Document:

Exhibit 10.10

 

TRIPLE NET
SPACE LEASE

 

between

 

PACIFIC
SHORES INVESTORS LLC,

 

as

 

LESSOR

 

and

 

PDL
BIOPHARMA, INC.,

a Delaware
corporation

 

as

 

LESSEE

 

for

 

PREMISES

 

at

 

Pacific
Shores Center

 

BUILDING 9

1400 SEAPORT BOULEVARD

REDWOOD CITY, CALIFORNIA 94063

 

 

TABLE OF CONTENTS

 

 

	
  ARTICLE I PARTIES  1

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 1.01  Parties

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II PREMISES

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.01  Demise
  of Premises

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.02  Common
  Area

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.03  Parking

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.04  Athletic
  Facility

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III TERM

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.01  Lease
  Term

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.02  Acceleration
  of Commencement Date

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.03  Option
  to Extend

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV RENT: TRIPLE NET LEASE

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.01  Base
  Rent

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.02  Rent
  Adjustment

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.03  [Intentionally
  Deleted]

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.04  Absolute
  Triple Net Lease

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.05  Additional
  Rent

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.06  Letter
  of Credit

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.07  Operating
  Expenses

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.08  Lessee’s
  Right to Review Supporting Data

  	
  13

  

 

i

 

	
  ARTICLE V USE

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.01  Permitted
  Use and Limitations on Use

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.02  Compliance
  with Laws

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.03  Condition
  of Premises at Commencement Date

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.04  [Intentionally
  Deleted]

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.05  Building
  Security

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.06  Rules and
  Regulations

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI MAINTENANCE, REPAIRS AND ALTERATIONS

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.01  Maintenance
  of Premises and Building

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.02  Maintenance
  of Project Common Areas

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.03  Alterations,
  Additions and Improvements

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.04  Covenant
  Against Liens

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII INSURANCE

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.01  Property/Rental
  Insurance for Premises

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.02  Property
  Insurance for Fixtures and Inventory

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.03  Lessor’s
  Liability Insurance

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.04  Liability
  Insurance Carried by Lessee

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.05  Proof
  of Insurance

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.06  Mutual
  Waiver of Claims and Subrogation Rights

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.07  Indemnification
  and Exculpation

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.08  Lessor
  as Party Defendant

  	
  23

  

 

ii

 

	
  ARTICLE VIII DAMAGE OR DESTRUCTION

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.01  Destruction
  of the Premises

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.02  Waiver
  of Civil Code Remedies

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.03  Damages
  Incurred during Repair

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.04  No
  Liability for Lessee’s Alterations or Personal Property

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX REAL PROPERTY TAXES

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.01  Payment
  of Taxes

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.02  Pro
  Ration for Partial Years

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.03  Personal
  Property Taxes

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.04  Right
  to Contest Real Property Taxes

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X UTILITIES

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 10.01  Lessee to Pay

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI ASSIGNMENT AND SUBLETTING

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.01  Lessor’s Consent Required

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.02  Lessee Affiliates

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.03  No Release of Lessee

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.04  Excess Rent

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.05  Information to be Provided

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.06  Lessor’s Recapture Rights

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII DEFAULTS; REMEDIES

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 12.01  Defaults

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 12.02  Remedies

  	
  32

  

 

iii

 

	
   

  	
  Section 12.03  Default by Lessor

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 12.04  Late Charges

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 12.05  Lessor’s Right to Perform Lessee’s Obligations

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII CONDEMNATION OF PREMISES

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.01  Total Condemnation

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.02  Partial Condemnation

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.03  Award to Lessee

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIV ENTRY BY LESSOR

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 14.01  Entry by Lessor Permitted

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XV ESTOPPEL CERTIFICATE

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 15.01  Estoppel Certificate

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVI LESSOR’S LIABILITY

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 16.01  Limitations on Lessor’s Liability

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVII GENERAL PROVISIONS

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.01  Severability

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.02  Agreed Rate Interest on Past Due Obligations

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.03  Time of Essence

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.04  Additional Rent

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.05  Incorporation of Prior Agreements, Amendments and Exhibits

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.06  Notices

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.07  Waivers

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.08  Recording

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.09  Surrender of Possession; Holding Over

  	
  39

  

 

iv

 

	
   

  	
  Section 17.10 Cumulative Remedies

  	
   

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.11 Covenants and Conditions

  	
   

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.12 Binding Effect; Choice of Law

  	
   

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.13 Lease to be Subordinate

  	
   

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.14 Attorneys’ Fees

  	
   

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.15 Signs

  	
   

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.16 Merger

  	
   

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.17 Quiet Possession

  	
   

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.18 Easements

  	
   

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.19 Authority

  	
   

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.20 Force Majeure Delays

  	
   

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.21 Hazardous Materials

  	
   

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.22 Modifications Required by Lessor’s Lender

  	
   

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.23 Brokers

  	
   

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.24 Acknowledgment of Notices

  	
   

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.25 Right of First Offer

  	
   

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.26 Right of First Refusal

  	
   

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.27 Lessee’s Expansion Right

  	
   

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.28 Notification of Intention to Market

  	
   

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.29 List of Lease Expiration Dates

  	
   

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.30 [Intentionally omitted.]

  	
   

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.31 Condition Subsequent

  	
   

  	
   

  	
  52 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.32 List of Exhibits

  	
   

  	
   

  	
  53

  

 

v

 

ARTICLE I

PARTIES

 

Section 1.01  Parties

 

This Lease, dated for
reference purposes, and effective as of July 6, 2006, is made by and
between PACIFIC SHORES INVESTORS LLC (“Lessor”) and PDL BIOPHARMA, INC., a
Delaware corporation (“Lessee”).

 

ARTICLE II

PREMISES

 

Section 2.01  Demise of Premises

 

Lessor hereby leases to
Lessee and Lessee leases from Lessor for the Lease Term, at the rental, and
upon all of the terms and conditions set forth herein, certain space consisting
of the entire two hundred eighty-three thousand and fifteen
(283,015) rentable square foot building sometimes known as “Building 9”
and commonly known as 1400 Seaport Boulevard, Redwood City, California 94063 (“Building 9”), which is one of ten free
standing, office and research and development Project Buildings (“Project Buildings”) on real property
situated in Redwood City, County of San Mateo, State of California and commonly
known as Pacific Shores Center. The Premises are more particularly described
and depicted herein in Exhibit “A.” The rentable square footage of the
Premises, Building 9 and other Project Buildings (the “Rentable Area”) has been determined and
certified by Lessor’s architect by a method described as “dripline,” whereby
the measurement encompasses the outermost perimeter of the constructed
building, including every projection thereof and all area beneath each such
projection, whether or not enclosed, with no deduction for any inward deviation
of structure and with the measurement being made floor by floor, but beginning
from the top of Building 9. The Premises, the Project Buildings and
appurtenances described herein, including Common Area (defined below), and all
other improvements at Pacific Shores Center together with the land on which the
same are located are together designated as the project (“Project”). Lessor and Lessee acknowledge
that Lessor, as landlord, and Lessee, as tenant, are also parties to that
certain Triple Net Space Lease of even date herewith (the “Building 10 Lease”) whereby Lessor leases
to Lessee, and Lessee leased from Lessor, Building 10 (“Building 10”) in the Project.

