant to Paragraph 44 below, are referred to collectively as the "Rent." All Rent shall be paid without deduction,
offset or abatement (except as specifically provided in this Lease) in lawful money of the United States of America. Checks are to be made payable to HMS Gateway Office, L.P. and shall be mailed: c/o
Hines Interests Limited Partnership, 101 California Street, Suite 1000, San Francisco, California 94111-5848, Attn: Tom Kruggel, or to such other person or place as Landlord may, from time
to time, designate to Tenant in writing. The Rent for any fractional part of a calendar month at the commencement or termination of the Lease term shall be a prorated amount of the Rent for a full
calendar month based upon the number of days in the month of the commencement or termination of the Lease term, as applicable. 

5.     UTILITY EXPENSES  

 5.1    Tenant's Obligation to Pay  

        Tenant shall pay the cost of all water, sewer use, sewer discharge fees, gas, heat, electricity, refuse pick-up, janitorial service (including,
without limitation, exterior and interior window washing), telephone, cable T.V., telecommunications facilities and all materials and services or other utilities (collectively, "Utilities") billed or
metered separately to the Premises and/or Tenant, together with all taxes, assessments, charges and penalties added to or included within such cost. Tenant acknowledges that the Premises, the Building
and/or the Project may become subject to the rationing of Utility services or restrictions on Utility use as required by a public utility company, governmental agency or other similar entity having
jurisdiction thereof. Tenant acknowledges and agrees that its tenancy and 

6

 

occupancy
hereunder shall be subject to such rationing or restrictions as may be imposed upon Landlord, Tenant, the Premises, the Building and/or the Project, and Tenant shall in no event be excused
or relieved from any covenant or obligation to be kept or performed by Tenant by reason of any such rationing or restrictions. Tenant agrees to comply with energy conservation programs implemented by
Landlord by reason of rationing, restrictions or Laws. 

 5.2    Limitation of Landlord's Liability for Interruption of Utilities  

        (a)   Landlord
shall not be liable for any loss, injury or damage to property caused by or resulting from any variation, interruption, or failure of Utilities due to any cause
whatsoever, or from failure to make any repairs or perform any maintenance. No temporary interruption or failure of such services incident to the making of repairs, alterations, improvements, or due
to accident, strike, or conditions or other events shall be deemed an eviction of Tenant or relieve Tenant from any of its obligations hereunder; provided, however, that Landlord shall give Tenant not
less than forty-eight (48) hours' notice of any interruption of Utilities planned in advance by Landlord. Landlord shall also use reasonable efforts to notify Tenant of any planned interruption
of Utilities by any Utility service provider, provided that Landlord obtains actual knowledge of such planned interruption. In no event shall Landlord be liable to Tenant for any damage to the
Premises or for any loss, damage or injury to any property therein or thereon occasioned by bursting, rupture, leakage, failure or overflow of any plumbing or other pipes (including, without
limitation, water, steam, and/or refrigerant lines), sprinklers, tanks, drains, drinking fountains or washstands, or other similar cause in, above, upon or about the Premises, the Building or the
Project. 

        (b)   Notwithstanding
the provisions of Paragraph 5.2(a) above, if any Utility Services to the Premises are interrupted or interfered with as the result of the
negligence or willful misconduct of any contractors engaged by Landlord to perform services at the Project, then Landlord shall use commercially reasonable efforts to pursue any claims for
compensation or reimbursement available to Landlord against such contractors to the extent of any losses suffered by Tenant and shall make any monies received available to Tenant after allowance for
Landlord's costs of collection. In addition to the foregoing, if any policy of insurance maintained by Landlord with respect to the Premises provides coverage for losses incurred due to the failure of
Utilities, then Landlord shall make a claim under such policy to the extent of any losses suffered by Tenant, and shall make the proceeds received, if any, available to Tenant after allowance for
Landlord's costs of collection. 

6.     LATE CHARGE  

        Notwithstanding any other provision of this Lease, Tenant hereby acknowledges that late payment to Landlord of Rent, or other amounts due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. If any Rent or other sums due from Tenant are not received by Landlord or by
Landlord's designated agent when due, and if Tenant does not cure such failure within five (5) days after the due date (the "Grace Period"), then Tenant shall pay to Landlord a late charge
equal to five percent (5%) of such overdue amount (the "Late Charge"), plus any costs and reasonable attorneys' fees incurred by Landlord by reason of Tenant's failure to pay Rent and/or other charges
when due hereunder; provided, however, that Tenant shall have the right to pay Rent during the Grace Period only five (5) times during the Term and, after Tenant has paid Rent during the Grace
Period an aggregate of five (5) times, Tenant shall pay to Landlord a Late Charge on any Rent or other sums due hereunder that are not received by Landlord or Landlord's designated agent when
due. Notwithstanding the foregoing, if Tenant establishes and maintains throughout the Term a direct payment or debit arrangement with a bank or financial institution pursuant to which the Rent due
hereunder is automatically paid to Landlord by electronic transfer on the first day of each month, and if Tenant provides Landlord with evidence of such arrangement, then Landlord shall. provide
Tenant with notice of any late payment of Rent prior to 

7

 

the
imposition of a Late Charge. Landlord and Tenant hereby agree that such Late Charge represent a fair and reasonable estimate of the cost that Landlord will incur by reason of Tenant's late payment
and shall not be construed as a penalty. Landlord's acceptance of such Late Charge shall not constitute a waiver of Tenant's default with respect to such overdue amount or estop Landlord from
exercising any of the other rights and remedies granted under this Lease. 

	Initials:	 	Landlord             	 	Tenant             

7.     LETTER OF CREDIT  

        (a)    Delivery of Letter of Credit.    Tenant has heretofore delivered to Landlord or, concurrently herewith, Tenant
shall deliver to Landlord, at Tenant's sole cost and expense, the Letter of Credit described below in the aggregate amount of Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000.00) as
security for the full and faithful performance of Tenant's covenants and obligations under this Lease and the 951 Gateway Lease. Upon the date that is forty-five (45) days after the
later of (i) the expiration of the Term or earlier termination of this Lease, and/or (ii) the expiration or earlier termination of the 951 Gateway Lease, the Letter of Credit (as reduced
pursuant to this Paragraph 7) shall be returned to Tenant, reduced by any amounts that Landlord reasonably estimates to be required to remedy any Defaults on the part of Tenant hereunder and/or
under the 951 Gateway Lease. 

        (b)    Increase in Face Amount of Letter of Credit.    Notwithstanding anything to the contrary contained in
Paragraph 7(a) above or Paragraph 7 of the 951 Gateway Lease, if at any time after the date of this Lease Tenant's Actual Cash Balance (as hereinafter defined) is less than Fifty Million
Dollars ($50,000,000.00), then Tenant shall immediately deliver to Landlord an amendment to the Letter of Credit increasing the then-current face amount thereof by the sum of One Million
Dollars ($1,000,000.00) (said One Million Dollar ($1,000,000.00) increase being herein referred to as the "Supplemental Credit"). Together with the execution of this Lease, Tenant shall deliver to
Landlord bank and investment statements and other financial information acceptable to Landlord to substantiate Tenant's Actual Cash Balance as of September 30, 2000. Commencing as of the
quarter ending December 31, 2000 and continuing thereafter, Tenant shall, within forty-five (45) days after the end of each calendar quarter, and at such other times as
Landlord may request, Tenant shall deliver to Landlord, bank and investment statements and other financial information acceptable to Landlord to substantiate Tenant's then-current Actual
Cash Balance. As used herein, Tenant's "Actual Cash Balance" means, at any given time, the actual balance of Tenant's "cash and cash equivalents," and "cash and cash equivalents" means the aggregate
amount of the following, to the extent owned by Tenant free and clear of all loans, repayment obligations, encumbrances and rights of others: (i) cash on hand; (ii) dollar demand
deposits maintained in the United States with any commercial bank and dollar time deposits maintained in the United States with, or certificates of deposit having a maturity of five years or less
issued by, any commercial bank or other financial institution acceptable to the Landlord; (iii) direct obligations of, or unconditionally guaranteed by, the United States and having a maturity
of five years or less; and (iv) readily marketable commercial paper having a maturity of five years or less, issued by any corporation organized and existing under the laws of the United States
or any state thereof or the District of Columbia and rated by Standard & Poor's or Moody's (or, if neither such organization shall rate such commercial paper at any time, rated by any
nationally recognized rating organization in the United States) with the highest rating assigned by such organization. 

8

   
        (c)    Landlord's Right to Draw on Letter of Credit; Letter of Credit Proceeds.    Landlord may (but shall not be
required to) draw upon the Letter of Credit from time to time, in a singular draw or by partial draws at Landlord's election, as permitted by the Letter of Credit, and use the proceeds therefrom (the
"Letter of Credit Proceeds") or any portion thereof to (i) cure or remedy any Default of Tenant under this Lease and/or under the 951 Gateway Lease, including, without limitation, any
failure of Tenant to remove the Bridge and to restore the facades of the Building and the 951 Gateway Premises upon the earlier of the expiration or sooner termination of this Lease or the
951 Gateway Lease, to the extent such removal and restoration are required under Section 11.2 of the 951 Gateway Lease, (ii) repair damage to the Premises and/or to the
951 Gateway Premises caused by Tenant, (iii) clean the Premises upon termination of this Lease and clean the 951 Gateway Premises upon termination of the 951 Gateway Lease,
(iv) reimburse Landlord for the payment of any amount which Landlord may spend or be required to spend by reason of Tenant's Default hereunder and/or under the 951 Gateway Lease, or
(v) compensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant's Default hereunder and/or under the 951 Gateway Lease, including, without limitation,
all costs incurred by Landlord in releasing the Premises and/or the 951 Gateway Premises, as appropriate, and any tenant improvement costs and leasing commissions associated therewith; it being
understood that any use of the Letter of Credit Proceeds shall not constitute a bar or defense to any of Landlord's remedies set forth in this Lease or the 951 Gateway Lease, as the case may
be. In such event and upon written notice from Landlord to Tenant specifying the amount of the Letter of Credit Proceeds so utilized by Landlord, Tenant shall immediately deliver to Landlord an
amendment to the Letter of Credit restoring the Letter of Credit to the full amount required under Paragraph 7(a) above (as increased pursuant to Paragraph 7(b) above), less any
reductions theretofore permitted pursuant to Paragraph 7(c). Tenant's failure to deliver such amendment to Landlord within ten (10) business days of Landlord's notice shall constitute a
Default hereunder and under the 951 Gateway Lease. 

        (d)    Reduction of Amount of Letter of Credit.    As used herein, "Letter of Credit" shall mean an unconditional,
stand-by irrevocable letter of credit (hereinafter referred to as the "Letter of Credit") issued by Mellon Bank or the San Francisco Bay Area office of another major national bank mutually
satisfactory to Landlord and Tenant (collectively, the "LC Issuing Bank"), naming Landlord as beneficiary, in the amount specified above; provided, however, that the amount of the Letter of Credit
shall be subject to reduction from time to time as provided below: 

        (1)   If
Tenant achieves actual annual net sales revenues of Thirty Million Dollars ($30,000,000.00) or more during any calendar year during the Term, the
then-current amount of the Letter of Credit (including the Supplemental Credit, if applicable) shall be reduced by twenty-five percent (25%) (in addition to any other reduction
to which Tenant is entitled under subparagraphs (2) and (3) below); for purposes of this subparagraph (1), "net sales revenues" shall mean the gross revenues actually realized by Tenant
from the operation of its core business (as opposed to nonrecurring income or revenues not generated by Tenant's core business), less actual expenses incurred by Tenant during the applicable calendar
year; 

        (2)   commencing
on April 1, 2004, the then-current amount of the Letter of Credit (specifically excluding, however, the Supplemental Credit, if applicable)
shall be reduced on April 1 of each year in substantially equal annual amounts such that the balance of the Letter of Credit shall be zero on the Expiration Date; and 

        (3)   commencing
on the fourth (4th) anniversary of the date Tenant delivers the Supplemental Credit to Landlord (the "Supplemental Credit Delivery Date"), the Supplemental
Credit shall be reduced on the fourth (4th) and each succeeding anniversary of the Supplemental Credit Delivery Date in substantially equal installments such that the balance of the Supplemental
Credit shall be zero on the Expiration Date. 

9

 

        The
Letter of Credit shall be for no less than a one-year term and in any event shall be maintained in effect from the date hereof through the date that is
forty-five (45) days after expiration of the Term or the earlier termination of this Lease. 

        (e)    Form of Letter of Credit.    The Letter of Credit shall provide: (i) that Landlord may make partial and
multiple draws hereunder, up to the face amount thereof, (ii) that Landlord may draw upon the Letter of Credit up to the full amount thereof, and the LC Issuing Bank will pay to Landlord the
amount of such draw upon receipt by the LC Issuing Bank of a draft signed by Landlord (which draft may be presented by Landlord to the LC Issuing Bank in person, by overnight mail or by
telefacsimile), accompanied by a written statement from Landlord that Tenant is in Default under this Lease and/or the 951 Gateway Lease or that Landlord is otherwise entitled to draw upon the
Letter of Credit, and (iii) that, in the event of Landlord's assignment or other transfer of its interest in this Lease and/or the 951 Gateway Lease, the Letter of Credit shall be freely
transferable by Landlord, without recourse, to the assignee or transferee of such interest and the LC Issuing Bank shall confirm the same to Landlord and such assignee or transferee. 

        (f)    Failure to Provide for Annual Renewal or Replacement of Letter of Credit.    In the event that the LC Issuing
Bank shall fail to notify Landlord at least forty-five (45) days prior to expiration of the Letter of Credit that the Letter of Credit will be renewed for at least one
(1) year beyond the then applicable expiration date, and deliver to Landlord a replacement Letter of Credit or a modification to the existing Letter of Credit effectuating such renewal at least
forty-five (45) days prior to expiration of the Letter of Credit, and Tenant shall not have otherwise delivered to Landlord, at least forty-five (45) days prior
to the relevant annual expiration date, a replacement Letter of Credit in the amount required hereunder and under the 951 Gateway Lease and otherwise meeting the requirements set forth above,
then Landlord shall be entitled to draw on the Letter of Credit as provided above, and shall hold the proceeds of such draw in a segregated interest bearing cash collateral account in the name of
Landlord and with a bank selected by Landlord, as security for the full and faithful performance of Tenant's obligations hereunder and under the 951 Gateway Lease, until Tenant shall have
provided a new Letter of Credit satisfying the requirements
of this Paragraph 7 and Paragraph 7 of the 951 Gateway Lease, in which event Landlord shall promptly return the proceeds of such draw plus all accrued interest thereon, not
otherwise used in accordance with the terms of this Lease and/or the 951 Gateway Lease, to Tenant. 

        (g)    Bifurcation of Letter of Credit.    Notwithstanding anything to the contrary contained herein or in the
951 Gateway Lease, if requested by Landlord at any time following the date of this Lease, Tenant shall cause the LC Issuing Bank to bifurcate the Letter of Credit into two separate letters of
credit, one securing Tenant's obligations under the 951 Gateway Lease and the other securing Tenant's obligations under this Lease. Such bifurcated letters of credit shall each be in an amount
specified by Landlord, provided that the aggregate amount of such letters of credit shall equal the amount of the Letter of Credit immediately prior to such bifurcation. Concurrently with the
bifurcation of the Letter of Credit, Landlord and Tenant shall enter into a modification of the 951 Gateway Lease and a modification of this Lease, which modifications shall amend
Paragraph 7 of the 951 Gateway Lease and this Paragraph 7 to provide for separate, stand-alone letter of credit provisions in the 951 Gateway Lease and this Lease. 

8.     POSSESSION  

        By entry hereunder, Tenant accepts the Premises as suitable for Tenant's intended use and as being in good and satisfactory condition, operating order and repair,
AS IS and without representation or warranty by Landlord as to the condition, use or occupancy which may be made thereof, with the exception of any obligation Landlord may have with respect to
Landlord's covenants set forth within Section 9.2(a) below. Any exceptions to the foregoing must be by written agreement executed by Landlord and Tenant. 

10

 

9.     USE OF PREMISES  

 9.1    Permitted Use  

        (a)   The
use of the Premises by Tenant and Tenant's agents, advisors, employees, partners, shareholders, directors, invitees and independent contractors (collectively,
"Tenant's Agents") shall be solely for the Permitted Use specified in the Basic Lease Information and for no other use. Tenant shall not permit any objectionable or unpleasant smoke, dust, gas, noise
or vibration to emanate from or near the Premises, and shall use its best efforts to prevent any objectionable odor from emanating from or near the Premises. Tenant shall strictly comply with the
measures set forth on Exhibit B hereto and any additional measures reasonably required by Landlord from time to time to eliminate the emanation
of objectionable odors. Tenant shall promptly provide Landlord with copies of all permits issued to Tenant by the Bay Area Air Quality Management District (the "Air Management District") and any other
governmental agency responsible for or having jurisdiction over matters related to air quality, together with copies of all correspondence between Tenant and the Air Management District or such other
agencies. Tenant acknowledges that The Gateway, the real estate development in which the Project is located, is a first-class office and R&D campus and that "objectionable odors" is a subjective
standard. Accordingly, Tenant agrees that if odors in the area of the Building lead to complaints from other tenants and occupants of The Gateway, and if Landlord reasonably determines, based upon
observation and/or a review of Tenant's records, that such odors emanated from the Premises, Tenant shall promptly use its best efforts to correct the situation at Tenant's sole cost and expense. Such
measures to be taken by Tenant shall include, without limitation, the hiring of special consultants and the making of capital improvements to the Premises. Tenant shall make its laboratory records
available to Landlord for review in connection with any complaints by tenants or occupants of the Gateway and as otherwise reasonably requested by Landlord. Any failure of Tenant to comply with its
obligations under this Paragraph 9.1 (a) shall constitute an immediate Default under this Lease. 

        (b)   The
Premises shall not be used to create any nuisance or trespass, for any illegal purpose, for any purpose not permitted by Laws, for any purpose that would invalidate
the insurance or increase the premiums for insurance on the Premises, the Building or the Project or for any purpose or in any manner that would unreasonably interfere with other tenants' use or
occupancy of the Project. Tenant agrees to pay to Landlord, as Additional Rent, any increases in premiums on policies resulting from Tenant's Permitted Use or any other use or action by Tenant or
Tenant's Agents which increases Landlord's premiums or requires additional coverage by Landlord to insure the Premises. Tenant agrees not to overload the floor(s) of the Building. 

 9.2    Compliance with Governmental Regulations and Private Restrictions  

        (a)   Subject
to the terms and conditions of the Lease, Landlord covenants that the Base Building Improvements have been constructed in compliance with all applicable building
code requirements in effect and actively being enforced by the City of South San Francisco on the date the building permits were issued to the Contractor therefor. Any claims by Tenant under this
Paragraph 9.2 shall be made in writing not later than March 31, 2001. In the event Tenant fails to deliver a written claim to Landlord on or before such date, then Landlord shall be
conclusively deemed to have satisfied its obligations under this paragraph. The covenants contained in this paragraph are subject to Paragraph 39 below of the Lease and are made specifically
and exclusively for the benefit of the original Tenant and any assignee or sublessee under a Permitted Transfer pursuant to Paragraph 23.4 below. 

        (b)   Tenant
and Tenant's Agents shall, at Tenant's expense, faithfully observe and comply with (1) all municipal, state and federal laws, statutes, codes, rules,
regulations, ordinances, requirements, and orders (collectively, "Laws"), now in force or which may hereafter be in force pertaining to the Premises or Tenant's use of the Premises, the Building or
the Project, including, without limitation, any 

11

 

Laws
requiring installation of fire sprinkler systems, seismic reinforcement and related alterations, whether substantial in cost or otherwise; provided, however, that except as provided in
Paragraph 9.3 below, Tenant shall not be required to make or, except as provided in Paragraph 4 above, pay for, structural changes to the Premises or the Building not related to Tenant's
specific use of the Premises unless the requirement for such changes is imposed as a result of any improvements or additions made or proposed to be made at Tenant's request; (2) all recorded
covenants, conditions and restrictions affecting the Project ("Private Restrictions") now in force or which may hereafter be in force, Landlord hereby specifically reserving the right to hereafter
adopt such Private Restrictions and to impose the same on the Project or any portion thereof; provided that such Private Restrictions adopted after the date hereof shall not unreasonably impair
Tenant's use of the Premises for any Permitted Use; and (3) any and all rules and regulations set forth in Exhibit C and any other rules
and regulations now or hereafter promulgated by Landlord (collectively, the "Rules and Regulations"). Without limiting the generality of the foregoing, Tenant hereby covenants and agrees for itself,
its successors and assigns, and all persons claiming under or through it, that this Lease is made and accepted upon and subject to the condition that there shall be no discrimination against, or
segregation of, any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin or ancestry in the leasing, subleasing, transferring, use, occupancy,
tenure or enjoyment of the Premises herein leased, nor shall Tenant, or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation
with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the premises herein leased. The judgment of any court of competent
jurisdiction, or the admission of Tenant in any action or proceeding against Tenant, whether Landlord be a party thereto or not, that Tenant has violated any such Laws or Private Restrictions, shall
be conclusive of that fact as between Landlord and Tenant. 

 9.3    Compliance with Americans with Disabilities Act  

        Landlord and Tenant hereby agree and acknowledge that the Premises, the Building and/or the Project may be subject to, among other Laws, the requirements of the
Americans with Disabilities Act, a federal law codified at 42 U.S.C. 12101 et seq., including, but not limited to, Title III thereof, and all
regulations and guidelines related thereto, together with any and all laws, rules, regulations, ordinances, codes and statutes now or hereafter enacted by local or state agencies having jurisdiction
thereof, including all requirements of Title 24 of the State of California, as the same may be in effect on the date of this Lease and may be hereafter modified, amended or supplemented (collectively,
the "ADA"). Any Tenant Improvements (as hereinafter defined) constructed in connection with Tenant's leasing of the Premises or Alterations (as hereinafter defined) made during the Term shall be in
compliance with the requirements of the ADA, and all costs incurred for purposes of compliance therewith shall be a part of and included in the costs of the Tenant Improvements or the Alterations, as
applicable. Tenant shall be solely responsible for conducting its own independent investigation of this matter and for ensuring that the design of all Tenant Improvements and Alterations strictly
complies with all requirements of the ADA. Subject to reimbursement pursuant to Paragraph 4 above, if any barrier removal work or other work is required to the Building, the Common Areas or the
Project under the ADA; then such work shall be the responsibility of Landlord; provided, if such work is required under the ADA as a result of Tenant's use of the Premises or any work or Alteration
made to the Premises by or on behalf of Tenant, then such work shall be performed by Landlord at the sole cost and expense of Tenant; and, provided further, that if any such work is required under the
ADA as a result of another tenant's specific use of its premises or improvements made by another tenant to its premises, then the cost of such work shall be solely chargeable to such tenant and Tenant
shall have no responsibility therefor. Except as otherwise expressly provided in this provision, Tenant shall be responsible at its sole cost and expense for fully and faithfully complying with all
applicable requirements of the ADA, including, without limitation, not discriminating against any disabled persons in the operation of Tenant's business in or about the Premises, and offering or
otherwise providing 

12

 

auxiliary
aids and services as, and when, required by the ADA. Within ten (10) days after receipt, Tenant shall advise Landlord in writing, and provide Landlord with copies of (as applicable),
any notices alleging violation of the ADA relating to any portion of the Premises, the Building or the Project; any claims made or threatened orally or in writing regarding noncompliance with the ADA
and relating to any portion of the Premises, the Building or the Project; or any governmental or regulatory actions or investigations instituted or threatened regarding noncompliance with the ADA and
relating to any portion of the Premises, the Building or the Project. Tenant shall and hereby agrees to protect, defend (with counsel acceptable to Landlord) and hold Landlord and Landlord's Agents
harmless and indemnify Landlord and Landlord's Agents from and against all liabilities, damages, claims, losses, penalties, judgments, charges and expenses (including attorneys' fees, costs of court
and expenses necessary in the prosecution or defense of any litigation including the enforcement of this provision) arising from or in any way related to, directly or indirectly, Tenant's or Tenant's
Agents' violation or alleged violation of the ADA. Landlord shall and hereby agrees to protect, defend (with counsel acceptable to Tenant) and hold Tenant and Tenant's Agents harmless and indemnify
Tenant and Tenant's Agents from and against all liabilities, damages, claims, losses, penalties, judgments, charges and expenses (including attorneys' fees, costs of court and expenses necessary in
the prosecution or defense of any litigation including the enforcement of this provision) arising from or in any way related to, directly or indirectly, Landlord's failure to have the Base Building
Improvements constructed in
compliance with the ADA as currently administered by the City of South San Francisco. 

10.   ACCEPTANCE OF PREMISES  

        By taking possession of the Premises hereunder Tenant accepts the Premises as suitable for Tenant's intended use and as being in good and sanitary operating
order, condition and repair, AS IS, and without representation or warranty by Landlord as to the condition, use or occupancy which may be made thereof, except for Landlord's covenant set forth in
Section 9.2(a) above. Any exceptions to the foregoing must be by written agreement executed by Landlord and Tenant. 

11.   SURRENDER  

 11.1    Surrender at Expiration or Termination  

        Tenant agrees that on the last day of the Term, or on the sooner termination of this Lease, Tenant shall surrender the Premises to Landlord (i) in good
condition and repair (damage by acts of God, fire, and normal wear and tear excepted), but with all interior walls painted or cleaned so they appear painted and, where appropriate, patched, any
carpets cleaned, all floors cleaned and waxed, and all plumbing fixtures in good condition and working order and, where appropriate, capped, and (ii) otherwise in accordance with
Paragraph 32.9. Normal wear and tear shall not include any damage or deterioration that would have been prevented by proper maintenance by Tenant, or Tenant otherwise performing all of its
obligations under this Lease. 

 11.2    Removal Obligations and Abandonment of Tenant's Property  

        On or before the expiration or sooner termination of this Lease, Tenant shall, in accordance with this Paragraph 11, and at Tenant's sole cost and expense,
remove, and repair any damage caused by such removal, (A) all of Tenant's Property (as hereinafter defined) and Tenant's signage from the Premises, the Building and the Project, (B) all
Tenant Improvements and Alterations required to be removed pursuant to Paragraph 12 below, and (C) remove the depressed slab and trench drains in Room 1205 and return to such slab to a
typical standard slab height and finish. Any of Tenant's Property not so removed by Tenant as required herein shall be deemed abandoned and may be stored, removed, and disposed of by Landlord at
Tenant's expense, and Tenant waives all claims against Landlord for any damages resulting from Landlord's retention and disposition of such property; 

13

 

provided,
however, that Tenant shall remain liable to Landlord for all costs incurred in storing and disposing of such abandoned property of Tenant. All Tenant Improvements and Alterations except
those which Tenant is required to remove pursuant to Paragraph 12 below hereto shall remain in the Premises as the property of Landlord. 

 11.3    Indemnification  

        If the Premises are not surrendered at the end of the Term or sooner termination of this Lease, and in accordance with the provisions of this Paragraph 11
and Paragraph 32.9 below, Tenant shall indemnify, defend and hold Landlord harmless from and against any and all loss or liability resulting from delay by Tenant in so surrendering the Premises
including, without limitation, any loss or liability resulting from any claim against Landlord made by any succeeding tenant or prospective tenant founded on or resulting from such delay and losses to
Landlord due to lost opportunities to lease any portion of the Premises to any such succeeding tenant or prospective tenant, together with, in each case, reasonable attorneys' fees and costs. 

12.   ALTERATIONS AND ADDITIONS  

 12.1    Landlord's Consent Required  

        Tenant shall not make, or permit to be made, any alteration, addition or improvement (hereinafter referred to individually as an "Alteration" and collectively as
the "Alterations") to the Premises or any part thereof without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that
Landlord shall have the right in its sole and absolute discretion to consent or to withhold its consent to any Alteration which affects the structural portions of the Premises, the Building or the
Project or the Systems serving the Premises, the Building and/or the Project or any portion thereof. 

 12.2    Alterations Permitted Without Landlord's Consent; Removal Requirements  

        Notwithstanding the foregoing, but subject to the conditions set forth below, Tenant may, without Landlord's consent, make Alterations within the Premises
provided that (i) such Alterations do not affect the structural portions of the Premises, the Building or the Project or the Systems, and (ii) the cost, on an individual project basis,
of any Alteration or related series of Alterations is less than $50,000, and all Alterations in the aggregate do not exceed $500,000 over the Term. The Alterations made by Tenant without the consent
of Landlord in accordance with this Paragraph 12.2 shall be herein referred to as the "Permitted Alterations." 

 12.3    Alterations at Tenant's Expense  

        Any Alteration to the Premises shall be at Tenant's sole cost and expense, in compliance with all applicable Laws and all requirements requested by Landlord,
including, without limitation, the requirements of any insurer providing coverage for the Premises or the Project or any part thereof, and in accordance with plans and specifications approved in
writing by Landlord (except for Permitted Alterations), which approval shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, with respect to Alterations that may
be made without Landlord's prior consent as permitted above, Landlord agrees that Tenant shall not be required to submit plans and specifications for prior approval of the Landlord and that Landlord
shall not require prior approval of the installing contractor; provided, however, if Tenant does not obtain the prior approval of plans and specifications for any Alteration, then subject to the terms
of Paragraph 12.4(b) below, Landlord may, by notice to Tenant given not later than ninety (90) days prior to the Expiration Date (except in the event of a termination of this Lease prior
to the scheduled Expiration Date, in which event no advance 

14

 

notice
shall be required), require Tenant, at Tenant's expense, to remove, and repair any damage caused by removal of, any and all such Alterations. If Tenant does not obtain Landlord's prior consent
as to the installing contractor, Tenant shall be responsible for maintaining harmonious labor relations with all contractors and service providers servicing the Premises, Building and/or Project. In
addition, with respect to any Permitted Alterations made without Landlord's prior consent as permitted above, Tenant agrees to meet with Landlord, at Landlord's request, not more than once in every
calendar year, to discuss any such Permitted Alterations that have been made to the Premises (each such meeting being herein referred to as an "Alterations Meeting"). Tenant shall provide to Landlord
within forty five (45) days after written request as-built plans and specifications for any Alterations (including, without limitation, any Permitted Alterations) made by Tenant to
the Premises. Notwithstanding anything in this Lease to the contrary, any approval by Landlord of any drawings, plans or specifications prepared on behalf of Tenant shall not in any way bind Landlord,
create any responsibility or liability on the part of Landlord for the completeness of the same, their design sufficiency or compliance with applicable statutes, ordinances or regulations or
constitute a representation or warranty by Landlord as to the adequacy or sufficiency of such drawings, plans or specifications, or the improvements to which they relate, but such approval shall
merely evidence the consent of Landlord to such drawings, plans or specifications. 

 12.4    Requirements of Request for Approval  

        (a)   Any
Alterations requiring the prior consent of Landlord shall contain a request that Landlord specify in writing to Tenant those Alterations that Tenant will be required
to remove in accordance with Paragraph 11.1 upon expiration or sooner termination of this Lease. Upon receipt of such request, Landlord shall make such determination and respond to Tenant
within twenty (20) business days of such request. Landlord's failure to respond within such time shall be deemed to mean that Tenant shall not be required to remove such Alterations upon the
expiration or sooner termination of this Lease. 

        (b)   In
the event Tenant constructs or installs any Permitted Alterations without the consent of Landlord, then Tenant shall have the right at the next succeeding Alterations
Meeting to request that Landlord specify in writing whether Tenant will be required to remove all or any portion of such Permitted Alterations upon expiration or sooner termination of this Lease. Upon
receipt of such request, Landlord shall make such determination and respond to Tenant within twenty (20) business days of such request. Landlord's failure to respond within such time shall
conclusively be deemed to be an irrevocable waiver of Landlord's right to demand their removal. 

 12.5    Permits Required; Insurance Required  

 12.5.1.    Permits  

        Before Alterations may begin, valid building permits or other permits or licenses required must be furnished to Landlord, and, once the Alterations begin, Tenant
will diligently and continuously pursue their completion. Landlord may monitor construction of the Alterations, either through its own employees or through a construction manager retained by Landlord. 

 12.5.2.    Insurance  

        Tenant shall maintain during the course of any construction (including, without limitation, during the construction of any Alterations), at its sole cost and
expense, builders' risk insurance for the amount of the completed value of the Alterations on an all-risk non-reporting form covering all improvements under construction,
including building materials, and other insurance in amounts and against such risks as Landlord shall reasonably require in connection with the Alterations, including, without limitation, naming
Landlord and Landlord's lender as loss payee under any such policy. In 

15

 

addition
to and without limitation on the generality of the foregoing, Tenant shall ensure that its contractor(s) procure and maintain in full force and effect during the course of construction a
"broad form" commercial general liability and property damage policy of insurance naming Landlord, Tenant and Landlord's lenders as additional insureds. The minimum limit of coverage of the aforesaid
policy shall be in the amount of not less than Three Million Dollars ($3,000,000.00) for injury or death of one person in any one accident or occurrence and in the amount of not less than Three
Million Dollars ($3,000,000.00) for injury or death of more than one person in any one accident or occurrence, and shall contain a severability of interest clause or a cross liability endorsement.
Such insurance shall further insure Landlord and Tenant against liability for property damage of at least One Million Dollars ($1,000,000.00). 

 12.6    Title to Improvements; Removal Rights; Financing  

        Except as otherwise expressly stated herein or agreed to in writing between the parties, the Tenant Improvements actually paid for by Tenant and all Alterations,
including, but not limited to, heating, lighting, electrical, air conditioning, fixed partitioning, drapery, wall covering and paneling, built-in cabinet work and carpeting installations
made by Tenant, together with all property that has become an integral part of the Premises or the Building, shall upon installation become the property of Tenant; provided, however, that title to all
such Tenant Improvements, Alterations and property shall automatically transfer to Landlord upon the expiration of the Term or the sooner termination of this Lease without the payment of any
consideration or the execution of any transfer documents. Notwithstanding the foregoing, Tenant shall retain title to and ownership of Tenant's Property at all times. For purposes of this
Paragraph 12.6 and Paragraph 49.4.1 below, Landlord shall be deemed to have paid for those Tenant Improvements funded out of the Initial Tenant Improvement Allowance (as hereinafter
defined), and Tenant shall be deemed to have paid for the remaining Tenant Improvements. As used herein, "Initial Tenant Improvement Allowance" means the initial $45.00 per square foot of the Tenant
Improvement Allowance provided by Landlord hereunder. 

 12.7    Computer, Utility and Telecommunications Equipment  

        No private telephone systems, utilities and/or other related computer, utility or telecommunications equipment or lines may be installed without Landlord's prior
written consent, which consent shall not be unreasonably withheld. If Landlord gives such consent, all equipment must be installed within the Premises and, unless Landlord, at the time of
installation, notifies Tenant in writing that removal will be required, left in the Premises and surrendered to Landlord upon the expiration or sooner termination of this Lease. 

 12.8    Notice and Opportunity to Post Notice of Nonresponsibility  

        Tenant agrees not to proceed to make any Alterations, notwithstanding consent from Landlord to do so, without fifteen (15) days' prior written notice to
Landlord, in order that Landlord may post appropriate notices to avoid any liability to contractors or material suppliers for payment for Tenant's improvements. Tenant will at all times permit such
notices to be posted and to remain posted until the completion of work. 

13.   MAINTENANCE AND REPAIRS OF PREMISES  

 13.1    Maintenance by Tenant  

        Subject to the provisions of Paragraph 13.2, 21 and 22 below, throughout the Term, Tenant shall, at its sole expense, (1) keep and maintain in good
order and condition the Building and the Premises and repair the Building and the Premises and every part thereof, including interior and exterior glass, 

16

 

windows,
window frames and casements, interior and exterior doors and door frames and door closers; interior and exterior lighting (including, without limitation, light bulbs and ballasts), the roof
covering; the Systems serving the Premises and the Building; interior and exterior signage, interior demising walls and partitions, equipment, interior painting and interior walls and floors, and the
roll-up doors, ramps and dock equipment, including, without limitation, dock bumpers, dock plates, dock seals, dock levelers and dock lights located in or on the Premises (excepting only
those portions of the Building or the Project to be maintained by Landlord, as provided in Paragraph 13.2 below), (2) furnish all expendables, including light bulbs, paper goods and
soaps, used in the Premises, and (3) keep and maintain in good order and condition and repair and replace all of Tenant's security systems in or about or serving the Premises. Tenant shall not
do nor shall Tenant allow Tenant's Agents to do anything to cause any damage, deterioration or unsightliness to the Premises, the Building or the Project. Tenant shall perform its obligations under
this Paragraph 13.1 in accordance with maintenance and repair standards adopted by Landlord from time to time for the Project. Tenant shall cause to be furnished to Landlord on not less than a
quarterly basis maintenance reports on all Systems and the roof of the Building prepared by a qualified vendor or consultant, and Tenant shall promptly perform any maintenance tasks recommended by
such reports or otherwise required by Landlord to cause the Premises and the Systems to comply with Landlord's maintenance and repair standards. 

 13.2    Maintenance by Landlord  

        Subject to the provisions of Paragraphs 13.1, 21 and 22, and further subject to Tenant's obligation under Paragraph 4 to reimburse Landlord, in the form of
Additional Rent, for Tenant's Proportionate Share(s) of the Project and the Building, as applicable, of the cost and expense of the following items, Landlord agrees to repair and maintain the Common
Areas in good order and condition, including, without limitation, the Parking Areas, pavement, landscaping, sprinkler systems, sidewalks, driveways, curbs, and lighting systems in the Common Areas.
Subject to the provisions of Paragraphs 13.1, 21 and 22, Landlord, at its own cost and expense, agrees to repair and maintain the following items: the structural portions of the roof (specifically
excluding the roof coverings), the foundation, the footings, the floor slab, and the load bearing walls and exterior walls of the Building (excluding any glass and any routine maintenance, including,
without limitation, any painting, sealing, patching and waterproofing of such walls). 

 13.3    Landlord's Right to Perform Tenant's Obligations  

        Notwithstanding anything in this Paragraph 13 to the contrary, Landlord shall have the right to either repair or to require Tenant to repair any damage to
any portion of the Premises, the Building and/or the Project caused by or created due to any act, omission, negligence or willful misconduct of Tenant or Tenant's Agents and to restore the Premises,
the Building and/or the Project, as applicable, to the condition existing prior to the occurrence of such damage; provided, however, that in the event Landlord elects to perform such repair and
restoration work, Tenant shall reimburse Landlord upon demand for all costs and expenses incurred by Landlord in connection therewith. Landlord's obligation hereunder to repair and maintain is subject
to the condition precedent that Landlord shall have received written notice of the need for such repairs and maintenance and a reasonable time to perform such repair and maintenance. Tenant shall
promptly report in writing to Landlord any defective condition which Landlord is required to repair, and failure to so report such defects shall make Tenant responsible to Landlord for the costs and
expenses of repairing any Preventable Damage occurring after the date Tenant obtains actual knowledge of such defective condition and any liability incurred by Landlord by reason of Tenant's failure
to notify Landlord of such defective condition in a timely manner as provided herein. As used herein, "Preventable Damage" means any damage or deterioration which could have been prevented had
Landlord received timely notice of the defective condition. Nothing contained herein shall be deemed or construed to limit Tenant's obligations under Paragraph 16 below. 

17

 

 13.4    Tenant's Waiver of Rights  

        Tenant hereby expressly waives all rights to make repairs at the expense of Landlord or to terminate this Lease, as provided for in California Civil Code Sections
1941 and 1942, and 1932(1), respectively, and any similar or successor statute or law in effect or any amendment thereof during the Term. 

14.   LANDLORD'S INSURANCE  

        At all times during the Term of this Lease, Landlord shall purchase and keep in force "all risk" property insurance covering the Base Building Improvements, the
Tenant Improvements and all Alterations made to the Premises by Tenant in accordance with the terms of Paragraph 12 above, in accordance with Landlord's customary insurance program for
comparable properties. Tenant shall provide Landlord with such information as may be requested by Landlord or its insurers concerning the
value of the Tenant Improvements or any Alterations. Tenant acknowledges and agrees that Landlord shall have no obligation to maintain property insurance covering any alterations, additions or
improvements made to the Premises other than Alterations made in strict accordance with Paragraph 12 (such other alterations, additions or improvements being herein referred to as "Unpermitted
Alterations"), and Tenant hereby agrees to indemnify and hold harmless Landlord and Landlord's Agents from and against any and all Losses (as hereinafter defined) resulting from or arising out of the
making of any such Unpermitted Alterations. Tenant shall, at its sole cost and expense, comply with any and all reasonable requirements pertaining to the Premises, the Building and the Project of any
insurer necessary for the maintenance of reasonable property damage and commercial general liability insurance, covering the Building and the Project. Landlord, at Tenant's cost, may maintain "Loss of
Rents" insurance, insuring that the Rent will be paid in a timely manner to Landlord for a period of at least twelve (12) months if the Building or any portion thereof are destroyed or rendered
unusable or inaccessible by any cause insured against under this Lease. 

15.   TENANT'S INSURANCE  

 15.1    Commercial General Liability Insurance  

        At all times during the Term of this Lease, Tenant shall, at Tenant's expense, secure and keep in force a Commercial General Liability insurance policy covering
the Premises, insuring Tenant, and naming Landlord and its lenders as additional insureds, against liability arising out of the ownership, use, occupancy or maintenance of the Premises. The minimum
limit of coverage of such policy shall be in the amount of not less than Three Million Dollars ($3,000,000.00) for each occurrence combined single limit for bodily injury and property damage, shall
include contractual liability coverage (which shall include coverage for Tenant's indemnification obligations in this Lease, provided that the amount of such coverage shall not be construed to limit
Tenant's indemnification obligations hereunder), and shall contain severability of interests and cross liability coverage clauses and/or endorsements. Such insurance shall be endorsed to be primary
and non-contributory to any insurance Landlord may carry. Landlord may from time to time require reasonable increases in any such limits if Landlord believes that additional coverage is
necessary or desirable. The limit of any insurance shall not limit the liability of Tenant hereunder. No policy maintained by Tenant under this Paragraph 15.1 shall contain a deductible greater
than Five Thousand Dollars ($5,000.00). Such policies of insurance shall be issued as primary policies and not contributing with or in excess of coverage that Landlord may carry. 