 

Section 2.02  Common Area

 

As of the Commencement Date,
and thereafter, during the Lease Term, Lessee shall have the non-exclusive
right to use the Common Area defined herein. Lessor reserves the right to
modify the Common Area, including increasing or reducing the size, adding
additional Project Buildings, structures or other improvements or changing the
use, configuration and elements thereof in its sole discretion and to close or
restrict access from time to time for repair, maintenance or construction or to
prevent a dedication thereof, provided that Lessee nonetheless (i) shall
have reasonable access to parking and the Premises during such activities; and (ii) such
modifications, when completed, shall not unreasonably interfere with or
restrict Lessee’s possession and use of the Premises. Lessor further reserves
the right to establish, repeal and amend from time to time non-discriminatory rules and
regulations for the use of the Common

 

1

 

Area and to grant reciprocal easements or other
rights to use the Common Area to owners of other property provided that no
amendment to the rules and regulations shall unreasonably interfere with
or restrict Lessee’s use of the Premises or the Common Area. “Common Area”
means all portions of the Project other than the Project Buildings, including
landscaping, sidewalks, walkways, driveways, curbs, parking lots (including
striping), roadways within the Project, sprinkler systems, lighting, surface
water drainage systems, an athletic facility to be available for use by Lessee’s
employees (the “Athletic Facility”),
as well as baseball and soccer fields, a water front park, and a perimeter
walking/biking trial, and additional or different facilities as Lessor may from
time to time designate or install or make available for the use by Lessee in
common with others. Lessee’s use of the Common Areas shall be subject to any
easements affecting the Project as of the date of this Lease. Subject to the
rights of the other tenants or users of the Project and the need for Lessee to
execute a license agreement therefor in the form attached hereto as Schedule
1, Lessee shall have the right to use portions of the Common Areas for the
hosting of outdoor meetings, which meetings may include the use of tents and
the catering and/or barbeque of food for such meetings. The location, time and
manner of such meetings shall be subject to the prior written consent of
Lessor, which consent shall not be unreasonably withheld.

 

Section 2.03  Parking

 

Lessor shall provide Lessee
with three (3) parking spaces per one thousand (1,000) square feet of
area within the Premises. In the event Lessor elects or is required by any law
to limit or control parking at the Premises, whether by validation of parking
tickets or any other method of assessment, Lessee agrees to participate in such
validation or assessment program under such reasonable rules and
regulations as are from time to time established by Lessor. Lessor agrees that
Lessee’s access to parking shall not be unreasonably limited beyond any
requirement of law by any such rules and regulations. Parking shall be
free of charge throughout the Lease Term (including any extensions thereof) except
as provided for in Article VI (i.e., Operating Expenses payable hereunder)
for reimbursement of repair, replacement and maintenance costs and expenses,
and in Article IX for payment or reimbursement of any real property taxes
including governmental or public authority charges, fees or impositions of any
nature hereafter imposed, except as otherwise provided herein. Nothing herein
shall prevent Lessee from allowing two (2) company vans, along with up to
ten (10) cars of employees of Lessee on an occasional basis, to remain in
the parking spaces for the Premises on an overnight basis.

 

Section 2.04  Athletic Facility

 

As of the Commencement Date,
Lessee and its employees shall have access to the thirty-eight thousand
(38,000) square foot Athletic Facility and all of the amenities thereof at
no additional cost to Lessee or its employees, except that Lessee acknowledges
that the cost of operating and maintaining the Athletic Facility will be an
Operating Expense as described in Section 4.07 below.

 

2

 

ARTICLE III

TERM

 

Section 3.01  Lease Term

 

Subject to the terms of Section 3.02
below, the term of this Lease (“Lease Term”)
shall be for one hundred and four (104) months, beginning on April 30,
2013 (the “Commencement Date”) and
expiring, unless sooner terminated as provided for herein, on December 31,
2021 (“Expiration Date”). The
parties shall execute a “Memorandum of Commencement of Lease Term” on the
Commencement Date which shall be substantially in the form attached hereto as Exhibit “B”.

 

Section 3.02  Acceleration of Commencement Date. If
that certain Sublease Agreement dated
                    ,
2006 (the “Openwave Sublease”) between Openwave, Inc.(“Openwave”), as
sublessor, and Lessee, as sublessee, terminates for any reason other than a
default by Lessee thereunder or a termination of that certain Triple Net Space
Lease dated February 4, 2000 between Lessor, as lessor, and Openwave, as
lessee by Lessor or Openwave pursuant to the terms of Article VIII or Article XIII
thereof, then the Commencement Date of this Lease will be accelerated to be
date on which the Openwave Sublease terminates, and the Lease Term shall be
extended to begin on such accelerated Commencement Date, but still expire on
the Expiration Date of December 31, 2021. During any portion of such
extended Lease Term that precedes the originally intended Commencement Date
(i.e., April 30, 2013), the monthly Base Rent due hereunder shall be as
follows:

 

	
  Time Period

  	
   

  	
  Monthly Base Rent

  	
   

  
	
  1/1/07-12/31/07

  	
   

  	
  $

  	
  466,974.75

  	
   

  
	
  1/1/08-12/31/08

  	
   

  	
  $

  	
  483,318.86

  	
   

  
	
  1/1/09-12/31/09

  	
   

  	
  $

  	
  500,235.02

  	
   

  
	
  1/1/10-12/31/10

  	
   

  	
  $

  	
  517,743.24

  	
   

  
	
  1/1/11-12/31/11

  	
   

  	
  $

  	
  535,864.25

  	
   

  
	
  1/1/12-12/31/12

  	
   

  	
  $

  	
  554,619.49

  	
   

  
	
  1/1/13-4/29/13

  	
   

  	
  $

  	
  574,031.17

  	
   

  

 

Section 3.03. Option to
Extend.

 

(a) Exercise.
Subject to the “Conditions to Extend” described in Section 3.03(d) below,
Lessee is given two (2) options to extend the Lease Term (each, an “Option
to Extend”) with respect to Building 9 for periods of five (5) years each
(each, an “Extended Term”) following the date on which the initial Lease Term
(or, in the case of the second Extended Term, the first Extended Term) would
otherwise expire, which option may be exercised only by written notice (“Option
Notice”) from Lessee to Lessor given not less than twelve (12) months nor
more than fifteen (15) months prior to the end of the initial Lease Term
or the first Extended Term, as relevant (“Option Exercise Date”).

 

3

 

(b) Extended Term
Rent. In the event Lessee exercises any Option to Extend set forth herein,
all the terms and conditions of this Lease shall continue to apply except that
Lessee shall no longer have the future right to exercise the Option to Extend
in question and the Base Rent payable by Lessee during the Extended Term shall
be equal to the greater of (i) ninety-five percent (95%) of Fair
Market Rent (defined below), as determined under subparagraph (c) below,
or (ii) the monthly Base Rent paid by Lessee during the last year of the
initial Lease Term or the first Extended Term, as relevant. “Fair Market Rent”
shall mean the effective rate being charged (including periodic adjustments
thereto as applicable during the period of the Extended Term, to the extent
such adjustments are determined to be part of the Fair Market Rent), for
comparable space in similar buildings in the vicinity, i.e. of a similar age
and quality considering any recent renovations or modernization, and floor
plate size or, if such comparable space is not available, adjustments shall be
made in the determination of Fair Market Rent to reflect the age and quality of
Building 9 and Premises as contrasted to other buildings used for comparison
purposes, with similar amenities, taking into consideration: size, location,
floor level, leasehold improvements or allowances provided or to be provided,
term of the lease, extent of services to be provided, the time that the
particular rate under consideration became or is to become effective, and any
other relevant terms or conditions applicable to tenants.

 

(c) Determination of
Fair Market Rent.

 

(i) Negotiation.
If Lessee so exercises the Option to Extend in a timely manner, the parties
shall then meet in good faith to negotiate the Base Rent for the Premises for
the Extended Term during the first thirty (30) days after the date of the
delivery by Lessee of the Option Notice (the “Negotiation Period”). If, during
the Negotiation Period, the parties agree on the Base Rent applicable to the
Premises for the Extended Term, then such agreed amount shall be the Base Rent
payable by Lessee during the Extended Term.

 

(ii) Arbitration.
In the event that the parties are unable to agree on the Base Rent for the
Premises within the Negotiation Period, then within ten (10) days after
the expiration of the Negotiation Period, each party shall separately designate
to the other in writing an appraiser to make this determination. Each appraiser
designated shall be a member of MAI and shall have at least ten (10) years
experience in appraising commercial real property in Santa Clara County. The
failure of either party to appoint an appraiser within the time allowed shall
be deemed equivalent to appointing the appraiser appointed by the other party,
who shall then determine the Fair Market Rent for the Premises for the Extended
Term. Within five (5) business days of their appointment, the two
designated appraisers shall jointly designate a third similarly qualified
appraiser. Within thirty (30) days after their appointment, each of the
two appointed appraisers shall submit to the third appraiser a sealed envelope
containing such appointed appraiser’s good faith determination of the Fair
Market Rent for the Premises for the Extended Term; concurrently with such
delivery, each such appraiser shall deliver a copy of his or her determination
to the other appraiser. The third appraiser shall within ten (10) days
following receipt of such submissions, then determine which of the two
appraisers’ determinations most closely reflects Fair Market Rent, as defined
in Section 3.03(b) of this Lease. The determination most closely
reflecting the third appraiser’s determination shall be

 

4

 

deemed to be the Fair Market Rent for the Premises
during the Extended Term; the third appraiser shall have no rights to adjust,
amend or otherwise alter the determinations made by the appraisers selected by
the parties, but must select one or the other of such appraisers’ submissions.
The determination by such third appraiser shall be final and binding upon the
parties. Said third appraiser shall, upon selecting the determination which
most closely resembles Fair Market Rent, concurrently notify both parties
hereto. The parties shall share the appraisal expenses equally. If the Extended
Term begins prior to the determination of Fair Market Rent, Lessee shall pay
monthly installments of Base Rent equal to one hundred three and one half
percent (103.5%) of the monthly installment of Base Rent in effect for the
last year of the initial Lease Term or the first Extended Term, as relevant (in
lieu of “holdover rent” payable under Section 17.09(b)). Once a
determination is made, any over payment or under payment shall be reimbursed as
a credit against, or paid by adding to, the monthly installment of Base Rent
next falling due.

 

(d) Conditions to
Extend. Notwithstanding anything herein to the contrary, Lessee shall have
no right to exercise Lessee’s Option to Extend hereunder, and any Option Notice
delivered by Lessee shall be void and invalid if at the time Lessee delivers
such notice any of the following conditions (collectively, the “Conditions to Extend”) are not satisfied
both at the time such Option Notice is delivered and at the time the Extended
Term in question is to commence: (i) Lessee has not assigned this Lease or
the Building 10 Lease to any party other than an Affiliate (as defined in Section 11.02),
during any time in which Lessor or any affiliate thereof owns Building 10 and
the Building 10 Lease is in effect (ii) Lessee has not sublet more than
fifty percent (50%) of the Premises to anyone other than an Affiliate, (iii) Lessee
physically occupies at least fifty percent (50%) of the Premises, (iv) Lessor
has delivered a written notice of default under this Lease or the Building 10
Lease and the default specified therein has not yet been cured, and (v) Lessor
has not delivered a written notice to Lessee that Lessee has committed a
monetary default under this Lease more than three (3) times during the
Lease Term and delivered a written notice to Lessee that Lessee has committed a
non-monetary default under this Lease more than one (1) time during the
Lease Term.

 

ARTICLE IV

RENT: TRIPLE NET LEASE

 

Section 4.01  Base Rent

 

Lessee shall pay to Lessor
monthly Base Rent, in advance, on the first day of each calendar month of the
Lease Term, commencing on the Commencement Date (subject to the adjustment of
the Commencement Date pursuant to the terms of Section 3.02 above), in the
initial amount of Five Hundred Seventy-Four Thousand Thirty-One and 11/100
Dollars ($574,031.11) per month; but subject to increase pursuant to the terms
of Section 4.02 below. Base Rent for any period during the Lease Term
which is for less than one month shall be a pro rata portion of the monthly
installment (based on the actual days in that month).

 

Section 4.02  Rent Adjustment

 

As of January 1, 2014,
the Base Rent due hereunder shall adjust to Five Hundred Ninety-Four Thousand
One Hundred Twenty-Two and 19/100 Dollars ($594,122.19). As of

 

5

 

June 1, 2014, the Base Rent shall further
adjust to the higher of: (i) Five Hundred Ninety-Four Thousand One Hundred
Twenty-Two and 19/100 Dollars ($594,122.19) or (ii) one hundred percent
(100%) of the then existing Fair Market Rent (as determined pursuant to
Sections 3.03(b) and (c)), but in no event higher than Seven Hundred
Forty-Nine Thousand Nine Hundred Eighty-Nine and 75/100 Dollars ($749,989.75).
Thereafter, the Base Rent due hereunder shall increase by escalations as
determined in the Fair Market Rent determination, effective on January 1
of each remaining year of the Lease Term..

 

Section 4.03  Intentionally Deleted

 

Section 4.04  Absolute Triple Net Lease

 

This Lease is what is
commonly called a “Absolute Triple Net Lease,” it being understood that Lessor
shall receive the Base Rent set forth in Section 4.01 free and clear of
any and all expenses, costs, impositions, taxes, assessments, liens or charges
of any nature whatsoever. Lessee shall pay all rent in lawful money of the United
States of America to Lessor at the notice address stated herein or to such
other persons or at such other places as Lessor may designate in writing not
later than ten (10) days before the due date specified for same without
prior demand, set-off or deduction of any nature whatsoever. It is the
intention of the parties hereto that this Lease shall not be terminable for any
reason by Lessee and that Lessee shall in no event be entitled to any abatement
of or reduction in rent payable under this Lease, except as herein expressly
provided in Articles VIII and XIII. Any present or future law to the contrary
shall not alter this agreement of the parties.

 

Section 4.05  Additional Rent

 

In addition to the Base Rent
reserved by Section 4.01, Lessee shall pay, beginning on the Commencement
Date and continuing throughout the Lease Term as Additional Rent (i) 100%
of amounts applicable solely to the Premises, and Lessee’s Share (as defined in
Section 4.07(c) below) of amounts applicable to Building 9, the
Project and the Common Area of all taxes, assessments, fees and other
impositions payable by Lessee in accordance with the provisions of Article IX
and insurance premiums in accordance with the provisions of Article VII, (ii) Lessee’s
Share of Operating Expenses ( as defined below), and (iii) any other
applicable charges, costs and expenses whether or not contemplated which may
arise under any provision of this Lease during the Lease Term, as the same may
be extended, plus a Management Fee to Lessor equal to two percent (2%) of
the Base Rent. The Management Fee is due and payable, in advance, with each
installment of Base Rent. All of such charges, costs, expenses, Management Fee
and all other amounts payable by Lessee hereunder, shall constitute Additional
Rent, and upon the failure of Lessee to pay any of such charges, costs or
expenses, Lessor shall have the same rights and remedies as otherwise provided
in this Lease for the failure of Lessee to pay Base Rent.