 15.2    Property Insurance  

        At all times during the Term of this Lease, Tenant shall, at Tenant's expense, maintain in full force and effect special form property insurance on all of its
personal property, possessions, furniture, 

18

 

furnishings,
trade or business fixtures, equipment and such other items listed on Exhibit E (collectively, "Tenant's Property") located on the
Premises. Such special form property insurance shall be on a full replacement cost basis and shall be written to cover all risks of direct loss or damage, including, but not be limited to, theft,
water damage and sprinkler leakage. No such policy shall contain a deductible greater than Five Thousand Dollars ($5,000.00). During the Term of this Lease the proceeds from any such policy or
policies of insurance shall be used for the repair or replacement of Tenant's Property. Landlord shall have no interest in the insurance upon Tenant's Property and will sign all documents reasonably
necessary in connection with the settlement of any claim or loss by Tenant. Landlord will not carry insurance on Tenant's Property. 

 15.3    Worker's Compensation Insurance; Employer's Liability Insurance  

        At all times during the Term of this Lease, Tenant shall, at Tenant's expense, maintain in full force and effect worker's compensation insurance with not less
than the minimum limits required by Law, and employer's liability insurance with a minimum limit of coverage of One Million Dollars ($1,000,000) per accident. 

 15.4    Business Interruption Insurance  

        Tenant shall, at all times during the Term of this Lease, maintain in full force and effect loss of income and extra expense insurance in such amounts as will
reimburse Tenant for direct or indirect loss of earnings or extra expenses attributable to or resulting from all perils commonly insured under a special form policy of property insurance. 

 15.5    Insurance Standards and Evidence of Coverage  

        All insurance required to be carried by Tenant hereunder shall be maintained with insurance companies authorized to do business in the State of California for the
issuance of the applicable type of insurance coverage and rated A:XIII or better in Best's Key Rating Guide. Notwithstanding the foregoing, Landlord hereby approves General Star Indemnity as the
carrier of the insurance required under Paragraph 15.1 above, provided that General Star Indemnity shall at all times during the Term maintain a Best's Key Rating of not less than A++:VIII.
Tenant shall deliver to Landlord certificates of insurance and true and complete copies of any and all endorsements required herein for all insurance required to be maintained by Tenant hereunder at
the time of execution of this Lease by Tenant. Tenant shall, at least thirty (30) days prior to expiration of each policy, furnish Landlord and the other parties named as additional insureds
with certificates of renewal or "binders" thereof. Each certificate shall expressly provide that such policies shall not be cancelable except after thirty (30) days' prior written notice to
Landlord and the other parties named as additional insureds as required in this Lease (except for cancellation for nonpayment of premium, in which event cancellation shall not take effect until at
least ten (10) days' notice has been given to Landlord and the parties named as additional insureds hereunder). 

16.   INDEMNIFICATION  

 16.1    Of Landlord  

        Tenant shall indemnify and hold harmless Landlord and Landlord's advisors, employees, partners, shareholders and directors against and from any and all claims,
liabilities, judgments, costs, demands, causes of action and expenses (including, without limitation, reasonable attorneys' fees) (collectively, "Losses") arising from (1) the use of the
Premises, the Building or the Project by Tenant or Tenant's Agents, or from any activity done, permitted or suffered by Tenant or Tenant's Agents in or about the Premises, the Building or the Project,
and (2) any act, neglect, fault, willful misconduct or omission of 

19

 

Tenant
or Tenant's Agents, or from any breach or default in the terms of this Lease by Tenant or Tenant's Agents, and (3) any action or proceeding brought on account of any matter in
items (1) or (2); provided, however, that in no event shall Tenant be required to indemnify Landlord against any claims, demands or losses resulting from any failure of Landlord to observe any
of the terms and conditions of this Lease, including, without limitation, the covenant set forth in Paragraph 9.2(a) above, in each case to the extent such failure or breach has persisted for
an unreasonable period of time after written notice of such failure or breach. If any action or proceeding is brought against Landlord by reason of any such claim, upon notice from Landlord, Tenant
shall defend the same at Tenant's expense by counsel reasonably satisfactory to Landlord. As a material part of the consideration to Landlord, Tenant hereby releases Landlord and Landlord's Agents
from responsibility for, waives its entire claim of recovery for and assumes all risk of (i) damage to property or injury to persons in or about the Premises, the Building or the Project from
any cause whatsoever (except that which is caused by the gross negligence or willful misconduct of Landlord or Landlord's Agents or by the failure of Landlord to observe any of the terms and
conditions of this Lease, if such failure has persisted for an unreasonable period of time after written notice of such failure), or (ii) loss resulting from business interruption or loss of
income at the Premises. The obligations of Tenant under this Paragraph 16.1 shall survive the expiration or earlier termination of this Lease. 

 16.2    Of Tenant  

        Landlord shall indemnify and hold harmless Tenant and Tenant's employees, partners, shareholders and directors against and from any and all Losses relating to the
Project and arising from (1) the gross negligence or willful misconduct of Landlord or Landlord's Agents, (2) the failure of Landlord to observe any of the terms and conditions of this
Lease, if such failure has persisted for an unreasonable period of time after written notice of such failure, and (3) any action or proceeding brought on account of any matter in
items (1) or (2). If any action or proceeding is brought against Tenant by reason of any such claim, upon notice from Tenant, Landlord shall defend the same at Landlord's expense by counsel
reasonably satisfactory to Landlord. The obligations of Landlord under this Paragraph 16.2 shall survive any termination of this Lease. 

 16.3    No Impairment of Insurance  

        The foregoing indemnity shall not relieve any insurance carrier of its obligations under any policies required to be carried by either party pursuant to this
Lease, to the extent that such policies cover the peril or occurrence that results in the claim that is subject to the foregoing indemnity. 

17.   SUBROGATION  

        Landlord and Tenant hereby mutually waive any claim against the other and its Agents for any loss or damage to any of their property located on or about the
Premises, the Building or the Project that is caused by or results from perils covered by the property insurance required to be carried by the respective parties in accordance with Paragraphs 14 and
15 of this Lease, whether or not due to the negligence of the other party or its Agents. Because the foregoing waivers will preclude the assignment of any claim by way of subrogation to an insurance
company or any other person, each party now agrees to immediately give to its insurer written notice of the terms of these mutual waivers and shall have their insurance policies endorsed to prevent
the invalidation of the insurance coverage because of these waivers. Nothing in this Paragraph 17 shall relieve a party of liability to the other for failure to carry insurance required by this
Lease. 

18.   SIGNS  

        Tenant shall not place or permit to be placed in, upon, or about the Premises, the Building or the Project any exterior lights, decorations, balloons, flags,
pennants, banners, advertisements or notices, or 

20

 

erect
or install any signs, windows or door lettering, placards, decorations, or advertising media of any type which can be viewed from the exterior of the Premises without obtaining Landlord's prior
written consent or without complying with Landlord's signage program, as the same may be modified by Landlord from time to time, and with all applicable Laws, and will not conduct, or permit to be
conducted, any sale by auction on the Premises or otherwise on the Project. Tenant shall remove any sign, advertisement or notice placed on the Premises, the Building or the Project by Tenant upon the
expiration of the Term or sooner termination of this Lease, and Tenant shall repair any damage or injury to the Premises, the Building or the Project caused thereby, all at Tenant's expense. If any
signs are not removed, or necessary repairs not made, Landlord shall have the right to remove the signs and repair any damage or injury to the Premises, the Building or the Project at Tenant's sole
cost and expense. 

19.   FREE FROM LIENS  

        Tenant shall keep the Premises, the Building and the Project free from any liens arising out of any work performed, material furnished or obligations incurred by
or for Tenant in accordance with the provisions of this Paragraph 19. In the event that Tenant shall not, within ten (10) days following the imposition of any such lien, cause the lien
to be released of record by payment or posting of a proper bond, Landlord shall have in addition to all other remedies provided herein and by law the right but not the obligation to cause same to be
released by such means as it shall deem proper, including payment of the claim giving rise to such lien. All such sums paid by Landlord and all expenses incurred by it in connection therewith
(including, without limitation, reasonable attorneys' fees) shall be payable to Landlord by Tenant upon demand. Landlord shall have the right at all times to post and keep posted on the Premises any
notices permitted or required by law or that Landlord shall deem proper for the protection of Landlord, the Premises, the Building and the Project, from mechanics' and materialmen's liens. Tenant
agrees not to proceed to perform any repairs or construction on the Premises without fifteen (15) days' prior written notice to Landlord in order that Landlord may post appropriate notices to
avoid any liability to contractors or material suppliers for payment for Tenant's work. 

20.   ENTRY BY LANDLORD  

        Tenant shall permit Landlord and Landlord's Agents to enter into and upon the Premises at all reasonable times upon twenty-four (24) hours'
notice (except in the case of an emergency, in which event no advance notice shall be required) for the purpose of inspecting the same or showing the Premises to prospective purchasers, lenders or
tenants or to alter, improve, maintain and repair the Premises or the Building as required or permitted of Landlord under the terms hereof, or for any other reasonable business purpose, without any
rebate of Rent and without any liability to Tenant for any loss of occupation or quiet enjoyment of the Premises thereby occasioned; and Tenant shall permit Landlord to post notices of
non-responsibility and ordinary "for sale" or "for lease" signs. Notwithstanding the foregoing, Landlord shall only enter the Premises for the purpose of showing the same to prospective
tenants during the last ten (10) months of the Term. No such entry shall be construed to be a forcible or unlawful entry into, or a detailer of, the Premises, or an eviction of Tenant from the
Premises. Tenant's representatives shall have the right to accompany Landlord on any inspection of the Premises, provided that Tenant's representatives are available at the time of such inspections.
Landlord may temporarily close entrances, doors, corridors, elevators or other facilities without liability to Tenant by reason of such closure in the case of an emergency and when Landlord otherwise
reasonably deems such closure necessary. 

21

 

21.   DESTRUCTION AND DAMAGE  

 21.1    Damage Covered by Extended Coverage Insurance  

        If the Premises are damaged by fire or other perils covered by extended coverage insurance, Landlord shall, at Landlord's option: 

 21.1.1.    Material Damage; Insured Loss  

        In the event of material damage to the Premises (which shall mean damage or destruction of a nature such that all required permits cannot be reasonably obtained
and/or the Premises cannot be substantially repaired and restored to the condition existing immediately prior to such damage or destruction within three hundred sixty-five
(365) days after the date Landlord obtains
actual knowledge of such destruction (the "Casualty Discovery Date")), Landlord may elect either to commence promptly to repair and restore the Premises and prosecute the same diligently to
completion, in which event this Lease shall remain in full force and effect; or not to repair or restore the Premises, in which event this Lease shall terminate. Landlord shall give Tenant written
notice of its intention within sixty (60) days after the Casualty Discovery Date. If Landlord elects in writing not to restore the Premises, this Lease shall be deemed to have terminated as of
the date of such destruction. 

 21.1.2.    Minor Damage; Insured Loss  

        In the event of minor damage to the Premises (which shall mean damage or destruction of a nature such that all required permits can be reasonably obtained and the
Premises may be substantially repaired or restored to the condition existing immediately prior to such damage or destruction within three hundred sixty-five (365) days after the
Casualty Discovery Date) for which Landlord will receive insurance proceeds sufficient to cover the cost to repair and restore such partial destruction, Landlord shall commence and proceed diligently
with the work of repair and restoration, in which event this Lease shall continue in full force and effect. If the insurance proceeds (plus any amounts Tenant may elect or is obligated to contribute)
are not sufficient to cover the cost of such repair and restoration, Landlord may elect either to so repair and restore, in which event this Lease shall continue in full force and effect, or not to
repair or restore, in which event this Lease shall terminate. In either case, Landlord shall give written notice to Tenant of its intention within sixty (60) days after the Casualty Discovery
Date. If Landlord elects, in writing, not to restore the Premises, this Lease shall be deemed to have terminated as of the date of such partial destruction. 

 21.1.3.    Calculation of Restoration Period.  

        Following the occurrence of any casualty event, Landlord shall obtain from a licensed general contractor selected by Landlord (the "Restoration Contractor") an
estimate of the time required to obtain all permits and to fully repair and restore the Premises. In the event the Restoration Contractor determines that the work of repair and restoration shall
require more than three hundred sixty-five (365) days to complete, Tenant shall have the right to discuss such timing with the Restoration Contractor and, with the approval of
Landlord, to discuss modifications to the scope of work in an effort to reduce the repair and restoration time to a period of less than three hundred sixty-five days; provided, however,
that in the event of any disagreement between the parties as to the estimated length of the restoration period or the scope of work required, the determination of Landlord and the Restoration
Contractor shall control. 

22

  

 21.2    Uninsured Loss  

        If the Premises are damaged by any peril not covered by Landlord's property insurance, and the cost to repair such damage exceeds any amount Tenant may agree to
contribute, Landlord may elect either to commence promptly to repair and restore the Premises and prosecute the same diligently to completion, in which event this Lease shall remain in full force and
effect; or not to repair or restore the Premises, in which event this Lease shall terminate. Landlord shall give Tenant written notice of its intention within sixty (60) days after the Casualty
Discovery Date. If Landlord elects, in writing, not to restore the Premises, this Lease shall be deemed to have terminated as of the date on which Tenant surrenders possession of the Premises to
Landlord. 

 21.3    Casualty During Last Twelve Months of Term  

        If fifty percent (50%) or more of the Building is damaged or destroyed during the last twelve (12) months of the Term (unless Tenant has remaining
extension options and has previously validly exercised such options or validly exercises such options within ten (10) days after the Casualty Discovery Date), Landlord shall have the option to
terminate this Lease, exercisable by notice to Tenant within sixty (60) days after the Casualty Discovery Date. 

 21.4    Tenant's Right to Terminate Lease  

        If the Premises is damaged or destroyed to the extent that the Premises cannot be substantially repaired or restored by Landlord within three hundred
sixty-five (365) days after the Casualty Discovery Date, Tenant may terminate this Lease immediately upon notice thereof to Landlord, which notice shall be given, if at all, not
later than fifteen (15) days after Landlord notifies Tenant of Landlord's estimate of the period of time required to repair such damage or destruction. 

 21.5    Rent Abatement  

        In the event of repair and restoration as herein provided, the monthly installments of Base Rent and Additional Rent shall be abated proportionately to the extent
Tenant's use of the Premises is impaired during the period of such repair or restoration, but only to the extent of rental abatement insurance proceeds actually received by Landlord. The number of
parking spaces allocated to Tenant hereunder shall be reduced on a proportionate basis in the event any of the parking spaces in the Parking Areas are eliminated as a result of such damage or
destruction affecting such Parking Areas. Except as expressly provided above with respect to abatement of Base Rent, Tenant shall have no claim against Landlord for, and hereby releases Landlord and
Landlord's Agents from responsibility for and waives its entire claim of recovery for any cost, loss or expense suffered or incurred by Tenant as a result of any damage to or destruction of the
Premises, the Building or the Project or the repair or restoration thereof, including, without limitation, any cost, loss or expense resulting from any loss of use of the whole or any part of the
Premises, the Building or the Project and/or any inconvenience or annoyance occasioned by such damage, repair or restoration. 

 21.6    Restoration of Base Building Improvements and Tenant Improvements  

        If Landlord is obligated to or elects to repair or restore as herein provided, Landlord shall repair or restore only the Base Building Improvements constructed
pursuant to the terms of this Lease, substantially to their condition existing immediately prior to the occurrence of the damage or destruction; and Tenant shall promptly repair and restore, at
Tenant's expense, the Tenant Improvements and Tenant's Alterations. Landlord shall make available to Tenant to pay Restoration Costs (as hereinafter defined) any insurance proceeds actually collected
by Landlord allocable to the Tenant Improvements and Alterations. Such proceeds shall be disbursed by Landlord in accordance with customary construction-lending practices and disbursement procedures
(including, without 

23

 

limitation,
the creation of a retention). As used herein, "Restoration Costs" means costs actually incurred by Tenant in repairing and restoring the Tenant Improvements and any Alterations made by
Tenant to the Premises. 

 21.7    Waiver  

        Tenant hereby waives the provisions of California Civil Code Section 1932(2) and Section 1933(4) which permit termination of a lease upon
destruction of the leased premises, and the provisions of any similar law now or hereinafter in effect, and the provisions of this Paragraph 21 shall govern exclusively in case of such
destruction. 

22.   CONDEMNATION  

        (a)   If
twenty-five percent (25%) or more of the Building or fifty percent (50%) or more of the Designated Parking Areas (as hereinafter defined) is taken for any
public or quasi-public purpose by any lawful governmental power or authority, by exercise of the right of appropriation, inverse condemnation, condemnation or eminent domain, or sold to prevent such
taking (each such event being referred to as a "Condemnation"), Landlord may, at its option, terminate this Lease as of the date title vests in the condemning party. If twenty-five percent
(25%) or more of the Premises is taken and if the Premises remaining after such Condemnation and any repairs by Landlord would be untenantable for the conduct of Tenant's business operations, Tenant
shall have the right to terminate this Lease as of the date title vests in the condemning party. If either party elects to terminate this Lease as provided herein, such election shall be made by
written notice to the other party given within thirty (30) days after the nature and extent of such Condemnation have been finally determined. If neither Landlord nor Tenant elects to terminate
this Lease to the extent permitted above, Landlord shall promptly proceed to restore the Premises, to the extent of any Condemnation award received by Landlord, to substantially the same condition as
existed prior to such Condemnation, allowing for the reasonable effects of such Condemnation, and a proportionate abatement shall be made to the Base Rent and Additional Rent corresponding to the time
during which, and to the portion of the floor area of the Premises (adjusted for any increase thereto resulting from any reconstruction) of which, Tenant is deprived on account of such Condemnation
and restoration, as reasonably determined by Landlord. Except as expressly provided in the immediately preceding sentence with respect to abatement of Rent, Tenant shall have no claim against Landlord
for, and hereby releases Landlord and Landlord's Agents from responsibility for and waives its entire claim of recovery for any cost, loss or expense suffered or incurred by Tenant as a result of any
Condemnation or the repair or restoration of the Premises, the Building, the Project or the Parking Areas following such Condemnation, including, without limitation, any cost, loss or expense
resulting from any loss of use of the whole or any part of the Premises, the Building, the Project or the parking areas and/or any inconvenience or annoyance occasioned by such Condemnation, repair or
restoration. The provisions of California Code of Civil Procedure Section 1265.130, which allows either party to petition the Superior Court to terminate the Lease in the event of a partial
taking of the Premises, the Building or the Project or the parking areas for the Building or the Project, and any other applicable law now or hereafter enacted, are hereby waived by Tenant. 

        (b)   Landlord
shall be entitled to any and all compensation, damages, income, rent, awards, or any interest therein whatsoever which may be paid or made in connection with
any Condemnation, and Tenant shall have no claim against Landlord for the value of any unexpired term of this Lease or otherwise; provided, however, that Tenant shall be entitled to receive any award
separately allocated by the condemning authority to Tenant for Tenant's relocation expenses or the value of Tenant's Property (specifically excluding fixtures, Alterations and other components of the
Premises which under this Lease or by law are or at the expiration of the Term will become the property of Landlord), provided that such award does not reduce any award otherwise allocable or payable
to Landlord. 

24

 

23.   ASSIGNMENT AND SUBLETTING  

 23.1    Landlord's Consent Required Except for Permitted Transfers  

        Except as specifically provided for in Paragraph 23.3 below, Tenant shall not voluntarily or by operation of law, (1) mortgage, pledge, hypothecate
or encumber this Lease or any interest herein, (2) assign or transfer this Lease or any interest herein, (3) sublease the Premises or any part thereof, or any right or privilege
appurtenant thereto, or (4) allow any other person (the employees and invitees of Tenant excepted) to occupy or use the Premises, or any portion thereof, without first obtaining the written
consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed provided that Tenant is not then in Default under this Lease nor is any event then occurring which with
the giving of notice or the passage of time, or both, would constitute a Default hereunder. 

 23.2    Requirements of Request for Consent.  

        When Tenant requests Landlord's consent to such assignment or subletting, it shall notify Landlord in writing of the name and address of the proposed assignee or
subtenant and the nature and character of the business of the proposed assignee or subtenant and shall provide current and prior financial statements for the proposed assignee or subtenant prepared in
accordance with generally accepted accounting principles consistently applied ("GAAP"). Tenant shall also provide Landlord with a copy of the proposed sublease or assignment agreement, including all
material terms and conditions thereof,
and such additional information concerning the proposed assignee or subtenant as Landlord may request. Landlord shall have the option, to be exercised within fifteen (15) days of receipt of the
foregoing in the case of a proposed assignment or subletting affecting not more than twenty five thousand (25,000) square feet of the Premises, and within thirty (30) days of receipt of the
foregoing in the case of a proposed assignment or subletting affecting more than twenty five thousand (25,000) square feet ("Landlord's Review Period"), to (1) consent to the proposed
assignment or sublease, (2) refuse its consent to the proposed assignment or sublease, providing that such consent shall not be unreasonably withheld, conditioned or delayed so long as Tenant
is not then in Default under this Lease or the Expansion Lease, if any, nor is any event then occurring which with the giving of notice or the passage of time, or both, would constitute a Default
hereunder or under the Expansion Lease, or (3) sublease or take an assignment, as the case may be, from Tenant of the interest in this Lease and/or the Premises that Tenant proposes to assign
or sublease, on the same terms and conditions as stated in the proposed sublet or assignment agreement. Notwithstanding the foregoing, in the event Tenant wishes to assign or sublet all of the
Premises for all of the remainder of the Term (except in either event in connection with a Permitted Transfer), then in addition to the options specified in the aforesaid clauses (1), (2) and
(3), Landlord shall have the additional right, to be exercised within the aforesaid thirty (30) day period, to terminate this Lease in its entirety. In the event Landlord elects to terminate
this Lease or sublease or take an assignment from Tenant of the interest in this Lease and/or the Premises that Tenant proposes to assign or sublease as provided in the foregoing clauses of this
Paragraph 23.2, then Landlord shall have the additional right to negotiate directly with Tenant's proposed assignee or subtenant and to enter into a direct lease or occupancy agreement with
such party on such terms as shall be acceptable to Landlord in its sole and absolute discretion, and Tenant hereby waives any claims against Landlord related thereto, including, without limitation,
any claims for any compensation or profit related to such lease or occupancy agreement. 

 23.3    Criteria To Be Considered in Connection with Request for Consent  

        Without otherwise limiting the criteria upon which Landlord may withhold its consent to a proposed assignment or sublease, Landlord shall be entitled to consider
all reasonable criteria including, but not limited to, the following: (1) whether or not the proposed subtenant or assignee is engaged in a business which, and the Premises will be used in a
manner which, is in keeping with the 

25

 

then
character and nature of all other tenancies in the Project, (2) whether the use to be made of the Premises by the proposed subtenant or assignee will conflict with any
so-called "exclusive" use then in favor of any other tenant of the Building, the Project, or the Adjacent Properties, and whether such use would be prohibited by any other portion of this
Lease, including, but not limited to, any rules and regulations then in effect, or under applicable Laws, and whether such use imposes an unreasonable load upon the Premises and the Building and
Project services, (3) the business reputation of the proposed individuals who will be managing and operating the business operations of the assignee or subtenant, and the long-term
financial and competitive business prospects of the proposed assignee or subtenant, and (4) the creditworthiness and financial stability of the proposed assignee or subtenant in light of the
responsibilities involved. In any event, Landlord may withhold its consent to any assignment or sublease if the actual use proposed to be conducted in the Premises or portion thereof is not a
Permitted Use provided for under Paragraph 9 above or a general office use. 

 23.4    Permitted Transfers  

        Notwithstanding the foregoing, Tenant may, without Landlord's consent, but upon notice and delivery of evidence documenting such assignment or subletting, assign
or sublet to an Affiliate (as defined below) of the original Tenant (such assignment or subletting being referred to as a "Permitted Transfer"). In addition, a sale or transfer of the capital stock of
Tenant shall be deemed a Permitted Transfer if (1) such sale or transfer occurs in connection with any bona fide financing or capitalization for the benefit of Tenant or (2) occurring
through a public trade. For purposes of this Lease, "Affiliate" shall mean, as to any Person, any person, firm or corporation (i) which shall be controlled by, under the control of, or under
common control with such person, (ii) which results from a merger of, reorganization of, or consolidation with, or (iii) which acquires substantially all of the stock or assets with
respect to the business that is conducted in the Premises. "Person" means any natural person, corporation, firm, association, government, governmental agency or any other entity, whether acting in any
individual, fiduciary or other capacity. For purposes hereof, "control" shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a
person, firm or corporation, whether through the ownership of voting securities, by contract or otherwise. 

 23.5    Excess Rent  

        If Landlord approves an assignment or subletting as herein provided, Tenant shall pay to Landlord, as Additional Rent, fifty percent (50%) of the Transfer Profits
(as hereinafter defined), as evidenced by written records satisfactory to Landlord. As used herein, "Transfer Profits" means the difference, if any, between (1) the Base Rent plus Additional
Rent allocable to that part of the Premises affected by such assignment or sublease pursuant to the provisions of this Lease, and (2) the rent and any additional rent payable by the assignee or
sublessee to Tenant, less actual leasing commissions and reasonable attorneys' fees, if any, incurred by Tenant in connection with such assignment or sublease, and actual tenant improvement costs paid
by Tenant in improving the Premises for the applicable assignee or subtenant up to an aggregate of five dollars ($5.00) per square foot of space subject to the assignment or sublease transaction. The
assignment or sublease agreement, as the case may be, after approval by Landlord, shall not be amended without Landlord's prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed, shall contain an express assumption by the assignee or subtenant of Tenant's obligations under this Lease and shall contain a provision directing the assignee or subtenant to
pay the rent and other sums due thereunder directly to Landlord upon receiving written notice from Landlord that Tenant is in default under this Lease with respect to. the payment of Rent. In the
event that, notwithstanding the giving of such notice, Tenant collects any rent or other sums from the assignee or subtenant, then Tenant shall hold such sums in trust for the benefit of Landlord and
shall immediately forward the same to Landlord. Landlord's collection of such rent and other sums shall not constitute an acceptance by Landlord of attornment by such assignee or subtenant. 

26

 

A
consent to one assignment, subletting, occupation or use shall not be deemed to be a consent to any other or subsequent assignment, subletting, occupation or use, and consent to any assignment or
subletting shall in no way relieve Tenant of any liability under this Lease. Any assignment or subletting without Landlord's consent shall be void, and shall, at the option of Landlord, constitute a
Default under this Lease. 

 23.6    No Release of Tenant  

        Notwithstanding any assignment or subletting, including, without limitation, a Permitted Transfer, Tenant shall at all times remain fully responsible and liable
for the payment of the Rent and for compliance with all of Tenant's other obligations under this Lease (regardless of whether Landlord's approval has been obtained for any such assignment or
subletting). 

 23.7    Payment of Landlord's Fees  

        Tenant shall pay Landlord's reasonable fees (including, without limitation, the fees of Landlord's counsel, not to exceed $1,000.00 per transaction), incurred in
connection with Landlord's review and processing of documents regarding any proposed assignment or sublease. 

 23.8    No Consent to Further Assignment  

        Notwithstanding anything in this Lease to the contrary, in the event Landlord consents to an assignment or subletting by Tenant in accordance with the terms of
this Paragraph 23 (specifically excluding any Permitted Transfer), Tenant's assignee or subtenant shall have no right to further assign this Lease or any interest therein or thereunder or to
further sublease all or any portion of the Premises. 

 23.9    Constraints Reasonable  

        Tenant acknowledges and agrees that the restrictions, conditions and limitations imposed by this Paragraph 23 on Tenant's ability to assign or transfer
this Lease or any interest herein, to sublet the Premises or any part thereof, to transfer or assign any right or privilege appurtenant to the Premises, or to allow any other person to occupy or use
the Premises or any portion thereof, are, for the purposes of California Civil Code Section 1951.4, as amended from time to time, and for all other purposes, reasonable at the time that the
Lease was entered into, and shall be deemed to be reasonable at the time that Tenant seeks to assign or transfer this Lease or any interest herein, to sublet the Premises or any part thereof, to
transfer or assign any right or privilege appurtenant to the Premises, or to allow any other person to occupy or use the Premises or any portion thereof. 

24.   TENANT'S DEFAULT  

        The occurrence of any one of the following events shall constitute an event of default on the part of Tenant ("Default"): 

        (a)   The
vacation of the Premises for a consecutive period of sixty (60) days or more, without (i) the intention of retaking possession or occupancy, and
(ii) providing for the security of the Building, or the abandonment of the Premises by Tenant or any other vacation which would cause any insurance policy to be invalidated or otherwise lapse; 

        (b)   Failure
to pay any installment of Rent or any other monies due and payable hereunder within five (5) days after the date the same are due; 

        (c)   A
general assignment by Tenant for the benefit of creditors; 

27

 

        (d)   The
filing of a voluntary petition in bankruptcy by Tenant, the filing by Tenant of a voluntary petition for an arrangement, the filing by or against Tenant of a
petition, voluntary or involuntary, for reorganization, or the filing of an involuntary petition by the creditors of Tenant, said involuntary petition remaining undischarged for a period of sixty
(60) days; 

        (e)   Receivership,
attachment, or other judicial seizure of substantially all of Tenant's assets on the Premises, such attachment or other seizure remaining undismissed or
undischarged for a period of sixty (60) days after the levy thereof; 

        (f)    Death
or disability of Tenant, if Tenant is a natural person, or the failure by Tenant to maintain its legal existence, if Tenant is a corporation, partnership, limited
liability company, trust or other legal entity; 

        (g)   Failure
of Tenant to execute and deliver to Landlord any estoppel certificate, subordination agreement, or lease amendment in the time periods and manner required by
Paragraphs 30 or 31 or 42; 

        (h)   An
assignment or sublease, or attempted assignment or sublease, of this Lease or the Premises by Tenant contrary to the provisions of Paragraph 23, unless such
assignment or sublease is expressly conditioned upon Tenant having received Landlord's consent thereto; 

        (i)    Failure
of Tenant to deposit the Letter of Credit with Landlord when required under Paragraph 7, and/or failure of Tenant to restore the Letter of Credit to the
amount and within the time period provided in Paragraph 7; 

        (j)    Failure
in the performance of any of Tenant's covenants, agreements or obligations hereunder (except those failures specified as events of Default in any other
subparagraphs of this Paragraph 24, which shall be governed by such other subparagraphs), which failure continues for thirty (30) days after written notice thereof from Landlord to
Tenant, provided that, if Tenant has exercised reasonable diligence to cure such failure and such failure cannot be cured within such thirty (30) day period despite reasonable diligence, Tenant
shall not be in default under this subparagraph so long as Tenant thereafter diligently and continuously prosecutes the cure to completion; 

        (k)   Chronic
delinquency by Tenant in the payment of Rent, or any other periodic payments required to be paid by Tenant under this Lease. "Chronic delinquency" shall mean
failure by Tenant to pay Rent, or any other periodic payments required to be paid by Tenant under this Lease, when due (i) for any three (3) months (consecutive or nonconsecutive) during
any period of twelve (12) months or (ii) for any twelve (12) months (consecutive or nonconsecutive) during the Term. In the event of a Chronic Delinquency, in addition to
Landlord's other remedies for Default provided in this Lease, at Landlord's option, Landlord shall have the right to require that Rent be paid by Tenant quarterly, in advance; 

        (l)    Chronic
overuse by Tenant or Tenant's Agents of the number of undesignated parking spaces set forth in the Basic Lease Information. "Chronic overuse" shall mean use by
Tenant or Tenant's Agents of a number of parking spaces greater than the number of parking spaces set forth in the Basic Lease Information more than three (3) times during any twelve
(12) month period; 

        (m)  Any
insurance required to be maintained by Tenant pursuant to this Lease shall be canceled or terminated or shall expire or be reduced or materially changed, except as
permitted in this Lease, and shall not have been replaced with substitute insurance satisfying the requirements of this Lease within five (5) business days of Tenant's receipt of notice of such
termination, reduction or change; 

28

 

        (n)   Any
failure by Tenant to discharge any lien or encumbrance placed on the Project or any part thereof in violation of this Lease within ten (10) days after the
date such lien or encumbrance is filed or recorded against the Project or any part thereof; and 

        (o)   Any
Default (as defined in the 951 Gateway Lease) under the terms of the 951 Gateway Lease. 

        Tenant
agrees that any notice given by Landlord pursuant to Paragraph 24(j) above shall satisfy the requirements for notice under California Code of Civil Procedure
Section 1161, and Landlord shall not
be required to give any additional notice in order to be entitled to commence an unlawful detainer proceeding. 

25.   LANDLORD'S REMEDIES  

 25.1    Termination  

        In the event of any Default by Tenant, then in addition to any other remedies available to Landlord at law or in equity and under this Lease, Landlord shall have
the immediate option to terminate this Lease and all rights of Tenant hereunder by giving written notice of such intention to terminate. In the event that Landlord shall elect to so terminate this
Lease then Landlord may recover from Tenant: 

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

        (2)   the
worth at the time of award of the amount by which the unpaid Rent and any other sums due and payable which would have been earned after termination until the time of
award exceeds the amount of such rental loss 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 any other sums due and payable for the balance of the term of this Lease after the time of
award exceeds the amount of such rental 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 its obligations under this Lease or which in
the ordinary course would be likely to result therefrom, including, without limitation, (A) any costs or expenses incurred by Landlord (1) in retaking possession of the Premises;
(2) in maintaining, repairing, preserving, restoring, replacing, cleaning, altering, remodeling or rehabilitating the Premises or any affected portions of the Building or the Project, including
such actions undertaken in connection with the reletting or attempted reletting of the Premises to a new tenant or tenants; (3) for leasing commissions, advertising costs and other expenses of
reletting the Premises; or (4) in carrying the Premises, including taxes, insurance premiums, utilities and security precautions; (B) any unearned brokerage commissions paid in
connection with Tenant's lease of the Premises; (C) reimbursement of any previously waived or abated Base Rent or
Additional Rent or any free rent or reduced rental rate granted hereunder; and (D) any concession made or paid by Landlord to the benefit of Tenant in consideration of this Lease including, but
not limited to, any moving allowances, contributions, payments or loans by Landlord for tenant improvements or build-out allowances (including, without limitation, any unamortized portion
of the Tenant Improvement Allowance (such Tenant Improvement Allowance to be amortized over the Term in the manner reasonably determined by Landlord), if any), or assumptions by Landlord of any of
Tenant's previous lease obligations; plus 

        (5)   such
reasonable attorneys' fees incurred by Landlord as a result of a Default, and costs in the event suit is filed by Landlord to enforce such remedy; and plus 

29

 

        (6)   at
Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law. 

        As
used in subparagraphs (1) and (2) above, the "worth at the time of award" is computed by allowing interest at an annual rate equal to twelve percent (12%) per annum or
the maximum rate permitted by law, whichever is less. As used in subparagraph (3) above, the "worth at the time of award" 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 pertinent 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. 

 25.2    Continuation of Lease  

        In the event of any Default by Tenant, then in addition to any other remedies available to Landlord at law or in equity and under this Lease, Landlord shall have
the remedy described in California Civil Code Section 1951.4 (Landlord may continue this Lease in effect after Tenant's Default and abandonment and recover Rent as it becomes due, provided
Tenant has the right to sublet or assign, subject only to reasonable limitations). In addition, Landlord shall not be liable in any way whatsoever for its failure or refusal to relet the Premises;
provided, however, that the foregoing provision shall not be deemed to relieve Landlord of any duty under applicable law to mitigate Tenant's damages in the event Landlord elects to seek damages for
Tenant's breach or default. For purposes of this Paragraph 25.2, the following acts by Landlord will not constitute the termination of Tenant's right to possession of the Premises: 

        (1)   Acts
of maintenance or preservation or efforts to relet the Premises, including, but not limited to, alterations, remodeling, redecorating, repairs, replacements and/or
painting as Landlord shall consider advisable for the purpose of reletting the Premises or any part thereof, or 

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

 25.3    Re-entry  

        In the event of any Default by Tenant, Landlord shall also have the right, with or without terminating this Lease, in compliance with applicable law, to
re-enter the Premises and remove all persons and property from the Premises; such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account
of Tenant. 

 25.4    Reletting  

        In the event of the abandonment of the Premises by Tenant or in the event that Landlord shall elect to re-enter as provided in Paragraph 25.3
or shall take possession of the Premises pursuant to legal proceeding or pursuant to any notice provided by law, then if Landlord does not elect to terminate this Lease as provided in
Paragraph 25.1, Landlord may from time to time, without terminating this Lease, relet the Premises or any part thereof for such term or terms and at such rental or rentals and upon such other
terms and conditions as Landlord in its sole discretion may deem advisable with the right to make alterations and repairs to the Premises in Landlord's sole discretion. In the event that Landlord
shall elect to so relet, then rentals received by Landlord from such reletting shall be applied in the following order: (1) to reasonable attorneys' fees incurred by Landlord as a result of a
Default and costs in the event suit is filed by Landlord to enforce such remedies; (2) to the payment of any indebtedness other than Rent due hereunder from Tenant to Landlord; (3) to
the payment of any costs of such reletting; (4) to the payment of the costs of any alterations and repairs to the Premises; (5) to the payment of Rent due and unpaid hereunder; and
(6) the residue, if any, shall 

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be
held by Landlord and applied in payment of future Rent and other sums payable by Tenant hereunder as the same may become due and payable hereunder. Should that portion of such rentals received from
such reletting during any month, which is applied to the payment of Rent hereunder, be less than the Rent payable during the month by Tenant hereunder, then Tenant shall pay such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall also pay to Landlord, as soon as ascertained, any costs and expenses incurred by Landlord in such reletting or in making
such alterations and repairs not covered by the rentals received from such reletting. 

 25.5    Termination  

        No re-entry or taking of possession of the Premises by Landlord pursuant to this Paragraph 25 shall be construed as an election to terminate
this Lease unless a written notice of such intention is given to Tenant or unless the termination thereof is decreed by a court of competent jurisdiction. Notwithstanding any reletting without
termination by Landlord because of any Default by Tenant, Landlord may at any time after such reletting elect to terminate this Lease for any such Default. 

 25.6    Cumulative Remedies  

        The remedies herein provided are not exclusive and Landlord shall have any and all other remedies provided herein or by law or in equity. 

 25.7    No Surrender  

        No act or conduct of Landlord, whether consisting of the acceptance of the keys to the Premises, or otherwise, shall be deemed to be or constitute an acceptance
of the surrender of the Premises by Tenant prior to the expiration of the Term, and such acceptance by Landlord of surrender by Tenant shall only flow from and must be evidenced by a written
acknowledgment of acceptance of surrender signed by Landlord. The surrender of this Lease by Tenant, voluntarily or otherwise, shall not work a merger unless Landlord elects in writing that such
merger take place, but shall operate as an assignment to Landlord of any and all existing subleases, or Landlord may, at its option, elect in writing to treat such surrender as a merger terminating
Tenant's estate under this Lease, and thereupon Landlord may terminate any or all such subleases by notifying the sublessee of its election so to do within five (5) days after such surrender. 

26.   LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS  

 26.1    Landlord's Right to Perform  

        Without limiting the rights and remedies of Landlord contained in Paragraph 25 above, if Tenant shall be in Default in the performance of any of the terms,
provisions, covenants or conditions to be performed or complied with by Tenant pursuant to this Lease, then Landlord may at Landlord's option, without any obligation to do so, and without further
notice to Tenant perform any such term, provision, covenant, or condition, or make any such payment and Landlord by reason of so doing shall not be liable or responsible for any loss or damage thereby
sustained by Tenant or anyone holding under or through Tenant or any of Tenant's Agents, unless caused by Landlord's gross negligence or willful misconduct. 

 26.2    In Emergencies  

        Without limiting the rights of Landlord under Paragraph 25 above, Landlord shall have the right at Landlord's option, without any obligation to do so, to
perform any of Tenant's covenants or obligations under this Lease without notice to Tenant in the case of an emergency, as determined by Landlord in its good faith and absolute judgment, or if
Landlord otherwise determines in its reasonable discretion 

31

 

that
such performance is necessary or desirable for the preservation of the rights and interests or safety of other tenants of the Building or the Project. 

 26.3    Tenant's Obligation to Reimburse Landlord  

        If Landlord performs any of Tenant's obligations hereunder in accordance with this Paragraph 26, the full amount of the cost and expense incurred or the
payment so made or the amount of the loss so sustained shall immediately be owing by Tenant to Landlord, and Tenant shall promptly pay to Landlord upon demand, as Additional Rent, the full amount
thereof with interest thereon from the date of payment by Landlord at the lower of (l) twelve percent (12%) per annum, or (2) the highest rate permitted by applicable law. 

27.   ATTORNEYS' FEES  

 27.1    Prevailing Party Entitled to Fees  

        If either party hereto fails to perform any of its obligations under this Lease or if any dispute arises between the parties hereto concerning the meaning or
interpretation of any provision of this Lease,
then the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party on account of such default and/or in
enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorneys' fees and disbursements. Any such attorneys' fees and other expenses incurred by
either party in enforcing a judgment in its favor under this Lease shall be recoverable separately from and in addition to any other amount included in such judgment, and such attorneys' fees
obligation is intended to be severable from the other provisions of this Lease and to survive and not be merged into any such judgment. 

 27.2    Costs of Collection  

        Without limiting the generality of Paragraph 27.1 above, if Landlord utilizes the services of an attorney for the purpose of collecting any Rent due and
unpaid by Tenant or in connection with any other breach of this Lease by Tenant, Tenant agrees to pay Landlord reasonable attorneys' fees as determined by Landlord for such services, regardless of the
fact that no legal action may be commenced or filed by Landlord. 

28.   TAXES  

        Tenant shall be liable for and shall pay, prior to delinquency, all taxes levied against Tenant's Property. If any Alteration or Tenant Improvement installed by
Tenant pursuant to Paragraph 12 or any of Tenant's Property is assessed and taxed with the Project or Building, Tenant shall pay such taxes to Landlord, in an amount reasonably determined by
Landlord if such taxes are not separately stated in the applicable tax bill, within ten (10) days after delivery to Tenant of a statement therefor. 

32

   29.   EFFECT OF CONVEYANCE  

        The term "Landlord" as used in this Lease means, from time to time, the then current owner of the Building or the Project containing the Premises, so that, in the
event of any sale of the Building or the Project, Landlord shall be and hereby is entirely freed and relieved of all covenants and obligations of Landlord arising hereunder from and after the date of
such transfer, and it shall be deemed and construed, without further agreement between the parties and the purchaser at any such sale, that the purchaser of the Building or the Project has assumed and
agreed to carry out any and all covenants and obligations of Landlord hereunder. 