 

Section 4.06  Letter of Credit

 

(a) Deposit of
Letter of Credit Security

 

Lessee shall deposit with
Lessor, on or before the date that is three (3) business days after the
date Lessee executes this Lease, an unconditional, irrevocable letter of

 

6

 

credit (“Letter of Credit”) on a form acceptable to
Lessor and, if required, Lessor’s lender(s), and in favor of Beneficiary (as
defined below) in the amount of One Million Five Hundred Thousand and 00/100
Dollars ($1,500,000.00) (the “Letter of Credit Security”). “Beneficiary,” as
used herein refers to either: (x) Lessor as beneficiary, or (y) if
required by Lessor’s lender(s), Lessor and Lessor’s lender(s) as
co-beneficiaries under the Letter of Credit Security. The Letter of Credit
Security shall: (i) be issued by a commercial money center bank reasonably
satisfactory to Lessor with retail branches in San Francisco, California (the “Issuer”);
(ii) be a standby, at-sight, irrevocable letter of credit; (iii) be
payable to Beneficiary; (iv) permit multiple, partial draws , (v) provide
that any draw on the Letter of Credit Security shall be made upon receipt by
the Issuer of a sight draft accompanied by a letter from Lessor stating that
Lessor is entitled, pursuant to the provisions of this Lease, to draw on the
Letter of Credit Security in the amount of such draw; (vi) provide for
automatic annual extensions, without amendment (so-called “evergreen”
provision) with a final expiry date no sooner than ninety (90) days after
the end of the Lease Term; (vii) provide that it is governed by the
Uniform Customs and Practice for Documentary Credits (1993 revisions)
International Chamber of Commerce Publication 500; and (viii) be
cancelable if, and only if, Issuer delivers to Beneficiary no less than sixty
(60) days advance written notice of Issuer’s intent to cancel. Lessee
shall pay all costs, expenses, points and/or fees incurred by Lessee in
obtaining the Letter of Credit Security.

 

(b) Lessor’s Right
to Draw on Letter of Credit Security

 

The Letter of Credit
Security shall be held by Lessor as security for the faithful performance by
Lessee of all of the terms, covenants, and conditions of this Lease and, so
long as Lessor or an affiliate thereof is the lessor under the Building 10
Lease and the Building 10 Lease is in effect, all of the terms, covenants and
conditions of the Building 10 Lease, applicable to Lessee. Lessor shall have
the immediate right to draw upon the Letter of Credit Security, in whole or in
part and without prior notice to Lessee, other than as required under this
Lease, at any time and from time to time: (i) if an Event of Lessee’s
Default occurs under this Lease or, if Lessor or an affiliate thereof is the
lessor under the Building 10 Lease and the Building 10 Lease is in effect, the
Building 10 Lease (beyond any applicable notice and cure period), or (ii) Lessee
either files a voluntary bankruptcy petition or an involuntary bankruptcy
petition is filed against Lessee by an entity or entities other than Lessor,
under 11 U.S.C. §101 et seq., or Lessee executes an assignment for the benefit
of creditors. No condition or term of this Lease shall be deemed to render the
Letter of Credit Security conditional, thereby justifying the Issuer of the
Letter of Credit Security in failing to honor a drawing upon such Letter of
Credit Security in a timely manner. The Letter of Credit Security and its
proceeds shall constitute Lessor’s sole and separate property (and not Lessee’s
property or, in the event of a bankruptcy filing by or against Lessee, property
of Lessee’s bankruptcy estate) and Lessor may immediately upon any draw (and
without notice to Lessee) apply or offset the proceeds of the Letter of Credit
Security against: (A) any amounts payable by Lessee under the Lease that
are not paid when due, after the expiration of any applicable notice and cure
period; (B) all losses and damages that Lessor has suffered or may
reasonably estimate that it may suffer as a result of an Event of Lessee’s
Default under this Lease or the Building 10 Lease, including any damages
arising under Section 1951.2 of the California Civil Code for rent due
following termination of this Lease; (C) any costs incurred by Lessor in
connection an Event of Lessee’s Default under this Lease (including attorney’s
fees); and (D) any other amount that Lessor may spend or become obligated
to spend by reason of an Event of Lessee’s Default under this Lease or the
Building 10

 

7

 

Lease but in no event in excess of amounts to which
the Lessor would be entitled under the law. If any portion of the Letter of
Credit Security is so drawn upon or applied, Lessee shall, within five (5) business
days after written demand therefore, deposit cash with Issuer in an amount
sufficient to restore the Letter of Credit Security to its original amount.
Tenant’s failure to do so shall be a Default by Lessee. It is expressly
understood that Lessor shall be relying on Issuer rather than Lessee for the
timely payment of proceeds under the Letter of Credit Security and the rights
of Lessor pursuant to this Section are in addition to any rights which
Lessor may have against Lessee pursuant to Article XII below. Lessor shall
not be required to keep the proceeds from the Letter of Credit Security
separate from Lessor’s general funds nor be deemed a trustee of same.

 

(c) Replacement
Letter of Credit Security

 

If, for any reason
whatsoever, the Letter of Credit Security becomes subject to cancellation or
expiration during the Lease Term, within forty-five (45) days prior to
expiration of the Letter of Credit Security, Lessee shall cause the Issuer or
another bank satisfying the conditions of Section 4.06(a) above to
issue and deliver to Lessor a Letter of Credit Security to replace the expiring
Letter of Credit Security (the “Replacement Letter of Credit Security”). The
Replacement Letter of Credit Security shall be in the same amount as the
original Letter of Credit Security (or such reduced amount as provided by the
terms of Section 4.06(g) of this Lease) and shall be on the terms and
conditions set forth in items (A) through (D) above. Failure of
Lessee to cause the Replacement Letter of Credit Security to be issued
forty-five (45) days prior to the then pending expiration or cancellation
shall entitle Lessor to fully draw down on the existing Letter of Credit
Security and, at Lessor’s election, shall be an event of default under this
Lease and/or the Building 10 Lease without any relevant notice and cure period.

 

(d) Transfer of
Beneficiary

 

During the Lease Term Lessor
may transfer its interest in the Lease or Lessor’s lender may change. Lessor
may request a change to Beneficiary under the Letter of Credit Security to the
successor of Lessor and/or Lessor’s lender (the “Transferee”). Lessee agrees to
cooperate and to cause Issuer, at Lessor’s cost, to timely issue a new Letter
of Credit Security on the same terms and conditions as the original Letter of
Credit Security, except that the new Letter of Credit Security shall be payable
to the Transferee. Lessor shall surrender the existing Letter of Credit
Security to Lessee simultaneously with Lessee’s delivery of the new Letter of
Credit Security to Transferee.

 

(e) Return of the
Letter of Credit Security

 

If Lessee fully and
faithfully performs every provision of this Lease to be performed by it, the
Letter of Credit Security or any balance thereof shall be returned (without
interest) to Lessee (or, at Lessee’s option, to the last assignee of Lessee’s
interests hereunder) within thirty (30) days after the expiration or
earlier termination of the Lease and after Lessee has vacated the Premises and
surrendered possession; provided that if prior to the Lease Expiration Date a
voluntary bankruptcy provision is filed by Lessee, or an involuntary bankruptcy
is filed against Lessee by any of Lessee’s creditors other than Lessor, under
11

 

8

 

U.S.C. § 101 et seq., or Lessee executes an
assignment for the benefit of creditors, then to the fullest extent permitted
by law Lessor shall not be obligated to return the Letter of Credit Security or
any proceeds of the Letter of Credit Security until all statutes of limitations
for any preference avoidance statutes applicable to such bankruptcy or
assignment for the benefit of creditors have elapsed or the bankruptcy court or
assignee, whichever is applicable, has executed a binding release releasing
Lessor of any and all liability for the preferential transfers relating to
payments made under this Lease, and Lessor may retain and offset against any
remaining Letter of Credit Security proceeds the full amount Lessor is required
to pay to any third party on account of preferential transfers relating to this
Lease. Lessor agrees it will cooperate in providing Issuer with a letter of
cancellation or such other reasonable documentation as Issuer requests to
effect the return and extinguishment of the credit issued under the Letter of
Credit Security.

 

(f) Acknowledgment
of Parties

 

Lessor and Lessee (a) acknowledge
and agree that in no event or circumstance shall the Letter of Credit Security
or any renewal thereof or substitute therefor or any proceeds thereof be deemed
to be or treated as a “security deposit” under any law applicable to security
deposits in the commercial context, including, but not limited to Section 1950.7
of the California Civil Code, as such Section now exists or as it may be
hereafter amended or succeeded (the “Security Deposit Laws”), (b) acknowledge
and agree that the Letter of Credit Security (including any renewal thereof or
substitute therefor or any proceeds thereof) is not intended to serve as a
security deposit, and the Security Deposit Laws shall have no applicability or
relevancy thereto, and (c) waive any and all rights, duties and
obligations that any such party may now, or in the future will, have relating
to or arising from the Security Deposit Laws. Lessee hereby waives the
provisions of Section 1950.7 of the California Civil Code and all other
provisions of law, now or hereafter in effect, which (i) establish the
time frame by which a Lessor must refund a security deposit under a lease,
and/or (ii) provide that a Lessor may claim from a security deposit only
those sums reasonably necessary to remedy defaults in the payment of rent, to
repair damage caused by a Lessee or to clean the premises, it being agreed that
Lessor may, in addition, claim those sums specified in this Section 4.06
and/or those sums reasonably necessary to compensate Lessor for any loss or
damage caused by Lessee’s breach of this Lease, including any damages Lessor
suffers.

 

(g) Scheduled
Reduction in Letter of Credit Security.

 

Notwithstanding anything herein to the contrary, as
of the eighth (8th) anniversary of the “Commencement Date” of the Building
10 Lease, the amount of the Letter of Credit Security shall be reduced to Seven
Hundred Fifty Thousand Dollars ($750,000), provided that (i) at such time
Lessor has not delivered a written notice of default by Lessee hereunder and
such default has not yet been cured, and (ii) Lessor has not delivered to
Lessee written notice that Lessee is in monetary default hereunder more than
three (3) times and written notice that Lessee is in non-monetary default
more than one (1) time during the Lease Term.

 

9

 

Section 4.07  Operating Expenses

 

(a) Definition

 

“Operating Expenses” shall mean and include those actual costs
or expenses of the Premises, Building 9 or Project described in Articles VI,
VII or IX, as well as all actual costs and expenses of every kind and nature
paid or incurred by Lessor (whether obligated to do so or undertaken at Lessor’s
discretion) in the ownership, operation, maintenance, repair and replacement of
the Common Areas, including Common Area Project Buildings and improvements
located within the Project as well as the Common Areas of Building 9. Such cost
and expenses shall include, but not be limited to, costs of cleaning; lighting;
maintaining, repairing and replacing all Common Area improvements and elements
(replacing shall be deemed to include but not be limited to the replacement of
light poles and fixtures, storm and sanitary sewers, parking lots, driveways
and roads as well as the Building 9 elevators, stairways, floors and walls in
the Common Area and Building 9, but not the Building 9 elements which are the
responsibility of Lessor to maintain, repair and replace under this Lease),
repairs to and maintenance of the structural and non-structural portions of the
Athletic Facility; supplies, tools, equipment and materials used in the
operation and maintenance of the Project; parking lot striping; removal of
trash, rubbish, garbage and other refuse; painting; removal of graffiti;
painting of exterior walls; landscaping; providing security to the extent
Lessor determines in its sole discretion to do so(including security systems
and/or systems designed to safeguard life or property against acts of God
and/or criminal and/or negligent acts, and the costs of maintaining of same); personal
property taxes; fire protection and fire hydrant charges (including fire
protection system signaling devices, now or hereafter required, and the costs
of maintaining of same); water and sewer charges; utility charges; license and
permit fees necessary to operate and maintain the Project; the initial cost or
the reasonable depreciation of equipment used solely in operating and
maintaining the Common Areas which is expensed or amortized, respectively by
Lessor in its good faith discretion using accounting practices commonly
utilized in the commercial real estate industry, consistently applied and rent
paid for leasing any such equipment; reasonable cost of on or off site storage
space of any and all items used in conjunction with the operation, maintenance
and management of the Project, including but not limited to tools, machinery,
records, decorations, tables, benches, supplies and meters; the cost of and
installation cost of any and all items which are installed for the purpose of
reducing Operating Expenses, increasing building or public safety or which may
be then required by governmental authority, laws, statutes, ordinances and/or
regulations, a use privilege for the Athletic Facility equal to: (A) the
product of 3,744 (Lessee’s Share of the Athletic Facility Square Footage) times
the monthly Base Rent per square foot then due hereunder, plus (B) Lessee’s
Share of the costs and expenses arising from the operation of same; total
compensation and benefits (including premiums for workers’ compensation and
other insurance) paid to or on behalf of Lessor’s employees, agents,
consultants and contractors, including but not limited to full or part time
on-site management or maintenance personnel, however, excluding any person with
a title greater than property manager, for work performed at the Project.

 

Notwithstanding the above,
if Lessee’s Share of the cost of any particular capital expenditure to the
Project or Premises exceeds Fifty Thousand Dollars ($50,000), then

 

10

 

such cost, together with interest thereon at the
rate actually charged Lessor by any lender or, if no such interest is relevant,
with interest thereon at an interest rate equal to the Bank of America prime
rate plus two percent (2%), shall be amortized over its useful life, and the
amount includible in Operating Expenses shall be limited to the monthly
amortized cost thereof. The determination of what constitutes a capital
expenditure and the useful life applicable thereto shall be made by Lessor in
its good faith discretion using accounting practices commonly utilized in the
commercial real estate industry, consistently applied

 

(b) Payment

 

Lessee shall pay Lessee’s
Share of Operating Expenses, as Additional Rent, in monthly installments on the
first day of each month in an amount set forth in a written estimate by Lessor.
Within ninety (90) days after the end of each calendar year, Lessor shall
furnish to Lessee a statement (hereinafter referred to as “Lessor’s Statement”)
of the actual amount of Lessee’s Share of such Operating Expenses for such
period. Within thirty (30) days after receipt thereof, Lessee shall pay to
Lessor, as Additional Rent, or Lessor shall apply as a credit to Additional
Rent next falling due (or if the Lease Term has expired or terminated and there
remains no money due to Lessor, remit to Lessee), as the case may be, the
difference between the estimated amounts paid by Lessee and the actual amount
of Lessee’s Share of Operating Expenses for such period as shown by such Lessor’s
Statement. Lessee’s Share of Operating Expenses for the ensuing estimation
period shall be adjusted upward or downward based upon Lessor’s Statement.