30.   TENANT'S ESTOPPEL CERTIFICATE  

        From time to time, upon written request of Landlord, Tenant shall execute, acknowledge and deliver to Landlord or its designee, a written certificate stating
(a) the date this Lease was executed, the Commencement Date of the Term and the date the Term expires; (b) the date Tenant entered into occupancy of the Premises; (c) the amount
of Rent and the date to which such Rent has been paid; (d) that this Lease is in full force and effect and has not been assigned, modified, supplemented or amended in any way (or, if assigned,
modified, supplemented or amended, specifying the date and terms of any agreement so affecting this Lease); (e) that this Lease represents the entire agreement between the parties with respect
to Tenant's right to use and occupy the Premises (or specifying such other agreements, if any); (f) that all obligations under this Lease to be performed by Landlord as of the date of such
certificate have been satisfied (or specifying those as to which Tenant claims that Landlord has yet to perform); (g) that all required contributions by Landlord to Tenant on account of
Tenant's improvements have been received (or stating exceptions thereto); (h) that on such date there exist no defenses or offsets that Tenant has against the enforcement of this Lease by
Landlord (or stating exceptions thereto); (i) that no Rent or other sum payable by Tenant hereunder has been paid more than one (1) month in advance (or stating exceptions thereto);
(j) that a currently valid Letter of Credit has been deposited with Landlord, stating the original amount thereof and any increases or decreases thereto; and (k) any other matters
evidencing the status of this Lease that may be required either by a lender making a loan to Landlord to be secured by a deed of trust covering the Building or the Project or by a purchaser of the
Building or the Project. Any such certificate delivered pursuant to this Paragraph 30 may be relied upon by a prospective purchaser of Landlord's interest or a mortgagee of Landlord's interest
or assignee of any mortgage upon Landlord's interest in the Premises. If Tenant shall fail to provide such certificate within ten (10) days of receipt by Tenant of a written request by Landlord
as herein provided, such failure shall, at Landlord's election, constitute a Default under this Lease, and Tenant shall be deemed to have given such certificate as above provided without modification
and shall be deemed to have admitted the accuracy of any information supplied by Landlord to a prospective purchaser or mortgagee. 

31.   SUBORDINATION  

        Landlord shall have the right to cause this Lease to be and remain subject and subordinate to any and all mortgages, deeds of trust and ground leases, if any
("Encumbrances") that are now or may hereafter be executed covering the Premises, or any renewals, modifications, consolidations, replacements or extensions thereof, for the full amount of all
advances made or to be made thereunder and without regard to the time or character of such advances, together with interest thereon and subject to all the terms and provisions thereof; provided only,
and as an express condition precedent to any such subordination of this Lease to an Encumbrance hereafter executed covering the Premises, that the holder of such Encumbrance ("Holder") shall agree to
recognize Tenant's rights under this Lease upon the foreclosure or termination, as applicable, of such Encumbrance as long as Tenant shall pay the Rent and observe and perform all the provisions of
this Lease to be observed and performed by Tenant. Within ten (10) days after Landlord's written request, Tenant shall execute, acknowledge and 

33

 

deliver
any and all reasonable documents required by Landlord or the Holder to effectuate such subordination, provided that, concurrently with the execution of such subordination documents, the Holder
shall execute a nondisturbance agreement in favor of Tenant consistent with the terms of this Paragraph 31. If Tenant fails to do so, such failure shall constitute a Default by Tenant under
this Lease. Notwithstanding anything to the contrary set forth in this Paragraph 31, Tenant hereby attorns and agrees to attorn to any person or entity purchasing or otherwise acquiring the
Premises at any sale or other proceeding or pursuant to the exercise of any other rights, powers or remedies under such Encumbrance. 

32.   ENVIRONMENTAL COVENANTS  

 32.1    Disclosure Certificate  

        Prior to executing this Lease, Tenant has completed, executed and delivered to Landlord a Hazardous Materials Disclosure Certificate ("Initial Disclosure
Certificate"), a fully completed copy of which is attached hereto as Exhibit D and incorporated herein by this reference. Tenant covenants,
represents and warrants to Landlord that the information on the Initial Disclosure Certificate is, to the best of
Tenant's knowledge, true and correct and accurately describes the Hazardous Materials which will be treated, used or stored on or about the Premises by Tenant or Tenant's Agents. 

 32.2    Tenant's Obligation to Update Disclosure Certificate  

        Tenant shall, on a semi-annual basis, complete, execute and deliver to Landlord an updated Disclosure Certificate (each, an "Updated Disclosure
Certificate") describing Tenant's then current and proposed future uses of Hazardous Materials on or about the Premises, which Updated Disclosure Certificates shall be in the same format as that which
is set forth in Exhibit D or in such updated format as Landlord may require from time to time. Landlord shall have the right to approve or
disapprove such new or additional Hazardous Materials in its sole and absolute discretion. Tenant shall make no use of Hazardous Materials on or about the Premises except as described in the Initial
Disclosure Certificate or as otherwise approved by Landlord in writing in accordance with this Paragraph 32.2. 

 32.3    Definition of Hazardous Materials  

        As used in this Lease, the term "Hazardous Materials" shall mean and include any substance that is or contains (1) any "hazardous substance" as now or
hereafter defined in § 101(14) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended ("CERCLA") (42 U.S.C. § 9601 et seq.) or any
regulations promulgated under CERCLA; (2) any "hazardous waste" as now or hereafter defined in the Resource Conservation and Recovery Act, as amended ("RCRA") (42 U.S.C. § 6901 et
seq.) or any regulations promulgated under RCRA; (3) any substance now or hereafter regulated by the Toxic Substances Control Act, as amended ("TSCA") (15 U.S.C. § 2601 et seq.) or
any regulations promulgated under TSCA; (4) petroleum, petroleum by-products, gasoline, diesel fuel, or other petroleum hydrocarbons; (5) asbestos and asbestos-containing
material, in any form, whether friable or non-friable; (6) polychlorinated biphenyls; (7) lead and lead-containing materials; or (8) any additional
substance, material or waste (A) the presence of which on or about the Premises (i) requires reporting, investigation or remediation under any Environmental Laws (as hereinafter
defined), (ii) causes or threatens to cause a nuisance on the Premises or any adjacent area or property or poses or threatens to pose a hazard to the health or safety of persons on the Premises
or any adjacent area or property, or (iii) which, if it emanated or migrated from the Premises, could constitute a trespass, or (B) which is now or is hereafter classified or considered
to be hazardous or toxic under any Environmental Laws. Landlord hereby notifies Tenant in accordance with California Health & Safety Code Section 25359.7 that in 1981-82, the
Project was 

34

 

the
subject of a state-supervised cleanup of hazardous waste disposed of on the site by prior occupants. As part of the cleanup approved by the applicable agencies, some soils containing heavy metals
were left in place, covered by clean fill. These soils are managed in accordance with the requirements of the applicable agencies and a Declaration of Covenants, Conditions and Restrictions imposed by
Homart Development Co. 

 32.4    Definition of Environmental Laws  

        As used in this Lease, the term "Environmental Laws" shall mean and include (1) CERCLA, RCRA and TSCA; and (2) any other federal, state or local
laws, ordinances, statutes, codes, rules, regulations, orders or decrees now or hereinafter in effect relating to (A) pollution, (B) the protection or regulation of human health, natural
resources or the environment, (C) the treatment, storage or disposal of Hazardous Materials, or (D) the emission, discharge, release or threatened release of Hazardous Materials into the
environment. 

 32.5    Tenant's Use of Hazardous Materials  

        Tenant agrees that during its use and occupancy of the Premises it will (1) not (A) introduce any Hazardous Materials on or about the Premises
except in a manner and quantity necessary for the ordinary performance of Tenant's business or (B) release, discharge or dispose of any Hazardous Materials on, in, at, under, or emanating from,
the Premises, the Building or the Project; (2) comply with all Environmental Laws relating to Tenant's use of Hazardous Materials in, on or about the Premises and not engage in or permit
Tenant's Agents to engage in any activity in, on or about the Premises in violation of any Environmental Laws; and (3) immediately notify Landlord of (A) any inquiry, test, investigation
or enforcement proceeding by any governmental agency or authority against Tenant, Landlord or the Premises, Building or Project relating to any Hazardous Materials or under any Environmental Laws or
(B) the occurrence of any event or existence of any condition that would cause a breach of any of the covenants set forth in this Paragraph 32. 

 32.6    Tenant's Remediation Obligations  

        If Tenant's use of Hazardous Materials on or about the Premises results in a release, discharge or disposal of Hazardous Materials on, in, at, under, or emanating
from, the Premises, the Building or the Project, Tenant agrees to investigate, clean up, remove or remediate such Hazardous Materials in full compliance with (1) the requirements of
(A) all Environmental Laws and (B) any governmental agency or authority responsible for the enforcement of any Environmental Laws; and (2) any additional requirements of Landlord
that are reasonably necessary to protect the value of the Premises, the Building or the Project. 

 32.7    Landlord's Inspections  

        Upon twenty-four (24) hours' notice to Tenant (except in the case of an emergency, in which event no advance notice shall be required),
Landlord may inspect the Premises and surrounding areas for the purpose of determining whether there exists on or about the Premises any Hazardous Material or other condition or activity that is in
violation of the requirements of this Lease or of any Environmental Laws. Such inspections may include, but are not limited to, entering upon the property adjacent to or surrounding the Premises with
drill rigs or other machinery for the purpose of obtaining laboratory samples. Landlord shall not be limited in the number of such inspections during the Term of this Lease. In the event
(1) such inspections reveal the presence of any such Hazardous Material or other condition or activity caused by Tenant or its Agents in violation of the requirements of this Lease or of any
Environmental Laws, or (2) Tenant or its Agents contribute or knowingly consent to the importation of any Hazardous Materials in, on, under, through or about the Premises, the Building or the
Project or, through their actions, exacerbate the condition of or the conditions caused by any 

35

 

Hazardous
Materials in, on, under, through or about the Premises, the Building or the Project, Tenant shall reimburse Landlord for the cost of such inspections within ten (10) days of receipt
of a written statement therefor. Tenant will supply to Landlord such historical and operational information regarding the Premises and surrounding areas as may be reasonably requested to facilitate
any such inspection and will make available for meetings appropriate personnel having knowledge of such matters. In the event Tenant vacates the Premises prior to the Expiration Date, Tenant shall
give Landlord at least sixty (60) days' prior notice of its intention to vacate the Premises so that Landlord will have an opportunity to perform such an inspection prior to such vacation. The
right granted to Landlord herein to perform inspections shall not create a duty on Landlord's part to inspect the Premises, or liability on the part of Landlord for Tenant's use, storage, treatment or
disposal of Hazardous Materials, it being understood that Tenant shall be solely responsible for all liability in connection therewith. 

 32.8    Landlord's Right to Remediate  

        Landlord shall have the right, but not the obligation, prior or subsequent to a Default, without in any way limiting Landlord's other rights and remedies under
this Lease, to enter upon the Premises, or to take such other actions as it deems necessary or advisable, to investigate, clean up, remove or remediate any Hazardous Materials or contamination by
Hazardous Materials present on, in, at, under, or emanating from, the Premises, the Building or the Project in violation of Tenant's obligations under this Lease or under any Environmental Laws.
Notwithstanding any other provision of this Lease, Landlord shall also have the right, at its election, in its own name or as Tenant's agent, to negotiate, defend, approve and appeal, at Tenant's
expense, any action taken or order issued by any governmental agency or authority with regard to any such Hazardous Materials or contamination by Hazardous
Materials. All reasonable costs and expenses paid or incurred by Landlord in the exercise of the rights set forth in this Paragraph 32 shall be payable by Tenant upon demand. 

 32.9    Condition of Premises Upon Expiration or Termination  

        Tenant shall surrender the Premises to Landlord upon the expiration or earlier termination of this Lease free of debris, waste or Hazardous Materials placed on,
about or near the Premises by Tenant or Tenant's Agents, and in a condition which complies with (i) all Environmental Laws, and (ii) any additional requirements of Landlord that are
reasonably necessary to protect the value of the Premises, the Building or the Project, including, without limitation, the obtaining of any closure permits or other governmental permits or approvals
related to Tenant's use of Hazardous Materials in or about the Premises. Tenant's obligations and liabilities pursuant to the provisions of this Paragraph 32 shall survive the expiration or
earlier termination of this Lease. 

 32.10    Tenant's Indemnification of Landlord  

        Tenant agrees to indemnify and hold harmless Landlord from and against any and all claims, losses (including, without limitation, loss in value of the Premises,
the Building or the Project and any losses to Landlord due to lost opportunities to lease any portions of the Premises to succeeding tenants due to the failure of Tenant to surrender the Premises upon
the expiration or sooner termination of this Lease in accordance with the provisions of Paragraph 32.9 above), liabilities and expenses (including attorneys' fees) sustained by Landlord
attributable to (1) any Hazardous Materials placed on or about the Premises, the Building or the Project by Tenant or Tenant's Agents, or (2) Tenant's breach of any provision of this
Paragraph 32. 

 32.11    Landlord's Indemnification of Tenant  

        Landlord agrees to indemnify and hold harmless Tenant from and against any and all claims, losses, liabilities and expenses (including attorneys' fees, but
specifically excluding lost profits and 

36

 

consequential
damages) actually sustained by Tenant attributable to any Hazardous Materials placed on or about the Premises, the Building or the Project by Landlord or Landlord's Agents, except to the
extent the condition thereof has been exacerbated by Tenant or Tenant's Agents. 

 32.12    Limitation of Tenant's Liability  

        Notwithstanding anything in this Lease to the contrary, Tenant shall not be responsible for the clean up or remediation of, and shall not be required to indemnify
Landlord against any costs or liabilities attributable to, contamination by Hazardous Materials during the Term caused by third parties or Hazardous Materials place on or about the Premises
(i) prior to the Commencement Date by third parties not related to Tenant or Tenant's Agents, or (ii) by Landlord at any time, except in any of the foregoing cases to the extent that
Tenant or Tenant's Agents have contributed to or exacerbated the presence of such Hazardous Materials. 

 32.13    Survival  

        The provisions of this Paragraph 32 shall survive the expiration or earlier termination of this Lease. 

33.   NOTICES  

        All notices and demands which are required or may be permitted to be given to either party by the other hereunder shall be in writing and shall be sent by United
States mail, postage prepaid, certified, or by personal delivery or overnight courier, addressed to the addressee at Tenant's Address or Landlord's Address as specified in the Basic Lease Information,
or to such other place as either party
may from time to time designate in a notice to the other party given as provided herein. Copies of all notices and demands given to Landlord shall additionally be sent to Landlord's property manager
at the address specified in the Basic Lease Information or at such other address as Landlord may specify in writing from time to time. Notice shall be deemed given upon actual receipt (or attempted
delivery if delivery is refused), if personally delivered, or one (1) business day following deposit with a reputable overnight courier that provides a receipt, or on the third (3rd) day
following deposit in the United States mail in the manner described above. 

34.   WAIVER  

        The waiver of any breach of any term, covenant or condition of this Lease shall not be deemed to be a waiver of such term, covenant or condition or of any
subsequent breach of the same or any other term, covenant or condition herein contained. The subsequent acceptance of Rent by Landlord shall not be deemed to be a waiver of any preceding breach by
Tenant, other than the failure of Tenant to pay the particular rental so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such Rent. No delay or
omission in the exercise of any right or remedy of Landlord in regard to any Default by Tenant shall impair such a right or remedy or be construed as a waiver. Any waiver by Landlord of any Default
must be in writing and shall not be a waiver of any other Default concerning the same or any other provisions of this Lease. 

35.   HOLDING OVER  

        Any holding over after the expiration of the Term, without the express written consent of Landlord, shall constitute a Default and, without limiting Landlord's
remedies provided in this Lease, such holding over shall be construed to be a tenancy at sufferance, at a rental rate equal to the greater of one hundred fifty percent (150%) of (i) the fair
market rental value for the Premises as determined by Landlord or (ii) the Base Rent last due in this Lease, plus Additional Rent, and shall otherwise be on the terms and conditions herein
specified, so far as applicable; provided, however, in no event shall 

37

 

any
renewal or extension option or other similar right or option contained in this Lease be deemed applicable to any such tenancy at sufferance. If the Premises are not surrendered at the end of the
Term or sooner termination of this Lease, and in accordance with the provisions of Paragraphs 11 and 32.9, Tenant shall indemnify, defend and hold Landlord harmless from and against any and all loss
or liability resulting from delay by Tenant in so surrendering the Premises including, without limitation, any loss or liability resulting from any claim against Landlord made by any succeeding tenant
or prospective tenant caused by such delay and losses to Landlord due to lost opportunities to lease any portion of the Premises to any such succeeding tenant or prospective tenant, together with, in
each case, actual attorneys' fees and costs. 

36.   SUCCESSORS AND ASSIGNS  

 36.1    Binding on Successors, Etc.  

        The terms, covenants and conditions of this Lease shall, subject to the provisions as to assignment, apply to and bind the heirs, successors, executors,
administrators and assigns of all of the parties hereto. If Tenant shall consist of more than one entity or person, the obligations of Tenant under this Lease shall be joint and several. 

 36.2    Landlord's Right to Sell  

        Notwithstanding anything in this Lease to the contrary, Landlord shall have the right to sell, transfer or otherwise convey, either separately or jointly, its
interest in the Building and/or the Project, and all of Landlord's related rights and obligations hereunder, to any Person. 

37.   TIME  

        Time is of the essence of this Lease and each and every term, condition and provision herein. 

38.   BROKERS  

        Landlord and Tenant each represents and warrants to the other that neither it nor its officers or agents nor anyone acting on its behalf has dealt with any real
estate broker other than BT Commercial ("Broker") in relation to Tenant's lease of the Premises and/or the negotiating or making of this Lease, and each party agrees to indemnify and hold harmless the
other from any claim or claims, and costs and expenses, including attorneys' fees, incurred by the indemnified party in conjunction with any such
claim or claims of any other broker or brokers to a commission in connection with this Lease as a result of the actions of the indemnifying party. Landlord has paid BT Commercial a brokerage
commissions in the amount of Five Hundred Fifty-Two Thousand One Hundred Forty ($552,140.00) in relation to Tenant's lease of the Premises. Nothing contained herein shall restrict Landlord
from paying any fees owed by Landlord in connection with Tenant's lease of the Premises and/or the execution of this Lease to any constituent partner of Landlord (or any Affiliate of any such partner)
and to any consultants providing services to Landlord in connection with the Project. 

39.   LIMITATION OF LIABILITY  

        Tenant agrees that, in the event of any default or breach by Landlord with respect to any of the terms of this Lease to be observed and performed by Landlord or
with respect to the enforcement of an indemnity obligation of Landlord under this Lease (1) Tenant shall look solely to the then-current landlord's interest in the Building for the
satisfaction of such indemnity obligation of Landlord or for satisfaction of Tenant's remedies for the collection of a judgment (or other judicial process) requiring the payment of money by Landlord;
(2) no other property or assets of Landlord, its partners, shareholders, officers, directors, employees, investment advisors, or any successor in interest of any of 

38

 

them
(collectively, the "Landlord Parties") shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies; (3) no personal liability shall at any
time be asserted or enforceable against the Landlord Parties; and (4) no judgment will be taken against the Landlord Parties (except for a judgment against Landlord which is enforceable only to
the extent of Landlord's interest in the Building). The provisions of this Paragraph shall apply only to the Landlord and the parties herein described, and shall not be for the benefit of any insurer
nor any other third party. 

40.   FINANCIAL STATEMENTS  

        Within ten (10) days after Landlord's request, Tenant shall deliver to Landlord the then current, or if Tenant is a publicly traded company, the publicly
available financial statements of Tenant (including interim periods following the end of the last fiscal year for which annual statements are available), prepared, compiled or reviewed by a certified
public accountant, including a balance sheet and profit and loss statement for the most recent prior year, all prepared in accordance with GAAP. 

41.   RULES AND REGULATIONS  

        Tenant agrees to comply with such reasonable rules and regulations as Landlord may adopt from time to time for the orderly and proper operation of the Building
and the Project. Such rules may include but shall not be limited to the following: (a) restriction of employee parking to a limited, designated area or areas in reasonable proximity to the
Building; and (b) regulation of the removal, storage and disposal of Tenant's refuse and other rubbish at the sole cost and expense of Tenant. The then current rules and regulations shall be
binding upon Tenant upon delivery of a copy of them to Tenant. Landlord shall not be responsible to Tenant for the failure of any other person to observe and abide by any of said rules and
regulations; provided, however, Landlord shall enforce such rules and regulation in a non-discriminatory manner. Landlord's current rules and regulations are attached to this Lease as  Exhibit C.

42.   MORTGAGEE PROTECTION  

 42.1    Modifications for Lender  

        If, in connection with obtaining financing for the Project or any portion thereof, Landlord's lender shall request reasonable modifications to this Lease as a
condition to such financing, Tenant shall not unreasonably withhold, delay or defer its consent to such modifications, provided such modifications do not materially adversely affect Tenant's rights or
increase Tenant's obligations under this Lease. 

 42.2    Rights to Cure  

        Tenant agrees to give to any trust deed or mortgage holder ("Holder"), by registered mail, at the same time as it is given to Landlord, a copy of any notice of
default given to Landlord, provided that prior to such notice Tenant has been notified, in writing, (by way of notice of assignment of rents and leases, or otherwise) of the address of such Holder.
Tenant further agrees that if Landlord shall have failed to cure such default within the time provided for in this Lease, then the Holder shall have an additional twenty (20) days after
expiration of such period, or after receipt of such notice from Tenant (if such notice to the Holder is required by this Paragraph 42.2), whichever shall last occur within which to cure such
default or if such default cannot be cured within that time, then such additional time as may be necessary if within such twenty (20) days, any Holder has commenced and is diligently pursuing
the remedies necessary to cure such default (including, but not limited to, commencement of foreclosure proceedings, if necessary to effect such cure), in which event there shall be no default under
this Lease. 

39

 

43.   ENTIRE AGREEMENT  

        This Lease, including the Exhibits and any Addenda attached hereto, which are hereby incorporated herein by this reference, contains the entire agreement of the
parties hereto, and no representations, inducements, promises or agreements, oral or otherwise, between the parties, not embodied herein or therein, shall be of any force and effect. 

44.   INTEREST  

        Any installment of Rent and any other sum due from Tenant under this Lease which is not received by Landlord when due shall bear interest from the date such
payment was originally due under this Lease until paid at an annual rate equal to the maximum rate of interest permitted by law. Payment of such interest shall not excuse or cure any Default by
Tenant. In addition, Tenant shall pay all costs and reasonable attorneys' fees incurred by Landlord in collection of such amounts. 

45.   INTERPRETATION  

        This Lease shall be construed and interpreted in accordance with the laws of the State of California. The parties acknowledge and agree that no rule of
construction to the effect that any ambiguities are to be resolved against the drafting party shall be employed in the interpretation of this Lease, including the Exhibits and any Addenda attached
hereto. All captions in this Lease are for reference only and shall not be used in the interpretation of this Lease. Whenever required by the context of this Lease, the singular shall include the
plural, the masculine shall include the feminine, and vice versa. If any provision of this Lease shall be determined to be illegal or unenforceable, such determination shall not affect any other
provision of this Lease and all such other provisions shall remain in full force and effect. Unless otherwise specifically stated herein to the contrary, Landlord's consent may be given or withheld in
Landlord's sole and absolute discretion. 

46.   REPRESENTATIONS AND WARRANTIES  

 46.1    Of Tenant  

        Tenant hereby makes the following representations and warranties, each of which is material and being relied upon by Landlord, is true in all respects as of the
date of this Lease, and shall survive the expiration or termination of the Lease. 

        (1)   If
Tenant is an entity, Tenant is duly organized, validly existing and in good standing under the laws of the state of its organization and the persons executing this
Lease on behalf of Tenant have the full right and authority to execute this Lease on behalf of Tenant and to bind Tenant without the consent or approval of any other person or entity. Tenant has full
power, capacity, authority and legal right to execute and deliver this Lease and to perform all of its obligations hereunder. This Lease is a legal, valid and binding obligation of Tenant, enforceable
in accordance with its terms. 

        (2)   Tenant
has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of an
involuntary petition by any creditors, (iii) suffered the appointment of a receiver to take possession of all or substantially all of its assets, (iv) suffered the attachment or other
judicial seizure of all or substantially all of its assets, (v) admitted in writing its inability to pay its debts as they come due, or (vi) made an offer of settlement, extension or
composition to its creditors generally. 

40

 

 46.2    Of Landlord  

        Landlord hereby makes the following representations and warranties, each of which is material and being relied upon by Tenant, is true in all respects as of the
date of this Lease, and shall survive the expiration or termination of the Lease. 

        (1)   If
Landlord is an entity, Landlord is duly organized, validly existing and in good standing under the laws of the state of its organization and the persons executing
this Lease on behalf of Landlord have the full right and authority to execute this Lease on behalf of Landlord and to bind Landlord without the consent or approval of any other person or entity.
Landlord has full power, capacity, authority and legal right to execute and deliver this Lease and to perform all of its obligations hereunder. This Lease is a legal, valid and binding obligation of
Landlord, enforceable in accordance with its terms. 

        (2)   Landlord
has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of an
involuntary petition by any creditors, (iii) suffered the appointment of a receiver to take possession of all or substantially all of its assets, (iv) suffered the attachment or other
judicial seizure of all or substantially all of its assets, (v) admitted in writing its inability to pay its debts as they come due, or (vi) made an offer of settlement, extension or
composition to its creditors generally. 

47.   SECURITY  

 47.1    Landlord Not Obligated to Provide Security  

        Tenant acknowledges and agrees that, while Landlord may engage security personnel to patrol the Building or the Project, Landlord is not required to provide any
security services with respect to the Premises, the Building or the Project and that Landlord shall not be liable to Tenant for, and Tenant waives any claim against Landlord with respect to, any loss
by theft or any other damage suffered or incurred by Tenant in connection with any unauthorized entry into the Premises or any other breach of security with respect to the Premises, the Building or
the Project. 

 47.2    Tenant's Obligation to Comply with Security Measures  

        Tenant hereby agrees to the exercise by Landlord and Landlord's Agents, within their sole discretion, of such security measures as, but not limited to, the
evacuation of the Premises, the Building or the Project for cause, suspected cause or for drill purposes, the denial of any access to the Premises, the Building or the Project and other similarly
related actions that it deems necessary to prevent any threat of property damage or bodily injury. The exercise of such security measures by Landlord and Landlord's Agents, and the resulting
interruption of service and cessation of Tenant's business, if any, shall not be deemed an eviction or disturbance of Tenant's use and possession of the Premises, or any part thereof, or render
Landlord or Landlord's Agents liable to Tenant for any resulting damages, or relieve Tenant from Tenant's obligations under this Lease. 

48.   JURY TRIAL WAIVER  

        Landlord and Tenant each hereby waive any right to trial by jury with respect to any action or proceeding (i) brought by Landlord, Tenant or any other
party, relating to (A) this Lease and/or any understandings or prior dealings between the parties hereto, or (B) the Premises, the Building or the Project or any part thereof, or
(ii) to which Landlord is a party. The parties each hereby agree that this Lease constitutes a written consent to waiver of trial by jury pursuant to the provisions of California Code of Civil
Procedure Section 631. 

41

 

49.   OPTION TO RENEW  

        Tenant shall have two (2) options (each a "Renewal Option") to extend the Term of this Lease with respect to the entire Premises (including, without
limitation, the "951 Gateway Premises"), for successive periods of five (5) years each (each a "Renewal Term"). Each Renewal Option shall be effective only if (i) Tenant is not in
Default under this Lease and no event has occurred which with the giving of notice or the passage of time, or both, would constitute a Default hereunder, either at the time of exercise of the Renewal
Option or the time of commencement of the Renewal Term, and (ii) concurrently with the exercise of each such Renewal Option hereunder, Tenant validly exercises the corresponding renewal option
contained in Paragraph 49 of the 951 Gateway Lease. 

 49.1    Commencement Dates  

        If Tenant exercises the first Renewal Option in accordance herewith, the first Renewal Term shall commence on the day following the last day of the initial Term
and end on the day preceding the fifth anniversary thereof. If Tenant exercises the second Renewal Option, the second Renewal Term shall commence on the day following the last day of the first Renewal
Term and end on the day preceding the fifth anniversary thereof. The second Renewal Option may not be exercised unless Tenant has previously exercised the first Renewal Option hereunder and under the
951 Gateway Lease. Each Renewal Term, if properly exercised, shall be upon the same terms and conditions as the Lease except for Monthly Base Rent (which shall be determined as provided in the
following provisions of this Paragraph). 

 49.2    Renewal Option is Personal; Non-Transferable  

        The Renewal Option shall be personal to Tenant, any transferee under a Permitted Transfer, and any assignee to whom Tenant assigns its entire right, title and
interest under, or any sublessee to whom Tenant subleases the entire Premises for the entire remaining Term of, this Lease, and shall not be assignable or otherwise transferable in whole or in part,
voluntarily or by operation of law, to any other permitted assignee, subtenant or other third parties and there shall be no further Renewal Option beyond the expiration of the second Renewal Term. 

 49.3    Tenant's Notice of Exercise  

        In order to exercise a Renewal Option, Tenant shall give written notice to Landlord of Tenant's exercise of such election ("Tenant's Notice") at least ten
(10) months prior to expiration of the then current Term and if such notice is not so given, the Renewal Option shall lapse; the Tenant hereby expressly acknowledges and agrees that time is of
the essence for purposes of notice of exercise of a Renewal Option and that Tenant's failure to do so by said date will relieve Landlord of any obligation under this Paragraph. If Tenant gives such
notice within the time prescribed, Landlord and Tenant shall be deemed to have entered into an extension of this Lease for a five (5) year extended term on the terms and conditions set forth
herein. 

 49.4    Monthly Base Rent During Renewal Term  

        The Monthly Base Rent payable during any Renewal Term shall be an amount equal to the greater of (i) the Monthly Base Rent payable for the last month of
the then expiring Term (provided that such Monthly Base Rent shall be increased during each year of the Renewal Term to an amount equal to one hundred three percent (103%) of the Monthly Base Rent
payable during the immediately preceding term), or (ii) ninety-five percent (95%) of the Fair Market Rent (as hereinafter defined) for the Premises during such Renewal Term. 

42

 

 49.4.1.    Fair Market Rent Definition  

        "Fair Market Rent" shall mean the rate being charged for comparable office/R&D/laboratory space in comparable locations in the South San Francisco/Brisbane market
area, taking into consideration: tenant credit, tenant improvements or allowances provided or to be provided and leasing commissions, but specifically excluding any specialized laboratory
improvements, Tenant's Property or other Tenant Improvements actually paid for by Tenant (as determined in accordance with Paragraph 12.6 above). 

 49.4.2.    Determination of Fair Market Rent  

        Landlord and Tenant shall meet and attempt in good faith to mutually determine the Fair Market Rent for any Renewal Term. If the parties have not reached
agreement on the Fair Market Rent by the date that is thirty (30) days after Landlord's receipt of Tenant's Notice, each party shall appoint an arbitrator and shall give to the other party
notice of the identity of the arbitrator no later than the date that is forty (40) days after Landlord's receipt of Tenant's Notice. If either party fails to appoint an arbitrator by the date
that is forty (40) days after Landlord's receipt of Tenant's Notice, the sole arbitrator appointed, if any, shall determine the Fair Market Rent. If two arbitrators are appointed, they shall
immediately meet and attempt to agree upon such Fair Market Rent. If the arbitrators cannot reach agreement on the Fair Market Rent by the date that is sixty (60) days after Landlord's receipt
of Tenant's Notice, each arbitrator shall submit a determination of Fair Market Rent to Landlord and Tenant. If the determinations of Fair Market Rent made by these two arbitrators vary by ten percent
(10%) or less, the Fair Market Rent shall be the average of the two determinations. If the determinations vary by more than ten percent (10%), the two arbitrators shall within ten (10) days
after submission of their determinations appoint a third arbitrator. If the two arbitrators shall be unable to agree on the selection of a third arbitrator within the 10-day period, then
either Tenant or Landlord may request such appointment by petitioning the presiding judge of the Superior Court in and for the County of San Mateo. Such third arbitrator shall, within thirty
(30) days after appointment, make a determination of the Fair Market Rent and submit such determination to Landlord and Tenant. The Fair Market Rent shall be the determination of Fair Market
Rent submitted by the original two arbitrators that is closer to the Fair Market Rent determination of the third arbitrator. If the third arbitrator's determination is exactly between the Fair Market
Rent determination of the original two arbitrators, then the Fair Market Rent shall be the average of the original two determinations. The determination of Fair Market Rent pursuant to this
Paragraph 49 shall be final and binding on Landlord and Tenant. 

 49.4.3.    Arbitrator Qualifications  

        For purposes of this Paragraph, "arbitrator" shall mean a licensed commercial real estate broker or leasing agent with not less than five (5) years of
fulltime commercial brokerage experience in San Mateo County. 

 49.4.4.    Fees and Costs of Arbitrators  

        Each party shall bear the fees and costs of its arbitrator in connection with the determination of Fair Market Rent and one-half of the fees and costs
of the third arbitrator, if any. 

 49.4.5.    Arbitration Period Base Rent  

        If the determination of Fair Market Rent has not been made by the expiration of the then expiring Term, Tenant shall (i) continue to pay Monthly Base Rent
at the Monthly Base Rent for the last month of the Term (the "Arbitration Period Base Rent") as well as any Additional Rent due under the Lease and (ii) pay to Landlord, or receive as a refund
from Landlord, as applicable, on the first day of the 

43

 

month
after the determination of Fair Market Rent is made, an amount, if any, equal to the difference between the Arbitration Period Base Rent that was paid to Landlord and the Monthly Base Rent for
the Renewal Term that should have been paid to Landlord as the Monthly Base Rent for the Renewal Term as determined hereunder. 

50.   PARKING  

 50.1    Grant of Parking License  

        Provided that Tenant shall comply with and abide by Landlord's parking rules and regulations from time to time in effect, Tenant shall have a license to use for
the parking of passenger automobiles the number of non-exclusive and undesignated parking spaces in the Common Areas set forth in the Basic Lease Information. Notwithstanding the
foregoing, Landlord shall not be required to enforce Tenant's right to use any such parking spaces (but Landlord shall use commercially reasonable efforts to resolve any problems related to parking);
and, provided further, that the number of parking spaces allocated to Tenant hereunder shall be reduced on a proportionate basis in the event any of the parking spaces in the Designated Parking Areas
are taken or otherwise eliminated as a result of any Condemnation or casualty event affecting such Designated Parking Areas. Notwithstanding the foregoing provisions of this Paragraph 50.1,
Landlord shall have the right to relocate Tenant's parking from time to time to other areas within the Project and to provide parking spaces to Tenant in surface parking lots, parking structures or
other areas now or hereafter designated by Landlord as the "Project's Parking Areas." All unreserved spaces will be on a first-come, first-served basis in common with other tenants of and
visitors to the Project in parking spaces provided by Landlord from time to time in the Project's Parking Areas. Tenant's license to use the parking spaces
provided for herein shall be subject to such terms, conditions, rules and regulations as Landlord or the operator of the Parking Area may impose from time to time. 

 50.2    No Assignment of Parking License  

        The license granted hereunder is for self-service parking only and does not include additional rights or services except to the extent that Landlord
elects in its sole and absolute discretion to provide any such services. 

 50.3    Visitor Parking  

        Tenant recognizes and agrees that visitors, clients and/or customers (collectively the "Visitors") to the Project and the Premises must park automobiles or other
vehicles only in areas designated by Landlord from time to time as being for the use of such Visitors and Tenant hereby agrees to ask its Visitors to park only in the areas designated by Landlord from
time to time for the use of Tenant's Visitors. 

51.   RIGHT OF FIRST OFFER  

 51.1    Offer Notice  

        If subsequent to the full execution of this Lease, Landlord desires to sell the Building, Landlord shall notify Tenant in writing of such intent to sell (the
"Offer Notice"); provided, however, Landlord shall not be required to provide Tenant with the Offer Notice with respect to the Building if Landlord has previously terminated this Lease or recaptured
the Premises. This Right of First Offer shall be personal to Tenant and any transferee under a Permitted Transfer and shall not be assignable or otherwise transferable in whole or in part, voluntarily
or by operation of law, to any other permitted assignee, subtenant or other third parties. Tenant's right to receive the Offer Notice shall further be 

44

 

effective
only if Tenant is not in Default under this Lease and no event has occurred which with the giving of notice or the passage of time, or both, would constitute a Default hereunder. Subject to
Paragraph 51.4 below, Tenant's right to receive an Offer Notice in accordance with this Paragraph 51.1 shall be a one-time right. 

 51.2    Election Notice  

        In the event Tenant desires to purchase the Building, Tenant shall notify Landlord in writing of its election to purchase the Building (the "Election Notice")
within ten (10) days following Tenant's receipt of the Offer Notice. If Tenant delivers an Election Notice to Landlord, Tenant shall acquire the Building on an "as-is" basis and
without any representations or warranties from Landlord. 

 51.3    Purchase and Sale Agreement  

        In the event Tenant timely delivers the Election Notice to Landlord, the parties shall thereafter execute a purchase and sale agreement prepared by Seller's
counsel (the "Purchase and Sale Agreement") with the purchase price of the Building equal to the quotient of the Net Operating Income (as defined below) of the Building divided by nine hundredths
(.09%) and with a closing to be held on or before the date that is forty-five (45) days after delivery of the Offer Notice. 

 51.4    Failure to Exercise or Sign Agreement  

        If Tenant fails to deliver an Election Notice within the 10-day time period, or if for any reason whatsoever Tenant has not executed the Purchase and
Sale Agreement within ten (10) days after its receipt thereof from Landlord, Tenant's right to purchase the Building hereunder shall automatically terminate and be of no further force and
effect with respect to Landlord or any other Person (as hereinafter defined) and Landlord shall thereafter have the right to sell the Building at any time to any Person on terms acceptable to Landlord
in its sole and absolute discretion. Notwithstanding the foregoing, if Landlord fails to enter into a letter of intent or purchase and sale agreement for the sale of the Building to any such Person
within two hundred seventy (270) days after the date Tenant's right to purchase the Building lapses pursuant to this Paragraph 51.4, then Tenant's rights under this Paragraph 51
shall be reinstated and Landlord shall once again furnish Tenant with an Offer Notice prior to selling the Building to a Person other than a Landlord Affiliate. Tenant hereby expressly acknowledges
and agrees that time is of the essence for purposes of the Election Notice and the ten (10) day period to execute the Purchase and Sale Agreement and that Tenant's failure to deliver such
Election Notice or the executed Purchase and Sale Agreement as specified herein will relieve Landlord of any obligation under this Paragraph. 

 51.5    Net Operating Income  

        As used herein, "Net Operating Income" shall mean the Monthly Base Rent due under the Lease with respect to the Building being purchased for the twelve
(12) full calendar months following the Offer Notice. As used in this Paragraph 51.5, Monthly Base Rent shall mean the scheduled Monthly Base Rent set forth in the Basic Lease
Information. 

 51.6    Landlord's Sale to Affiliate; Survival of Option  

        Notwithstanding anything in this Paragraph to the contrary, this Paragraph shall be inapplicable to, and neither Landlord nor any person or entity providing
financing to Landlord in connection with the Building ("Lender") shall have any obligation to provide an Offer Notice to Tenant in connection with (i) any sale, conveyance or other transfer or
proposed sale, conveyance or other transfer of the Building to any Person who controls, is controlled by or is under common control with, Landlord or Lender or any Person in which Hines Interest
Limited Partnership or Morgan Stanley Real Estate 

45

 

Investment
Fund maintains an interest (collectively, a "Landlord Affiliate"), or (ii) any foreclosure sale or deed-in-lieu of foreclosure or the exercise of any similar
remedy (collectively, a "Foreclosure") by any Lender. As used herein "Person" shall mean any natural person, corporation, firm, association or other entity, whether acting in an individual, fiduciary
or other capacity. Tenant's rights under this Paragraph 51.6 shall survive Landlord's transfer pursuant to clause (i) of this Paragraph 51.6 but shall not survive any Foreclosure. 

 51.7    Concurrent Exercise of Rights of First Offer with respect to 901 Gateway Boulevard and 951 Gateway Boulevard  

        Notwithstanding anything to the contrary contained in this Paragraph 51, if Landlord concurrently delivers to Tenant an Offer Notice under this Lease and
an Offer Notice under Paragraph 51 of the 951 Gateway Lease, then Tenant shall have the right to exercise the Right of First Offer contained in this Paragraph 51 only if it concurrently
and validly exercises the Right of First Offer granted to Tenant under Paragraph 51 of the 951 Gateway Lease. Any attempt by Tenant to deliver an Election Notice under Paragraph 51.2
above without the concurrent delivery of an Election Notice under Paragraph 51.2 of the 951 Gateway Lease (assuming that Landlord has delivered to Tenant Offer Notices under both this Lease and
the 951 Gateway Lease) shall be null and void and of no force or effect. 

52.   MEMORANDUM OF LEASE  

        Promptly after full execution of this Lease, Landlord and Tenant shall execute and cause to be recorded a Memorandum of Lease in the form attached hereto as  Exhibit F.

53.   TENANT IMPROVEMENTS AND TENANT IMPROVEMENT ALLOWANCE  

        In connection with Tenant's lease of the Premises, Tenant has constructed the improvements described in  Exhibit G attached hereto
(the "Tenant Improvements"). In connection with this Lease, Landlord has agreed to supply Tenant with an improvement
allowance ("Tenant Improvement Allowance") in an amount equal to Nine Million Three Hundred Eighty-Six Thousand Three Hundred Eighty Dollars ($9,386,380). Landlord and Tenant hereby
acknowledge that prior to the date hereof, Landlord has paid Tenant Seven Million Seven Hundred Twenty-Nine Thousand Nine Hundred Sixty ($7,729,960), representing a portion of the Tenant
Improvement Allowance owed hereunder, leaving a remaining Tenant Improvement Allowance to be paid to Tenant in the amount of One Million Six Hundred Fifty-Six Thousand Four Hundred Twenty
Dollars ($1,656,420). On the later date to occur of (i) January 1, 2001, or (ii) the date which is five (5) business days following the mutual execution and delivery of
this Lease, Landlord shall pay to Tenant the amount of One Million Six Hundred Fifty-Six Thousand Four Hundred Twenty Dollars ($1,656,420) representing the remaining outstanding balance of
the Tenant Improvement Allowance owed hereunder. 

46

 

        Landlord
and Tenant have executed and delivered this Lease effective as of the Lease Date specified in the Basic Lease Information. 

	 	 	LANDLORD:	HMS GATEWAY OFFICE, L.P.,

a Delaware limited partnership	 
	

 	
 	

 	

By:	

Hines Gateway Office, L.P.,

Administrative Partner
	

 	
 	

 	

 	

By:	

Hines Interests Limited Partnership,

General Partner
	

 	
 	

 	

 	

 	

By:	

Hines Holdings, Inc.,

General Partner
	

 	
 	

 	

 	

 	

 	

By:	

/s/  JAMES C. BUIE, JR.      

	 	 	 	 	 	 	Name:	James C. Buie, Jr.

	 	 	 	 	 	 	Its:	Executive Vice President

	

 	
 	
TENANT:	

ADVANCED MEDICINE, INC.

a Delaware corporation
	

 	
 	

 	

By:	

/s/  A. GREG STURMER      

	 	 	 	Name:	A. Greg Sturmer

	 	 	 	Its:	Vice President, Finance

47

  

 
 

EXHIBIT A    
    
    SITE PLAN    
    

[TO COME]

A-1

  

 
 

EXHIBIT B    
    
    ADDITIONAL OPERATIONAL GUIDELINES    
    

        As a component of the Tenant Improvements and any Alterations made by Tenant to the Premises, Tenant shall install fume hoods, as well as a rooftop venting and
exhaust system designed to increase the velocity of exhaust such that any odors shall be discharged high into the atmosphere in order to minimize the risk of odors detectable at ground level. In
addition, Tenant shall install and utilize such additional venting, exhaust and quenching systems, including, without limitation, base quenching, distillation units, acid quenching, and mechanical
exhaust/filtration systems, as appropriate to reduce the risk of emanation of such odors. 

B-1

  

 
 

EXHIBIT C    
    
    RULES AND REGULATIONS    
    

        This exhibit, entitled "Rules and Regulations," is and shall constitute Exhibit E to the Lease Agreement,
dated as of the Lease Date, by and between Landlord and Tenant for the Premises. The terms and conditions of this Exhibit E are hereby
incorporated into and are made a part of the Lease. Capitalized terms used, but not otherwise defined, in this Exhibit E have the meanings
ascribed to such terms in the Lease. 

        1.     Tenant
shall not use any method of heating or air conditioning other than that approved by Landlord in writing without the prior written consent of Landlord, which
consent shall not to be unreasonably withheld, conditioned or delayed. 

        2.     All
window coverings installed by Tenant and visible from the outside of the Building require the prior written approval of Landlord. 

        3.     Tenant
shall not use, keep or permit to be used or kept any foul or noxious gas or substance or any flammable or combustible materials on or around the Project or the
Adjacent Properties, except to the extent that Tenant is permitted to use the same in the Premises under the terms of Paragraph 32 of the Lease. 

        4.     Tenant
shall not alter any lock or install any new locks or bolts on any door at the Premises without the prior written consent of Landlord, which consent shall not be
unreasonably withheld, conditioned or delayed. 

        5.     Tenant
shall not make any duplicate keys without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. 

        6.     Tenant
shall park motor vehicles in parking areas designated by Landlord, including areas for loading and unloading. During those periods of loading and unloading, Tenant
shall not unreasonably interfere with traffic flow around the Building or the Project and loading and unloading areas of other tenants. 

        7.     Tenant
shall not disturb, solicit or canvas any tenant or other occupant of the Building or Project and shall cooperate to prevent same. 

        8.     No
person shall go on the roof without Landlord's permission. 

        9.     Business
machines and mechanical equipment belonging to Tenant which cause noise or vibration that may be transmitted to the structure of the Building, to such a degree
as to be objectionable to Landlord or other tenants, shall be placed and maintained by Tenant, at Tenant's expense, on vibration isolators or in noise-dampening housing or other devices sufficient to
eliminate noise or vibration. 

        10.   All
goods, including material used to store goods, delivered to the Premises of Tenant shall be immediately moved into the Premises and shall not be left in parking or
receiving areas overnight. During the period of construction of the Tenant Improvements and any Alterations, all construction materials shall be stored in a manner and a location mutually acceptable
to Landlord and Tenant. 

        11.   Tenant
is responsible for the storage and removal of all trash and refuse. All such trash and refuse shall be contained in suitable receptacles stored behind screened
enclosures at locations approved by Landlord. 

        12.   Tenant
shall not store or permit the storage or placement of goods or merchandise in or around the Common Areas surrounding the Premises. No displays or sales or
merchandise shall be allowed in the Parking Areas or other Common Areas. 

C-1

 

        13.   Tenant
shall not permit any animals, including, but not limited to, any household pets, to be brought or kept in or about the Premises, the Building, the Project or any
of the Common Areas which would violate applicable Laws or constitute a nuisance to the Premises, the Building or the Project. Tenant shall prior to the Commencement Date and thereafter from time to
time upon the request of Landlord provide to Landlord a written plan for the handling and disposal of all animals used by Tenant in the conduct of its business, which plan shall be subject to the
written approval of Landlord. 

	INITIALS:	 	 
	

TENANT:	
 	

    

	LANDLORD:	 	    

C-2

  

 
 

EXHIBIT D    
    
    HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE    
    

        Your cooperation in this matter is appreciated. Initially, the information provided by you in this Hazardous Materials Disclosure Certificate is necessary for the
Landlord to evaluate your proposed uses of the premises (the "Premises") and to determine whether to enter into a lease agreement with you as tenant. If a lease agreement is signed by you and the
Landlord (the "Lease Agreement"), on an annual basis in accordance with the provisions of Paragraph 32 of the Lease Agreement, you are to provide an update to the information initially provided
by you in this certificate. Any questions regarding this certificate should be directed to, and when completed, the certificate should be delivered to: 

	Landlord:	 	HMS Gateway Office L.P. c/o Hines
	 	 	c/o Hines
	 	 	650 Gateway Boulevard, Suite 1140
	 	 	South San Francisco, California 94080
	 	 	Phone: (650) 794-1111

Name
of (Prospective) Tenant: Advance Medicine, Inc. 

	Mailing Address:	 	

	

	

Contact Person, Title and Telephone Number(s):	
 	

	

Contact Person for Hazardous Waste Materials Management and Manifests and Telephone Number(s):
	

	

	

Address of (Prospective) Premises:	
 	

	

Length of (Prospective) initial Term:	
 	

	

D-1

 

	1.	 	GENERAL INFORMATION:	 	 
	

 	
 	

    Describe the proposed operations to take place in, on, or about the Premises, including, without limitation, principal products processed, manufactured or assembled, and services and activities to be provided or otherwise
conducted. Existing tenants should describe any proposed changes to on-going operations.
	

 	
 	

	
 	

 
	

 	
 	

	
 	

 
	

2.	
 	

USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS	
 	

 
	

 	
 	

2.1	
 	

Will any Hazardous Materials (as hereinafter defined) be used, generated, treated, stored or disposed of in, on or about the Premises? Existing tenants should describe any Hazardous Materials which continue to be used, generated, treated, stored or
disposed of in, on or about the Premises.	
 	

 
	

 	
 	

 	
 	

Wastes	
 	

Yes o	
 	

No o	
 	

 
	

 	
 	

 	
 	

Chemical Products	
 	

Yes o	
 	

No o	
 	

 
	

 	
 	

 	
 	

Other	
 	

Yes o	
 	

No o	
 	

 

	

 	
 	

 	
 	

If Yes is marked, please explain:	
 	

	

 	
 	

 	
 	

	

 	
 	

 	
 	

	

 	
 	

2.2	
 	

If Yes is marked in Exhibit 2.1, attach a list of any Hazardous Materials to be used, generated, treated, stored or disposed of in, on or about the Premises, including the applicable hazard class and an estimate of the quantities of such
Hazardous Materials to be present on or about the Premises at any given time; estimated annual throughput; the proposed location(s) and method of storage (excluding nominal amounts of ordinary household cleaners and janitorial supplies which are not
regulated by any Environmental Laws, as hereinafter defined); and the proposed location(s) and method(s) of treatment or disposal for each Hazardous Material, including the estimated frequency, and the proposed contractors or subcontractors. Existing
tenants should attach a list setting forth the information requested above and such list should include actual data from on-going operations and the identification of any variations in such information from the prior year's certificate.
	

3.	
 	

STORAGE TANKS AND SUMPS
	

 	
 	

3.1	
 	

Is any above or below ground storage or treatment of gasoline, diesel, petroleum, or other Hazardous Materials in tanks or sumps proposed in, on or about the Premises? Existing tenants should describe any such actual or proposed
activities.

	

 	
 	

 	
 	

Yes o	
 	

No o	

 

	

 	
 	

 	
 	

If yes, please explain:	
 	

	

 	
 	

 	
 	

	

 	
 	

 	
 	

	

4.	
 	

WASTE MANAGEMENT
	

 	
 	

4.1	
 	

Has your company been issued an EPA Hazardous Waste Generator I.D. Number? Existing tenants should describe any additional identification numbers issued since the previous certificate.

D-2

 

	

 	
 	

 	
 	

Yes o	
 	

No o	

 
	

 	
 	

4.2	
 	

Has your company filed a biennial or quarterly reports as a hazardous waste generator? Existing tenants should describe any new reports filed.
	

 	
 	

 	
 	

Yes o	
 	

No o	

 
	

 	
 	

 	
 	

If yes, attach a copy of the most recent report filed.
	

5.	
 	

WASTEWATER TREATMENT AND DISCHARGE
	

 	
 	

5.1	
 	

Will your company discharge wastewater or other wastes to:

	

 	
 	

 	
 	

	
 	

storm drain?	
 	

	
 	

sewer?
	

 	
 	

 	
 	

	
 	

surface water?	
 	

	
 	

no wastewater or other wastes discharged.
	

 	
 	

 	
 	

Existing tenants should indicate any actual discharges. If so, describe the nature of any proposed or actual discharge(s).
	

 	
 	

 	
 	

	

 	
 	

 	
 	

	

 	
 	

5.2	
 	

Will any such wastewater or waste be treated before discharge?

	

 	
 	

 	
 	

Yes o	
 	

No o	

 
	

 	
 	

 	
 	

If yes, describe the type of treatment proposed to be conducted. Existing tenants should describe the actual treatment conducted.
	

 	
 	

 	
 	

	

 	
 	

 	
 	

	

6.	
 	

AIR DISCHARGES
	

 	
 	

6.1	
 	

Do you plan for any air filtration systems or stacks to be used in your company's operations in, on or about the Premises that will discharge into the air; and will such air emissions be monitored? Existing tenants should indicate whether or not
there are any such air filtration systems or stacks in use in, on or about the Premises which discharge into the air and whether such air emissions are being monitored.
	

 	
 	

 	
 	

Yes o	
 	

No o	

 

	

 	
 	

 	
 	

If yes, please describe:	
 	

	

 	
 	

 	
 	

	

 	
 	

 	
 	

	

 	
 	

6.2	
 	

Do you propose to operate any of the following types of equipment, or any other equipment requiring an air emissions permit? Existing tenants should specify any such equipment being operated in, on or about the Premises.

	

 	
 	

 	
 	

	
 	

Spray booth(s)	
 	

	
 	

Incinerator(s)
	

 	
 	

 	
 	

	
 	

Dip tank(s)	
 	

	
 	

Other (Please describe)
	

 	
 	

 	
 	

	
 	

Drying oven(s)	
 	

	
 	

No Equipment Requiring Air Permits

D-3

 

	

 	
 	

 	
 	

If yes, please describe:	
 	

	

 	
 	

 	
 	

	

 	
 	

 	
 	

	

 	
 	

6.3	
 	

Please describe (and submit copies of with this Hazardous Materials Disclosure Certificate) any reports you have filed in the past [thirty-six] months with any governmental or quasi-governmental agencies or authorities related to air discharges or
clean air requirements and any such reports which have been issued during such period by any such agencies or authorities with respect to you or your business operations.
	

7.	
 	

HAZARDOUS MATERIALS DISCLOSURES
	

 	
 	

7.1	
 	

Has your company prepared or will it be required to prepare a Hazardous Materials management plan ("Management Plan") or Hazardous Materials Business Plan and Inventory ("Business Plan") pursuant to Fire Department or other governmental or regulatory
agencies' requirements? Existing tenants should indicate whether or not a Management Plan is required and has been prepared.

	

 	
 	

 	
 	

Yes o	
 	

No o	
 	

 
	

 	
 	

 	
 	

If yes, attach a copy of the Management Plan or Business Plan. Existing tenants should attach a copy of any required updates to the Management Plan or Business Plan.
	

 	
 	

7.2	
 	

Are any of the Hazardous Materials, and in particular chemicals, proposed to be used in your operations in, on or about the Premises listed or regulated under Proposition 65? Existing tenants should indicate whether or not there are any new Hazardous
Materials being so used which are listed or regulated under Proposition 65.
	

 	
 	

 	
 	

Yes o	
 	

No o	
 	

 
	

If yes, please explain:	
 	

 
	

8.	
 	

ENFORCEMENT ACTIONS AND COMPLAINTS
	

 	
 	

8.1	
 	

With respect to Hazardous Materials or Environmental Laws, has your company ever been subject to any agency enforcement actions, administrative orders, or consent decrees or has your company received requests for information, notice or demand letters,
 or any other inquiries regarding its operations? Existing tenants should indicate whether or not any such actions, orders or decrees have been, or are in the process of being, undertaken or if any such requests have been received.
	

 	
 	

 	
 	

Yes o	
 	

No o	
 	

 
	

 	
 	

 	
 	

If yes, describe the actions, orders or decrees and any continuing compliance obligations imposed as a result of these actions, orders or decrees and also describe any requests, notices or demands, and attach a copy of all such documents. Existing
tenants should describe and attach a copy of any new actions, orders, decrees, requests, notices or demands not already delivered to Landlord pursuant to the provisions of Paragraph 32 of the Lease Agreement.
	

 	
 	

 	
 	

	

 	
 	

 	
 	

	

 	
 	

 	
 	

	

 	
 	

8.2	
 	

Have there ever been, or are there now pending, any lawsuits against your company regarding any environmental or health and safety concerns?
	

 	
 	

 	
 	

Yes o	
 	

No o	
 	

 
	 	 	 	 	 	 	 	 	 

D-4

 

	

 	
 	

 	
 	

If yes, describe any such lawsuits and attach copies of the complaint(s), cross-complaint(s), pleadings and other documents related thereto as requested by Landlord. Existing tenants should describe and attach a copy of any new complaint(s),
cross-complaint(s), pleadings and other related documents not already delivered to Landlord pursuant to the provisions of Paragraph 32 of the Lease Agreement.
	

 	
 	

8.3	
 	

Have there been any problems or complaints from adjacent tenants, owners or other neighbors at your company's current facility with regard to environmental or health and safety concerns? Existing tenants should indicate whether or not there have been
any such problems or complaints from adjacent tenants, owners or other neighbors at, about or near the Premises and the current status of any such problems or complaints.
	

 	
 	

 	
 	

Yes o	
 	

No o	
 	

 
	

 	
 	

 	
 	

If yes, please describe. Existing tenants should describe any such problems or complaints not already disclosed to Landlord under the provisions of the signed Lease Agreement and the current status of any such problems or complaints.
	

 	
 	

 	
 	

	

 	
 	

 	
 	

	

 	
 	

 	
 	

	

9.	
 	

PERMITS AND LICENSES
	

 	
 	

9.1	
 	

Attach copies of all permits and licenses issued to your company with respect to its proposed operations in, on or about the Premises, including, without limitation, any Hazardous Materials permits, wastewater discharge permits, air emissions permits,
 and use permits or approvals. Existing tenants should attach copies of any new permits and licenses as well as any renewals of permits or licenses previously issued.

        As
used herein, "Hazardous Materials" shall mean and include any substance that is or contains (a) any "hazardous substance" as now or hereafter defined in § 101(14)
of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended ("CERCLA") (42 U.S.C. § 9601 et seq.) or
any regulations promulgated under CERCLA; (b) any "hazardous waste" as now or hereafter defined in the Resource Conservation and Recovery Act, as amended ("RCRA") (42 U.S.C. § 6901  et seq.) or
any regulations promulgated under RCRA; (c) any substance now or hereafter regulated by the Toxic Substances Control Act, as amended
("TSCA") (15 U.S.C. § 2601 et seq.) or any regulations promulgated under TSCA; (d) petroleum, petroleum by-products,
gasoline, diesel fuel, or other petroleum hydrocarbons; (e) asbestos and asbestos-containing material, in any form, whether friable or non-friable; (f) polychlorinated
biphenyls; (g) lead and lead-containing materials; or (h) any additional substance, material or waste (A) the presence of which on or about the Premises
(i) requires reporting, investigation or remediation under any Environmental Laws (as hereinafter defined), (ii) causes or threatens to cause a nuisance on the Premises or any adjacent
property or poses or threatens to pose a hazard to the health or safety of persons on the Premises or any adjacent property, or (iii) which, if it emanated or migrated from the Premises, could
constitute a trespass, or (B) which is now or is hereafter classified or considered to be hazardous or toxic under any Environmental Laws; and "Environmental Laws" shall mean and include
(a) CERCLA, RCRA and TSCA; and (b) any other federal, state or local laws, ordinances, statutes, codes, rules, regulations, orders or decrees now or hereinafter in effect relating to
(i) pollution, (ii) the protection or regulation of human health, natural resources or the environment, (iii) the treatment, storage or disposal of Hazardous Materials, or
(iv) the emission, discharge, release or threatened release of Hazardous Materials into the environment. 

        The
undersigned hereby acknowledges and agrees that this Hazardous Materials Disclosure Certificate is being delivered to Landlord in connection with the evaluation of a Lease Agreement
and, if such Lease Agreement is executed, will be attached thereto as an exhibit. The undersigned further 

D-5

 

acknowledges
and agrees that if such Lease Agreement is executed, this Hazardous Materials Disclosure Certificate will be updated from time to time in accordance with Paragraph 32 of the Lease
Agreement. The undersigned further acknowledges and agrees that the Landlord and its partners, lenders and representatives may, and will, rely upon the statements, representations, warranties, and
certifications made herein and the truthfulness thereof in entering into the Lease Agreement and the continuance thereof throughout the term, and any renewals thereof, of the Lease Agreement. I
[print name]                        , acting with full authority to bind the (proposed) Tenant and on behalf of the (proposed)
Tenant, certify, represent and warrant that the
information contained in this certificate is true and correct. 

	(PROSPECTIVE) TENANT:
	

ADVANCED MEDICINE, INC.,

a Delaware corporation
	

By:	
 	

	
 	

 
	

Title:	
 	

	
 	

 
	

Date:	
 	

	
 	

 

	

INITIALS:	
 	

 	
 	

 
	

TENANT:	
 	

/s/  A. GREG STURMER      
	
 	

 
	

LANDLORD:	
 	

/s/  JAMES C. BUIE, JR.      
	
 	

 

D-6

  

 
 

EXHIBIT E    
    
    TENANT'S PROPERTY    
    

Laboratory
related furniture and equipment including: 

benches
and tables

casework

biosafety, laminar flow, and fume hoods

cages/fencing

DI water system

vacuum pumps

compressed air

nitrogen manifold 

Office
related furniture and equipment including: 

open
office partitions

telephone and network equipment

reception desk

lobby furniture

lobby display cases

appliances

interior signage 

E-1

  

 
 

EXHIBIT F    
    

	RECORDING REQUESTED BY AND

WHEN RECORDED RETURN TO:

    
    
    
	 	 
	Attention:	 	    
	 	 

 
 

MEMORANDUM OF LEASE    
    

        THIS MEMORANDUM OF LEASE is executed as of February 17, 1999, by and between HMS GATEWAY OFFICE, L.P., a Delaware limited partnership ("Landlord"), and
ADVANCED MEDICINE, INC., a Delaware corporation ("Tenant"). Landlord has previously leased to Tenant a portion of that certain real property described on  Exhibit A attached hereto and
incorporated herein by reference, consisting of the building commonly known as 901 Gateway Boulevard located in
South San Francisco, California, commencing on                        ,
            and terminating on                        ,
            on the terms and conditions set forth in that certain Lease between
Landlord and Tenant dated as of February    , 1999 (the "Off Record Lease"). Landlord has also granted to Tenant (i) options to renew the term of the Lease for two
(2) additional periods of five (5) years each, and (ii) a right to expand the premises being leased by Tenant, all terms and conditions of the Off Record Lease. 

F-1

 

        IN
WITNESS WHEREOF, the undersigned have executed this Memorandum of Lease so that third parties might have notice of the lease by Landlord and Tenant herein. 

	 	 	Landlord:	 	HMS GATEWAY OFFICE, L.P.,

a Delaware limited partnership
	

 	
 	

 	
 	

By:	

Hines Gateway Office, L.P.,

Administrative Partner
	

 	
 	

 	
 	

By:	

Hines Interests Limited Partnership,

General Partner
	

 	
 	

 	
 	

By:	

Hines Holdings, Inc.,

General Partner
	

 	
 	

 	
 	

By:	

 
	 	 	 	 	 	

	

 	
 	

 	
 	

Name:	

 
	 	 	 	 	 	

	

 	
 	

 	
 	

Its:	

 
	 	 	 	 	 	

	

 	
 	
Tenant:	
 	

ADVANCED MEDICINE, INC.,

a Delaware corporation
	

 	
 	

 	
 	

By:	

 
	 	 	 	 	 	

	

 	
 	

 	
 	

Name:	

 
	 	 	 	 	 	

	

 	
 	

 	
 	

Its:	

 
	 	 	 	 	 	

INITIALS:

TENANT:
/s/ A. GREG STURMER 

LANDLORD:
/s/ JAMES C. BUIE, JR. 

F-2

  

 
 

EXHIBIT G    
    
    TENANT IMPROVEMENTS    
    

        The tenant improvements depicted on the plan set dated August 10, 1999, titled "Advanced Medicine, Inc. Tenant Improvement Package." 

G-1

 
 

Exhibit H    
    
    TENANT ESTOPPEL CERTIFICATE
  901 GATEWAY BOULEVARD    
    

	From:
	Theravance, Inc.
(Formerly Advanced Medicine, Inc.)

901 Gateway Boulevard

South San Francisco, California 94080

("Tenant")

	To:
	ARE-901/951
Gateway Boulevard LLC

c/o Alexandria Real Estate Equities, Inc.

135 N. Los Robles Ave., Suite 250

Pasadena, California 91101

("Purchaser")

	

	HMS
Gateway Office, L.P.

Hines Gateway

651 Gateway Boulevard, Suite 1140

South San Francisco, California 94080

("Landlord") 

        Lease:
Lease Agreement dated January 1, 2001 between HMS Gateway Office,. L.P., a Delaware limited partnership, and Advanced Medicine, Inc., a Delaware corporation,
covering the Premises (as defined below), as modified, altered or amended (as further described in Paragraph 1 below) (the "Lease"). 

        Premises:    110,428
rentable square feet (as set forth in the Lease) (the "Premises"), located in the building known as 901 Gateway having an address of 901 Gateway Boulevard,
South San Francisco, California 94080. 

        Tenant
hereby certifies to Landlord and Purchaser as follows: 

        1.    Attached
hereto as Annex 1 is a true, correct, and complete copy of the Lease, including amendments, modifications, supplements, guarantees, and restatements thereof.
Tenant is the current Tenant under the Lease. The Lease is in full force and effect and is the complete and only lease, agreement or understanding between Landlord and Tenant affecting the Premises
and any rights to parking. The Lease has not been modified, altered or amended, except by the documents listed on Annex I attached hereto. Pursuant to the Lease, Tenant has the right to use 293
non-exclusive and undesignated parking spaces located within the project of which the Premises are part (the "Project"). Tenant acknowledges that Landlord may fulfill its obligations
regarding parking under the Lease through the exercise of Landlord's rights under that certain Declaration of Reciprocal Easements made by HMS Gateway Office, L.P. and recorded on June 26, 2000
as Document No. 2000-077496. 

        2.    The
term of the Lease has commenced and expires on March 31, 2012 subject to the following options to extend: Two (2) options of five (5) years each.
Tenant has accepted and is presently occupying the Premises. 

 

        10.    As
of the date of this Certificate, Tenant has not sublet any portion of the Premises or assigned any rights under the Lease. The address for notices to be sent to
Tenant is as set forth in the Lease. 

        11.    Tenant
understands that this Certificate is required in connection with Purchaser's acquisition of the Property, and Tenant agrees that Purchaser and its assigns
(including any parties providing financing for the Property) will, and will be entitled to, rely on the truth of this Certificate. 

        12.    The
party executing this document on behalf of Tenant represents that he/she has been authorized to do so on behalf of Tenant. 

        EXECUTED
on this    day of April, 2002. 

	 	 	"TENANT"	 	 	 	 	 	 
	

 	
 	

 	
 	

By:	
 	

/s/  A. GREG STURMER      
	
 	

 

2

QuickLinks

Exhibit 10.9

LEASE AGREEMENT BY AND BETWEEN HMS GATEWAY OFFICE L.P., A Delaware Limited Partnership AS LANDLORD, AND ADVANCED MEDICINE, INC., a Delaware corporation AS TENANT DATED JANUARY 1, 2001

TABLE OF CONTENTS

LEASE AGREEMENT BASIC LEASE INFORMATION

LEASE AGREEMENT

O P E R A T I V E P R O V I S I O N S

EXHIBIT A SITE PLAN

EXHIBIT B ADDITIONAL OPERATIONAL GUIDELINES

EXHIBIT C RULES AND REGULATIONS

EXHIBIT D HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE

EXHIBIT E TENANT'S PROPERTY

EXHIBIT F

MEMORANDUM OF LEASE

EXHIBIT G TENANT IMPROVEMENTS

Exhibit H TENANT ESTOPPEL CERTIFICATE 901 GATEWAY BOULEVARDQuickLinks
 -- Click here to rapidly navigate through this document

Exhibit 10.10  

 
 

COLLABORATION AGREEMENT    
    
    by and between    
    
    THERAVANCE, INC.    
    
    and    
    
    GLAXO GROUP LIMITED    

Dated:
November 14, 2002 

 
TABLE OF CONTENTS  

	ARTICLE 1 DEFINITIONS	 	1
	ARTICLE 2 RIGHTS AND OBLIGATIONS	 	9
	 	2.1	 	License Grants from Theravance to GSK	 	9
	 	 	 	2.1.1	 	Development License	 	9
	 	 	2.1.2	 	Commercialization License	 	9
	 	 	2.1.3	 	Manufacturing License	 	9
	 	2.2	 	Sublicensing and Subcontracting	 	9
	 	2.3	 	Trademarks and Housemarks	 	10
	 	 	2.3.1	 	Trademarks	 	10
	 	 	2.3.2	 	Housemarks	 	10
	 	 	2.3.3	 	Ownership of Inventions	 	10
	ARTICLE 3 GOVERNANCE OF DEVELOPMENT AND COMMERCIALIZATION OF PRODUCTS	 	10
	 	3.1	 	Joint Steering Committee	 	10
	 	 	3.1.1	 	Purpose	 	10
	 	 	3.1.2	 	Members; Officers	 	10
	 	 	3.1.3	 	Responsibilities	 	11
	 	 	3.1.4	 	Meetings	 	11
	 	 	3.1.5	 	Decision-Making	 	11
	 	3.2	 	Joint Project Committee	 	12
	 	 	3.2.1	 	Purpose	 	12
	 	 	3.2.2	 	Members; Officers	 	12
	 	 	3.2.3	 	Responsibilities	 	12
	 	 	3.2.4	 	Meetings	 	13
	 	 	3.2.5	 	Decision-Making	 	13
	 	3.3	 	Minutes of Committee Meetings	 	13
	 	 	3.3.1	 	Distribution of Minutes	 	13
	 	 	3.3.2	 	Review of Minutes	 	14
	 	 	3.3.3	 	Discussion of Comments	 	14
	 	3.4	 	Expenses	 	14
	 	3.5	 	General Guidelines and Initial Coordination Efforts	 	14
	ARTICLE 4 DEVELOPMENT OF PRODUCTS	 	14
	 	4.1	 	Pooling of Compounds	 	14
	 	4.2	 	Obligations for Development	 	15
	 	 	4.2.1	 	General; GSK	 	15
	 	 	4.2.2	 	GSK's Funding Responsibility	 	15
	 	 	4.2.3	 	Decisions with Respect to Products	 	15
	 	 	4.2.4	 	Development Timelines	 	16
	 	4.3	 	Replacement Compounds	 	16
	 	4.4	 	Transfer of Data	 	16
	 	4.5	 	LABA Activity Inside and Outside of the Collaboration	 	16
	ARTICLE 5 COMMERCIALIZATION	 	17
	 	5.1	 	Global Marketing Plans	 	17
	 	 	5.1.1	 	General	 	17
	 	 	5.1.2	 	Contents of Each Marketing Plan	 	17
	 	5.2	 	Obligations for Commercialization	 	17
	 	5.3	 	Commercialization	 	18
	 	 	5.3.1	 	GSK Responsibility	 	18
	 	 	 	 	 	 	 

i

 

	 	 	5.3.2	 	Semi-Annual Reports	 	18
	 	 	5.3.3	 	Exports to the United States	 	18
	ARTICLE 6 FINANCIAL PROVISIONS	 	18
	 	6.1	 	Signing Payment; Equity Investment; One-Time Fee	 	18
	 	 	6.1.1	 	Signing Payment	 	18
	 	 	6.1.2	 	Stock Purchase	 	18
	 	 	6.1.3	 	One-Time Fee for [*]	 	18
	 	 	6.1.4	 	One-Time Fee for Each Theravance New Compound	 	19
	 	6.2	 	Milestone Payments	 	19
	 	 	6.2.1	 	General	 	19
	 	 	6.2.2	 	GSK to Theravance	 	20
	 	 	6.2.3	 	Theravance to GSK	 	21
	 	 	6.2.4	 	Notification and Payment	 	21
	 	6.3	 	Payment of Royalties on Net Sales	 	21
	 	 	6.3.1	 	Royalty on Single-Agent Collaboration Products and LABA/ICS Combination Products	 	21
	 	 	6.3.2	 	Royalty Adjustment	 	22
	 	 	6.3.3	 	Royalties on Other Collaboration Products Launched After the LABA/ICS Combination Product	 	22
	 	6.4	 	Royalty Responsibilities; Net Sales Reports	 	22
	 	 	6.4.1	 	Payments to Third Parties	 	22
	 	 	6.4.2	 	Net Sales Report	 	22
	 	6.5	 	GAAP	 	23
	 	6.6	 	Currencies	 	23
	 	6.7	 	Manner of Payments	 	23
	 	6.8	 	Interest on Late Payments	 	23
	 	6.9	 	Tax Withholding	 	23
	 	6.10	 	Financial Records; Audits	 	24
	ARTICLE 7 PROMOTIONAL MATERIALS AND SAMPLES	 	24
	 	7.1	 	Promotional Materials	 	24
	 	 	7.1.1	 	Review of Core Promotional Materials	 	24
	 	 	7.1.2	 	Markings of Promotional Materials	 	25
	 	7.2	 	Samples	 	25
	 	7.3	 	Statements Consistent with Labeling	 	25
	 	7.4	 	Implications of Change in Control in Theravance	 	25
	ARTICLE 8 REGULATORY MATTERS	 	25
	 	8.1	 	Governmental Authorities	 	25
	 	8.2	 	Filings	 	25
	 	8.3	 	Exchange of Drug Safety Information	 	25
	 	8.4	 	Recalls or Other Corrective Action	 	25
	 	8.5	 	Events Affecting Integrity or Reputation	 	26
	ARTICLE 9 ORDERS; SUPPLY AND RETURNS	 	26
	 	9.1	 	Orders and Terms of Sale	 	26
	 	9.2	 	Supply of API Compound and Formulated Collaboration Product for Development	 	26
	 	 	9.2.1	 	Supply of API Compound for Development	 	26
	 	 	9.2.2	 	Supply of Formulated Collaboration Products for Development	 	26
	 	9.3	 	Supply of API Compound for Commercial Requirements	 	27
	 	9.4	 	Supply of Collaboration Products for Commercialization	 	27
	 	9.5	 	Inventories	 	27
	ARTICLE 10 CONFIDENTIAL INFORMATION	 	27
	 	10.1	 	Confidential Information	 	27
	 	 	 	 	 	 	 

ii

 

	 	10.2	 	Permitted Disclosure and Use	 	27
	 	10.3	 	Publications	 	28
	 	10.4	 	Public Announcements	 	28
	 	10.5	 	Confidentiality of This Agreement	 	28
	 	10.6	 	Termination of Prior Confidentiality Agreements	 	28
	 	10.7	 	Survival	 	28
	ARTICLE 11 REPRESENTATIONS AND WARRANTIES; COVENANTS	 	29
	 	11.1	 	Mutual Representations and Warranties	 	29
	 	11.2	 	Additional GSK Representations and Warranties	 	30
	 	11.3	 	Additional Theravance Representations and Warranties	 	30
	 	11.4	 	Covenants	 	30
	 	11.5	 	Disclaimer of Warranty	 	31
	ARTICLE 12 INDEMNIFICATION	 	31
	 	12.1	 	Indemnification by GSK	 	31
	 	12.2	 	Indemnification by Theravance	 	31
	 	12.3	 	Procedure for Indemnification	 	31
	 	 	12.3.1	 	Notice	 	31
	 	 	12.3.2	 	Defense of Claim	 	31
	 	12.4	 	Assumption of Defense	 	32
	 	12.5	 	Insurance	 	32
	ARTICLE 13 PATENTS	 	33
	 	13.1	 	Prosecution and Maintenance of Patents	 	33
	 	 	13.1.1	 	Prosecution and Maintenance of Theravance Patents	 	33
	 	 	13.1.2	 	Prosecution and Maintenance of Patents Covering Joint Inventions	 	33
	 	 	13.1.3	 	Prosecution and Maintenance of GSK Patents	 	35
	 	 	13.1.4	 	GSK Step-In Rights	 	35
	 	 	13.1.5	 	Theravance Step-In Rights	 	35
	 	 	13.1.6	 	Execution of Documents by Agents	 	35
	 	 	13.1.7	 	Patent Term Extensions	 	35
	 	13.2	 	Patent Infringement	 	36
	 	 	13.2.1	 	Infringement Claims	 	36
	 	 	13.2.2	 	Infringement of Theravance Patents	 	36
	 	 	13.2.3	 	Infringement of GSK Patents	 	36
	 	13.3	 	Notice of Certification	 	36
	 	 	13.3.1	 	Notice	 	36
	 	 	13.3.2	 	Option	 	36
	 	 	13.3.3	 	Name of Party	 	36
	 	13.4	 	Assistance	 	37
	 	13.5	 	Settlement	 	37
	ARTICLE 14 TERM AND TERMINATION	 	37
	 	14.1	 	Term and Expiration of Term	 	37
	 	14.2	 	Termination for Material Breach	 	37
	 	14.3	 	GSK Right to Terminate Development of a Collaboration Product	 	37
	 	14.4	 	GSK Right to Terminate Commercialization of a Collaboration Product Following First Commercial Sale	 	38
	 	14.5	 	Termination of the Agreement Due to Discontinuation of Development of All Collaboration Products and All Pooled Compounds	 	38
	 	14.6	 	Effects of Termination	 	38
	 	 	14.6.1	 	Effect of Termination for Material Breach	 	38
	 	 	14.6.2	 	Effect of Termination by GSK of Certain Terminated Development Collaboration Product(s)	 	39
	 	 	 	 	 	 	 

iii

 

	 	 	14.6.3	 	Effect of Termination by GSK of a Terminated Commercialized Collaboration Product	 	40
	 	 	14.6.4	 	Effect of Termination of the Agreement Due to Discontinuation of Development Prior to First Commercial Sale of All Collaboration Products and All Pooled Compounds	 	41
	 	14.7	 	License Rights	 	42
	 	14.8	 	Milestone Payments	 	42
	 	14.9	 	Subsequent Royalties	 	42
	 	14.10	 	Accrued Rights; Surviving Obligations	 	42
	ARTICLE 15 LIMITATIONS RELATING TO THERAVANCE EQUITY SECURITIES	 	43
	 	15.1	 	Purchases of Equity Securities	 	43
	 	15.2	 	Exceptions for Purchasing Securities of Theravance	 	43
	 	15.3	 	Voting	 	44
	 	15.4	 	Theravance Voting Securities Transfer Restrictions	 	45
	 	15.5	 	Termination of Purchase Restrictions	 	45
	ARTICLE 16 MISCELLANEOUS	 	45
	 	16.1	 	Relationship of the Parties	 	45
	 	16.2	 	Registration and Filing of This Agreement	 	46
	 	16.3	 	Force Majeure	 	46
	 	16.4	 	Governing Law	 	46
	 	16.5	 	Attorneys' Fees and Related Costs	 	46
	 	16.6	 	Assignment	 	46
	 	16.7	 	Notices	 	47
	 	16.8	 	Severability	 	47
	 	16.9	 	Headings	 	47
	 	16.10	 	Waiver	 	47
	 	16.11	 	Entire Agreement	 	48
	 	16.12	 	No License	 	48
	 	16.13	 	Third Party Beneficiaries	 	48
	 	16.14	 	Counterparts	 	48
	 	16.15	 	Single Closing Condition	 	48
	Schedules	 	 	 	 	 	 
	 	1.19	 	Criteria for Theravance New Compounds and Replacement Compounds	 	 
	 	6.1.2	 	Preferred Stock Purchase Agreement	 	 

iv

  

 
 

COLLABORATION AGREEMENT    
    

        This COLLABORATION AGREEMENT ("Agreement") dated November 14, 2002, is made by and between THERAVANCE, INC., a Delaware corporation, and having its
principal office at 901 Gateway Boulevard, South San Francisco, California 94080 ("Theravance"), and GLAXO GROUP LIMITED, a United Kingdom corporation, and having its principal office at Glaxo
Wellcome House, Berkeley Avenue, Greenford, Middlesex, UB6 0NN, United Kingdom ("GSK"). Theravance and GSK may be referred to as a "Party" or together, the "Parties". 

RECITALS  

        WHEREAS, Theravance is currently developing Long-Acting â2 Adrenoceptor Agonists such as but not limited to TD-3327 and
AMI-15471 for the treatment and/or prophylaxis of asthma and other respiratory diseases; 

        WHEREAS,
GSK is also currently developing Long-Acting â2 Adrenoceptor Agonists such as but not limited to [*], as well as other
anti-inflammatory compounds, for the treatment and/or prophylaxis of respiratory disease; 

        WHEREAS,
GSK and Theravance desire to pool certain of their respective development compounds on an exclusive, worldwide basis to commercialize at least one Long-Acting
â2 Adrenoceptor Agonist that can be used as a single agent and/or in combination with a Long-Acting Inhaled Corticosteroid and potentially other compounds for treatment
and/or prophylaxis of respiratory disease; 

        WHEREAS,
GSK and Theravance are willing to undertake research and development activities and investment and to coordinate such activities and investment as provided by this Agreement
with respect to the Collaboration Products; and 

        WHEREAS,
GSK and Theravance believe that a collaboration pursuant to this Agreement for the development and commercialization of Collaboration Products would be desirable and compatible
with their respective business objectives. 

        NOW,
THEREFORE, in consideration of the foregoing premises and the representations, covenants and agreements contained herein, Theravance and GSK, intending to be legally bound, hereby
agree as follows: 

 
 

ARTICLE 1
  DEFINITIONS    
    

        For purposes of this Agreement, the following initially capitalized terms, whether used in the singular or plural, shall have the following meanings: 

        1.1   "AMI-15471"
means the Long-Acting b2 Adrenoceptor Agonist designated as such by Theravance and all
pharmaceutically acceptable salts and solvates thereof. 

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        1.2    "Adverse
Drug Experience" means any of: an "adverse drug experience," a "life-threatening adverse drug experience," a "serious adverse drug experience," or
an "unexpected adverse drug experience," as those terms are defined at either 21 C.F.R.(S)312.32 or 21 C.F.R.(S)314.80. 

        1.3    "Affiliate"
of a Party means any Person, whether de jure or de facto, which directly or indirectly controls, is controlled by, or is under common control with such
Person for so long as such control exists, where "control" means the decision-making authority as to such Person and, further, where such control shall be presumed to exist where a Person owns more
than fifty percent (50%) of the equity (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) having the power to vote on or direct
the affairs of the entity. 

        1.4    "API
Compound" means bulk quantities of active pharmaceutical ingredient compound prior to the commencement of secondary manufacturing resulting in a Collaboration
Product. 

        1.5    "Breaching
Party" shall have the meaning set forth in Section 14.2. 

        1.6    "Business
Day" means any day on which banking institutions in both New York City, New York, United States and London, England are open for business. 

        1.7    "Calendar
Month" means for each Calendar Year, each of the one-month periods. 

        1.8    "Calendar
Quarter" means for each Calendar Year, each of the three month periods ending March 31, June 30, September 30 and December 31;
provided, however, that the first calendar quarter for the first Calendar Year shall extend from the Effective Date to the end of the first complete calendar quarter thereafter. 

        1.9    "Calendar
Year" means, for the first calendar year, the period commencing on the Effective Date and ending on December 31 of the calendar year during which the
Effective Date occurs, and each successive period beginning on January 1 and ending twelve (12) consecutive calendar months later on December 31. 

        1.10    "Change
in Control" means, with respect to a Party, any transaction or series of related transactions following which continuing stockholders of such Party hold less
than 50% of the outstanding voting securities of either such Party or the entity surviving such transaction. 

        1.11    "Claim"
means all charges, complaints, actions, suits, proceedings, hearings, investigations, claims and demands. 

        1.12    "Collaboration
Product" means any of the Long-Acting â2 Adrenoceptor Agonists identified in Section 4.1 as Pooled Compounds (including
any Theravance New Compounds and Replacement Compounds, as applicable) which may become Developed and Commercialized subject to and in accordance with the terms of this Agreement, which such
Collaboration Product can be used as a single agent and/or in combination with other therapeutically active components, including but not limited to a Long-Acting Inhaled Corticosteroid,
for the treatment and prophylaxis of respiratory diseases. The term "Collaboration Product" shall also include any [*] to prepare and deliver a pharmaceutically effective dose
of the Pooled Compound and any other therapeutically active component together with any delivery device. 