 

(c) Lessee’s Share

 

For purposes hereof, “Lessee’s
Share” shall mean (i) as to amounts allocable solely to Building 9 (and
with respect to real property tax, also to the legal parcel in which Building 9
is located), one hundred percent (100%), and (ii) as to amounts allocable
to the Project or Project Common Area, the Rentable Area of the Premises divided
by the Rentable Area of all Project Buildings at the Project (irrespective of
whether they are rented). Subject to being increased or decreased (in an amount
Lessor shall, in good faith, determine), upon the increase or reduction in the
Rentable Area of the Premises and the Project, respectively, Lessee’s Share for
each of the Building 9 items shall be 100% and Lessee’s Share of Project items
shall be sixteen and ninety-three hundredths percent (16.93%). The Rentable
Area of all Project Buildings at the Project shall not be reduced for vacancies
in the ordinary course of business.

 

(d) Exclusions

 

For purposes of this Lease,
the term Operating Expenses shall not include (and Lessee shall have no
liability for) any of the following:

 

(i) any expenses incurred
by Lessor for the sole benefit of Lessee, which expenses are reimbursed by
Lessee pursuant to the other terms of this Lease,

 

(ii) any expenses
incurred by Lessor for the benefit of the other tenants of the Project, but not
Lessee, which expenses are in fact reimbursed by such other tenant(s),

 

11

 

(iii) any payments of
points, interest or principal relating to any debt secured by Building 9 or the
Project,

 

(iv) costs associated
with the operation of the business of the ownership or entity which constitutes
“Lessor,” as distinguished from the costs of Project operations, including, but
not limited to, partnership accounting and legal matters, costs of defending
any lawsuits with any mortgagee (except as the actions of Lessee may be in
issue), costs of selling syndicating, financing, mortgaging or hypothecating
any of Lessor’s interest in the Project, costs of any disputes between Lessor
and its employee (if any) not engaged in Project operation, or outside fees
paid in connection with disputes with other tenants,

 

(v) Legal fees, space
planners’ fees, real estate brokers’ leasing commissions, and advertising
expenses incurred in connection with leasing of the Project Buildings,

 

(vi) Costs for which
Lessor is reimbursed by its insurance carrier or any tenant’s insurance
carrier,

 

(vii) any bad debt
loss, rent loss or reserves for bad debts or rent loss,

 

(viii) costs, including
permit, license and inspection costs, incurred with respect to the installation
of tenant improvements made for new tenants in the Project or incurred in
renovating or otherwise improving, decorating, painting or redecorating vacant
space for tenants or other occupants of the Project,

 

(ix) costs of a capital
nature, including, without limitation, capital improvements and replacements,
capital repairs, capital equipment and capital tools, unless such costs are
amortized pursuant to the terms of Subsection 4.07(a) above,

 

(x) any interest or
late fee resulting from any failure of Lessor to pay any item of Operating
Expense when it would have been due without such interest or late fee,
provided, however, that nothing herein shall be deemed from precluding Lessor
from passing through to Lessee as an Operating

 

Expense any cost associated with
paying Operating Expenses on any permitted installment or other periodic basis,
even if such payment basis results in an increase in the Operating Expense in
question,

 

(xi) overhead and profit
increment paid to Lessor or to subsidiaries or affiliates of Lessor for such
services in the Building to the extent the same exceeds the costs of such
services rendered by unaffiliated third parties on a competitive basis.

 

It is understood that Operating Expenses shall be
reduced by all cash discounts, trade discounts, or quantity discounts received
by Lessor or Lessor’s managing agent in the purchase of any goods, utilities,
or services in connection with the operation of the Project. In the calculation
of any expenses hereunder, it is understood that Lessor will not charge Lessee
more than one hundred percent (100%) of any Operating Expense due
hereunder. Lessor shall use its best efforts to effect an equitable proration
of bills for services rendered to Building 9 and to any other property owned by
Lessor.

 

12

 

Section 4.08  Lessee’s Right to Review Supporting Data

 

(a) Exercise of
Right by Lessee

 

Provided that Lessor has not
delivered to Lessee written notice of any default by Lessee hereunder, which
default has not then been cured, and provided further that Lessee strictly
complies with the provisions of this Section 4.08, Lessee shall have the
right to reasonably review supporting data for any portion of a Lessor’s
Statement that Lessee believes may be incorrect. In order for Lessee to
exercise its right under this Section 4.08, Lessee shall, within: (i) forty-five
(45) days after any Lessor’s Statement is received, if Lessor includes a
copy of Lessor’s general ledger for Building 9 with such Lessor’s Statement, or
(ii) ninety (90) days after Lessor’s Statement is received, in all
other events, deliver a written notice to Lessor specifying the portions of the
Lessor’s Statement that it believes to be incorrect, and Lessee shall
simultaneously pay to Lessor all amounts due from Lessee to Lessor as specified
in the Lessor’s Statement, if applicable. Except as expressly set forth in
subparagraph (c) below, in no event shall Lessee be entitled to withhold,
deduct, or offset any monetary obligation of Lessee to Lessor under the Lease
including, without limitation, Lessee’s obligation to make all Base Rent
payments and all payments for Additional Rent, pending the completion of, and
regardless of the results of, any review under this Section 4.08. The
right to review granted to Lessee under this Section 4.08 may only be
exercised once for any Lessor’s Statement, and if Lessee fails to meet any of
the above conditions as a prerequisite to the exercise of such right, the right
of Lessee under this Section 4.08 for a particular Lessor’s Statement
shall be deemed waived.

 

(b) Procedures for
Review

 

Lessee acknowledges that
Lessor maintains its records for Building 9 and the Project at its offices in
San Francisco, and Lessee therefore agrees that any review of supporting data under
this Section shall occur at such location. Any review to be conducted
under this Section shall be at the sole expense of Lessee, except as
otherwise provided herein, below, and shall be conducted by an independent
(i.e., not then engaged by Lessee for any other purposes) firm of certified
public accountants on a non-contingency fee basis. Lessee acknowledges and
agrees that any supporting data reviewed under this Section shall
constitute confidential information of Lessor, which shall not be disclosed to
anyone other than the accountants of national standing performing the review
and the principals or other employees or counsel of Lessee who receive the
results of the review. Except to the extent (i) required by law, (ii) in
connection with any legal proceeding concerning this Lease, or (iii) if
such information or results are otherwise publicly available, the disclosure of
such information or results of the review to any other person by Lessee or any
person or entity who received such information from or on behalf of Lessee
shall constitute a material breach of this Lease.

 

(c) Finding of Error

 

Any errors disclosed by the
review of supporting data under this Section shall be promptly corrected,
provided that Lessor shall have the right to cause another review of the
supporting data to be made by an independent (i.e., not then engaged by Lessor
for any other purposes) firm of certified public accountants of Lessor’s
choice. If the results of the review of the supporting data, taking into
account (if applicable) the results of any additional review

 

13

 

caused by Lessor, reveal that Lessee has overpaid
obligations for a preceding period, the amount of such overpayment shall be
credited against Lessee’s subsequent installment obligations to pay its share
of Additional Rent or, if the Lease has terminated or expired, in cash within
thirty (30) days after the determination of overpayment is received by
Lessor. In the event that such results show that Lessee has underpaid its
obligations for a preceding period, the amount of such underpayment shall be paid
by Lessee to Lessor with the next succeeding installment obligation of
Additional Rent or, if this Lease has terminated or expired, in cash within
thirty (30) days after the determination of underpayment is received by
Lessee. Each party shall pay all the costs, and expenses of its chosen
accounting firm; provided, however, if Lessor and Lessee determine that
Operating Expenses for the Project for the year in question were less than
those stated in Lessor’s Statement by more than five percent (5%), Lessor shall
reimburse Lessee for the reasonable amounts paid by Lessee to third parties in
connection with such review. If Lessor and Lessee determine that Operating
Expenses for the Project in the year in question were not less than those
stated in Lessor’s Statement by more than five percent (5%), then Lessee shall
reimburse Lessor for the reasonable amounts paid by Lessor to third parties in
connection with such review.