        1.13    "Commercial
Conflict" means a situation where Theravance determines that GSK's decision related to [*] of a [*] is
likely to result in a [*], and that such decision is not based on the [*] of the [*] but primarily on
[*] whereby GSK is likely to achieve [*]. 

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        1.14    "Commercial
Failure" means failure of [*] for reasons other than [*], based on the determination that such product will
result in a [*] that is materially worse than the [*]. The [*] of a [*] will be based on
[*] from such product not taking into account the [*]. 

        1.15    "Commercialization"
means any and all activities directed to marketing, promoting, distributing, offering for sale and selling a Collaboration Product, importing a
Collaboration Product (to the extent applicable) and conducting Phase IV Studies. When used as a verb, "Commercialize" means to engage in Commercialization. 

        1.16    "Competing
Product" means a product that [*]. 

        1.17    "Confidential
Information" means all secret, confidential or proprietary information, data or Know-How (including GSK Know-How and Theravance
Know-How) whether provided in written, oral, graphic, video, computer or other form, provided by one Party (the "Disclosing Party") to the other Party (the "Receiving Party") pursuant to
this Agreement or generated pursuant to this Agreement, including but not limited to, information relating to the Disclosing Party's existing or proposed research, development efforts, patent
applications, business or products, the terms of this Agreement and any other materials that have not been made available by the Disclosing Party to the general public. Confidential Information shall
not include any information or materials that the Receiving Party can document with competent written proof: 

        1.17.1    were
already known to the Receiving Party (other than under an obligation of confidentiality), at the time of disclosure by the Disclosing Party; 

        1.17.2    were
generally available to the public or otherwise part of the public domain at the time of its disclosure to the Receiving Party; 

        1.17.3    became
generally available to the public or otherwise part of the public domain after its disclosure or development, as the case may be, and other than through any
act or omission of a Party in breach of such Party's confidentiality obligations under this Agreement; 

        1.17.4    were
disclosed to a Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the Disclosing Party not to disclose such
information to others; or 

        1.17.5    were
independently discovered or developed by or on behalf of the Receiving Party without the use of the Confidential Information belonging to the other Party. 

        1.18    "Country"
means any generally recognized sovereign entity. 

        1.19    "Criteria"
means the requirements set forth in Schedule 1.19 that the Replacement Compounds and Theravance New Compounds must meet to become a Pooled Compound.
These requirements may be amended after the Effective Date by written agreement of the Parties (such agreement not to be unreasonably withheld by either Party) to take account of any newly established
data or knowledge that has or have arisen since the Effective Date that affect or is likely to affect same. 

        1.20    "Designated
Foreign Filing" shall have the meaning set forth in Section 13.1.2(b). 

        1.21    "Development"
or "Develop" means preclinical and clinical drug development activities, including, among other things: test method development and stability testing,
toxicology, formulation, process development, manufacturing scale-up, development-stage manufacturing, current Good Manufacturing Practices audits, current Good Clinical Practices audits,
current Good Laboratory Practices audits, analytical method validation, manufacturing process validation, cleaning validation, scale-up and post approval changes, quality assurance/quality
control development, statistical analysis and report writing, preclinical and clinical studies, regulatory filing submission and approval, and regulatory affairs related to the foregoing. When used as
a verb, "Develop" means to engage in Development. 

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        1.22    "Development
Expenses" means the cost of all studies or activities performed by or on behalf of GSK or any of its Affiliates pursuant to this Agreement. 

        1.23    "Development
Milestone" shall have the meaning set forth in Section 6.2.1. 

        1.24    "Development
Plan" means the outline plan for each Collaboration Product designed to achieve the Development for such Collaboration Product, including, without
limitation, the nature, number and schedule of Development activities as well as the estimated resources necessary to implement such activities as such may be amended in accordance with the terms of
this Agreement. 

        1.25    "Diligent
Efforts" means the carrying out of [*], based on [*], with the objective of [*].
Diligent Efforts requires that: (i) each Party [*], (ii) each Party [*], and (iii) each Party [*]. 

        1.26    "Disclosing
Party" shall have the meaning set forth in Section 1.17. 

        1.27    "Effective
Date" means the first business day following the date on which the last of the conditions contained in Section 16.15 of this Agreement has been
satisfied. 

        1.28    "Exchange
Act" shall have the meaning set forth in Section 15.1.1. 

        1.29    "FDA"
means the United States Food and Drug Administration and any successor agency thereto. 

        1.30    "Field"
means [*]. 

        1.31    "First
Commercial Sale" means the first shipment of commercial quantities of any Collaboration Product sold to a Third Party by a Party or its sublicensees in any
Country after receipt of Marketing Authorization Approval for such Collaboration Product in such Country. Sales for test marketing, sampling and promotional uses, clinical trial purposes or
compassionate or similar uses shall not be considered to constitute a First Commercial Sale. 

        1.32    "Force
Majeure Event" shall have the meaning set forth in Section 16.3. 

        1.33    "Governmental
Authority" means any court, tribunal, arbitrator, agency, legislative body, commission, official or other instrumentality of (i) any government of
any Country, (ii) a federal, state, province, county, city or other political subdivision thereof or (iii) any supranational body, including without limitation the European Agency for
the Evaluation of Medicinal Products. 

        1.34    "GSK
Compound" means a GSK Initially Pooled Compound, any Replacement Compound offered up to the collaboration by GSK or a GSK non-LABA Compound utilised by
GSK for Development purposes in relation to combination product activity under this Agreement currently owned or subsequently discovered by GSK and/or its predecessors in title or
in-licensed from a Third Party by GSK and/or its predecessors in title. 

        1.35    "GSK
Initially Pooled Compound" shall mean the chemical entities individually identified as [*] and all pharmaceutically acceptable
[*] thereof. 

        1.36    "GSK
Invention" means an Invention that is invented by an employee or agent of GSK solely or jointly with a Third Party. 

        1.37    "GSK
Know-How" means all present and future information directly relating to the Collaboration Products, a GSK Compound or the GSK Inventions, including
without limitation all data, records, and regulatory filings relating to Collaboration Products, that is required for Theravance to perform its obligations or exercise it rights under this Agreement,
and which during the Term are in GSK's or any of its Affiliates' possession or control and are or become owned by, or otherwise may be licensed to (provided there is no restriction on GSK thereof),
GSK. GSK Know-How does not include any GSK Patents. 

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        1.38    "GSK
non-LABA Compound" means any other compound contributed to the collaboration by GSK pursuant to Section 4.2.1 for the purpose of developing a
combination product. 

        1.39    "GSK
Patents" means all present and future patents and patent applications including United States provisional applications and any continuations,
continuations-in-part, divisionals, registrations, confirmations, revalidations, reissues, Patent Cooperation Treaty applications, certificates of addition, utility models,
design patents, petty patents as well as all other intellectual property related to the application or patent including extensions or restorations of terms thereof, pediatric use extensions,
supplementary protection certificates or any other such right covering the Pooled Compounds, Collaboration Products, a GSK Compound or the GSK Inventions which are or become owned by GSK or GSK's
Affiliates, or as to which GSK or GSK's Affiliates otherwise are or become licensed, now or in the future, where GSK has the right to grant the sublicense rights granted to Theravance under this
Agreement, which such patent rights cover the making, having made, use, offer for sale, sale or importation of the Collaboration Products. 

        1.40    "Hatch-Waxman
Certification" shall have the meaning set forth in Section 13.3. 

        1.41    "Hostile
Tender Offer" shall have the meaning set forth in Section 15.2.6. 

        1.42    "Indemnified
Party" shall have the meaning set forth in Section 12.3.1. 

        1.43    "Indemnifying
Party" shall have the meaning set forth in Section 12.3.1. 

        1.44    "Invention"
means any discovery (whether patentable or not) invented during the Term as a result of research, Development or manufacturing activities and specifically
related to a Pooled Compound or Collaboration Product hereunder. 

        1.45    "Investigational
Authorization" means, with respect to a Country, the regulatory authorization required to investigate a Collaboration Product in such Country as
granted by the relevant Governmental Authority. 

        1.46    "Joint
Invention" means an Invention that is invented jointly by employees and/or agents of both Theravance and GSK hereunder and the patent rights in such Invention. 

        1.47    "Joint
Project Committee" shall have the meaning set forth in Section 3.2. 

        1.48    "Joint
Steering Committee" shall have the meaning set forth in Section 3.1. 

        1.49    "LABA/ICS
Combination Product" means a product that contains a Pooled Compound and a Long-Acting Inhaled Corticosteroid for the treatment and/or prophylaxis
of respiratory diseases. A LABA/ICS Combination Product shall also be considered a Collaboration Product. 

        1.50    "Laws"
means all laws, statutes, rules, regulations (including, without limitation, current Good Manufacturing Practice Regulations as specified in 21 C.F.R. (S)(S) 210
and 211; Investigational New Drug Application regulations at 21 C.F.R. (S) 312; NDA regulations at 21 C.F.R. (S) 314, relevant provisions of the Federal Food, Drug and Cosmetic Act, and
other laws and regulations enforced by the FDA), ordinances and other pronouncements having the binding effect of law of any Governmental Authority. 

        1.51    "Litigation
Condition" shall have the meaning set forth in Section 12.3.2. 

        1.52    "Long-Acting
â2 Adrenoceptor Agonist" or "LABA" means a chemical entity that (i) [*] and
(ii) has significantly longer activity than [*]. 

        1.53    "Long-Acting
Inhaled Corticosteroid" or "ICS" means a corticosteroid that has duration of action of [*]. 

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        1.54    "Losses"
means any and all damages (including all incidental, consequential, statutory an treble damages), awards, deficiencies, settlement amounts, defaults,
assessments, fines, dues, penalties, costs, fees, liabilities, obligations, taxes, liens, losses, lost profits and expenses (including without limitation court costs, interest and reasonable fees of
attorneys, accountants and other experts) incurred by or awarded to Third Parties and required to be paid to Third Parties with respect to a Claim by reason of any judgment, order, decree, stipulation
or injunction, or any settlement entered into in accordance with the provisions of this Agreement, together with all documented out-of-pocket costs and expenses incurred in
complying with any judgments, orders, decrees, stipulations and injunctions that arise from or relate to a Claim of a Third Party. 

        1.55    "Major
Market Country" means each of the [*]. 

        1.56    "Marketing
Authorization" means, with respect to a Country, the regulatory authorization required to market and sell a Collaboration Product in such Country as granted
by the relevant Governmental Authority. 

        1.57    "Marketing
Authorization Approval" shall mean approval by a Governmental Authority for sale of a Collaboration Product, including any applicable pricing, final labeling
or reimbursement approvals. 

        1.58    "Marketing
Plan" means for each relevant Collaboration Product the global plan prepared by GSK identifying the core strategic, commercial and promotional claims and
objectives for the specific Collaboration Product as reviewed and approved under Section 5.1.1. 

        1.59    "NDA"
means a new drug application or supplemental new drug application or any amendments thereto submitted to the FDA in the United States. 

        1.60    "NDA
Acceptance" shall mean the written notification by the FDA that the NDA has met all the criteria for filing acceptance pursuant to 21 C.F.R.(S)314.101. 

        1.61    "Net
Sales" means the [*], less the following to the extent [*]: (a) [*];
(b) [*], including [*]; and (c) [*]. Net Sales shall [*]. 

        1.62    "Net
Sales Report" shall have the meaning set forth in Section 6.4.2. 

        1.63    "Officers"
shall have the meaning set forth in Section 3.1.5(b). 

        1.64    "Other
Combination Product" means any product developed pursuant to this Agreement for the treatment and/or prophylaxis of respiratory disease that contains a
[*]. 

        1.65    "Patent
Infringement Claim" shall have the meaning set forth in Section 13.2.1. 

        1.66    "Patent
Infringement Notice" shall have the meaning set forth in Section 13.2.2. 

        1.67    "Person"
means any natural person, corporation, general partnership, limited partnership, limited liability company, joint venture, proprietorship or other business
organization. 

        1.68    "Phase
I Studies" means that portion of the Development Plan or Development relating to each Collaboration Product which provides for the first introduction into humans
of such Collaboration Product including small scale clinical studies conducted in normal volunteers to obtain information on such Collaboration Product's safety, tolerability, pharmacological
activity, pharmacokinetics, drug metabolism and mechanism of action, as well as early evidence of effectiveness, as more fully defined in 21 C.F.R. (S) 312.21(a). 

        1.69    "Phase
II Studies" means, subject to Section 6.2.2, that portion of the Development Plan or Development relating to each Collaboration Product which provides for
well controlled clinical trials of such Collaboration Product in patients, including clinical studies conducted in patients with the condition, and designed to evaluate clinical efficacy and safety
for such Collaboration Product for one or more indications, as well as to obtain an indication of the dosage regimen required, as more fully defined in 21 C.F.R. (S) 312.21(b). 

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        1.70    "Phase
III Studies" means that portion of the Development Plan or Development relating to each Collaboration Product which provides for large scale, pivotal, clinical
studies conducted in a sufficient number of patients and whose primary objective is to obtain a definitive evaluation of the therapeutic efficacy and safety of the Collaboration Product in patients
for the particular indication in question that is needed to evaluate the overall risk-benefit profile of the Collaboration Product and to provide adequate basis for obtaining requisite
regulatory approval(s) and product labeling, as more fully defined in 21 C.F.R. (S) 312.21(c). 

        1.71    "Phase
IV Studies" means a study for a Collaboration Product that is initiated after receipt of a Marketing Authorization for a Collaboration Product and is principally
intended to support the marketing and Commercialization of such Collaboration Product, including without limitation investigator initiated trials, clinical experience trials and studies conducted to
fulfill local commitments made as a condition of any Marketing Authorization. 

        1.72    "Pooled
Compounds" means (i) the four Long-Acting Beta-2 Adrenoceptor Agonists provided by GSK as of the Effective Date (identified as
[*]), (ii) the two Long-Acting Beta-2 Adrenoceptor Agonists provided by Theravance as of the Effective Date (identified as TD-3327
and AMI-15471), (iii) the Theravance New Compounds provided by Theravance pursuant to Section 4.1, and any Replacement Compounds provided by Theravance or GSK. 

        1.73    "Product
Supplier" means any manufacturer, packager or processor of a Collaboration Product for development, marketing and sale. 

        1.74    "Promotional
Materials" means the core written, printed, video or graphic advertising, promotional, educational and communication materials (other than Collaboration
Product labeling) for marketing, advertising and promotion of the Collaboration Products. 

        1.75    "Receiving
Party" shall have the meaning set forth in Section 1.17. 

        1.76    "Replacement
Compound" means a Long-Acting â2 Adrenoceptor Agonist that meets the Criteria and is provided by Theravance or GSK, as
applicable, (and "GSK Replacement Compound" and "Theravance Replacement Compound" shall be interpreted accordingly) after the Effective Date to replace a Pooled Compound for which Development has been
discontinued due to Technical Failure. 

        1.77    "ROW"
means Countries other than the Major Market Countries. 

        1.78    "Samples"
means Collaboration Product packaged and distributed as a complimentary trial for use by patients in the Territory. 

        1.79    "SEC"
shall have the meaning set forth in Section 15.1.2. 

        1.80    "Selectively"
means [*] (a) [*] as determined by [*], and
(b) [*]. 

        1.81    "TD-3327"
means the Long-Acting â2 Adrenoceptor Agonist so designated by Theravance and all pharmaceutically acceptable salts and
solvates thereof contributed to the collaboration by Theravance. 

        1.82    "Taxes"
shall have the meaning set forth in Section 6.9.1. 

        1.83    "Technical
Failure" means [*], or [*], or [*], or [*], or
[*]. 

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        1.84    "Term" means, on a Country-by-Country and Collaboration Product-by-Collaboration Product basis, the period from
[*], and (b) [*], unless this Agreement is terminated earlier in accordance with Article 14. 

        1.85    "Terminated
Collaboration Product" shall mean a Terminated Development Collaboration Product or a Terminated Commercialized Collaboration Product. 

        1.86    "Terminated
Commercialized Collaboration Product" shall have the meaning set forth in Section 14.4. 

        1.87    "Terminated
Development Collaboration Product" shall have the meaning set forth in Section 14.3. 

        1.88    "Territory"
means worldwide. 

        1.89    "Theravance
Compound" means TD-3327 and AMI-15471, (together the "Theravance Initially Pooled Compounds"), the two Theravance New Compounds and
any Replacement Compound that is offered up to the collaboration by Theravance. 

        1.90    "Theravance
New Compound" means each of the two chemical entities meeting the Criteria and provided by Theravance to the collaboration as Pooled Compounds after the
Effective Date pursuant to Section 4.1. 

        1.91    "Housemark"
means the name and logo of GSK or Theravance or any of their respective Affiliates as identified by one Party to the other from time to time. 

        1.92    "Theravance
Invention" means an Invention that is invented by an employee or agent of Theravance solely or jointly with a Third Party. 

        1.93    "Theravance
Know-How" means all present and future information directly relating to the Collaboration Products, a Theravance Compound or the Theravance
Inventions that is required for GSK to perform its obligations or exercise its rights under this Agreement, and which during the Term are in Theravance's or any of its Affiliates' possession or
control and are or become owned by, or otherwise may be licensed (provided there are no restrictions on Theravance thereof) by, Theravance. Theravance Know-How does not include any
Theravance Patents. 

        1.94    "Theravance
Patents" means all present and future patents and patent applications including United States provisional applications and any continuations,
continuations-in-part, divisionals, registrations, confirmations, revalidations, reissues, Patent Cooperation Treaty applications, certificates of addition, utility models,
design patents, petty patents as well as all other intellectual property related to the application or patent including extensions or restorations of terms thereof, pediatric use extensions,
supplementary protection certificates or any other such right covering the Pooled Compounds, the Collaboration Products, a Theravance Compound or the Theravance Inventions which are or become owned by
Theravance or Theravance's Affiliates, or as to which Theravance or Theravance's Affiliates are or become licensed, now or in the future, with the right to grant the sublicense rights granted to GSK
under this Agreement, which patent rights cover the making, having made, use, offer for sale, sale or importation of Collaboration Products. 

        1.95    "Third
Party" means a Person who is not a Party or an Affiliate of a Party. 

        1.96    "Third
Party Claim" shall have the meaning set forth in Section 12.3.1. 

        1.97    "United
States" means the United States, its territories and possessions. 

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        1.98    "Valid
Claim" means any claim(s) pending in a patent application or in an unexpired patent which has not been held unenforceable, unpatentable or invalid by a decision
of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not has been admitted to be invalid or unenforceable
through reissue or disclaimer. If in any country there should be two or more such decisions conflicting with respect to the
validity of the same claim, the decision of the higher or highest tribunal shall thereafter control; however, should the tribunals be of equal rank, then the decision or decisions upholding the claim
shall prevail when the decisions are equal in number, and the majority of decisions shall prevail when the conflicting decisions are unequal in number. 

        1.99    "Withholding
Party" shall have the meaning set forth in Section 6.9.1. 

 
 

ARTICLE 2
  RIGHTS AND OBLIGATIONS    
    

        2.l    License Grants from Theravance to GSK.    

        2.1.1    Development License.    Subject to the terms of this Agreement, including without limitation
Section 2.2, Theravance grants to GSK, and GSK accepts, an exclusive (except as to Theravance and its Affiliates) license in the Field under the Theravance Patents, Theravance
Know-How and Theravance's rights in the Joint Inventions to make, have made, use and Develop Collaboration Products for Commercialization in the Territory. 

        2.1.2    Commercialization License.    Subject to the terms of this Agreement, including without limitation
Section 2.2, Theravance hereby grants to GSK, and GSK accepts, an exclusive license in the Field under the Theravance Patents, Theravance Know-How and Theravance's rights in the
Joint Inventions to make, have made use, sell, offer for sale and import Collaboration Products in the Territory. 

        2.1.3    Manufacturing License.    Subject to the terms of this Agreement, including without limitation
Section 2.2, Theravance grants to GSK an exclusive license in the Field under the Theravance Patents, Theravance Know-How and Theravance's rights in the Joint Inventions to make and
have made API Compound or formulated Collaboration Product in the Territory. 

        2.2    Sublicensing and Subcontracting.    GSK may sublicense or subcontract its rights to Develop, Manufacture or
Commercialize the Collaboration Products in whole or in part to one or more of its Affiliates, provided that the rights sublicensed or subcontracted to such Affiliate shall automatically terminate
upon a change of control of such Affiliate in connection with which such Affiliate ceases to be an Affiliate of GSK. GSK may also sublicense or subcontract any of GSK's rights to Develop or
Manufacture the Collaboration Products, in whole or in part, to one or more Third Parties. In the event GSK wishes to sublicense or subcontract any of GSK's rights to Commercialize the Collaboration
Products, in whole or in part, to one or more Third Parties, GSK shall obtain the prior written consent of Theravance, such consent not to be unreasonably withheld, provided always that no such
restriction shall apply in respect of those countries of the Territory wherein GSK is or has been required under applicable local laws to appoint a Third Party as its distributor or marketing partner.
GSK shall secure all appropriate covenants, obligations and rights from any such sublicensee or subcontractor granted by it under this Agreement, including, but not limited to, intellectual property
rights and confidentiality obligations in any such agreement or other relationship, to ensure that such sublicensee can comply with all of GSK's covenants and obligations to Theravance under this
Agreement. GSK's rights to sublicense, subcontract or otherwise transfer its rights granted under Section 2.1 are limited to those expressly set forth in this Section 2.2. 

9

 

        2.3    Trademarks and Housemarks.    

        2.3.1    Trademarks.    The Collaboration Products shall be Commercialized under trademarks (the "Trademarks") and
trade dress selected by the Joint Project Committee and approved by the Joint Steering Committee. Prior to any such proposed Trademark(s) being submitted to the Joint Project Committee, GSK shall be
responsible for undertaking their preliminary selection. GSK shall exclusively own all Trademarks, and shall be responsible for the procurement, filing and maintenance of trademark registrations for
such Trademarks and all costs and expenses related thereto. GSK shall also exclusively own all trade dress and copyrights associated with the Collaboration Products. Nothing herein shall create any
ownership rights of Theravance in and to the Trademarks or the copyrights and trade dress associated with the Collaboration Products. 

        2.3.2    Housemarks.    Each Party acknowledges the goodwill and reputation that has been associated with the other
Party's Housemarks over the years, and shall use such Housemarks in a manner that maintains and promotes such goodwill and reputation and is consistent with trademark guidelines. Each Party shall take
all reasonable precautions and actions to protect the goodwill and reputation that has inured to the other Party's Housemarks, shall refrain from doing any act that is reasonably likely to impair the
reputation of such Housemarks, and shall cooperate fully to protect such Housemarks. 

        2.3.3    Ownership of Inventions.    Each Party shall promptly disclose to the other Party all Inventions made by it
during the Term; provided that GSK will be allowed a reasonable time to file patent applications covering GSK Inventions prior to disclosing the GSK Invention to Theravance, and Theravance will be
allowed a reasonable time to file patent applications covering Theravance Inventions prior to disclosing the Theravance Invention to GSK. Theravance shall own all Theravance Inventions and GSK shall
own all GSK Inventions. All Joint Inventions shall be owned jointly by Theravance and GSK, and each Party hereby consents to the assignment or license or other disposition by the other Party of its
joint interests in Joint Inventions without the need to seek the consent of the other Party to such assignment or license or other disposition; provided that any such assignment, license or other
disposition shall at all times be subject to the grant of rights and accompanying conditions under Sections 2.1 and 2.2 and
Article 14. The determination of inventorship for Inventions shall be made in accordance with applicable laws relating to inventorship set forth in the patent laws of the United States (Title
35, United States Code). 

 
 

ARTICLE 3
  GOVERNANCE OF DEVELOPMENT AND COMMERCIALIZATION OF PRODUCTS    
    

        3.1    Joint Steering Committee.    

        3.1.1    Purpose.    The purposes of the Joint Steering Committee shall be (i) to determine the overall
strategy for this collaboration between the Parties and (ii) to coordinate the Parties' activities hereunder. The Parties intend that their respective organizations will work together and will
use Diligent Efforts to assure success of the collaboration. 

        3.1.2    Members; Officers.    Within thirty (30) days after the Effective Date, the Parties shall establish a
joint steering committee (the "Joint Steering Committee"), which shall consist of four (4) members, two (2) of whom shall be designated by each of GSK and Theravance and shall have
appropriate expertise, with at least one (1) member from each Party being at least at a vice president level or higher. Each of GSK and Theravance may replace any or all of its representatives
on the Joint Steering Committee at any time upon written notice to the other Party. A Party may designate a substitute to temporarily attend and perform the functions of such Party's designee at any
meeting of the Joint Steering Committee. GSK and Theravance each may, on advance written notice to the other Party, invite non-member representatives of such Party to 

10

 

attend
meetings of the Joint Steering Committee. The Joint Steering Committee shall be chaired on an annual rotating basis by a representative of either Theravance or GSK, as applicable, on the Joint
Steering Committee, with Theravance providing the first such chairperson. The chairperson shall appoint a secretary of the Joint Steering Committee, who shall be a representative of the other Party
and who shall serve for the same annual term as such chairperson. 

        3.1.3    Responsibilities.    The Joint Steering Committee shall perform the following functions: 

        (a)   Manage
and oversee the Development and Commercialization of the Collaboration Products pursuant to the terms of this Agreement; 

        (b)   Review
and approve the Development Plans and the Marketing Plans for Collaboration Products and any material amendments to the Development Plans and Marketing Plans; 

        (c)   At
each meeting of the Joint Steering Committee, review Net Sales for the year-to-date as available; 

        (d)   Review
and approve the progress of the Joint Project Committee; 

        (e)   Review
and approve the Trademarks selected under Section 2.3; 

        (f)    Review
and approve "go/no-go" decisions and other matters referred to the Joint Steering Committee, including, without limitation, the continued Development
of a particular Collaboration Product or the inclusion of Replacement Compounds; 

        (g)   Life
cycle management of, and intellectual property protection for, the Collaboration Products; 

        (h)   In
accordance with the procedures established in Section 3.1.5, resolve disputes, disagreements and deadlocks unresolved by the Joint Project Committee; and 

        (i)    Have
such other responsibilities as may be assigned to the Joint Steering Committee pursuant to this Agreement or as may be mutually agreed upon by the Parties from time
to time. 

        3.1.4    Meetings.    The Joint Steering Committee shall meet in person at least once during every Calendar Year, and
more frequently (i) as mutually agreed by the Parties or (ii) as required to resolve disputes, disagreements or deadlocks in the Joint Project Committee, on such dates, and at such
places and times, as such Parties shall agree; provided that the Parties shall endeavor to have the first meeting of the Joint Steering Committee within thirty (30) days after the establishment
of the Joint Steering Committee. The Joint Steering Committee shall arrange to meet in person or convene otherwise to assess and approve any Development Plans or Marketing Plans, if any, submitted to
the Joint Steering Committee in each Calendar Year so that such plans will be reviewed and approved within thirty (30) days following submission to the Joint Steering Committee. To the extent
any such Development Plans or Marketing Plans are not approved and need to be reformulated by the Joint Project Committee, such plans shall be reviewed by the Joint Steering Committee as soon as
reasonably practicable after resubmission of same. Meetings of the Joint Steering Committee that are held in person shall alternate between offices of GSK and Theravance, or such other place as the
Parties may
agree. In addition to the annual face to face meetings the Joint Steering Committee may also be held by means of telecommunications or, video conferences as deemed appropriate by the Parties. 

        3.1.5    Decision-Making.    

        (a)   The
Joint Steering Committee may make decisions with respect to any subject matter that is subject to the Joint Steering Committee's decision-making authority and
functions as 

11

 

set
forth in Section 3.1.3. Except as specified in Section 3.1.5(b), all decisions of the Joint Steering Committee shall be made by consensus, with the representatives from each Party
presenting a unified position on behalf of such Party. The Joint Steering Committee shall use Diligent Efforts to resolve the matters within its roles and functions or otherwise referred to it. 

        (b)   With
respect to any issue, if the Joint Steering Committee cannot reach consensus within ten (10) Business Days after the matter has been brought to the Joint
Steering Committee's attention, then such issue shall be referred to the Chief Executive Officer of Theravance and the Chairman of R&D of GSK (collectively, the "Officers") for resolution. The Parties
accept that the use of the Officers for resolution of any unresolved issues will be on an exceptional basis. In the event that the use of the Officers occurs on more than two occasions in any
consecutive twelve (12) month period and such disputes are not related to [*], then GSK will from then on retain the final vote within the Joint Steering Committee for
all issues [*]. If the Officers are unable to reach consensus within thirty (30) days after the matter has been referred to them, the final decision on such disputed
issue will reside with GSK; provided, however, that if the disputed issue involves [*], then the final decision will be made by [*]. 

        3.2    Joint Project Committee.    

        3.2.1    Purpose.    The purposes of the Joint Project Committee shall be to manage the Parties'
day-to-day activities hereunder. 

        3.2.2    Members; Officers.    Within thirty (30) days after the Effective Date, the Parties shall establish a
Project Committee (the "Joint Project Committee"), and GSK and Theravance shall designate an equal number of representatives, up to a maximum total of eight (8) members on such Joint Project
Committee, with a maximum of four (4) from each Party. Each of GSK and Theravance may replace any or all of its representatives on the Joint Project Committee at any time upon written notice to
the other Party. Such representatives shall include individuals who have the relevant experience and expertise for the next twelve months as included in the Development Plan for the Collaboration
Products. A Party may designate a substitute to temporarily attend and perform the functions of such Party's designee at any meeting of the Joint Project Committee. GSK and Theravance each may, on
advance written notice to the other Party, invite non-member representatives of such Party to attend meetings of the Joint Project Committee. The Joint Project Committee shall be chaired
by a representative of GSK. The chairperson shall appoint a secretary of the Joint Project Committee, who shall be a representative of Theravance. 

        3.2.3    Responsibilities.    The Joint Project Committee shall perform the following functions: 

        (a)   Review
the Development Plans as prepared by GSK; 

        (b)   On
an annual rolling basis beginning within six months of the Effective Date, update and amend any initial Development Plan and review the Development Plan for each
Collaboration Product for the following Calendar Year so that it can immediately thereafter submit such proposed Development Plan to the Joint Steering Committee for review and approval; 

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        (c)   At
each meeting of the Joint Project Committee, review the Development strategy for the Collaboration Products in the Territory; 

        (d)   At
each meeting of the Joint Project Committee, review and recommend to the Joint Steering Committee any material amendments or modifications to the Development Plans; 

        (e)   Coordinate
and monitor regulatory strategy and activities for the Collaboration Products in accordance with Article 8; 

        (f)    Review
and recommend to the Joint Steering Committee "go/no-go" decisions for the Development of Collaboration Products; 

        (g)   Review
the Marketing Plans where appropriate; 

        (h)   Review
and recommend to the Joint Steering Committee any material amendments or modifications to the Marketing Plans; 

        (j)    Discuss
the state of the markets for Collaboration Products and opportunities and issues concerning the Commercialization of the Collaboration Products, including
consideration of marketing and promotional strategy, marketing research plans, labeling, Collaboration Product positioning and Collaboration Product profile issues; 

        (k)   At
each meeting of the Joint Project Committee, review the status of all Studies conducted on Collaboration Products and any results therefrom; 

        (l)    At
each meeting of the Joint Project Committee, review Net Sales for the year-to-date, as available; and 

        (m)  Have
such other responsibilities as may be assigned to the Joint Project Committee pursuant to this Agreement or as may be mutually agreed upon by the Parties through
the Joint Steering Committee from time to time. 

        3.2.4    Meetings.    The Joint Project Committee shall meet at least once during every Calendar Quarter, and more
frequently as GSK and Theravance mutually agree on such dates, and at such places and times, as such Parties shall agree; provided that the Parties shall endeavor to have the first meeting of the
Joint Project Committee as a face to face meeting within thirty (30) days after the establishment of the Joint Project Committee. Meetings of the Joint Project Committee that are held in person
shall alternate between the offices of GSK and Theravance, or such other place as the Parties may agree and such face to face meetings shall occur no less than twice a year. The remaining meetings may
be held by means of telecommunications or video conferences as deemed appropriate. Following Commercialization of a Collaboration Product in the first Major Market, the Joint Project Committee shall
meet twice a year with only one annual face to face meeting required. 

        3.2.5    Decision-Making.    The Joint Project Committee may make decisions with respect to any subject matter that is
subject to the Joint Project Committee's decision-making authority and functions as set forth in Section 3.2.3. All decisions of the Joint Project Committee shall be made by consensus, with the
representatives from each Party presenting a unified position on behalf of such Party. If the Joint Project Committee cannot reach consensus within ten (10) Business Days after it has first met
and attempted to reach such consensus, the matter shall be referred on the eleventh (11th) Business Day to the Joint Steering Committee for resolution. 

        3.3    Minutes of Committee Meetings.    Definitive minutes of all committee meetings shall be finalized no later than
thirty (30) days after the meeting to which the minutes pertain as follows: 

        3.3.1    Distribution of Minutes.    Within ten (10) days after a committee meeting, the secretary of such
committee shall prepare and distribute to all members of such committee draft minutes of 

13

 

the
meeting. Such minutes shall provide a list of any issues yet to be resolved, either within such committee or through the relevant resolution process. 

        3.3.2    Review of Minutes.    The Party members of each committee shall have ten (10) days after receiving
such draft minutes to collect comments thereon and provide them to the secretary of such committee. 

        3.3.3    Discussion of Comments.    Upon the expiration of such second ten (10) day period, the Parties shall
have an additional ten (10) days to discuss each other's comments and finalize the minutes. The secretary and chairperson(s) of such committee shall each sign and date the final minutes. The
signature of such chairperson(s) and secretary upon the final minutes shall indicate each Party's assent to the minutes. 

        3.4    Expenses.    Each Party shall be responsible for all travel and related costs and expenses for its members and
other representatives to attend meetings of, and otherwise participate on, a committee. 

        3.5    General Guidelines and Initial Coordination Efforts.    In all matters related to the collaboration established
by this Agreement, the Parties shall strive to balance as best they can the legitimate interests and concerns of the Parties and to realize the economic potential of Collaboration Products. In all
matters relating to this Agreement, the Parties shall seek to comply with good pharmaceutical and environmental practices. The Parties intend, following the Effective Date, to organize meetings of
internal staff to communicate and explain the provisions of this Agreement to ensure the efficient and timely Development and Commercialization of the Collaboration Products. 

 
 

ARTICLE 4
  DEVELOPMENT OF PRODUCTS    
    

        4.1.    Pooling of Compounds.    Subject to and consistent with the further Development principles outlined herein,
each Party will offer a minimum of four (4) identified LABA compounds to this collaboration, with the intention of commercializing [*] Long-Acting Beta2
Adrenoceptor Agonist as a single agent and/or as a LABA/ICS Combination Product. Upon commencement of the collaboration pursuant to this Agreement, GSK and Theravance will contribute the following
LABA compounds as Pooled Compounds to the collaboration: 

GSK
Compounds [*] and Theravance Compounds [*]. 

For
the avoidance of doubt, it is agreed and hereby acknowledged by both Parties that the compounds [*] are hereby accepted as Pooled Compounds. 

Theravance
will provide two (2) Theravance New Compounds to the collaboration within [*] of the Effective Date in order to meet the requirement that Theravance
contribute a total of four (4) LABA compounds to the Pooled Compounds. Without prejudice to the foregoing, GSK will endeavor to provide Theravance, upon Theravance's request and at
[*], such assistance as may be reasonably required by Theravance to achieve this objective, including providing directly or through GSK's vendors, assistance in
(i) [*], (ii) [*], (iii) [*], (iv) [*], and
(v) [*]. 

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        4.2    Obligations for Development.    

        4.2.1    General; GSK.    Under the direction of the Joint Project Committee, specific Pooled Compounds will be
identified from time to time and, as applicable, selected for Development as a Collaboration Product. The Joint Project Committee will determine the number and extent of Development of the Pooled
Compounds and the criteria to be used for selecting among the eight Pooled Compounds and, subject to the other terms of this Agreement, will endeavor to move [*] forward in
Development. In relation to the foregoing, GSK shall have the overall responsibility for, and
use Diligent Efforts in, the performance of all such Development activities which shall include, where applicable, relevant regulatory filings (as contemplated under Article 8) for any such
Collaboration Product moved forward in Development. Further, GSK shall use Diligent Efforts to advance such Collaboration Product through Development in accordance with [*] the
then current Development Plan for such Collaboration Product. GSK shall also use Diligent Efforts to contribute [*] to the collaboration for the purpose of developing a
[*] and Diligent Efforts to develop an [*] which may be [*] of the Collaboration Compound and Development activities of such may
continue in parallel. 

        4.2.2    GSK Funding Responsibility.    GSK shall bear all costs and expenses associated with the Development of
Collaboration Products for Commercialization including those incurred by Theravance (or to which it has become obligated) after the signature date of this Agreement and which previously have been
discussed with and agreed to by GSK and, so far as the aforementioned Theravance costs are concerned, for the avoidance of doubt, the maximum amount shall not exceed [*]. 

        4.2.3    Decisions with Respect to Products.    

        (a)   GSK
shall have the sole discretion with respect to Development decisions for Collaboration Products subject to and in accordance with Sections 3.1.5, 3.2.5, and 4.3. 

        (b)   Notwithstanding
the foregoing, the Parties acknowledge that Theravance is about to initiate a Phase I Study in two parts, on TD-3327. The initiation of this
study will be approved via the Joint Project Committee in accordance with all other Development activities. Theravance shall be responsible for the routine monitoring of this study and will transfer
remaining clinical development responsibility for TD-3327 to the Joint Project Committee on [*]. 

        (c)   GSK
shall provide the Joint Project Committee with an update report within thirty days of (i) the initiation (i.e., first person dosed) of any Study involving a
Collaboration Product, and (ii) the last person dosed/last visit in any Study relating to a Collaboration Product. GSK will provide the Joint Project Committee with a reasonably detailed "top
line results" report within sixty days following the last person dosed/last visit in any Study involving a Collaboration Product. 

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        4.2.4    Development Timelines.    It is hereby acknowledged that GSK's strategic objective is
[*]. GSK will consult with the Joint Project Committee and will share, modify and further develop all applicable Development Plans and timelines in that forum. It is recognised
that success can be optimised [*]. At a strategic level, GSK is committed to this objective. However, at an operational level it is recognised that [*].
GSK will use Diligent Efforts to secure the necessary resource and will keep the Joint Project Committee informed on the progress of individual studies and activities relating to Collaboration
Products as part of any changes to Development Plans and timelines. The current objective of the Collaboration is to achieve Marketing Authorization Approval in the US and other Major Markets for a
Collaboration Product from one of the eight Pooled Compounds which can be used as a single agent and/or in combination with other therapeutically active components (including but not limited to a Long
Acting Inhaled Corticosteroid) for the treatment and/or prophylaxis of one or more respiratory diseases [*] and Development Plans and timelines will be developed and/or refined
in an effort to achieve this objective. 

        4.3    Replacement Compounds.    If within [*], the Development of Collaboration Products
containing [*] of the Pooled Compounds contributed by a Party is [*], it will be the option of the Party who contributed the discontinued compounds to
discover and offer up to the collaboration [*] Replacement Compounds as replacements for the discontinued compounds within [*] following the
discontinuation of the [*] failed compound. For the avoidance of doubt, any such new compound that satisfies the Criteria will automatically be accepted as a Pooled Compound in
place of the relevant Party's discontinued compound, subject to Joint Steering Committee approval pursuant to Section 3.1.3(f). Nothing in the foregoing shall preclude either Party from having
the option of offering up a Replacement Compound for a Pooled Compound at any time during the period referred to in Section 14.5 (subject to the Criteria being met and Joint Steering Committee
approval pursuant to Section 3.1.3(f)). 

        4.4    Transfer of Data.    As soon as practicable but in no event more than thirty (30) days after the
Effective Date, the Parties shall determine what data and materials relating to TD-3327 and AMI-15471 are necessary for GSK's Development obligations pursuant to this
Article 4, including any technology transfer required for API Compound manufacturing activities contemplated by Article 9, and establish a process for transferring copies of such data
and material to GSK (including, to the extent available, in appropriate electronic format) or provide means of access thereto reasonably acceptable to GSK. 

        4.5    LABA Activity Inside and Outside of the Collaboration.    

        4.5.1    The
intent of the Parties in respect of the Pooled Compounds is that such Pooled Compounds remain exclusive to this Collaboration and, subject to Sections
4.5.2 - 4.5.4 and Article 14 below, no activity in respect of such Pooled Compounds shall be permitted outside of this Agreement. 

        4.5.2    Subject
to Article 14 and to Section 4.5.4, if prior to First Commercial Sale of a GSK Initially Pooled Compound or a GSK Replacement Compound,
Development of such compound is discontinued under this Agreement ("GSK Discontinued Compound"), [*], and (ii) for the avoidance of doubt, [*]. 

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        4.5.3    Subject
to Article 14 and Section 4.5.4, if prior to First Commercial Sale of a Theravance Compound, Development of such compound is discontinued under
this Agreement ("Theravance Discontinued Compound"), [*], and (ii) for the avoidance of doubt, [*]. 

        4.5.4    Notwithstanding
Sections 4.5.2 and 4.5.3, for so long as there is one Collaboration Product being Developed under this Agreement, neither Party shall
[*]; provided, however, that this restriction shall not apply to any compound or product (including new product line extensions and/or re-formulation work) where
[*]. 

 
 

ARTICLE 5
  COMMERCIALIZATION    
    

        5.1    Global Marketing Plans.    

        5.1.1    General.    The Joint Project Committee shall be responsible for reviewing and approving a Global Marketing
Plan for each Collaboration Product ("Marketing Plan"). Each Marketing Plan shall define the goals and objectives for Commercializing the Collaboration Products in the pertinent Calendar Year
consistent with the applicable Development Plan. 

        5.1.2    Contents of Each Marketing Plan.    The Marketing Plan for each Collaboration Product shall be prepared
during the Calendar Year wherein, and where applicable, Phase III Studies for such Collaboration Product have commenced and shall be a rolling, three year plan, updated annually and shall contain at a
minimum and as appropriate to current knowledge: 

        (a)   Results
of market research and strategy, including market size, dynamics, growth, customer segmentation, customer targeting, competitive analysis and global
Collaboration Product positioning; 

        (b)   Annual
sales forecasts for Major Market Countries; 

        (c)   For
each major Market Country (as available): sales plans which will include target number of sales representatives, detail order and target number of details 

        (d)   Core,
global advertising and promotion programs and strategies, including literature, media plans, symposia and speaker programs; and 

        (e)   Core
Phase III/Phase IV Studies to be conducted 

        5.2    Obligations for Commercialization.    GSK shall use Diligent Efforts to Commercialize the Collaboration
Products. 

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        5.3    Commercialization.    

        5.3.1    GSK Responsibility.    GSK shall have the sole right and responsibility for Commercialization of
Collaboration Products for distribution and sale. GSK shall bear all costs and expenses associated with the Commercialization of Collaboration Products for sale or distribution. 

        (a)   GSK
shall have the sole right and responsibility to distribute, sell, record sales and collect payments for Collaboration Products. 

        (b)   GSK
shall have the sole right and responsibility for establishing and modifying the terms and conditions with respect to the sale of Collaboration Products, including,
without limitation, the price or prices at which the Collaboration Products will be sold, any discount applicable to payments or receivables, and similar matters. 

        (c)   GSK
will be responsible for storage, order receipt, order fulfillment, shipping and invoicing of Collaboration Products. 

        5.3.2    Semi-Annual Reports.    GSK shall provide the Joint Project Committee reports
semi-annually. Such reports shall set forth in summary form the results of GSK's Commercialization activities performed during such semi-annual period in the Major Markets. 

        5.3.3    Exports to the United States.    To the extent permitted by Law, the Parties shall use Diligent Efforts to
prevent the Collaboration Products distributed for sale in a particular Country other than the United States from being exported to the United States for sale. 

 
 

ARTICLE 6
  FINANCIAL PROVISIONS    
    

        6.1    Signing Payment; Equity Investment; One-Time Fee.    

        6.1.1    Signing Payment.    In partial consideration for the acquisition of license rights under the Theravance
Patents and the Theravance Know-How by GSK under this Agreement, GSK shall on the Effective Date, pay to Theravance a non-creditable, non-refundable amount of Ten
Million United States Dollars (U.S. $10,000,000). 

        6.1.2    Stock Purchase.    On the Effective Date, GSK will purchase 4,000,000 shares of Theravance Series E
Preferred Stock at a price of U.S.$10.00 per share for total consideration of Forty Million United States Dollars (U.S. $40,000,000). Such purchase will be made pursuant to the Preferred Stock
Purchase Agreement attached hereto as Schedule 6.1.2. 

        6.1.3    One-Time Fee for [*].    Within thirty days following receipt by GSK of
Theravance's written notification of the decision by Theravance to nominate [*] as a "development candidate," and in further partial consideration for the acquisition of
license rights under the Theravance Patents and the Theravance Know-How by GSK under this Agreement, GSK shall pay to Theravance a non-creditable, non-refundable
amount of [*]. [*] will be declared a development
candidate when Theravance (a) completes a study demonstrating [*] (as per the Criteria in Schedule 1.19), and (b) [*]. 

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        6.1.4    One-Time Fee for Each Theravance New Compound.    Within thirty days following the acceptance by
the Joint Project Committee or the Joint Steering Committee of each of the [*] Theravance New Compounds to be contributed to the collaboration pursuant to Section 4.1,
and in further partial consideration for the acquisition of license rights under the Theravance Patents and the Theravance Know-How by GSK under this Agreement, GSK shall pay to Theravance
a non-creditable, non-refundable amount of [*] for each such Theravance New Compound. 

        6.2    Milestone Payments.    

        6.2.1    General.    In further consideration of the covenants and agreements contained herein, the Parties shall also
pay to each other the payments set forth below for each such Development milestone referred to therein (each, a "Development Milestone"); provided always that each such payment shall be made only one
time for each Collaboration Product regardless of how many times such Development Milestones are achieved for such Collaboration Product, and no payment shall be owed for a Development Milestone which
is not reached (except that, upon achievement of a Development Milestone for a particular Collaboration Product, any previous Development Milestone for that Collaboration Product for which payment was
not made shall be deemed achieved and payment therefore shall be made); provided further that, in the event that [*], then all applicable payments under Section 6.2
shall be made. For example, [*]. In the event of termination of development of a particular Collaboration Product and an alternative Collaboration Product replaces such
Terminated Collaboration Product then milestone payments for such replacement compound shall not be paid in respect of milestones already achieved by the Terminated Collaboration Product. For example,
[*]. 

[*]=CERTAIN
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19

 

        6.2.2    GSK to Theravance.    GSK shall make the following milestone payments to Theravance upon the achievement of
the indicated Development Milestone for the first Collaboration Product in which the Long-Acting â2 Adrenoceptor Agonist is [*], and for the first
LABA/ICS Combination Product in which the Long-Acting â2 Adrenoceptor Agonist [*]: 

	Milestone
 
	 	Amount

	[*]*	 	[*]
	[*]**	 	[*]
	[*]**	 	[*]
	[*]	 	[*]
	
Registration	
 	

 
	[*]	 	[*]
	[*]	 	[*]
	[*]	 	[*]
	
Launch	
 	

 
	[*]	 	[*]
	[*]	 	[*]
	[*]	 	[*]
	

Annual Worldwide Net Sales over [*] Collaboration Product	
 	

[*]
	

Annual Worldwide Net Sales over [*] Combination Product	
 	

[*]

	*
	GSK
will make a [*]. The [*] for [*] is defined as [*] and will
[*]. The [*] is defined as [*] and will [*].

	**
	[*]
is defined as [*] where such [*]. [*] is defined as [*]. 

Other
Combination Products that contain a Long-Acting â2 Adrenoceptor Agonist that is a Theravance Compound are not subject to milestone payments by GSK  only if [*]. The Parties intend that if the
collaboration is successful [*] Collaboration Products that
contain a Theravance Compound, Theravance be paid the applicable milestones [*]. 

If
GSK, either individually or as a member of the Joint Steering Committee or Joint Project Committee, discontinues the Development of a [*] Collaboration Product that is a
Theravance Compound for reasons other than [*], and such compound is the [*], it will [*]. 

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20

 

        6.2.3    Theravance to GSK.    Theravance shall make the following milestone payments to GSK upon the achievement of
the indicated Development Milestone for the first Collaboration Product in which the Long-Acting â2 Adrenoceptor Agonist is a GSK Compound and for the first LABA/ICS
Combination Product in which the Long-Acting â2 Adrenoceptor Agonist is a GSK Compound: 

	Milestone
 
	 	Amount

	Registration	 	 
	[*]	 	[*]
	[*]	 	[*]
	[*]	 	[*]
	
Launch	
 	

 
	[*]	 	[*]
	[*]	 	[*]
	[*]	 	[*]

        Other
Combination Products that contain a Long-Acting â2 Adrenoceptor Agonist that is a GSK Compound are not subject to milestone payments by Theravance  only if all milestone payments through launch
have otherwise been made to GSK from any Collaboration Product [*]. The Parties
intend that if the collaboration is successful [*] Collaboration Products that contain a GSK Compound, GSK be paid the applicable milestones [*]. 

        6.2.4    Notification and Payment.    In the event a Party achieves a Development Milestone, such Party shall
promptly, but in no event more than ten (10) days after the achievement of each such Development Milestone, notify the other Party in writing of the achievement of same. For all Development
Milestones achieved, each Party shall promptly, but in no event more than thirty (30) days after notification of the achievement of each such Development Milestone, remit payment to the other
Party for such Development Milestone. 

        6.3    Payment of Royalties on Net Sales.    

        6.3.1    Royalty on Single-Agent Collaboration Products and LABA/ICS Combination Products.    

Within
twenty (20) days after the end of each Calendar Quarter, GSK shall pay Theravance royalty payments based on Net Sales in such Calendar Quarter during the Term as follows: 

        [*]

it
being understood that [*] for purposes of the foregoing royalty calculation. 

The
quarterly royalty payments made under this Section 6.3.1 may be based on estimated Net Sales. Within thirty (30) days after the end of each Calendar Quarter, GSK shall calculate the
actual amount of Net Sales for the previous Calendar Quarter and either credit or debit the difference between such actual and projected amount on the succeeding Calendar Quarter's royalty payment to
Theravance. As soon as practical following the end of each Calendar Month, but in no event later than the 10th business day of the following month, GSK will provide Theravance with an
estimate of Net Sales for such Calendar Month. 

[*]=CERTAIN
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21

 

The
royalties payable under this Section 6.3 shall be paid on a Country-by-Country basis from the date of first commercial sale of each Collaboration Product in a
particular Country for the Term of the Collaboration. 

        6.3.2    Royalty Adjustment.    The [*] royalty payable on the first
[*] of total annual worldwide Net Sales under this Section 6.3 shall be reduced to [*] if all of the following occur:
(i) [*]; (ii) [*]; and (iii) [*]. The [*] royalty payable on
[*] under this Section 6.3 shall be [*] if all of the following occur: (i) [*];
(ii) [*]; and (iii) [*]. Nothing in the foregoing shall affect other royalties owed under this Agreement. 

        6.3.3    Royalties on Other Collaboration Products Launched After the LABA/ICS Combination Product.    For any Other
Collaboration Product launched after the LABA/ICS Combination Product, GSK shall within twenty (20) days after the end of each Calendar Quarter, pay Theravance royalty payments based on Net
Sales in such Calendar Quarter during the Term as follows: 

        [*] 

For
the avoidance of doubt, the Parties agree that the royalty set forth in this Section 6.3.3 shall only be effective if GSK has launched and is selling a LABA/ICS Combination Product that is
subject to the royalties under Section 6.3.1. If GSK is not selling a LABA/ICS Combination Product, then the royalty set forth in Section 6.3.1 shall apply to the first Other Combination
Product launched by GSK, provided such Other Combination Product does not contain a product [*]; if such Other Combination Product contains a product
[*], then the royalty payable to Theravance will be [*], provided that in no case will the royalty payable to Theravance be less than set forth in this
Section 6.3.3. 

        6.4    Royalty Responsibilities; Net Sales Reports.    

        6.4.1    Payments to Third Parties.    

        (a)   If,
as a result of a settlement approved by both Parties or as a result of a final non-appealable judgment, GSK is required to pay any amounts to a Third
Party directly because using or selling a Theravance Compound is found to infringe the rights of such Third Party, GSK shall deduct [*] of any such amount paid to such Third
Party from the royalties otherwise due Theravance for the Collaboration Product containing such Theravance Compound, provided in no event shall such reduction reduce the royalties otherwise payable to
Theravance during any Calendar Year by more than [*]; provided, further, that any excess deduction shall be carried over into subsequent years of this Agreement until the full
deduction is taken. 

        (b)   GSK
shall pay any amounts owed to a Third Party as a result of the use of GSK Patents or GSK Know-How with respect to sales of Collaboration Products and
shall not deduct any of such amounts from the royalties due Theravance. The foregoing is subject to Section 6.3.3. 

        6.4.2    Net Sales Report.    Within thirty (30) days after the end of each Calendar Quarter, GSK shall submit
to Theravance a written report setting forth Net Sales in the Territory on a Country-by-Country and Collaboration Product-by-Collaboration Product basis
during such Calendar Quarter, total royalty payments due Theravance, relevant market share data and any payments made to any Third Party pursuant to Section 6.4.1(a) (each a "Net Sales
Report"). 

[*]=CERTAIN
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22

 

        6.5    GAAP.    All financial terms and standards defined or used in this Agreement for sales or activities occurring
in the United States shall be governed by and determined in accordance with United States generally accepted accounting principles, consistently applied. Except as otherwise set forth herein, all
financial terms and standards defined or used in this Agreement for sales or activities occurring outside the United States shall be governed by and determined in accordance with United Kingdom
generally accepted accounting principles, consistently applied. 

        6.6    Currencies.    Monetary conversion from the currency of a foreign country in which Collaboration Product is
sold into US Dollars shall be calculated in accordance with either (a) the methodology referred to in GSK's then current Corporate Finance Reporting Policy or (b) as otherwise may be
mutually agreed by the Parties. The following summarizes GSK's current methodology applied in accordance with its current Corporate Finance Reporting System: the cumulative
year-to-date Average Rates are calculated by determining the average of (i) the preceding 31st December Spot Rate plus (ii) the Closing Spot Rates of the relevant
months to date using the exact figures provided by the Reuters 2000 download. (By way of example, the Average Rate for the five months from January, 2002 to May, 2002 would be computed by taking the
sum of
the Spot Rates for the preceding 31st December, 2001, plus the month-end Spot Rates for the five months to May, 2002, divided by six). 

        6.7    Manner of Payments.    All sums due to either Party under this Section 6 shall be payable in United
States Dollars by bank wire transfer in immediately available funds to such bank account(s) as each of GSK and Theravance shall designate. GSK shall notify Theravance as to the date and amount of any
such wire transfer to Theravance at least five (5) Business Days prior to such transfer. Theravance shall notify GSK as to the date and amount of any such wire transfer to GSK at least five
(5) Business Days prior to such transfer. 

        6.8    Interest on Late Payments.    If either Theravance or GSK shall fail to make a timely payment pursuant to this
Article 6, any such payment that is not paid on or before the date such payment is due under this Agreement shall bear interest, to the extent permitted by applicable law, at the average
one-month London Inter-Bank Offering Rate (LIBOR) for the United States Dollar as reported from time to time in The Wall Street Journal, effective for the first date on which
payment was delinquent and calculated on the number of days such payment is overdue or, if such rate is not regularly published, as published in such source as the Joint Steering Committee agrees. 

        6.9    Tax Withholding.    

        6.9.1    Any
taxes, levies or other duties ("Taxes") paid or required to be withheld under the appropriate local tax laws by one of the Parties ("Withholding Party") on account
of monies payable to the other Party under this Agreement shall, subject to Sections 6.9.2 and 6.9.3, be deducted from the amount of monies otherwise payable to the other Party under this Agreement.
The Withholding Party shall secure and send to the other Party within a reasonable period of time proof of any such Taxes paid or required to be withheld by Withholding Party for the benefit of the
other Party. 

        6.9.2    If
GSK or any GSK Affiliate is or becomes liable to withhold any taxes from payments made to Theravance under Sections 6.1 and 6.2 of this Agreement, then GSK shall
pay to Theravance an amount equal to the amount GSK or the applicable GSK Affiliate owes to the relevant tax authority provided always that if Theravance is able to obtain credit for any taxes
withheld ("Creditable Taxes") against any liability to tax either in the year in which the receipt is taxable or any preceding years, Theravance shall reimburse to GSK an amount equivalent to the
Creditable Taxes. Theravance shall provide GSK with such reasonable evidence as GSK may reasonably request to determine whether the taxes are creditable against taxes payable by Theravance. 

23

 

        6.9.3    If
GSK or any GSK Affiliate is or becomes liable to withhold any taxes from payments made to Theravance under Section 6.3, then such taxes may be withheld by
GSK or the applicable GSK Affiliate up to a limit of [*] of the relevant payment. GSK shall pay to Theravance an amount equal to the amount GSK owes to the relevant tax
authority in excess of such [*] provided always that if Theravance is able to obtain credit for any taxes withheld ("Creditable Taxes") against any liability to tax either in
the year in which the receipt is taxable or any preceding years, Theravance shall reimburse to GSK an amount equivalent to the Creditable Taxes. Theravance shall provide GSK with such reasonable
evidence as GSK may reasonably request to determine whether the taxes are creditable against taxes payable by Theravance. 

        6.10    Financial Records; Audits.    GSK shall keep, and shall cause its Affiliates and sublicensees to keep, such
accurate and complete records of Net Sales as are necessary to determine the amounts due to Theravance under this Agreement and such records shall be retained by GSK or any of its Affiliates or
sublicensees (in such capacity, the "Recording Party") for at least the three preceding Calendar Years to which the Net Sales relate. During normal business hours and with reasonable advance notice to
the Recording Party, such records shall be made available for inspection, review and audit, at the request and expense of Theravance, by an independent certified public accountant, or the local
equivalent, appointed by Theravance and reasonably acceptable to the Recording Party for the sole purpose of verifying the accuracy of the Recording Party's accounting reports and payments made or to
be made pursuant to this Agreement; provided, however that such audits may not be performed by Theravance more than once per Calendar Year. Such accountants shall be instructed not to reveal to
Theravance the details of its review, except for (i) such information as is required to be disclosed under this Agreement and (ii) such information presented in a summary fashion as is
necessary to report the accountants' conclusions to Theravance, and all such information shall be deemed Confidential Information of the Recording Party; provided, however, that in any event such
information may be presented to Theravance in a summary fashion as is necessary to report the accountants' conclusions. All costs and expenses incurred in connection with performing any such audit
shall be paid by Theravance unless the audit discloses at least a [*] shortfall, in which case the Recording Party will bear the full cost of the audit for such Calendar Year.
Theravance will be entitled to recover any shortfall in payments due to it as determined by such audit, plus interest thereon calculated in accordance with Section 6.8, or alternatively shall
have the right to offset and deduct any such shortfall in payments due to it against payments Theravance is otherwise required to make to the Reporting Party under this Agreement. The documents from
which were calculated the sums due under this Article 6 shall be retained by the relevant Party during the Term. 

 
 

ARTICLE 7
  PROMOTIONAL MATERIALS AND SAMPLES    
    

        7.1    Promotional Materials.    

        7.1.1    Review of Core Promotional Materials.    Subject to applicable Law, in accordance with the direction of the
Joint Project Committee, the Parties will jointly, through consultation and with the assistance of each other, review the core Promotional Materials. The relevant legal or regulatory personnel of each
Party shall have the opportunity to review and comment on all such core Promotional Materials prior to use and such comments shall be considered by the Joint Project Committee in the review of such
core Promotional Materials. 

[*]=CERTAIN
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24

 

        7.1.2    Markings of Promotional Materials.    To the extent required by applicable Law, and further to the extent
reasonably practicable, all Promotional Materials will indicate the contribution of the license from Theravance for the Collaboration Products. Subject to the foregoing, the Theravance Housemark and
the GSK Housemark shall both be given exposure and prominence on all promotional materials, labelling, package inserts or outserts and packaging for the Collaboration Products. 

        7.2    Samples.    Packaging, package inserts and outserts, Sample labels and labeling shall each contain reference to
Theravance and GSK indicating, in the case of Theravance, the contribution of the license from Theravance for the Collaboration Products, if appropriate, and as may be required under applicable FDA
rules and regulations. 

        7.3    Statements Consistent with Labeling.    GSK shall ensure that its sales representatives detail the
Collaboration Products in a fair and balanced manner and consistent with the requirements of the Federal Food, Drug and Cosmetic Act of the United States, as amended, including, but not limited to,
the regulations at 21 C.F.R. (S) 202 in the United States. 

        7.4    Implications of Change in Control in Theravance.    In the event that there is a Change in Control of
Theravance and the references contemplated in Sections 7.1.2 and 7.2 are no longer made to "Theravance,", then other than to the extent required by applicable Law, GSK shall have the right, not to be
unreasonably exercised, to terminate its obligations under Sections 7.1 and 7.2. 

 
 

ARTICLE 8
  REGULATORY MATTERS    
    

        8.1    Governmental Authorities.    GSK shall be solely responsible for communicating with Governmental Authorities
and will keep Theravance informed, through the Joint Project Committee and Joint Steering Committee, of any significant issue or issues arising therefrom. 

        8.2    Filings.    GSK shall also be solely responsible for filing drug approval applications for Collaboration
Products and will use Diligent Efforts in seeking appropriate approvals in those Countries of the Territory for Collaboration Products as GSK reasonably determines and sees fit. Such regulatory
documents for each filing shall be centralized and held at the offices of GSK. Theravance shall provide such reasonable assistance as may be required by GSK where liaison between the Parties is, or
may be, necessary to enable GSK to fulfill its responsibilities hereunder. GSK shall be responsible for maintaining the Approvals obtained under this Section and shall solely own all such Approvals in
the Territory. GSK shall be fully responsible for bearing all costs and expense associated with undertaking and completing said registration activities in the Territory, including but not limited to
the costs of preparing and prosecuting applications for such Approvals and fees payable to regulatory agencies in obtaining and maintaining same. 

        8.3    Exchange of Drug Safety Information.    Subject to the second sentence of this Section 8.3, GSK shall be
responsible for recording, investigating, summarizing, notifying, reporting and reviewing all Adverse Drug Experiences in accordance with Law and shall require that its Affiliates (i) adhere to
all requirements of applicable Laws which relate to the reporting and investigation of Adverse Drug Experiences, and (ii) keep the Joint Project Committee apprised on a regular basis of such
matters arising therefrom. The foregoing shall be subject to any of Theravance's own clinical safety obligations mandated by Law as a result of its ongoing Development activity related to
TD-3327 (as such activity is more specifically referred to in Article 4) and, in acknowledgement of this, it is thereby contemplated that the Parties' respective clinical safety
groups may need to discuss and agree, at the appropriate time after the Effective Date, appropriate safety data exchange procedures related to same. 

        8.4    Recalls or Other Corrective Action.    Each Party shall, as soon as practicable, notify the other Party of any
recall information received by it in sufficient detail to allow the Parties to comply with any 

25

 

and
all applicable Laws. GSK shall promptly notify Theravance of any material actions to be taken by GSK with respect to any recall or market withdrawal or other corrective action related to a
Collaboration Product prior to such action to permit Theravance a reasonable opportunity to consult with GSK with respect thereto. All costs and expenses with respect to a recall, market withdrawal or
other corrective action shall be borne by GSK unless such recall, market withdrawal or other corrective action was due solely to the negligence, willful misconduct or breach of this Agreement by
Theravance. GSK shall have sole responsibility for and shall make all decisions with respect to any recall, market withdrawals or any other corrective action related to the Collaboration Products. 

        8.5    Events Affecting Integrity or Reputation.    During the Term, the Parties shall notify each other immediately
of any circumstances of which they are aware and which could impair the integrity and reputation of the Collaboration Products or if a Party is threatened by the unlawful activity of any Third Party
in relation to the Collaboration Products, which circumstances shall include, by way of illustration, deliberate tampering with or contamination of the Collaboration Products by any Third Party as a
means of extorting payment from the Parties or another Third Party. In any such circumstances, the Parties shall use Diligent Efforts to limit any damage to the Parties and/or to the Collaboration
Products. The Parties shall promptly call a Joint Steering Committee meeting to discuss and resolve such circumstances. 

 
 

ARTICLE 9
  ORDERS; SUPPLY AND RETURNS    
    

        9.1    Orders and Terms of Sale.    Except as otherwise expressly stated in this Agreement, GSK shall have the sole
right to (i) receive, accept and fill orders for the Collaboration Products, (ii) control invoicing, order processing and collection of accounts receivable for the Collaboration Products
sales, (iii) record the Collaboration Products sales in its books of account, and (iv) establish and modify the commercial terms and conditions with respect to the sale and distribution
of the Collaboration Products, [*]. 

        9.2    Supply of API Compound and Formulated Collaboration Product for Development.    

        9.2.1    Supply of API Compound for Development.    Subject to the terms and conditions of this Agreement, GSK shall
conduct or have conducted any chemical process development required to develop a
commercially acceptable process for making API Compound and obtain supply for worldwide requirements of API Compound. Notwithstanding the foregoing, Theravance may transfer to GSK, at cost, whatever
supply it has on hand of TD-3327 API and/or AMI-15471 API and/or intermediate materials for API manufacture, within specification as of the Effective Date, such cost not to
exceed [*]. API Compound requirements for Development activities shall be set forth in the relevant Development Plan and shall be periodically updated by the Joint Project
Committee. 

        9.2.2    Supply of Formulated Collaboration Products for Development.    Subject to the terms and conditions of this
Agreement, GSK shall obtain supply for worldwide requirements of formulated Collaboration Products. Notwithstanding the foregoing, Theravance agrees to transfer to GSK whatever supply it has on hand
of formulated TD-3327, within specification, at cost as of the Effective Date, such cost not to exceed [*]. Formulated Collaboration Product requirements for
Development activities shall be set forth in the relevant Development Plan and shall be periodically updated by the Joint Project Committee. 

[*]=CERTAIN
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26

 

        9.3    Supply of API Compound for Commercial Requirements.    Subject to the terms and conditions of this Agreement,
GSK shall obtain supply of API Compound. A forecast for API Compound requirements for Commercialization of the Collaboration Products shall be prepared and periodically updated by the Joint Project
Committee and coordinated with the applicable Marketing Plans for Collaboration Products. 

        9.4    Supply of Collaboration Products for Commercialization.    Subject to the terms and conditions of this
Agreement, GSK shall obtain supply of the commercial requirements of formulated, packaged and labeled Collaboration Products. Such formulated, packaged and labeled Collaboration Products shall be
manufactured and supplied in accordance with all applicable Laws and current Good Manufacturing Practices. GSK shall be solely responsible for secondary manufacture, packaging and labeling of the
Collaboration Product. 

        9.5    Inventories.    GSK and its Product Suppliers shall maintain an inventory of API Compound and Collaboration
Products in accordance with their normal practices and so as to ensure fulfillment of its respective supply obligations herein. 

 
 

ARTICLE 10
  CONFIDENTIAL INFORMATION    
    

        10.1    Confidential Information.    Each of GSK and Theravance shall keep all Confidential Information received from
the other Party with the same degree of care it maintains the confidentiality of its own Confidential Information. Neither Party shall use such Confidential Information for any purpose other than in
performance of this Agreement or disclose the same to any other Person other than to such of its agents who have a need to know such Confidential Information to implement the terms of this Agreement
or enforce its rights under this Agreement. A Receiving Party shall advise any agent who receives such Confidential Information of the confidential nature thereof and of the obligations contained in
this Agreement relating thereto, and the Receiving Party shall ensure that all such agents comply with such obligations as if they had been a Party hereto. Upon termination of this Agreement, the
Receiving Party shall return or destroy all documents, tapes or other media containing Confidential Information of the Disclosing Party that remain in the Receiving Party's or its agents' possession,
except that the Receiving Party may keep one copy of the Confidential Information in the legal department files of the Receiving Party, solely for archival purposes. Such archival copy shall be deemed
to be the property of the Disclosing Party, and shall continue to be subject to the provisions of this Article 10. Notwithstanding anything to the contrary in this Agreement, the Receiving
Party shall have the right to disclose this Agreement or Confidential Information provided hereunder if, in the reasonable opinion of the Receiving Party's legal counsel, such disclosure is necessary
to comply with the terms of this Agreement, or the requirements of any Law. Where possible, the Receiving Party shall notify the Disclosing Party of the Receiving Party's intent to make such
disclosure pursuant to the provision of the preceding sentence sufficiently prior to making such disclosure so as to allow the Disclosing Party adequate time to take whatever action the Disclosing
Party may deem to be appropriate to protect the confidentiality of the information. The Receiving Party will cooperate reasonably with the Disclosing Party's efforts to protect the confidentiality of
the information. Each Party will be liable for breach of this Article 10 by any of its Affiliates. 

        10.2    Permitted Disclosure and Use.    Notwithstanding Section 10.1, a Party may disclose Confidential
Information belonging to the other Party only to the extent such disclosure is reasonably necessary to: (a) obtain Marketing Authorization of a Collaboration Product; (b) enforce the
provisions of this Agreement; or (c) comply with Laws. If a Party deems it necessary to disclose Confidential Information of the other Party pursuant to this Section 10.2, such Party
shall give reasonable advance notice of such disclosure to the other Party to permit such other Party sufficient opportunity to object to such disclosure or to take measures to ensure confidential
treatment of such information. The 

27

 

Receiving
Party will cooperate reasonably with the Disclosing Party's efforts to protect the confidentiality of the information. 

        10.3    Publications.    Subject to any Third Party rights existing as of the Effective Date, each Party shall submit
to the Joint Project Committee for review and approval all proposed academic, scientific and medical publications and public presentations relating to a Collaboration Product or any research or
Development activities under this Agreement for review in connection with preservation of Patent Rights, and trade secrets and/or to determine whether Confidential Information should be modified or
deleted from the proposed publication or public presentation. Written copies of such proposed publications and presentations shall be submitted to the Joint Project Committee no later than sixty
(60) days before submission for publication or presentation and the Joint Project Committee shall provide its comments with respect to such publications and presentations within ten
(10) Business Days of its receipt of such written copy. The review period may be extended for an additional sixty (60) days if a representative of the non-publishing Party on
the Joint Project Committee can demonstrate a reasonable need for such extension including, but not limited to, the preparation and filing of patent applications. By mutual agreement of the Parties,
this period may be further extended. The Parties will each comply with standard academic practice regarding authorship of scientific publications and recognition of contribution of other parties in
any publications relating to the Collaboration Products or any research or Development activities under this Agreement. 

        10.4    Public Announcements.    Except as may be expressly permitted under Section 10.3 or required by
applicable Laws and subject to the final two sentences of this Section 10.4, neither Party will make any public announcement of any information regarding this Agreement, the Collaboration
Products or any research or Development activities under this Agreement without the prior written approval of the other Party, which approval shall not be withheld unreasonably. Once any statement is
approved for disclosure by the Parties or information is otherwise made public in accordance with the preceding sentence, either Party may make a subsequent public disclosure of the contents of such
statement without further approval of the other Party. Notwithstanding the foregoing, within sixty (60) days following the Effective Date, appropriate representatives of the Parties will meet
and agree upon a process and principles for reaching timely consensus on how the Parties will make public disclosure concerning this Agreement, the Collaboration Products or any research and
Development activities under this Agreement. 

        10.5    Confidentiality of This Agreement.    The terms of this Agreement shall be Confidential Information of each
Party and, as such, shall be subject to the provisions of this Article 10. Either party may disclose the terms of this Agreement if, in the opinion of its counsel, such disclosure is required
by Law. In such event, the disclosing Party will seek appropriate confidentiality of those portions of the Agreement for which confidential treatment is typically permitted by the relevant
Governmental Authority. 

        10.6    Termination of Prior Confidentiality Agreements.    Except as expressly provided in this Section 10.6,
this Agreement supercedes the Mutual Confidential Disclosure Agreement (the "MCDA") between the Parties dated April 10, 2002. Except as expressly provided in this Section 10.6 and in
Paragraph 8 of the Confidentiality Agreement between the Parties dated October 2, 2002 (the "Patent CDA"), this Agreement supersedes the Patent CDA. Except as set forth in
Paragraph 8 of the Patent CDA, all information disclosed pursuant to the MCDA and the Patent CDA shall be subject to the provisions of this Article 10. 

        10.7    Survival.    The obligations and prohibitions contained in this Article 10 shall survive the expiration
or termination of this Agreement for a period of ten (10) years. 

28

  

 
 

ARTICLE 11
  REPRESENTATIONS AND WARRANTIES; COVENANTS    
    

        11.1    Mutual Representations and Warranties.    Theravance and GSK each represents and warrants to the other as of
the Effective Date that: 

        11.1.1    Such
Party (a) is a company duly organized, validly existing, and in good standing under the Laws of its incorporation; (b) is duly qualified as a
corporation and in good standing under the Laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, where the failure to be so
qualified would have a material adverse effect on its financial condition or its ability to perform its obligations hereunder; (c) has the requisite corporate power and authority and the legal
right to conduct its business as now conducted and hereafter contemplated to be conducted; (d) has or will obtain all necessary licenses, permits, consents, or approvals from or by, and has
made or will make all necessary notices to, all Governmental Authorities having jurisdiction over such Party, to the extent required for the ownership and operation of its business, where the failure
to obtain such licenses, permits, consents or approvals, or to make such notices, would have a material adverse effect on its financial condition or its ability to perform its obligations hereunder;
and (e) is in compliance with its charter documents; 

        11.1.2    The
execution, delivery and performance of this Agreement by such Party and all instruments and documents to be delivered by such Party hereunder (a) are
within the corporate power of such Party; (b) have been duly authorized by all necessary or proper corporate action; (c) do not conflict with any provision of the charter documents of
such Party; (d) will not, to the best of such Party's knowledge, violate any law or regulation or any order or decree of any court of governmental instrumentality; (e) will not violate
or conflict with any terms of any indenture, mortgage, deed of trust, lease, agreement, or other instrument to which such Party is a party, or by which such Party or any of its property is bound,
which violation would have a material adverse effect on its financial condition or on its ability to perform its obligations hereunder; 

        11.1.3    This
Agreement has been duly executed and delivered by such Party and constitutes a legal, valid and binding obligation of such Party, enforceable against such Party
in accordance with its terms, except as such enforceability may be limited by applicable insolvency and other Laws affecting creditors' rights generally, or by the availability of equitable remedies;
and 

        11.1.4    All
of its employees, officers, and consultants have executed agreements or have existing obligations under law requiring assignment to such Party of all Inventions
made by such individuals during the course of and as the result of their association with such Party, and obligating such individuals to maintain as confidential such Party's Confidential Information. 

        11.1.5    Nothing
contained in this Agreement shall give a Party the right to use the Confidential Information received from the other Party in connection with any activity
other than Development and Commercialization of a Pooled Compound or Collaboration Product consistent with this Agreement. 

        11.1.6    As
soon as practicably possible after the Effective Date, the Parties will each deliver to each other a schedule listing (i) in the case of GSK, GSK Patents as
of the date of signature of this Agreement and (ii) in the case of Theravance, Theravance Patents as of the date of signature of this Agreement. 

29

 

        11.2    Additional GSK Representations and Warranties.    GSK further represents, warrants and covenants to Theravance
that: 

        11.2.1    It
has utilized its own scientific, marketing and distribution expertise and experience to analyze and evaluate both the scientific and commercial value of this
collaboration and has solely relied on such analysis and evaluations in deciding to enter into this Agreement; 

        11.2.2    Neither
GSK nor any of its Affiliates is a party to or otherwise bound by any oral or written contract or agreement that will result in any Person obtaining any
interest in, or that would give to any Person any right to assert any claim in or with respect to, any of GSK's rights granted under this Agreement; 

        11.2.3    There
is no claim or demand of any person or entity pertaining to, or any proceeding which is pending or, to the knowledge of GSK, threatened, that challenges the
rights of Theravance in respect of any GSK Know-How or GSK Patents, or that claims that any default exists under any license with respect to any GSK Know-How or GSK Patents to
which GSK is a party, except where such claim, demand or proceeding would not materially and adversely affect the ability of GSK to carry out its obligations under this Agreement; and 

        11.2.4    Having
carried out and completed diligent searches in relation to the GSK Patents, and other than as disclosed to Theravance's counsel by GSK's counsel, GSK is not
aware, nor has been made aware, of any conflict or likely future conflict with the intellectual property rights of any Third Party with respect to GSK Patents. 

        11.3    Additional Theravance Representations and Warranties.    Theravance further represents and warrants to GSK as
of the Effective Date that: 

        11.3.1    Having
carried out and completed diligent searches in relation to the Theravance Patents, and other than as disclosed to GSK's counsel by Theravance's counsel,
Theravance is not aware, nor has been made aware, of any conflict or likely future conflict with the intellectual property rights of any Third Party with respect to Theravance Patents. 

        Theravance
has not received notice from any Third Party of a claim that an issued patent of such Third Party would be infringed by the manufacture, distribution, marketing or sale of the
Collaboration Products under this Agreement; 

        11.3.2    To
Theravance's knowledge, the Theravance Patents are not subject to any pending or any threatened re-examination, opposition, interference or litigation
proceedings; 

        11.3.3    Theravance
has not received notice from any Third Party of a claim asserting the invalidity, misuse, unregisterability or unenforceability of any of the Theravance
Patents, or challenging its right to use or ownership of any of the Theravance Patents or the Theravance Know-How, or making any adverse claim of ownership thereof; 

        11.3.4    Theravance
has not received notice from any Third Party that any trade secrets or other intellectual property rights of such Third Party would be misappropriated by
the development and reduction to practice of the Theravance Patents and Theravance Know-How; and 

        11.3.5    Theravance
has, up to and including the Effective Date, furnished GSK with all material information requested by GSK concerning the quality, toxicity, safety and/or
efficacy concerns that may materially impair the utility and/or safety of the Compound or Collaboration Products. 

        11.4    Covenants.    Each Party hereby covenants and agrees during the Term that it shall carry out its obligations
or activities hereunder in accordance with (i) the terms of this Agreement and (ii) all applicable Laws. 

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        11.5    Disclaimer of Warranty.    Subject to the specific warranties and representations given under
Sections 11.1 through and including 11.3, nothing in this Agreement shall be construed as a warranty or representation by either Party (i) that any Collaboration Product made, used, sold
or otherwise disposed of under this Agreement is or will be free from infringement of patents, copyrights, trademarks, industrial design or other intellectual property rights of any Third Party,
(ii) regarding the effectiveness, value, safety, non-toxicity, patentability, or non-infringement of any patent technology, the Collaboration Products or any information
or results provided by either Party pursuant to this Agreement or (iii) that any Collaboration Product will obtain Marketing Authorization or appropriate pricing approval. Each Party explicitly
accepts all of the same as experimental and for development purposes, and without any express or implied warranty from the other Party. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, EACH
PARTY EXPRESSLY DISCLAIMS, WAIVES, RELEASES, AND RENOUNCES ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 

 
 

ARTICLE 12
  INDEMNIFICATION    
    

        12.1    Indemnification by GSK.    Subject to Sections 12.4 and 13.2, GSK shall defend, indemnify and hold harmless
Theravance and its Affiliates and each of their officers, directors, shareholders, employees, successors and assigns from and against all Claims of Third Parties, and all associated Losses, to the
extent arising out of (a) GSK's negligence or willful misconduct in performing any of its obligations under this Agreement, (b) a breach by GSK of any of its representations, warranties,
covenants or agreements under this Agreement, or (c) the manufacture, use, handling, storage, marketing, sale, distribution or other disposition of Collaboration Products by GSK, its
Affiliates, agents or sublicensees, except to the extent such losses result from the negligence or willful misconduct of Theravance. 

        12.2    Indemnification by Theravance.    Subject to Sections 12.4 and 13.2, Theravance shall defend, indemnify
and hold harmless GSK and its Affiliates and each of their officers, directors, shareholders, employees, successors and assigns from and against all Claims of Third Parties, and all associated Losses,
to the extent arising out of (a) Theravance's negligence or willful misconduct in performing any of its obligations under this Agreement, or (b) a breach by Theravance of any of its
representations, warranties, covenants or agreements under this Agreement. 

        12.3    Procedure for Indemnification.    

        12.3.1    Notice.    Each Party will notify promptly the other in writing if it becomes aware of a Claim (actual or
potential) by any Third Party (a "Third Party Claim") for which indemnification may be sought by that Party and will give such information with respect thereto as the other Party shall reasonably
request. If any proceeding (including any governmental investigation) is instituted involving any Party for which such Party may seek an indemnity under Section 12.1 or 12.2, as the case may be
(the "Indemnified Party"), the Indemnified Party shall not make any admission or statement concerning such Third Party Claim, but shall promptly notify the other Party (the "Indemnifying Party")
orally and in writing and the Indemnifying Party and Indemnified Party shall meet to discuss how to respond to any Third Party Claims that are the subject matter of such proceeding. The Indemnifying
Party shall not be obligated to indemnify the Indemnified Party to the extent any admission or statement made by the Indemnified Party or any failure by such Party to notify the Indemnifying Party of
the claim materially prejudices the defense of such claim. 

        12.3.2    Defense of Claim.    If the Indemnifying Party elects to defend or, if local procedural rules or laws do not
permit the same, elects to control the defense of a Third Party Claim, it shall be entitled to do so provided it gives notice to the Indemnified Party of its intention to do so 

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within
forty-five (45) days after the receipt of the written notice from the Indemnified Party of the potentially indemnifiable Third Party Claim (the "Litigation Condition"). The
Indemnifying Party expressly agrees the Indemnifying Party shall be responsible for satisfying and discharging any award made to or settlement reached with the Third Party pursuant to the terms of
this Agreement without prejudice to any provision in this Agreement or right at law which will allow the Indemnifying Party subsequently to recover any amount from the Indemnified Party to the extent
the liability under such settlement or award was attributable to the Indemnified Party. Subject to compliance with the Litigation Condition, the Indemnifying Party shall retain counsel reasonably
acceptable to the Indemnified Party (such acceptance not to be unreasonably withheld, refused, conditioned or delayed) to represent the Indemnified Party and shall pay the reasonable fees and expenses
of such counsel related to such proceeding. In any such proceeding, the Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the
expense of the Indemnified Party. The Indemnified Party shall not settle any claim for which it is seeking indemnification without the prior written consent of the Indemnifying Party which consent
shall not be unreasonably withheld, refused, conditioned or delayed. The Indemnified Party shall, if requested by the Indemnifying Party, cooperate in all reasonable respects in the defense of such
claim that is being managed and/or controlled by the Indemnifying Party. The Indemnifying Party shall not, without the written consent of the Indemnified Party (which consent shall not be unreasonably
withheld, refused, conditioned or delayed), effect any settlement of any pending or threatened proceeding in which the Indemnified Party is, or based on the same set of facts could have been, a party
and indemnity could have been sought hereunder by the Indemnified Party, unless such settlement includes an unconditional release of the Indemnified Party from all liability on claims that are the
subject matter of such proceeding. If the Litigation Condition is not met, then neither Party shall have the right to control the defense of such Third Party Claim and the Parties shall cooperate in
and be consulted on the material aspects of such defense at each Party's own expense; provided that if the Indemnifying Party does not satisfy the Litigation Condition, the Indemnifying Party may at
any subsequent time during the pendency of the relevant Third Party Claim irrevocably elect, if permitted by local procedural rules or laws, to defend and/or to control the defense of the relevant
Third Party Claim so long as the Indemnifying Party also agrees to pay the reasonable fees and costs incurred by the Indemnified Party in relation to the defense of such Third Party Claim from the
inception of the Third Party Claim until the date the Indemnifying Party assumes the defense or control thereof. 

        12.4    Assumption of Defense.    Notwithstanding anything to the contrary contained herein, an Indemnified Party
shall be entitled to assume the defense of any Third Party Claim with respect to the Indemnified Party, upon written notice to the Indemnifying Party pursuant to this Section 12.4, in which
case the Indemnifying Party shall be relieved of liability under Section 12.1 or 12.2, as applicable, solely for such Third Party Claim and related Losses. 

        12.5    Insurance.    During the Term of this Agreement and for a period of [*] after the
termination or expiration of this Agreement, GSK shall obtain and/or maintain at its sole cost and expense, product liability insurance (including any self-insured arrangements) in amounts
which are reasonable and customary in the U.S. pharmaceutical industry for companies of
comparable size and activities. Such product liability insurance or self-insured arrangements shall insure against all liability, including without limitation personal injury, physical
injury, or property damage arising out of the manufacture, sale, distribution, or marketing of the Collaboration Products. GSK shall provide written proof of the existence of such insurance to
Theravance upon request. 