 

(d) Effect of Lessee’s
Default. In the event that Lessor has delivered a written notice of default
to Lessee hereunder and such default then remains uncured during the pendency
of a review of records under this Section, said right to review shall
immediately cease and the matters originally set forth in Lessor’s Statement
shall be deemed to be correct.

 

ARTICLE V

USE

 

Section 5.01  Permitted Use and Limitations on Use

 

(a) The Premises shall
be used and occupied only for general office purposes, research and
development, laboratory, biopharmaceutical research (including without
limitation, vivarium and animal colony facilities for rodents only, small scale
pilot fermentation and other pilot plant facilities) and other related legal
uses and for no other use without Lessor’s prior written consent, which shall
not be unreasonably withheld, conditioned or delayed so long as such use is
lawful and does not conflict with any other provision of this Lease, including,
without limitation, the restrictions set forth in the following provisions of
this Section. Lessee shall not use, suffer or permit the use of the Premises in
any manner that will tend to constitute waste, nuisance or unlawful acts or
void any warranties that Lessor has received with respect to Building 9,
provided that biological and chemical and other waste generated and disposed of
in the ordinary course of business for the permitted uses in full and timely
compliance with all applicable laws shall not be deemed a violation of this Section 5.01.
In no event shall it be unreasonable for Lessor to withhold its consent as to
uses other than those expressly permitted above which it determines would tend
to materially increase the wear of the Premises or any part thereof or increase
the potential liability of Lessor or decrease the marketability,
financeability, leaseability or value of the Premises or Project. Lessee shall
not do anything in or about the Premises which will (i) cause structural
injury to Building 9 or Premises, or (ii) cause damage to any part of
Building 9 or Premises except to the extent reasonably necessary for the
installation of Lessee’s trade fixtures and Lessee’s Alterations, and then only
in a manner and to the extent consistent with this Lease. Lessee shall not
operate any equipment within Building 9 or

 

14

 

Premises which will (A) materially damage
Building 9 or the Common Area, (B) overload existing electrical systems or
other mechanical equipment servicing Building 9, (C) impair the efficient
operation of the sprinkler system or the heating, ventilating or air
conditioning (“HVAC”) equipment within or servicing Building 9, (D) damage,
overload or corrode the sanitary sewer system, or (E) damage the Common
Area or any other part of the Project. Lessee shall not do any of the following
in excess of the load limits for which such items are designed (based on
structural reinforcements to be constructed by Lessee as part of Lessee’s
alterations to the Premises): attach, hand or suspend anything from the
ceiling, roof, walls or columns of Building 9 or set any load on the floor. Lessee
shall not operate hard wheel forklifts within the Premises. Any dust, fumes, or
waste products generated by Lessee’s use of the Premises shall be contained and
disposed so that they do not (1) create an unreasonable fire or health
hazard, (2) damage the Premises, or (3) result in the violation of
any law. Except as approved by Lessor, Lessee shall not change the exterior of
Building 9, or the outside area of the Premises, or install any equipment or
antennas on or make any penetrations of the exterior or roof of Building 9.
Lessee shall not conduct, on any portion of the Premises, any sale of any kind
(but nothing herein is meant to prohibit sales and marketing activities of
Lessee’s products and services in the normal course of business consistent with
the permitted uses), including any public or private auction, fire sale,
going-out-of-business sale, distress sale or other liquidation sale, and any
such sale shall be an immediate event of default hereunder without the benefit
of a notice and cure period from Lessor, notwithstanding anything to the
contrary in this Lease. No materials, supplies, tanks or containers, equipment,
finished products or semi-finished products, raw materials, inoperable vehicles
or articles of any nature shall be stored upon or permitted to remain within
the outside areas of the Premises except in fully fenced and screened areas
outside Building 9 which have been designed for such purpose and have been
approved in writing by Lessor for such use by Lessee and for which Lessee has
obtained all appropriate permits from governmental agencies having jurisdiction
over such articles. Lessee shall also reimburse Lessor for any increased
premiums or additional insurance which Lessor reasonably deems necessary as a
result of Lessee’s use of the Premises.

 

Section 5.02  Compliance with Laws

 

Lessor represents and
warrants to Lessee that Building 9 was constructed in accordance with all
applicable laws, codes and regulations in effect as of the date Building 9 was
built. Except for any work necessary as a result of the inaccuracy of the
foregoing representation and warranty, Lessee shall, at Lessee’s cost and
expense, comply promptly with all statutes, ordinances, codes, rules,
regulations, orders, covenants and restrictions of record, and requirements
applicable to the Premises and Lessee’s use and occupancy of same in effect
during any part of the Lease Term, whether the same are presently foreseeable
or not, and without regard to the cost or expense of compliance provided that
any Alteration(s) required for compliance shall be subject to the
provisions of this Lease. By executing this Lease, Lessee acknowledges that it
has reviewed and satisfied itself as to its compliance, or intended compliance
with the applicable zoning and permit requirements, hazardous materials and
waste requirements, and all other statutes, laws, or ordinances relevant to the
uses stated in Section 5.01, above, or the occupancy of the Premises.

 

15

 

Section 5.03  Condition of Premises at Commencement
Date

 

Lessee hereby accepts the
Premises in their condition existing as of the date the Premises is delivered
to Lessee, “AS-IS” and “WITH ALL FAULTS” subject to all applicable zoning,
municipal, county and state laws, ordinances and regulations governing and
regulating the use and condition of the Premises, and any covenants or
restrictions, liens, encumbrances and title exceptions of record, and accepts
this Lease subject thereto and to all matters disclosed thereby and by any exhibits
attached hereto. Lessee acknowledges that neither Lessor nor any agent of
Lessor has made any representation or warranty as to the present or future
suitability of the Premises for the conduct of Lessee’s business, except as
otherwise provided herein.

 

Section 5.04  Intentionally Deleted

 

Section 5.05  Building Security

 

Lessee acknowledges and
agrees that it assumes sole responsibility for security at the Premises for its
agents, employees, invitees, licensees, contractors, guests and visitors and will
provide such systems and personnel for same including, without limitation,
while such person(s) are using the Common Area, as it deems necessary or
appropriate and at its sole cost and expense. Lessor shall have absolutely no
liability whatsoever with respect to the security of Lessee’s agents,
employees, invitees or contractors or their respective personal property at the
Project, except to the extent that liability to such parties arises out of the
intentional misconduct of Lessor or Lessor’s agents, employees, invitees or
contractors. Lessee acknowledges and agrees that Lessor does not intend to
provide any security system or security personnel at the Premises or Project,
including, without limitation, at the Common Area, provided, however, that nothing
herein shall be deemed to prevent Lessor from providing such system or
personnel in the future, the cost of which will be included in those items for
which Lessee pays additional rent.