[*]=CERTAIN
INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 

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ARTICLE 13
  PATENTS    
    

        13.1    Prosecution and Maintenance of Patents.    

        13.1.1    Prosecution and Maintenance of Theravance Patents.    Theravance shall have the exclusive right and the
obligation to (subject to Theravance's election not to file, prosecute, or maintain pursuant to Section 13.1.4) or to cause its licensors to, prepare, file, prosecute in a diligent manner
(including without limitation by conducting interferences, oppositions and reexaminations or other similar proceedings), maintain (by timely paying all maintenance fees, renewal fees, and other such
fees and costs required under applicable Laws) and extend all Theravance Patents and related applications. Theravance shall consult with GSK prior to abandoning any Theravance Patents or related
applications that are material to the matters contemplated in this Agreement. Theravance shall regularly advise GSK of the status of all pending applications, including with respect to any hearings or
other proceedings before any Governmental Authority, and, at GSK's request, shall provide GSK with copies of all documentation concerning such applications, including all correspondence to and from
any Governmental Authority. Subject to Section 2.3.3, Theravance shall solicit GSK's advice and review of the nature and text of such patent applications and important prosecution matters
related thereto in reasonably sufficient time prior to filing thereof, and Theravance shall take into account GSK's reasonable comments related thereto; provided, however, Theravance shall have the
final decision authority with respect to any action relating to any Theravance Patent. Within the priority period, Theravance shall agree with GSK regarding the countries outside the United States in
which corresponding applications should be filed ("OUS Filings"). It is presumed that a corresponding Patent
Cooperation Treaty ("PCT") application will be filed unless otherwise agreed by the Parties. Theravance shall effect filing of all such applications within the priority period. 

        Subject
to Section 13.1.4, Theravance shall be responsible for all costs incurred in the United States in connection with procuring Theravance Patents, including applications
preparation, filing fees, prosecution, maintenance and all costs associated with reexamination and interference proceedings in the United States Patent and Trademark Office and United States Courts.
GSK shall be responsible for all out-of-pocket costs and expenses incurred by Theravance after the Effective Date that are associated with procuring corresponding OUS patents,
including without limitation PCT and individual country filing fees, translations, maintenance, annuities, and protest proceedings. For all such OUS patent applications, Theravance will invoice GSK on
a quarterly basis beginning April 1, 2003, setting forth all such expenses incurred. Reimbursement will be made to Theravance in United States Dollars within thirty (30) days of receipt
of the invoice by GSK. GSK will within thirty (30) days following the Effective Date identify the GSK representative that should receive such invoices from Theravance. GSK's obligations
hereunder are in addition to any obligations of GSK under Section 13.1.2(b) 

        13.1.2    Prosecution and Maintenance of Patents Covering Joint Inventions.    

        (a)   For
Patents covering Joint Inventions, the Parties shall agree, without prejudice to ownership, which Party shall have the right to prepare and file a priority
patent application, and prosecute such application(s) and maintain any patents derived therefrom, with the Parties equally sharing the reasonable out-of-pocket costs for the
preparation, filing, prosecution and maintenance of such priority patent application. The Parties will reasonably cooperate to obtain any export licenses that might be required for such activities.
Should the agreed upon Party elect not to prepare and/or file any such priority patent application, it shall (i) provide the other Party with written notice as soon as reasonably possible after
making such election but in any event no later than sixty (60) days before the other Party would be faced with a possible loss of rights, (ii) give the other Party the right, at the
other Party's discretion and sole expense, to prepare and file the 

33

 

priority
application(s), and (iii) offer reasonable assistance in connection with such preparation and filing at no cost to the other Party except for reimbursement of reasonable
out-of-pocket expenses incurred by the agreed upon Party in rendering such assistance. The other Party, at its discretion and cost, shall prosecute such application(s) and
maintain sole ownership of any patents derived therefrom. 

        (b)   Within
nine (9) months after the filing date of a priority application directed to an Invention, the Party filing the priority application shall request that the
other Party identify those non-priority, non-PCT ("foreign") Countries in which the other Party desires that the Party filing the priority application file corresponding patent
applications. Within thirty (30) days after receipt by the other Party of such request from the Party filing the priority application, the other Party shall provide to the Party filing the
priority application a written list of such foreign
countries in which the other Party wishes to effect corresponding foreign patent applications filings. The Parties will then attempt to agree on the particular countries in which such applications
will be filed, provided that in the event agreement is not reached, the application will be filed in the disputed as well as the non-disputed countries (all such filings referred to
hereinafter as "Designated Foreign Filings"). Thereafter, within twelve (12) months after the filing date of the priority application, the Party filing the priority application shall effect all
such Designated Foreign Filings. It is presumed unless otherwise agreed in writing by the Parties, that a corresponding PCT application will be filed designating all PCT member countries. As to each
Designated Foreign Filing and PCT application, GSK shall bear the costs for the filing and prosecutions of such Designated Foreign Filing and PCT application (including entering national phase in all
agreed countries). Should the Party filing the priority application not agree to file or cause to be filed a Designated Foreign Filing, the other Party will have the right to effect such Designated
Foreign Filing in its name. 

        (c)   Should
the filing Party pursuant to Section 13.1.2(a) or 13.1.2(b) no longer wish to prosecute and/or maintain any patent application or patent resulting from
such application, the filing Party shall (i) provide the non-filing Party with written notice of its wish no later than sixty (60) days before the patent or patent
applications would otherwise become abandoned, (ii) give the non-filing Party the right, at the non-filing Party's election and sole expense, to prosecute and/or
maintain such patent or patent application, and (iii) offer reasonable assistance to the non-filing Party in connection with such prosecution and/or maintenance at no cost to the
non-filing Party except for reimbursement of the filing Party's reasonable out-of-pocket expenses incurred by the filing Party in rendering such assistance. 

        (d)   Should
the non-filing Party pursuant to Section 13.1.2(c) not wish to incur its share of preparation, filing, prosecution and/or maintenance costs for
a patent application filed pursuant to Section 13.1.2(a) or 13.1.2(b) or patents derived therefrom, it shall (i) provide the filing Party with written notice of its wish, and
(ii) continue to offer reasonable assistance to the filing Party in connection with such prosecution or maintenance at no cost to the filing Party except for reimbursement of the
non-filing Party's reasonable out-of-pocket expenses incurred by the non-filing Party in rendering such assistance. 

        (e)   The
Parties agree to cooperate in the preparation and prosecution of all patent applications filed under Section 13.1.2(a) and 13.1.2(b), including obtaining and
executing necessary powers of attorney and assignments by the named inventors, providing relevant technical reports to the filing Party concerning the invention disclosed in such patent application,
obtaining execution of such other documents which shall be needed in the filing and prosecution of such patent applications, and, as requested, updating each other regarding the status of such patent
applications. 

34

 

        13.1.3    Prosecution and Maintenance of GSK Patents.    GSK shall have the exclusive right and obligation to (subject
to GSK's election not to file, prosecute or maintain pursuant to Section 13.1.5) or to cause its licensors to, prepare, file and prosecute in a diligent manner (including without limitation by
conducting interferences, oppositions and reexaminations or other similar proceedings), maintain (by timely paying all maintenance fees, renewal fees, and other such fees and costs required under
applicable Laws) and extend all GSK Patents and related applications. Consistent with Section 2.3.3, GSK will consult with Theravance within the priority period for any patent application that
is material to this Agreement concerning Countries in which corresponding applications will be filed. In the event the Parties can not agree, GSK shall make the final decision. GSK shall consult with
Theravance prior to abandoning any GSK Patents or related applications that are material to the matters contemplated in this Agreement. GSK shall regularly advise Theravance of the status of all
pending applications, including with respect to any hearings or other proceedings before any Governmental Authority, and, at Theravance's request, shall provide Theravance with copies of documentation
relating to such applications, including all correspondence to and from any Governmental Authority. Subject to Section 2.3.3, GSK shall solicit Theravance's advice and review of the nature and
text of such patent applications and important prosecution matters related thereto in reasonably sufficient time prior to filing thereof, and GSK shall take into account Theravance's reasonable
comments relating thereto; provided that GSK shall have the final decision authority with respect to any action relating to a GSK Patent. 

        13.1.4    GSK Step-In Rights.    If Theravance elects not to file, prosecute or maintain the Theravance
Patents or claims encompassed by such Theravance Patents necessary for GSK to exercise its rights hereunder in any Country, Theravance shall give GSK notice thereof within a reasonable period prior to
allowing such Theravance Patents, or such claims encompassed by such Theravance Patents, to lapse or become abandoned or unenforceable, and GSK shall thereafter have the right, at its sole expense, to
prepare, file, prosecute and maintain such Theravance Patents in such Country. 

        13.1.5    Theravance Step-In Rights.    If GSK elects not to file, prosecute or maintain the GSK Patents
or claims encompassed by such GSK Patents necessary for Theravance to exercise its license rights hereunder in any Country, GSK shall give Theravance notice thereof within a reasonable period prior to
allowing such GSK Patents, or such claims encompassed by such GSK Patents, to lapse or become abandoned or unenforceable, and Theravance shall thereafter have the right, at its sole expense, to
prepare, file, prosecute and maintain such GSK Patents in such Country. In the event that GSK elects not to file, prosecute or maintain GSK Patents or claims that would affect the royalty owed
Theravance pursuant to Section 6.3, GSK shall reimburse Theravance for all out-of-pocket expenses incurred by Theravance in connection with Theravance exercising its
Step-In Rights under this Section. 

        13.1.6    Execution of Documents by Agents.    Each of the Parties shall execute or have executed by its appropriate
agents such documents as may be necessary to obtain, perfect or maintain any Patent Rights filed or to be filed pursuant to this Agreement, and shall cooperate with the other Party so far as
reasonably necessary with respect to furnishing all information and data in its possession reasonably necessary to obtain or maintain such Patent Rights. 

        13.1.7    Patent Term Extensions.    The Parties shall cooperate with each other in gaining patent term extension
where applicable to Collaboration Products. The Joint Steering Committee shall determine which patents the Parties shall endeavor to have extended. All filings for such extension will be made by the
Party to whom the patent is assigned after consultation with the other Party. In the event the Joint Steering Committee can not agree, the Party who is assigned the compound patent covering the LABA
in the Collaboration Product will make the decision. 

35

 

        13.2    Patent Infringement.    

        13.2.1    Infringement Claims.    With respect to any and all Claims instituted by Third Parties against Theravance or
GSK or any of their respective Affiliates for patent infringement involving the manufacture, use, license, marketing or sale of a Collaboration Product in the United States during the Term (each, a
"Patent Infringement Claim") as applicable, Theravance and GSK will assist one another and cooperate in the defense and settlement of such Patent Infringement Claims at the other Party's request. 

        13.2.2    Infringement of Theravance Patents.    In the event that Theravance or GSK becomes aware of actual or
threatened infringement of a Theravance Patent during the Term, that Party will promptly notify the other Party in writing (a "Patent Infringement Notice"). Theravance will have the right but not the
obligation to bring an infringement action against any Third Party. If Theravance elects to pursue such infringement action, Theravance shall be solely responsible for the costs and expenses
associated with such action and retain all recoveries. During the Term, in the event that Theravance does not undertake such an infringement action, upon Theravance's written consent, which shall not
be unreasonably withheld, refused, conditioned or delayed, GSK shall be permitted to do so in Theravance's or the relevant Theravance Affiliate's name and on Theravance's or the relevant Theravance
Affiliate's behalf. If Theravance has consented to an infringement action but GSK is not recognized by the applicable court or other relevant body as having the requisite standing to pursue such
action, then GSK may join Theravance as party-plaintiff. If GSK elects to pursue such infringement action, Theravance may be represented in such action by attorneys of its own choice and its own
expense with GSK taking the lead in such action. 

        13.2.3    Infringement of GSK Patents.    In the event that GSK or Theravance becomes aware of actual or threatened
infringement of a GSK Patent during the Term, that Party will promptly notify the other Party in writing. GSK will have the right but not the obligation to bring an infringement action against any
Third Party. If GSK elects to pursue such infringement action, GSK shall be solely responsible for the costs and expenses associated with such action and retain all recoveries. During the Term, in the
event that GSK does not undertake such an infringement action, upon GSK's written consent, which shall not be unreasonably withheld, refused, conditioned or delayed, Theravance shall be permitted to
do so in GSK's or the relevant GSK Affiliate's name and on GSK's or the relevant GSK Affiliate's behalf. If GSK has consented to an infringement action but Theravance is not recognized by the
applicable court or other relevant body as having the requisite standing to pursue such action, then
Theravance may join GSK as a party-plaintiff. If Theravance elects to pursue such infringement action, GSK may be represented in such action by attorneys of its own choice and at its own expense, with
Theravance taking the lead in such action. 

        13.3    Notice of Certification.    GSK and Theravance each shall immediately give notice to the other of any
certification filed under the "U.S. Drug Price Competition and Patent Term Restoration Act of 1984" (or its foreign equivalent) claiming that a GSK Patent or a Theravance Patent is invalid or that
infringement will not arise from the manufacture, use or sale of any Collaboration Product by a Third Party ("Hatch-Waxman Certification"). 

        13.3.1    Notice.    If a Party decides not to bring infringement proceedings against the entity making such a
certification, such Party shall give notice to the other Party of its decision not to bring suit within twenty-one (21) days after receipt of notice of such certification. 

        13.3.2    Option.    Such other Party then may, but is not required to, bring suit against the entity that filed the
certification. 

        13.3.3    Name of Party.    Any suit by Theravance or GSK shall either be in the name of Theravance or in the name of
GSK, (or any Affiliate) or jointly in the name of Theravance and GSK (or any Affiliate), as may be required by law. 

36

 

        13.4    Assistance.    For purposes of this Article 13, the Party not bringing suit shall execute such legal
papers necessary for the prosecution of such suit as may be reasonably requested by the Party bringing suit. The out-of-pocket costs and expenses of the Party bringing suit
shall be reimbursed first out of any damages or other monetary awards recovered in favor of GSK or Theravance. The documented out-of-pocket costs and expenses of the other
Party shall then be reimbursed out of any remaining damages or other monetary awards. The Party initiating and prosecuting the action to completion will retain any remaining damages or other monetary
awards following such reimbursements. 

        13.5    Settlement.    No settlement or consent judgment or other voluntary final disposition of a suit under this
Article may be entered into without the joint written consent of GSK and Theravance (which consent will not be withheld unreasonably). 

ARTICLE 14

TERM AND TERMINATION  

        14.1    Term and Expiration of Term.    Unless otherwise mutually agreed to by the Parties, this Agreement shall
commence on the Effective Date and shall end upon expiration of the Term, unless terminated early as contemplated hereunder. Unless terminated early under this Article 14, the licenses granted
by Theravance to GSK pursuant to Section 2.1 with respect to the Collaboration Products shall be considered fully-paid and shall become non-exclusive upon expiration of
the Term. 

        14.2    Termination for Material Breach.    Either Party may, without prejudice to any other remedies available to it
at law or in equity, terminate this Agreement subject to Section 14.10 in the event that the other Party (as used in this subsection, the "Breaching Party") shall have materially breached or
defaulted in the performance of any of its obligations. The Breaching Party shall, if such breach can be cured, have sixty (60) days after written notice thereof was provided to the Breaching
Party by the non-breaching Party to remedy such default (or, if such default cannot be cured within such 60-day period, the Breaching Party must commence and diligently
continue actions to cure such default during such 60-day period). Any such termination shall become effective at the end of such 60-day period unless the Breaching Party has
cured any such breach or default prior to the expiration of such 60-day period (or, if such default is capable of being cured but cannot be cured within such 60-day period, the
Breaching Party has commenced and diligently continued actions to cure such default provided always that, in such instance, such cure must have occurred within one hundred twenty (120) days
after written notice thereof was provided to the Breaching Party by the non-breaching Party to remedy such default). 

        14.3    GSK Right to Terminate Development of a Collaboration Product.    On a Collaboration
Product-by-Collaboration Product basis, and at any time during Development and prior to First Commercial Sale of the applicable Collaboration Product, GSK shall have the right
to terminate Development of such Collaboration Product (upon the provision of ninety (90) days written notice) for reasons of Technical Failure or Commercial Failure following communication to,
and assessment of such proposed termination by, the Joint Project Committee and Joint Steering Committee (in which case such Collaboration Product shall be referred to as a "Terminated Development
Collaboration Product"). For the avoidance of doubt, a "Terminated Development Collaboration Product" can be any of the following: [*]. 

[*]=CERTAIN
INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT AHS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 

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        14.4    GSK Right to Terminate Commercialization of a Collaboration Product Following First Commercial Sale.    On
a
Collaboration Product-by-Collaboration Product basis, and on a Country-by-Country basis, at any time after First Commercial Sale of the applicable
Collaboration Product in such country, GSK shall have the right to terminate Commercialization of such Collaboration Product (upon the provision of one hundred and eighty (180) days written
notice) for reasons of Commercial Failure or Technical Failure and following communication to, and assessment of such proposed termination by, the Joint Project Committee and Joint Steering Committee
(in which case, such Collaboration Product shall be referred to as a "Terminated Commercialized Collaboration Product"). For the avoidance of doubt, a Terminated Commercialized Collaboration Product
can be any of the following: [*]. 

        14.5    Termination of the Agreement Due to Discontinuation of Development of All Collaboration Products and All Pooled
Compounds.    Any time following the [*] the Effective Date, either Party may terminate this Agreement, subject to Section 14.10, upon
the provision of ninety (90) days written notice if Development of all Collaboration Products and all Pooled Compounds have been discontinued for Technical Failure and/or Commercial Failure.
Notwithstanding the foregoing, in the event that (i) Development of all Collaboration Products and all Pooled Compounds (including any Replacement Compounds) has ceased for at least
[*], (ii) all such termination and/or discontinuance decisions have been validly approved by the Joint Steering Committee, and (iii) both parties have provided
written notice to the other that such party does not intend to contribute any additional Replacement Compounds to the collaboration, then either Party shall be entitled to terminate this Agreement,
subject to Section 14.10, upon the provision of ninety (90) days written notice. 

        14.6    Effects of Termination.    

        14.6.1    Effect of Termination for Material Breach.    

        (a)    Material Breach by Theravance.    In the event this Agreement is terminated by GSK pursuant to
Section 14.2 for material breach by Theravance, all licenses granted by Theravance to GSK under this Agreement shall survive, subject to GSK's continued obligation to pay milestones and
royalties to Theravance hereunder. In such event, GSK shall retain all of its rights to bring an action against Theravance for damages and any other available remedies in law or equity, and shall be
entitled to set-off against any monies payable to Theravance hereunder all amounts GSK reasonably believes constitute its damages incurred by such breach, subject to final judicial
resolution or settlement. Also, Theravance shall, at its sole expense, promptly transfer to GSK copies of all data, reports, records and materials in its possession or control that relate to the
Collaboration Products that contain a GSK Compound and return to GSK, or destroy at GSK's request, all relevant records and
materials in its possession or control containing Confidential Information of GSK (provided that Theravance may keep one copy of such Confidential Information of GSK for archival purposes only in
accordance with Section 10.1). 

        (b)    Material Breach By GSK.    In the event that this Agreement is terminated by Theravance pursuant to
Section 14.2 for material breach by GSK: 

	(i)
	GSK
shall [*] promptly transfer to Theravance copies of all data, reports, records and materials in its possession or control that relate to the
Theravance Compounds and return to Theravance, or destroy at Theravance's request, all relevant records and materials in its possession or control containing Confidential Information of Theravance
(provided that GSK may keep one copy of such Confidential Information of Theravance for archival purposes only in accordance with Section 10.1). 

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38

 

	(ii)
	GSK
shall [*] transfer to Theravance, or shall cause its designee(s) to transfer to Theravance, ownership of all regulatory filings made or
filed for any Collaboration Product that contains a LABA as a single agent (to the extent that any are held in GSK's or such designee(s)'s name), and such transfer to be as permitted by applicable
Laws and regulations; otherwise GSK shall cooperate as necessary to permit Theravance to exercise its rights hereunder.

	(iii)
	Theravance
shall have the non-exclusive right to [*].

	(iv)
	All
of the provisions of Section [*] shall apply for the benefit of Theravance for any Collaboration Product for which
[*] at the effective date of such termination, subject to the limitations set forth in Section [*].

	(v)
	All
the provisions of Section [*] shall apply for any Collaboration Product that has been Commercialized at the effective date of such
termination.

	(vi)
	All
licenses granted by Theravance to GSK with respect to the applicable Theravance Compounds under this Agreement shall terminate.

	(vii)
	Theravance
shall retain all of its rights to bring an action against GSK for damages and any other available remedies in law or equity, and shall be entitled to
set-off against any monies payable to GSK hereunder all amounts Theravance reasonably believes constitute its damages incurred by such breach, subject to final judicial resolution or
settlement. 

        14.6.2    Effect of Termination by GSK of Certain Terminated Development Collaboration Product(s).    If GSK
terminates a Collaboration Product [*] concerning such Collaboration Product, and Development of all other Collaboration Products and Pooled Compounds have been discontinued
for Technical Failure and/or Commercial Failure, then at the sole election of Theravance, the following shall apply: 

	(a)
	GSK
shall [*] promptly transfer to Theravance copies of all data, reports, records and materials in its possession or control that relate to the Theravance
Compounds and return to Theravance, or destroy at Theravance's request, all relevant records and materials in its possession or control containing Confidential Information of Theravance (provided that
GSK may keep one copy of such Confidential Information of Theravance for archival purposes only in accordance with Section 10.1).

	(b)
	GSK
shall [*] transfer to Theravance, or shall cause its designee(s) to transfer to Theravance, ownership of all regulatory filings made or filed for the
Terminated Development Collaboration Product that contains a LABA as a single agent (to the extent that any are held in GSK's or such designee(s)'s name), such transfer to be as permitted by any Third
Party licenses or other such prior rights and applicable Laws and regulations, otherwise GSK shall cooperate as necessary to permit Theravance to exercise its rights hereunder.

	(c)
	Theravance
shall have the non-exclusive right to [*].

	(d)
	For
[*]. 

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39

 

	(e)
	In
the event of a Change in Control of Theravance prior to termination by GSK under Section 14.3, none of the provisions under this Section 14.6.2 shall survive as they
pertain to any Collaboration Product other than [*]. 

        14.6.3    Effect of Termination by GSK of a Terminated Commercialized Collaboration Product.    The provisions of this
Section 14.6.3 shall apply only where a Terminated Commercialised Collaboration Product is not being or has not been replaced by an alternative
Collaboration Product under this Agreement and provided that, [*]. GSK will use reasonable efforts to assist Theravance in locating a mutually acceptable Third Party to carry
out the rights and activities contemplated by this Section 14.6.3. Subject to the foregoing: 

	(a)
	If
GSK terminates a Collaboration Product after First Commercial Sale of such Collaboration Product in one or more of the Major Market Countries, Theravance shall have the right in
its sole discretion and at its sole expense, for its own benefit or together with a Third Party, to commercialize such Terminated Commercialized Collaboration Product in any of such Major Market
Countries where it has been terminated.

	(b)
	If
GSK terminates Commercialization of a Collaboration Product in all Countries of the Territory following the first commercial sale in any Country of the Territory, Theravance shall
have the right in its sole discretion and at it sole expense, for its own benefit or together with a Third Party, to Commercialise such Terminated Commercialized Collaboration Product in the
Territory.

	(c)
	[*].

	(d)
	In
the event Theravance exercises its rights under Section 14.6.3(a) and (b) above, the Parties shall negotiate in good faith a [*] for such
Terminated Commercialized Collaboration Product which shall ensure that, based on commercially reasonable terms (recognizing the Commercialized status of the Terminated Commercialized Collaboration
Product), Theravance has a [*]. 

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40

 

	(e)
	In
the event of a Change in Control of Theravance, prior to termination by GSK under Section 14.4, [*].

	(f)
	[*].

        14.6.4    Effect of Termination of the Agreement Due to Discontinuation of Development Prior to First Commercial Sale of All Collaboration Products and
All Pooled Compounds.    In the event that the Agreement is terminated pursuant to Section 14.5, the following shall occur: 

        (i)    Return of Materials.    GSK shall [*] promptly transfer to Theravance copies of all
data, reports, records and materials in its possession or control that relate to the Theravance Compounds and return to Theravance, or destroy at Theravance's request, all relevant records and
materials in its possession or control containing Confidential Information of Theravance (provided that GSK may keep one copy of such Confidential Information of Theravance for archival purposes only
in accordance with Section 10.1). Theravance shall, at its sole expense, promptly transfer to GSK copies of all data, reports, records and materials in its possession or control that relate to
the GSK Compounds and return to GSK, or destroy at GSK's request, all relevant records and materials in its possession or control containing Confidential Information of GSK (provided that Theravance
may keep one copy of such Confidential Information of GSK for archival purposes only in accordance with Section 10.1). 

        (ii)    Transfer of Regulatory Filings.    GSK shall [*] transfer to Theravance, or shall
cause its designee(s) to transfer to Theravance, ownership of all regulatory filings made or filed for any Terminated Development Collaboration Product (to the extent that any are held in GSK's or
such designee(s)'s name), but only where [*] and such transfer to be as permitted by applicable Laws and regulations. GSK, at its sole discretion, shall also give due
consideration to transferring to Theravance any additional regulatory filings for a Terminated Development Collaboration Product which contains a [*]. 

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41

 

        (iii)    License Rights.    All licenses granted by Theravance to GSK with respect to the Collaboration Products under
this Agreement shall terminate. 

        (iv)    Stock Return.    GSK shall return to Theravance all available formulated and API stocks that contain a
Theravance Compound and which are then held by GSK or cause such API stocks to be provided to Theravance if held by a vendor or other Third Party on behalf of GSK. 

        (v)    Limitations on Further Development by GSK.    GSK shall not be permitted to continue or re-initiate
clinical Development of any GSK Compound that is both a Terminated Collaboration Product and a LABA in the Field for a period of [*] after the date of such termination. 

        14.7    License Rights.    Except as otherwise provided herein in, all licenses granted hereunder relating to
Terminated Collaboration Products shall terminate. Also the Parties accept that nothing provided for in this Article 14 or elsewhere in this Agreement, grants any licenses (whether exclusive,
semi-exclusive or otherwise) from GSK to Theravance for any (i) GSK Compound (ii) GSK Invention (ii) GSK Know How and (iv) GSK Patents, except for those rights
essential and specific to enable Theravance to exercise those rights and carry out those activities contemplated under Section 14.6 above. 

        14.8    Milestone Payments.    Neither Party shall be obligated to make a Development Milestone payment under
Section 6.2 which is triggered by an event occurring after the effective date of termination of this Agreement with respect to a Collaboration Product. 

        14.9    Subsequent Royalties.    If after termination of this Agreement either Party subsequently Develops and
Commercializes any [*] for the treatment / prophylaxis of respiratory diseases which (i) was [*] or (ii) was a
[*], it will pay to the other Party a royalty on Net Sales of any such products at the rate of [*] for a single-agent product and
[*] for the first combination product for a period of [*] from the date of launch on a Country-by-Country basis; provided,
however, that this royalty shall not apply to any compound or product (including new product line extensions and/or re-formulation work) where the original compound or product is, as of
the date of signature of this Agreement, already Commercialized. 

        14.10    Accrued Rights; Surviving Obligations.    Termination, relinquishment or expiration of this Agreement for any
reason shall be without prejudice to any rights that shall have accrued to the benefit of any Party prior to such termination, relinquishment or expiration. Such termination, relinquishment or
expiration shall not relieve any Party from obligations which are expressly or by implication intended to survive termination, relinquishment or expiration of this Agreement, including without
limitation Article 10, and shall not affect or prejudice any provision of this Agreement which is expressly or by implication provided to come into effect on, or continue in effect after, such
termination, relinquishment or expiration. 

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42

 
ARTICLE 15

LIMITATIONS RELATING TO THERAVANCE EQUITY SECURITIES  

        15.1    Purchases of Equity Securities.    So long as this Agreement remains in effect and for a period of
[*] thereafter, except as permitted by Section 15.2, or as otherwise agreed in writing by Theravance, GSK and its Affiliates will not (and will not assist or encourage
others to) directly or indirectly in any manner: 

        15.1.1    acquire,
or agree to acquire, directly or indirectly, alone or in concert with others, by purchase, gift or otherwise, any direct or indirect beneficial ownership
(within the meaning of Rule l3d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or interest in any securities or direct or indirect rights, warrants or
options to acquire, or securities convertible into or exchangeable for, any securities of Theravance; 

        15.1.2    make,
or in any way participate in, directly or indirectly, alone or in concert with others, any "solicitation" of "proxies" to vote (as such terms are used in the
proxy rules of the Securities and Exchange Commission (the "SEC") promulgated pursuant to Section 14 of the Exchange Act); provided, however, that the prohibition in this Section 15.1.2
shall not apply to solicitations exempted from the proxy solicitation rules by Rule 14a-2 under the Exchange Act as such Rule 14a-2 is in effect as of the date
hereof; 

        15.1.3    form,
join or in any way participate in a "group" within the meaning of Section 13(d)(3) of the Exchange Act with respect to any voting securities of
Theravance; 

        15.1.4    acquire
or agree to acquire, directly or indirectly, alone or in concert with others, by purchase, exchange or otherwise, (i) any of the assets, tangible or
intangible, of Theravance or (ii) direct or indirect rights, warrants or options to acquire any assets of Theravance, except for such assets as are then being offered for sale by Theravance; 

        15.1.5    enter
into any arrangement or understanding with others to do any of the actions restricted or prohibited under Sections 15.1.1, 15.1.2, 15.1.3, or 15.1.4. 

        15.1.6    otherwise
act in concert with others, to seek to offer to Theravance or any of its stockholders any business combination, restructuring, recapitalization or similar
transaction to or with Theravance or otherwise seek in concert with others, to control, change or influence the management, board of directors or policies of Theravance or nominate any person as a
director of Theravance who is not nominated by the then incumbent directors, or propose any matter to be voted upon by the stockholders of Theravance. 

        15.2    Exceptions for Purchasing Securities of Theravance.    Nothing herein shall prevent GSK or its Affiliates (or
in the case of Section 15.2.4, their employees) from: 

        15.2.1    purchasing
the Series E Preferred Stock of Theravance on the Effective Date as contemplated herein. 

        15.2.2    purchasing
additional equity securities of Theravance after the Effective Date if after such purchase GSK and its Affiliates would own in the aggregate no greater
percent of the total voting power of all voting securities of Theravance then outstanding than GSK together with its Affiliates owned immediately after purchase of the Series E Preferred Stock
on the Effective Date. 

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43

 

        15.2.3    acquiring
securities of Theravance issued in connection with stock splits or recapitalizations or on exercise of pre-emptive rights afforded to Theravance
stockholders generally. 

        15.2.4    purchasing
securities of Theravance pursuant to (i) a pension plan established for the benefit of GSK's employees, (ii) any employee benefit plan of
GSK, (iii) any stock portfolios not controlled by GSK or any of its Affiliates that invest in Theravance among other companies, or (iv) following an initial public offering of Theravance
common stock, for the account of a GSK employee in such employee's personal capacity. 

        15.2.5    acquiring
securities of another biotechnology or pharmaceutical company that beneficially owns any of Theravance's securities. 

        15.2.6    acquiring
equity securities of Theravance without any limitation following initiation by a third party of an unsolicited tender offer to purchase
[*] or more of any class or service of Theravance's publicly traded voting securities (a "Hostile Tender Offer"); provided that the exception provided by this
Section 15.2.6 shall be limited to the classes or series of Theravance's securities that are the subject of the Hostile Tender Offer; provided, further, that, in the event that either
(a) such Hostile Tender Offer is terminated or expires without the purchase of at least [*] of any class or series of Theravance's publicly traded voting securities by
such third party, or (b) the Theravance Board of Directors subsequently recommends that such offer be accepted, then following the date of such termination, expiration or recommendation the
acquisitions by GSK and/or its Affiliates under this Section 15.2.6 prior to the events described in clauses (a) and (b) above shall not be considered a breach by GSK of the
provisions of Section 15.2 as long as GSK, at its option, either: 

          (i)  divests
(or cause to be divested) in one or more open-market transactions such number of shares of Theravance's securities acquired by it and its Affiliates
pursuant to this
Section 15.2.6 such that after such divestiture GSK and its Affiliates would own in the aggregate no greater percent of the total voting power of all voting securities of Theravance then
outstanding than GSK together with its Affiliates owned immediately prior to the commencement of such Hostile Tender Offer, any such divestiture to be completed as expeditiously as possible consistent
with applicable securities laws and regulations and in a manner intended to shield GSK and its Affiliates from liability for recovery of short swing profits under Section 16 of the Exchange Act
and the rules promulgated thereunder; or 

         (ii)  enters
into a voting agreement, proxy or similar arrangement pursuant to which (A) all Theravance voting securities acquired pursuant to this
Section 15.2.6 are voted on all matters to be voted on by holders of Theravance voting securities, including, but not limited to, in favor of any transaction involving a proposed Change in
Control (as defined below) of Theravance in the same proportion as the outstanding Theravance voting securities not held by GSK or any GSK Affiliate are voted, (B) no Theravance voting
securities beneficially owned by GSK and/or any Affiliate abstain from such a vote, and (C) no dissenter or appraisal or similar rights are exercised with respect to any vote relating to a
Change in Control of Theravance. 

        15.3    Voting.    Until the date of an initial public offering of Theravance common stock, GSK shall ensure that all
outstanding Theravance voting securities beneficially owned by GSK and/or any GSK Affiliate are voted for management's nominees to the Board of Directors of Theravance to the extent not inconsistent
with Section 2.8 of the Investors' Rights Agreement. 

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44

 

        15.4    Theravance Voting Securities Transfer Restrictions.    

        15.4.1    So
long as this Agreement remains in effect and for a period of one (1) year thereafter, neither GSK nor any of its Affiliates shall dispose of beneficial
ownership of Theravance voting securities except (i) pursuant to a bona fide public offering registered under the Securities Act of either Theravance voting securities or securities
exchangeable or exercisable for Theravance voting securities (in which the securities are broadly distributed and GSK does not select the purchasers); or (ii) pursuant to Rule 144 under
the Securities Act (provided that if Rule 144(k) is available, such transfer nevertheless is within the volume limits and manner of sale requirements applicable to non-144(k)
transfers under Rule 144); or (iii) in transactions that to the knowledge of GSK do not, directly or indirectly, result in any person or group owning or having the right to acquire
or intent to acquire beneficial ownership of Theravance voting securities with aggregate voting power of five percent or more of the aggregate voting power of all outstanding Theravance voting
securities. 

        15.4.2    Notwithstanding
the foregoing, the restrictions on disposition under Section 15.4.1 shall not apply if, as a result of such disposition, (A) no filing
by any Person (including, but not limited to GSK or any of its Affiliates) shall be required under any Law (including but not limited to the Exchange Act) that would identify GSK or any of its
Affiliates as the seller of the securities, and (B) neither GSK nor any of its Affiliates (or any transferee thereof) would be required by Law (including without limitation the disclosure
requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act) to make any public announcement of the transfer or disposition. 

        15.4.3    So
long as this Agreement remains in effect and for a period of one (1) year thereafter, neither GSK nor any of its Affiliates may make any public disclosure
of any holdings of or disposition of beneficial ownership of Theravance voting securities unless such disclosure is approved in advance in writing by Theravance, such approval not to be unreasonably
withheld or delayed. Notwithstanding the foregoing, no consent of Theravance shall be required for any filing that GSK or any of its Affiliates is required to make under applicable Law in any
jurisdiction, including without limitation any Form 144 under the Securities Act, any Form 4 under the Exchange Act, or any Schedule 13D or 13G or any amendments thereto under the
Exchange Act; provided that, prior to making any such filings, GSK shall use reasonable efforts to (i) to provide Theravance notice and a copy of such proposed filings and (ii) consult
with Theravance on the content of such filings. 

        15.5    Termination of Purchase Restrictions.    The limitations on purchase of equity securities set forth in
Section 15.1 shall terminate immediately upon a transaction or series of related transactions following a Change in Control of Theravance. 

ARTICLE 16

MISCELLANEOUS  

        16.1    Relationship of the Parties.    Each Party shall bear its own costs incurred in the performance of its
obligations hereunder without charge or expense to the other except as expressly provided in this Agreement. Neither Party shall have any responsibility for the hiring, termination or compensation of
the other Party's employees or for any employee benefits of such employee. No employee or representative of a Party shall have any authority to bind or obligate the other Party to this Agreement for
any sum or in any manner whatsoever, or to create or impose any contractual or other liability on the other Party without said Party's approval. For all purposes, and notwithstanding any other
provision of this Agreement to the contrary, GSK's legal relationship under this Agreement to Theravance shall be that of independent contractor. This Agreement is not a partnership agreement and
nothing in this 

45

 

Agreement
shall be construed to establish a relationship of co-partners or joint venturers between the Parties. 

        16.2    Registration and Filing of This Agreement.    To the extent, if any, that either Party concludes in good faith
that it or the other Party is required to file or register this Agreement or a notification thereof with any Governmental Authority, including without limitation the U.S. Securities and Exchange
Commission, the Competition Directorate of the Commission of the European Communities or the U.S. Federal Trade Commission, in accordance with Law, such Party shall inform the other Party thereof.
Should both Parties jointly agree that either of them is required to submit or obtain any such filing, registration or notification, they shall cooperate, each at its own expense, in such filing,
registration or notification and shall execute all documents reasonably required in connection therewith. In such filing, registration or notification, the Parties shall request confidential treatment
of sensitive provisions of this Agreement, to the extent permitted by Law. The Parties shall promptly inform each other as to the activities or inquiries of any such Governmental Authority relating to
this Agreement, and shall reasonably cooperate to respond to any request for further information there from on a timely basis. 

        16.3    Force Majeure.    The occurrence of an event which materially interferes with the ability of a Party to
perform its obligations or duties hereunder which is not within the reasonable control of the Party affected or any of its Affiliates, not due to malfeasance by such Party or its Affiliates, and which
could not with the exercise of due diligence have been avoided (each, a "Force Majeure Event"), including, but not limited to, an injunction, order or action by a Governmental Authority, fire,
accident, labor difficulty, strike, riot, civil commotion, act of God, inability to obtain raw materials, delay or errors by shipping companies or change in law, shall not excuse such Party from the
performance of its obligations or duties under this Agreement, but shall merely suspend such performance during the continuation of the Force Majeure. The Party prevented from performing its
obligations or duties because of a Force Majeure Event shall promptly notify the other Party of the occurrence and particulars of such Force Majeure and shall provide the other Party, from time to
time, with its best estimate of the duration of such Force Majeure Event and with notice of the termination thereof. The Party so affected shall use Diligent Efforts to avoid or remove such causes of
nonperformance as soon as is reasonably practicable. Upon termination of the Force Majeure Event, the performance of any suspended obligation or duty shall promptly recommence. The Party subject to
the Force Majeure Event shall not be liable to the other Party for any direct, indirect, consequential, incidental, special, punitive, exemplary or other damages arising out of or relating to the
suspension or termination of any
of its obligations or duties under this Agreement by reason of the occurrence of a Force Majeure Event, provided such Party complies in all material respects with its obligations under this
Section 16.3. 

        16.4    Governing Law.    This Agreement shall be construed, and the respective rights of the Parties determined,
according to the substantive law of the State of Delaware notwithstanding the provisions governing conflict of laws under such Delaware law to the contrary, except matters of intellectual property law
which shall be determined in accordance with the intellectual property laws relevant to the intellectual property in question. 

        16.5    Attorneys' Fees and Related Costs.    In the event that any legal proceeding is brought to enforce or
interpret any of the provisions of this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees, court costs and expenses of litigation whether or not the action or
proceeding proceeds to final judgment. 

        16.6    Assignment.    This Agreement may not be assigned by either Party without the prior written consent of the
other Party; provided, however that either Party may assign this Agreement, in whole or in part, to any of its Affiliates if such Party guarantees the performance of this Agreement by such Affiliate;
and provided further that either Party may assign this Agreement to a successor to all or substantially all of the assets of such Party whether by merger, sale of stock, sale of assets or other
similar transaction. This Agreement shall be binding upon, and subject to the terms of the foregoing sentence, inure to the benefit of the Parties hereto, their permitted successors, legal
representatives and assigns. 

46

  

        16.7    Notices.    All demands, notices, consents, approvals, reports, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered personally, by facsimile with confirmation of receipt, by mail (first class, postage prepaid), or by overnight delivery
using a globally-recognized carrier, to the Parties at the following addresses: 

	Theravance:	 	Theravance, Inc.

901 Gateway Boulevard

South San Francisco, CA 94080

Facsimile: 650-827-8683

Attn: Senior Vice President, Commercial Development
	

GSK:	
 	

Glaxo Group Limited

Glaxo Wellcome House

Berkeley Avenue

Greenford

Middlesex UB6 0NN

United Kingdom

Attn: Company Secretary

Facsimile: 011 44 208-047-6912
	

With a copy to:	
 	

GlaxoSmithKline plc

980 Great West Road

Brentford

Middlesex

TW8 9GS

United Kingdom

Attn: Corporate Law

Facsimile: 011 44 208-047-6912
	

and with a copy to:	
 	

Brentford

Middlesex

TW8 9GS

United Kingdom

Attn: Vice President, Worldwide Business Development

Facsimile: 011 44 208-990-8142

or
to such other address as the addressee shall have last furnished in writing in accord with this provision to the addressor. All notices shall be deemed effective upon receipt by the addressee. 

        16.8    Severability.    In the event of the invalidity of any provisions of this Agreement or if this Agreement
contains any gaps, the Parties agree that such invalidity or gap shall not affect the validity of the remaining provisions of this Agreement. The Parties will replace an invalid provision or fill any
gap with valid provisions which most closely approximate the purpose and economic effect of the invalid provision or, in case of a gap, the Parties' presumed intentions. In the event that the terms
and conditions of this Agreement are materially altered as a result of the preceding sentences, the Parties shall renegotiate the terms and conditions of this Agreement in order to resolve any
inequities. Nothing in this Agreement shall be interpreted so as to require either Party to violate any applicable laws, rules or regulations. 

        16.9    Headings.    The headings used in this Agreement have been inserted for convenience of reference only and do
not define or limit the provisions hereof. 

        16.10    Waiver.    Any term or condition of this Agreement may be waived at any time by the Party that is entitled to
the benefit thereof, but no such waiver shall be effective unless set forth in a written 

47

 

instrument
duly executed by or on behalf of the Party waiving such term or condition. No waiver by any Party of any term or condition of this Agreement, in any one or more instances, shall be deemed
to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. Except as expressly set forth in this Agreement, all rights and remedies available
to a Party, whether under this Agreement or afforded by law or otherwise, will be cumulative and not in the alternative to any other rights or remedies that may be available to such Party. 

        16.11    Entire Agreement.    This Agreement (including the exhibits and schedules hereto) constitutes the entire
agreement between the Parties hereto with respect to the within subject matter and supersedes all previous agreements and understandings between the Parties, whether written or oral. This Agreement
may be altered, amended or changed only by a writing making specific reference to this Agreement and signed by duly authorized representatives of Theravance and GSK. 

        16.12    No License.    Nothing in this Agreement shall be deemed to constitute the grant of any license or other
right in either Party, to or in respect of any Collaboration Product, patent, trademark, Confidential Information, trade secret or other data or any other intellectual property of the other Party,
except as expressly set forth herein. 

        16.13    Third Party Beneficiaries.    None of the provisions of this Agreement shall be for the benefit of or
enforceable by any Third Party, including without limitation any creditor of either Party hereto. No such Third Party shall obtain any right under any provision of this Agreement or shall by reasons
of any such provision make any Claim in respect of any debt, liability or obligation (or otherwise) against either Party hereto. 

        16.14    Counterparts.    This Agreement may be executed in any two counterparts, each of which, when executed, shall
be deemed to be an original and both of which together shall constitute one and the same document. 

        16.15    Single Closing Condition.    The obligation of each Party to consummate the transaction contemplated hereby
is subject to the satisfaction of the following condition (the "Closing Condition"): All filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and any other similar
competition or merger control laws that are necessary in any jurisdiction with respect to the transaction contemplated hereby shall have been made and any required waiting period under such laws shall
have expired or been terminated and any Governmental Authority that has power under or authority to enforce such laws shall have, if applicable, approved, cleared or decided neither to initiate
proceedings or otherwise intervene in respect of the transaction contemplated hereby nor to refer the transaction to any other competent Governmental Authority. Each Party shall use good faith efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other party in doing, all things necessary, proper or advisable to consummate and make
effective the transaction contemplated by this Agreement, including, but not limited to satisfaction of the Closing Condition and each Party shall keep the other Party reasonably apprised of the
status of matters relating to the completion of same. In connection with the foregoing, the Parties hereby agree to negotiate in good faith to make as soon as practicable any modification or amendment
to this Agreement or any agreement related hereto that is required by the United States Federal Trade Commission, Department of Justice or equivalent Governmental Authority, provided that no Party
shall be required to agree to any modification or amendment that, in the reasonable opinion of such Party's external legal or financial counsel, would be adverse to such Party. This Agreement may be
terminated by either Party upon written notice any time after June 1, 2003 if the transactions contemplated by this Agreement shall not have been consummated by June 1, 2003 due to
failure to satisfy the Closing Condition; provided, however, that the terminating Party shall not have breached in any material respect its obligations under this Agreement in any manner that shall
have been the proximate cause of, or resulted in, the failure to satisfy the Closing Condition or otherwise to consummate the transactions contemplated by this Agreement by such date. 

48

 

        IN
WITNESS WHEREOF, Theravance and GSK, by their duly authorized officers, have executed this Agreement on November 14, 2002. 

	THERAVANCE, INC.	 	GLAXO GROUP LIMITED
	

By:	
 	

/s/  RICK E WINNINGHAM      
 Rick E Winningham

Chief Executive Officer	
 	

By:	
 	

/s/  JEAN-PIERRE GARNIER      
 Jean-Pierre Garnier

Chief Executive Officer

49

 
 
 

Schedule 1.19    
    
    Criteria for Theravance New Compounds and Replacement Compounds    
    

[*] 

[*]=CERTAIN
INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 

50

 
 
 

Schedule 6.1.2    
    
    Preferred Stock Purchase Agreement    
    

51

 
 

THERAVANCE, INC.    
    
    SERIES E PREFERRED    
    
    STOCK PURCHASE AGREEMENT    
    
    December 19, 2002    
    

 
 
 

TABLE OF CONTENTS    
    

	 
	 	Page

	1. Purchase and Sale or Stock	 	1
	 	1.1 Sale and Issuance of Series E Preferred Stock	 	1
	 	1.2 Closing	 	1
	

2. Representations and Warranties of the Company	
 	

1
	 	2.1 Organization, Good Standing and Qualification	 	1
	 	2.2 Capitalization and Voting Rights	 	2
	 	2.3 Subsidiaries	 	2
	 	2.4 Authorization	 	3
	 	2.5 Valid issuance of Preferred and Common Stock	 	3
	 	2.6 Governmental Consents	 	3
	 	2.7 Offering	 	3
	 	2.8 Litigation	 	3
	 	2.9 Patents and Trademarks	 	4
	 	2.10 Compliance with Other Instruments	 	4
	 	2.11 Agreements; Action	 	5
	 	2.12 Related Party Transactions	 	5
	 	2.13 Permits	 	6
	 	2.14 Disclosure	 	6
	 	2.15 Corporate Documents	 	6
	 	2.16 Title to Property and Assets	 	6
	 	2.17 Tax Returns, Payments and Elections	 	6
	 	2.18 Environmental Law	 	6
	 	2.19 Proprietary Information and Employment Agreements	 	6
	 	2.20 Financial Statements	 	6
	 	2.21 Changes	 	7
	 	2.22 Registration Rights	 	8
	 	2.23 Real Property Holding Corporation	 	8
	 	2.24 Labor Agreements	 	8
	 	2.25 Insurance	 	8
	

3. Representations and Warranties of the Investor	
 	

8
	 	3.1 Authorization	 	8
	 	3.2 Purchase Entirely for Own Account	 	8
	 	3.3 Disclosure of Information	 	8
	 	3.4 Investment Experience	 	8
	 	3.5 Accredited Investor	 	9
	 	3.6 Restricted Securities	 	9
	 	3.7 Further Limitations on Disposition	 	9
	 	3.8 Legends	 	9
	

4. Conditions of Investor's Obligations at Closing	
 	

10
	 	4.1 Representations and Warranties	 	10
	 	4.2 Performance	 	10
	 	4.3 Compliance Certificate	 	10
	 	4.4 Qualifications	 	10
	 	4.5 Proceedings and Documents	 	10
	 	4.6 Opinion of Company Counsel	 	10
	 	4.7 Investors' Rights Agreement	 	10
	 	 	 

i

 

	 	4.8 Filing of the Restated Certificate	 	10
	 	4.9 HSR Act	 	10
	

5. Conditions of the Company's Obligations at Closing	
 	

10
	 	5.1 Representations and Warranties	 	10
	 	5.2 Qualifications	 	10
	 	5.3 Investors' Rights Agreement	 	11
	 	5.4 HSR Act	 	11
	

6. Miscellaneous	
 	

11
	 	6.1 Survival of Warranties	 	11
	 	6.2 Successors and Assigns	 	11
	 	6.3 Governing Law	 	11
	 	6.4 Counterparts	 	11
	 	6.5 Titles and Subtitles	 	11
	 	6.6 Notices	 	11
	 	6.7 Finder's Fee	 	11
	 	6.8 Expenses	 	12
	 	6.9 Amendments and Waivers	 	12
	 	6.10 Severability	 	12
	 	6.11 Confidentiality	 	12
	 	6.12 Publicity	 	12
	 	6.13 Entire Agreement	 	13
	 	6.14 Waiver of Conflicts	 	13

	

SCHEDULE A	
 	

Schedule of Exceptions	
 	

 
	

EXHIBIT A	
 	

Restated Certificate of Incorporation	
 	

 
	EXHIBIT B	 	Amended and Restated Investors' Rights Agreement	 	 
	EXHIBIT C	 	Opinion of Counsel for the Company	 	 

ii

 
 

THERAVANCE, INC.    
    
    SERIES E PREFERRED STOCK PURCHASE AGREEMENT    
    

        THIS STOCK PURCHASE AGREEMENT is made as of the 19th day of December, 2002, by and among Theravance, Inc., a Delaware corporation (the "Company"), and
Glaxo Group Limited, a limited liability company organized under the laws of England and Wales (the "Investor"). 

        THE
PARTIES HEREBY AGREE AS FOLLOWS: 

        1.    Purchase and Sale of Stock.    

        1.1    Sale and Issuance of Series E Preferred Stock.    

        (a)   The
Company shall adopt and file with the Secretary of State Delaware on or before the Closing (as defined below) the Restated Certificate of Incorporation in the form
attached hereto as Exhibit A (the "Restated Certificate"). 

        (b)   On
or prior to the Closing (as defined below), the Company shall have authorized (i) the sale and issuance pursuant to this Agreement of up to an aggregate of
4,000,000 shares at a price of $10.00 per share of its Series E Preferred Stock and (ii) the issuance of the same number of shares of its Common Stock to be issued upon conversion of the
Series E Preferred Stock (the "Conversion Shares"). The Series E Preferred Stock and the Conversion Shares shall have the rights, preferences, privileges and restrictions set forth in
the Restated Certificate. 

        (c)   Subject
to the terms and conditions of this Agreement, the Investor agrees, severally and not jointly, to purchase at the Closing and the Company agrees to sell and
issue to the Investor at the Closing, 4,000,000 shares of the Company's Series E Preferred Stock for an aggregate purchase price of $40,000,000. 

        1.2    Closing.    The purchase and sale of the Series E Preferred Stock shall take place at the offices of
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, 610 Lincoln Street, Waltham, MA 02451, at 10:00 A.M., on the date all conditions to closing set forth in Sections 4 and 5
have been satisfied or effectively waived, or at such other time and place as the Company and Investor mutually agree upon orally or in writing (which time and place are designated as the "Closing").
At the Closing the Company shall deliver to the Investor a certificate representing the Series E Preferred Stock that the Investor is purchasing against payment of the purchase price therefor
by check or wire transfer, or any combination thereof. 

        2.    Representations and Warranties of the Company.    The Company hereby represents and warrants to the Investor
that, except as set forth on a Schedule of Exceptions (the "Schedule of Exceptions") furnished to the Investor, which exceptions shall be deemed to be representations and warranties as if made
hereunder: 

        2.1    Organization, Good Standing and Qualification.    The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to (i) execute, deliver and perform its obligations under this Agreement and the
Amended and Restated Investors' Rights Agreement dated of even date herewith, by and among the Company and the Investors, the form of which is attached hereto as  Exhibit B (the "Investors' Rights
Agreement"), (ii) to issue and sell the Series E Preferred Stock hereunder, (iii) to issue
the Conversion Shares in accordance with the Restated Certificate, (iv) to perform its obligations under the Restated Certificate, and (v) to carry on its business as now conducted and
as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on
its business or properties. 

 

        2.2    Capitalization and Voting Rights.    The authorized capital of the Company will consist immediately prior to
the Closing, of: 

        (a)    Preferred Stock.    50,000,000 shares of Preferred Stock (the "Preferred Stock"), of which (i) 5,020,000
shares have been designated Series A Preferred Stock (the "Series A Preferred Stock"), 4,988,000 of which are outstanding; (ii) 5,100,000 shares have been designated
Series B Preferred Stock (the "Series B Preferred Stock"), 5,074,000 of which are outstanding; (iii) 18,823,000 shares have been designated Series C Preferred Stock (the
"Series C Preferred Stock"), 18,745,166 of which are outstanding; (iv) 1,666,666 shares have been designated Series D Preferred Stock (the "Series D Preferred Stock"),
1,666,666 of which are outstanding (which are initially convertible into 2,777,777 shares of Common Stock); (v) 13,888,889 shares have been designated Series D-1 Preferred
Stock (the
"Series D-1 Preferred Stock"), 13,169,905 of which are outstanding; and (vi) 4,000,000 shares have been designated Series E Preferred Stock (the "Series E
Preferred Stock"), none of which will be outstanding prior to the Closing, and up to all of which may be sold pursuant to this Agreement. The rights, privileges and preferences of the Preferred Stock
will be as stated in the Company's Restated Certificate. 

        (b)    Common Stock.    120,000,000 shares of common stock, par value $0.01 ("Common Stock"), of which 11,158,392
shares are issued and outstanding. 

        (c)   The
outstanding shares of Common Stock and Preferred Stock are all duly and validly authorized and issued, fully paid and nonassessable, and were issued in accordance
with the registration or qualification provisions of the Securities Act of 1933, as amended (the "Act") and any relevant state securities laws, or pursuant to valid exemptions therefrom. 

        (d)   Except
for (A) the conversion privileges of the Preferred Stock, (B) the rights provided in Section 2.5 of the Investors' Rights Agreement,
(C) currently outstanding warrants to purchase 4,000 shares of Series A Preferred Stock, (D) currently outstanding warrants to purchase 4,000 shares of Series B Preferred
Stock, (E) currently outstanding warrants to purchase 45,000 shares of Series C Preferred Stock, (F) a currently outstanding warrant to purchase 48,611 shares of
Series D-1 Preferred Stock, and (G) currently outstanding options to purchase 7,187,436 shares of Common Stock granted to employees, directors, board members, consultants and
service providers, there are not outstanding any options, warrants, rights (including conversion or preemptive rights) or agreements for the purchase or acquisition from the Company of any shares of
its capital stock. In addition to the aforementioned options, the Company has reserved an additional 969,493 shares of its Common Stock for issuance upon exercise of options to be granted in the
future under the Company's 1997 Stock Plan. Except for the provisions of the Restated Certificate, the Investors' Rights Agreement and of that certain Amended and Restated Stockholders' Voting
Agreement dated as of January 25, 1999 by and among the Company and the other parties listed therein, the Company is not a party or subject to any agreement or understanding, and, to the best
of the Company's knowledge, there is no agreement or understanding between any persons and/or entities, which affects or relates to the voting or giving of written consents with respect to any
security or by a director of the Company. No stock plan, stock purchase, stock option or other agreement or understanding between the Company and any holder of any equity securities or rights to
purchase equity securities provides for acceleration or other changes in the vesting provisions of such agreement or understanding as the result of any merger, consolidated sale of stock or assets,
change in control or any other similar transaction(s) by the Company. 

        2.3    Subsidiaries.    The Company does not presently own or control, directly or indirectly, any interest in any
other corporation, association or other business entity, other than Theravance East, Inc., a Delaware corporation and a direct wholly-owned subsidiary of the Company. The Company is not a
participant in any joint venture, partnership, or similar arrangement. 

2

 

        2.4    Authorization.    All corporate action on the part of the Company, its officers, directors and stockholders
necessary for the authorization, execution and delivery of this Agreement and the Investors' Rights Agreement (collectively, the "Transaction Documents"), the performance of all obligations of the
Company hereunder and thereunder, and the authorization, issuance (or reservation for issuance), sale and delivery of the Series E Preferred Stock being sold hereunder and the Common Stock
issuable upon conversion of the Series E Preferred Stock has been taken or will be taken prior to the Closing, and the Transaction Documents constitute valid and legally binding obligations of
the Company, enforceable in accordance with their respective terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, and
(iii) to the extent the indemnification provisions contained in the Investors' Rights Agreement may be limited by applicable federal or state securities laws. 

        2.5    Valid Issuance of Preferred and Common Stock.    The Series E Preferred Stock that is being purchased by
the Investor hereunder, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under the Transaction Documents and under applicable state and federal securities laws. The Common Stock
issuable upon conversion of the Series E Preferred Stock purchased under this Agreement has been duly and validly reserved for issuance and, upon issuance in accordance with the terms of the
Restated Certificate, will be duly and validly issued, fully paid, and nonassessable and will be free of restrictions on transfer other than restrictions on transfer under the Transaction Documents
and under applicable state and federal securities laws. The Series E Preferred Stock that is being purchased by the Investor hereunder, and the Common Stock issuable upon conversion of such
Series E Preferred Stock is not subject to preemptive rights or rights of first refusal that have not been waived or complied with. The outstanding Series A, Series B,
Series C, Series D and Series D-1 Preferred Stock was duly and validly issued, fully paid, and is nonassessable. The Common Stock issuable upon conversion of the
outstanding Series A, Series B, Series C, Series D and Series D-1 Preferred Stock has been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Restated Certificate, will be duly and validly issued, fully paid, and nonassessable and will be free of restrictions on transfer other than restrictions on transfer
under the documents executed in connection with the sale of the Series A, Series B, Series C, Series D and Series D-1 Preferred Stock and under
applicable state and federal securities laws. The outstanding Series A, Series B, Series C, Series D and Series D-1 Preferred Stock and the Common Stock
issuable upon conversion of such Preferred Stock is not subject to preemptive rights or rights of first refusal that have not been waived or complied with. 

        2.6    Governmental Consents.    No consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated
by this Agreement, except (i) a filing under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing of the Restated Certificate with the
Secretary of State of Delaware; and (iii) certain post-closing filings as may be required pursuant to federal securities laws and under the "Blue Sky" laws of the various states. 

        2.7    Offering.    Subject in part to the truth and accuracy of the Investor's representations set forth in
Section 3 of this Agreement, the offer, sale and issuance of the Series E Preferred Stock and the Conversion Shares as contemplated by this Agreement are exempt from the registration
requirements of any applicable state and federal securities laws, and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such
exemption. 

        2.8    Litigation.    There is no action, suit, proceeding or investigation pending or, to the Company's knowledge,
currently threatened against the Company that questions the validity of the Transaction 

3

 

Documents,
or the right of the Company to enter into such agreements, or to consummate the transactions contemplated hereby or thereby, or if determined adversely, might result, either individually or
in the aggregate, in (i) any material adverse changes in the assets or business of the Company, financially or otherwise or (ii) any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for the foregoing. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or that the Company intends to initiate. 

        2.9    Patents and Trademarks.    The Company owns, or has rights to use pursuant to a valid license, all patents,
trademarks, service marks, trade names, copyrights, trade secrets, information, proprietary rights and processes necessary for its business as now conducted. There are no outstanding options, licenses
or agreements of any kind relating to the foregoing proprietary rights, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any other person or entity other than such licenses or agreements
arising from the purchase of "off the shelf" or standard products. The use, modification, licensing, sublicensing, sale, or any other exercise of rights involving such intellectual property does not
infringe any copyright, trade secret, trademark, service mark, trade name, firm name, logo, trade dress, mask work, moral right, other intellectual property right, right of privacy or right in
personal data, or to the knowledge of the Company, any patent, of any person. No claims (i) challenging the validity, effectiveness, or ownership by the Company of any of the Company's
intellectual property, or (ii) to the effect that the use, reproduction, modification, manufacturing, distribution, licensing, sublicensing, sale or any other exercise of rights in any product,
work, technology, service or process as used, provided or offered at any time, or as proposed for use, reproduction, modification, distribution, licensing, sublicensing, sale or any other exercise of
rights, by the Company infringes or will infringe on any intellectual property or other proprietary or personal right of any person have been asserted or, to the knowledge of the Company,
(A) are threatened by any person nor (B) are there any valid grounds for any bona fide claim of any such kind. To the knowledge of the Company, there is no unauthorized use, infringement
or misappropriation of any of the Company's intellectual property by any third party, employee or former employee. The Company's employees are not obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of the Company or that would conflict with the Company's business as proposed to be conducted. Neither the execution nor delivery of the Transaction Documents, nor the
carrying on of the Company's business by the employees of the Company, nor the conduct of the Company's business as proposed, will, to the best of the Company's knowledge, conflict
with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions of any of its employees made prior to their employment by the Company unless such inventions are properly assigned to the
Company. 

        2.10    Compliance with Other Instruments.    The Company is not in violation or default in any material respect of
any provision of its Restated Certificate or Bylaws, or in any material respect of any instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound, or, to the
best of its knowledge, of any provision of any statute, rule or regulation applicable to the Company. The execution, delivery and performance of the Transaction Documents, and the consummation of the
transactions contemplated hereby and thereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default
under any such provision, instrument, judgment, order, writ, decree or contract or an event that results in the creation of any lien, charge or encumbrance upon any assets of the Company or the
suspension, revocation, impairment, forfeiture, or nonrenewal of any material permit, license, 

4

 

authorization,
or approval applicable to the Company, its business or operations or any of its assets or properties. 

        2.11    Agreements; Action.    

        (a)   Except
for agreements explicitly contemplated by the Transaction Documents, there are no agreements, understandings or proposed transactions between the Company and any
of its officers, directors, affiliates, or any affiliate thereof. 

        (b)   There
are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which the Company is a party or by which
it is bound that may involve (i) provisions restricting or affecting the development, manufacture or distribution of the Company's products or services; (ii) obligations (contingent or
otherwise) of, or payments to, the Company in excess of $100,000 (other than obligations of, or payments to, the Company arising from agreements entered into in the ordinary course of business); or
(iii) indemnification by the Company with respect to infringements of proprietary rights (other than indemnification obligations arising from agreements entered into in the ordinary course of
business). 

        (c)   The
Company has not (i) declared or paid any dividends or authorized or made any distribution upon or with respect to any class or series of its capital stock,
(ii) incurred any indebtedness for money borrowed or any other liabilities individually in excess of $1,000,000 or in the aggregate in excess of $5,000,000, (iii) made any loans or
advances to any person, other than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business. 

        (d)   For
the purposes of subsection (c) above, all indebtedness and liabilities involving the same person or entity (including persons or entities the Company has
reason to believe are affiliated therewith) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsection. 

        (e)   The
Company is not a party to and is not bound by any contract, agreement or instrument, or subject to any restriction under its Restated Certificate or Bylaws that
adversely affects its business as now conducted or as proposed to be conducted, its properties or its financial condition. 

        (f)    The
Company has not engaged in the past three (3) months in any discussion (i) with any representative of any corporation or corporations regarding the
consolidation or merger of the Company with or into any such corporation or corporations, (ii) with any corporation, partnership, association or other business entity or any individual
regarding the sale, conveyance or disposition of all or substantially all of the assets of the Company or a transaction or series of related transactions in which more than fifty percent (50%) of the
voting power of the Company is disposed of, or (iii) regarding any other form of acquisition, liquidation, dissolution or winding up of the Company. 

        2.12    Related-Party Transactions.    No employee, officer, or director of the Company or member of his or her
immediate family is indebted to the Company, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to any of them. To the Company's knowledge, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation that
competes with the Company, except that employees, officers, or directors of the Company and members of their immediate families may own stock in publicly traded companies that may compete with the
Company. No member of the immediate family of any officer or director of the Company is directly or indirectly interested in any material contract with the Company. 

5

 

        2.13    Permits.    The Company has all franchises, permits, licenses, and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which could materially and adversely affect the business, properties, prospects, or financial condition of the Company, and the
Company believes it can obtain, without undue burden or expense, any similar authority for the conduct of its business as planned to be conducted. The Company is not in default in any material respect
under any of such franchises, permits, licenses, or other similar authority. 

        2.14    Disclosure.    The Company has provided the Investor with all information requested by the Investor in
connection with their decision to purchase the Shares, including all information the Company believes is reasonably necessary to make such investment decision. To the Company's knowledge, neither this
Agreement, the Investors' Rights Agreement, nor any other statements or certificates made or
delivered in connection herewith or therewith contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading. 

        2.15    Corporate Documents.    Except for amendments necessary to satisfy representations and warranties or
conditions contained herein (the form of which amendments has been approved by the Investor), the Restated Certificate and Bylaws of the Company are in the form previously provided to the Investor. 

        2.16    Title to Property and Assets.    The Company owns its property and assets free and clear of all mortgages,
liens, loans and encumbrances, except such encumbrances and liens that arise in the ordinary course of business and do not materially impair the Company's ownership or use of such property or assets
and has good and marketable title to such property. With respect to the property and assets it leases, the Company is in compliance with such leases and holds a valid leasehold interest free of any
liens, claims or encumbrances. 

        2.17    Tax Returns, Payments and Elections.    The Company has timely filed all tax returns and reports as required
by law. These returns and reports are true and correct in all material respects. The Company has paid all taxes and assessments due, except those contested by it in good faith, if any. The Company has
not been advised (a) that any of its federal, state or local returns are being audited as of the date hereof, or (b) of any deficiency in assessment or proposed judgment to its federal,
state or other taxes. The Company has no knowledge of any liability of any tax to be imposed upon its properties or assets as of the date of this Agreement that isn't adequately provided for. 

        2.18    Environmental Law.    To the Company's knowledge, the Company is not in violation of and has no liability or
potential liability under any applicable statute, law, or regulation relating to the environment, and to the best of its knowledge, no material expenditures are or will be required in order to comply
with any such existing statute, law, or regulation. 

        2.19    Proprietary Information and Employment Agreements.    Each current and former employee, officer and consultant
of the Company has executed a standard Proprietary Information and Inventions Agreement. The Company is not aware that any of its employees, officers or consultants are in violation thereof, and the
Company will use its best efforts to prevent any such violation. The Company has not entered into any employment agreements. 

        2.20    Financial Statements.    The Company has made available to the Investor its audited financial statements as of
and for the twelve-month period ended December 31, 2001, and its unaudited financial statements for the six-month period ending September 30, 2002 (the "Financial
Statements"). The Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated and with each other
except that the unaudited Financial Statements may not contain all footnotes required by generally accepted accounting principles. The Financial Statements fairly present the financial condition and
operating results of the Company as of the dates, and for the periods, indicated therein, subject in the case of the 

6

 

unaudited
Financial Statements to normal year-end audit adjustments. Except as set forth in the Financial Statements, the Company has no material liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business subsequent to the date of the Financial Statements and (ii) obligations under contracts and commitments incurred in
the ordinary course of business and not required under generally accepted accounting principles to be reflected in the Financial Statements, which, in both cases, individually or in the aggregate, are
not material to the financial condition or operating results of the Company. Except as disclosed in the Financial Statements, the Company is not a guarantor or indemnitor of any indebtedness of any
other person, firm or corporation. The Company maintains and will continue to maintain a standard system of accounting established and administered in accordance with generally accepted accounting
principles. 

        2.21    Changes.    Since September 30, 2002 there has not been: 

        (a)   any
change in the assets, liabilities, financial condition or operating results of the Company from that reflected in the Financial Statement, except changes in the
ordinary course of business that have not been, in the aggregate, materially adverse; 

        (b)   any
damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the assets, properties, financial condition, operating results,
prospects or business of the Company (as such business is presently conducted and as it is proposed to be conducted); 

        (c)   any
waiver by the Company of a valuable right or of a material debt owed to it; 

        (d)   any
satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and that is not
material to the assets, properties, financial condition, operating results or business of the Company (as such business is presently conducted and as it is proposed to be conducted); 

        (e)   any
material change or amendment to a material contract or arrangement by which the Company or any of its assets or properties is bound or subject; 

        (f)    any
material change in any compensation arrangement or agreement with any employee; 

        (g)   any
sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets; 

        (h)   any
resignation or termination of employment of any key employee or officer of the Company; and the Company, to the best of its knowledge, does not know of the impending
resignation or termination of employment of any such employee or officer; 

        (i)    receipt
of notice that there has been a loss of, or material order cancellation by, any major customer of the Company; 

        (j)    any
mortgage, pledge, transfer of a security interest in, or lien, created by the Company, with respect to any of its material properties or assets, except liens for
taxes not yet due or payable; 

        (k)   any
loans or guarantees made by the Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel
advances and other advances made in the ordinary course of its business; 

        (l)    any
declaration, setting aside or payment or other distribution in respect of any of the Company's capital stock, or any direct or indirect redemption, purchase or other
acquisition of any of such stock by the Company; 

        (m)  to
the best of the Company's knowledge, any other event or condition of any character that might materially and adversely affect the assets, properties, financial
condition, operating 

7

 

results
or business of the Company (as such business is presently conducted and as it is proposed to be conducted); or 

        (n)   any
agreement or commitment by the Company to do any of the things described in this Section 2.21. 

        2.22    Registration Rights.    Except as required pursuant to the Investors' Rights Agreement, the Company is not
presently under any obligation, and has not granted, any rights to register any of the Company's presently outstanding securities or any of its securities that may hereafter be issued. 

        2.23    Real Property Holding Corporation.    The Company is not a real property holding corporation within the
meaning of Code Section 897(c)(2) and any regulations promulgated thereunder. 

        2.24    Labor Agreements.    The Company is not bound by or subject to (and none of its assets or properties is bound
by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union, and no labor union has requested or, to the Company's knowledge, has sought to
represent any of the employees, representatives or agents of the Company. There is no strike or other labor dispute involving the Company pending, or to the Company's knowledge, threatened, that could
have a material adverse effect on its business or properties, nor is the Company aware of any labor organization activity involving its employees. 

        2.25    Insurance.    The Company maintains in full force and effect such types and amounts of insurance issued by
insurers of recognized responsibility insuring the Company with respect to its business and properties, in such amounts and against such losses and risks which are usual and customary in the Company's
business as to amount and scope. 

        3.    Representations and Warranties of the Investor.    The Investor hereby represents and warrants that: 

        3.1    Authorization.    The Investor has full power and authority to enter into the Transaction Documents, and each
such Agreement constitutes its valid and legally binding obligation, enforceable in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification provisions contained in the Investors' Rights Agreement may be limited by applicable federal or state securities
laws. 

        3.2    Purchase Entirely for Own Account.    This Agreement is made with the Investor in reliance upon the Investor's
representation to the Company, which by the Investor's execution of this Agreement the Investor hereby confirms, that the Series E Preferred Stock to be received by the Investor and the Common
Stock issuable upon conversion thereof (collectively, the "Securities") will be acquired for investment for the Investor's own account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of applicable securities
laws. By
executing this Agreement, the Investor further represents that the Investor does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations
to such person or to any third person, with respect to any of the Securities. 

        3.3    Disclosure of Information.    The Investor further represents that it has had an opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the offering of the Series E Preferred Stock and the business, properties, prospects and financial condition of the
Company. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this Agreement or the right of the Investor to rely thereon. 

        3.4    Investment Experience.    The Investor is an investor in securities of companies in the development stage and
acknowledges that it is able to fend for itself, can bear the economic risk of its 

8

 

investment,
and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Series E Preferred Stock. The
Investor also represents that it has not been organized for the purpose of acquiring the Series E Preferred Stock. 

        3.5    Accredited Investor.    The Investor is an "accredited investor" within the meaning of SEC Rule 501 of
Regulation D, as presently in effect. 

        3.6    Restricted Securities.    The Investor understands that the Securities it is purchasing are characterized as
"restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable
regulations such securities may be resold without registration under the Act, only in certain limited circumstances. In this connection, the Investor represents that it is familiar with SEC
Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Act. 

        3.7    Further Limitations on Disposition.    Without in any way limiting the representations set forth above, the
Investor further agrees not to make any disposition of all or any portion of the Securities unless and until the transferee has agreed in writing for the benefit of the Company to be bound by this
Section 3 and the Investors' Rights Agreement provided and to the extent this Section and such agreements are then applicable, and: 

        (a)   There
is then in effect a Registration Statement under the Act covering such proposed disposition and such disposition is made in accordance with such Registration
Statement; or 

        (b)   (i) The
Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, including, but not limited to, the name of the transferee, and (ii) if reasonably requested by the Company, the Investor shall have furnished the Company
with an opinion of counsel, reasonably satisfactory to the Company that such disposition will not require registration of such shares under the Act. It is agreed that the Company will not require
opinions of counsel for transactions made pursuant to Rule 144 except in unusual circumstances. 

        (c)   Notwithstanding
the provisions of Section 3.2 or Paragraphs (a) and (b) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by the Investor (i) that is a partnership to a partner of such partnership or a retired partner of such partnership who retires after the date hereof, or to the estate
of any such partner or retired partner or the transfer by gift, will or intestate succession of any partner to his or her spouse or to the siblings, lineal descendants or ancestors of such partner or
his or her spouse, or (ii) to any entity that is not a natural person and is controlled by, controls or is under common control with the Investor, if the transferee agrees in writing to be
subject to the terms hereof to the same extent as if he or she were an original Investor hereunder. 

        (d)   In
addition, Investor agrees that, without the Company's written consent, in no event shall any transfer of Securities by the Investor made prior to the initial public
offering of the Company's Common Stock pursuant to an effective registration statement under the Act be effective if the transferee is a direct competitor with the primary business of the Company (as
determined in the sole discretion of the Company's Board of Directors). The Company agrees that it shall not unreasonably withhold consent for any transfer by Investor to a member or affiliate of
Investor or an affiliate of GlaxoSmithKline PLC. 

        3.8    Legends.    It is understood that the certificates evidencing the Securities may bear one or all of the
following legends: 

        (a)   "These
securities have not been registered under the Securities Act of 1933, as amended. They may not be sold, offered for sale, pledged or hypothecated in the absence
of a registration statement in effect with respect to the securities under such Act or an opinion of counsel 

9

 

satisfactory
to the Company that such registration is not required or unless sold pursuant to Rule 144 of such Act." 

        (b)   Any
legend required by the laws of any state. 

        4.    Conditions of Investor's Obligations at Closing.    The obligations of the Investor under subsection 1.1(c) of
this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions, the waiver of which shall not be effective against the Investor if it does not consent
thereto: 

        4.1    Representations and Warranties.    The representations and warranties of the Company contained in
Section 2 shall have been true on and as of the date of this Agreement. 

        4.2    Performance.    The Company shall have performed and complied with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied with by it on or before the Closing. 

        4.3    Compliance Certificate.    The Chief Executive Officer of the Company shall deliver to each Investor at the
Closing a certificate stating that the conditions specified in Sections 4.1 and 4.2 have been fulfilled. 

        4.4    Qualifications.    All authorizations, approvals, or permits, if any, of any governmental authority or
regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing. 

        4.5    Proceedings and Documents.    All corporate and other proceedings in connection with the transactions
contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Investor, and they shall have received all such counterpart original and
certified or other copies of such documents as they may reasonably request. 

        4.6    Opinion of Company Counsel.    The Investor shall have received from Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP, counsel for the Company, an opinion, dated as of the Closing, in the form attached hereto as Exhibit C. 

        4.7    Investors' Rights Agreement.    The Company and the Investor shall have entered into the Investors' Rights
Agreement. 

        4.8    Filing of the Restated Certificate.    The Restated Certificate shall have been filed with the Secretary of
State of Delaware, and shall not have been amended or modified since the date of filing. 

        4.9    HSR Act.    The waiting period applicable to the consummation of the transactions contemplated hereby and by
that certain Collaboration Agreement between the Company and the Investor under the
HSR Act shall have expired or been terminated and no action by the Department of Justice or Federal Trade Commission challenging or seeking to enjoin the consummation of such transactions shall have
been instituted and be pending. 

        5.    Conditions of the Company's Obligations at Closing.    The obligations of the Company to the Investor under this
Agreement are subject to the fulfillment on or before the Closing of each of the following conditions by the Investor: 

        5.1    Representations and Warranties.    The representations and warranties of the Investor contained in
Section 3 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing. 

        5.2    Qualifications.    All authorizations, approvals, or permits, if any, of any governmental authority or
regulatory body of the United States or of any state that are required in connection with 

10

 

the
lawful issuance and sale of the Securities pursuant to this Agreement shall be duly obtained and effective as of the Closing. 

        5.3    Investors' Rights Agreement.    The Company and the Investor shall have entered into the Investors' Rights
Agreement. 

        5.4    HSR Act.    The waiting period applicable to the consummation of the transactions contemplated hereby and by
that certain Collaboration Agreement between the Company and the Investor under the HSR Act shall have expired or been terminated and no action by the Department of Justice or Federal Trade Commission
challenging or seeking to enjoin the consummation of such transactions shall have been instituted and be pending. 

        6.    Miscellaneous.    

        6.1    Survival of Warranties.    The warranties, representations and covenants of the Company and the Investor
contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation of the subject matter
thereof made by or on behalf of the Investor or the Company. 

        6.2    Successors and Assigns.    Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any Securities). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement. 

        6.3    Governing Law.    This Agreement shall be governed by and construed under the laws of the State of California
as applied to agreements among California residents entered into and to be performed entirely within California. 

        6.4    Counterparts.    This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument. 

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

        6.6    Notices.    All notices required or permitted hereunder shall be in writing and shall be deemed effectively
given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, if not, then
on the next business day or (c) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.
Notwithstanding the foregoing or any provision to the contrary in the Investors' Rights Agreement or the Restated Certificate, the Company agrees that when any notice is given to the Investor, whether
under this Agreement, the Investors' Rights Agreement or the Restated Certificate, such notice shall not be deemed to be effectively given until a copy of such notice is transmitted to the Investor
via facsimile. All notices and certificates will be addressed to the Investor at the address set forth on the signature page hereto or at such other address as the Company or the Investor may
designate by ten (10) days advance written notice to the other parties hereto. 

        6.7    Finder's Fee.    The Investor agrees to indemnify and to hold harmless the Company from any liability for any
commission or compensation in the nature of a finders' fee (and the costs and expenses of defending against such liability or asserted liability) for which such Investor or any of its officers,
partners, employees, or representatives is responsible. 

        The
Company agrees to indemnify and hold harmless the Investor from any liability for any commission or compensation in the nature of a finders' fee (and the costs and expenses of
defending 

11

 

against
such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible. 

        6.8    Expenses.    Irrespective of whether the Closing is effected, each party shall bear their own costs and
expenses incurred with respect to the negotiation, execution, delivery and performance of this Agreement. If any action at law or in equity is necessary to enforce or interpret the terms of this
Agreement, the Investors' Rights Agreement or the Restated Certificate, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled. 

        6.9    Amendments and Waivers.    Any term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Investor. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder of any securities purchased under this Agreement at the time outstanding (including securities into which such securities
are convertible), each future holder of all such securities, and the Company. 

        6.10    Severability.    If one or more provisions of this Agreement are held to be unenforceable under applicable
law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its
terms. 

        6.11    Confidentiality.    Any confidential information obtained by the Investor pursuant to this Agreement which is
labeled or otherwise identified as confidential or proprietary shall be treated as confidential and shall not be disclosed to a third party without the prior written consent of the Company and shall
not be used by the Investor for any purpose other than monitoring the Investor's investment in the Company, except that the Investor may disclose such information (i) to its attorneys,
accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company, (ii) to its affiliates, officers,
directors, shareholders, members and/or partners in the ordinary course of business or pursuant to disclosure obligation to affiliates, shareholders, members and/or partners; provided that such
information is provided to such persons and entities with notice that such information is confidential and should be treated as such, (iii) to any prospective purchaser of the Investor's shares
of the Company, provided (in the case of disclosure in clause (iii)) the recipient agrees to keep such information confidential and to use such information solely for evaluation of such
proposed purchase, or (iv) as may otherwise be required by law. Notwithstanding the foregoing, such information shall not be deemed confidential for the purpose of enforcement of this Agreement
and said information shall not be deemed confidential after it becomes publicly known through no fault of the recipient. The provisions of this Section 6.11 shall be in addition to, and not in
substitution for, the provisions of any separate confidentiality agreement executed by the
parties hereto; provided that if there is any conflict between the provisions of this Section 6.11 and the more restrictive provisions of such separate confidentiality agreement, the provisions
of such separate confidentiality agreement shall prevail. 

        6.12    Publicity.    No party or any affiliate of a party shall make, or cause to be made, any publicity, news
release or other such general public announcement or make any other disclosure to any third party in respect of this Agreement or the transactions contemplated hereby (including, without limitation,
disclosure of Investor's ownership interest in the Company) without the prior written consent of the other parties; provided however, that the foregoing
provision is not intended to limit communications deemed reasonably necessary or appropriate by a party or its affiliates to its employees, stockholders, partners, directors, officers, potential
investors, accountants and legal counsel who are under an obligation to preserve the confidentiality of the foregoing. Notwithstanding the foregoing provision, the parties and their respective
affiliates shall not be prohibited from making any disclosure or release that is required by law, court order, or applicable regulation, or is considered 

12

 

necessary
by legal counsel to fulfill an obligation under securities laws or the rules of a national stock exchange. 

        6.13    Entire Agreement.    This Agreement and the documents referred to herein constitute the entire agreement among
the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein. 

        6.14    Waiver of Conflicts.    Each party to this Agreement acknowledges that Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP ("Gunderson Dettmer"), counsel for the Company, has in the past and may continue to perform legal services for certain of the Investors in the purchase of the
Company's Series A, Series B, Series C, Series D, Series D-1 and Series E Preferred Stock and other matters. Accordingly, each party to this
Agreement hereby (1) acknowledges that they have had an opportunity to ask for information relevant to this disclosure; (2) acknowledges that Gunderson Dettmer represented the Company in
the transaction contemplated by this Agreement and has not represented any individual Investor or any individual stockholder or employee of the Company in connection with such transaction; and
(3) gives its informed consent to Gunderson Dettmer's representation of certain of the Investors in such unrelated matters and to Gunderson Dettmer's representation of the Company in connection
with this Agreement and the transactions contemplated hereby. 

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

	 	 	THERAVANCE, INC.
	 	 	 	 	 
	 	 	 	 	 
	 	 	By:	 	/s/  RICK E WINNINGHAM      
 Rick E Winningham

President and Chief Executive Officer

13

QuickLinks

COLLABORATION AGREEMENT by and between THERAVANCE, INC. and GLAXO GROUP LIMITED

COLLABORATION AGREEMENT

ARTICLE 1 DEFINITIONS

ARTICLE 2 RIGHTS AND OBLIGATIONS

ARTICLE 3 GOVERNANCE OF DEVELOPMENT AND COMMERCIALIZATION OF PRODUCTS

ARTICLE 4 DEVELOPMENT OF PRODUCTS

ARTICLE 5 COMMERCIALIZATION

ARTICLE 6 FINANCIAL PROVISIONS

ARTICLE 7 PROMOTIONAL MATERIALS AND SAMPLES

ARTICLE 8 REGULATORY MATTERS

ARTICLE 9 ORDERS; SUPPLY AND RETURNS

ARTICLE 10 CONFIDENTIAL INFORMATION

ARTICLE 11 REPRESENTATIONS AND WARRANTIES; COVENANTS

ARTICLE 12 INDEMNIFICATION

ARTICLE 13 PATENTS

Schedule 1.19 Criteria for Theravance New Compounds and Replacement Compounds

Schedule 6.1.2 Preferred Stock Purchase Agreement

THERAVANCE, INC. SERIES E PREFERRED STOCK PURCHASE AGREEMENT December 19, 2002

TABLE OF CONTENTS

THERAVANCE, INC. SERIES E PREFERRED STOCK PURCHASE AGREEMENT

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