 

Section 5.06  Rules and Regulations

 

Lessor may from time to time
promulgate reasonable and nondiscriminatory rules and regulations
applicable for the care and orderly management of the Premises, the Project
and/or its Common Area. Such rules and regulations shall be binding upon
Lessee upon delivery of a copy thereof to Lessee, and Lessee agrees to abide by
such rules and regulations. A copy of the initial Rules and
Regulations is attached hereto as Exhibit “I.” If there is a conflict
between the rules and regulations and any of the provisions of this Lease,
the provisions of this Lease shall prevail. Lessor shall not be responsible for
the violation of any such rules and regulations by any person, including,
without limitation, Lessee or its employees, agents, invitees, licensees,
guests, visitors or contractors.

 

16

 

ARTICLE VI

MAINTENANCE, REPAIRS AND
ALTERATIONS

 

Section 6.01  Maintenance of Premises and Building

 

(a) Throughout the
Lease Term, Lessee, at its sole cost and expense, shall keep, maintain, repair
and replace the Premises and every part thereof (except as provided in 6.01(b),
Article VIII (Damage and Destruction), Article XIII (Eminent Domain)
and also, except for uninsured maintenance, repairs or replacement costs caused
solely by an act of gross negligence or intentional misconduct by Lessor, or
its employees, agents or contractors during the Lease Term), maintain and
repair all improvements and appurtenances in the Premises, including, without
limitation, all interior walls, all doors and windows, all wall surfaces and
floor coverings, all Alterations, additions and improvements installed by or on
behalf of Lessee during the Lease Term, all sewer, plumbing, electrical,
lighting, heating, ventilation and cooling systems and fixtures, fire
sprinklers, fire safety and security systems and fixtures and all wiring and
glazing, in the same good order, condition and repair as they are in on the
Commencement Date, or may be improved during the Lease Term, reasonable wear
and tear excepted, provided that such wear and tear could not have been
reasonably prevented by best maintenance practices customarily used in the
Project.

 

(b) Lessor, at its sole
cost and expense, shall (i) repair defects, latent and patent, in Building
9 (including all exterior glass which is damaged by structural defects in
exterior walls), and keep, maintain, repair and, if deemed necessary by Lessor,
replace (ii) (a) supporting pillars, (b) structural walls, (c) the
structural portions of Building 9 (including, but not limited to, the roof and
window systems, provided that Lessee, and not Lessor, shall be responsible for
washing the windows, and Lessee shall be responsible for Lessee’s Share of any
costs incurred by Lessee in repairing, maintaining or replacing the roof
membrane of Building 9 as an Operating Expense) and (d) foundations of
Building 9. Notwithstanding the foregoing, subject to the terms of Section 7.06
hereof, if the need for such repair is caused by Lessee, Lessor shall, at
Lessee’s sole cost and expense, repair same. Lessee shall give Lessor written
notice of any needed repairs which are the obligation of Lessor hereunder. It
shall then be the obligation of Lessor, after receipt of such notice, to
perform the same within fifteen (15) business days after such notice (or,
if the condition in need of repair constitutes an emergency which is causing
imminent and material risk of damage or injury to persons or property at
Building 9, Lessor must perform such repair within five (5) business days
after receipt of such notice); provided, however, that if the nature of the
repairs is such that more than fifteen (15) business days (or, in the case
of the emergency repairs described above, five (5) business days) are
reasonably required for performance, then Lessor shall not be deemed to be in
default hereunder if Lessor commences such repairs within said fifteen
(15) business day period and thereafter diligently completes them and
provided further, that for purposes of this sentence “commences” includes any
steps taken by Lessor to investigate, design, consult, bid or seek permit or
other governmental approval in connection with such repair. Should Lessor
default as provided in Section 12.03 with respect to its obligation to
make any of the repairs assumed by it hereunder with respect to the Premises or
Building 9, Lessee shall have the right to perform such repairs and Lessor
agrees that within thirty (30) days after written demand accompanied by
detailed

 

17

 

invoice(s), it shall pay to Lessee the cost of any
such repairs together with accrued interest from the date of Lessee’s payment
at the Agreed Rate. Lessor shall not be liable to Lessee for any damage to
person or property as a result of any failure to timely perform any of its
obligations with respect to the repair, maintenance or replacement of the
Premises, Project Buildings or Project or any part thereof, and Lessee’s sole
right and remedy (together with its rights under Section 12.03 below)
shall be the performance of said repairs by Lessee with right of reimbursement
from Lessor of the reasonable fair market cost of said repairs, not exceeding
the out of pocket sums actually expended by Lessee, together with accrued
interest from the date of Lessee’s payment at the Agreed Rate, provided that nothing
herein shall be deemed to create a right of setoff or withholding by Lessee of
Base Rent or Additional Rent or any other amounts due herein. Lessee hereby
expressly waives all rights under and benefits of Sections 1941 and 1942 of the
California Civil Code or under any similar law, statute or ordinance now or
hereafter in effect to make repairs and offset the cost of same against rent or
to withhold or delay any payment of rent or any other of its obligations
hereunder as a result of any default by Lessor under this Section 6.01(b).

 

(c) Lessee agrees to
keep the Premises, both inside and out, clean and in sanitary condition as
required by the health, sanitary and police ordinances and regulations of any
political subdivision having jurisdiction and to remove all trash and debris
which may be found in or around the Premises. Lessee further agrees to keep the
interior surfaces of the Premises, including, without limitation, windows,
floors, walls, doors, showcases and fixtures clean and neat in appearance.

 

(d) If Lessee refuses
or neglects to commence such repairs and/or maintenance for which Lessee is
responsible under this Article VI within a ten (10) business day
period (or as soon as practical and in no event later than five (5) days,
if the failure to initiate the repair threatens to cause further damage to the
Premises) after written notice from Lessor and thereafter diligently prosecute
the same to completion, then Lessor may enter the Premises (except in an
emergency, upon at least 24 hours advance written notice) during Lessee’s
business hours and cause such repairs and/or maintenance to be made. Lessor
shall not be responsible to Lessee for any loss or damage occasioned thereby
other than physical damage to the Premises caused by the negligence of Lessor
or Lesson’s agents, employees or contractors which damage Lessor shall repair
at its sole cost as Lessor’s sole obligation and Lessee’s sole right and remedy
with respect to such damage. Lessee agrees that upon demand, it shall pay to
Lessor the reasonable cost of any such repairs subject to the terms of the
preceding sentence, not exceeding the amount of out-of-pocket expenses actually
expended by Lessor, together with accrued interest from the date of Lessor’s
payment at the Agreed Rate. Notwithstanding anything to the contrary contained
herein, above, if Lessor elects to enter the Premises as permitted herein,
above, it shall use commercially reasonable efforts to minimize any
interference with Lessee’s business at the Premises.

 

Section 6.02  Maintenance of Project Common Areas

 

Lessor shall maintain,
repair and replace all landscape, hardscape and other improvements within the
Project Common Area and shall operate and manage the Athletic Facility and
other Project Common Area features and facilities described in Section 2.02
including, without limitation, all landscape, hardscape and other improvements
within the

 

18

 

outside areas of Building 9 and the other Project
Buildings located within the Project, including without limitation,
landscaping, curbs, walkways, driveways, roadways, parking areas and lighting,
sprinkler, drainage, sewer, plumbing systems. Notwithstanding the foregoing,
subject to the terms of Section 7.06 below, any damage thereto, except for
normal wear, caused by Lessee or its employees, agents, contractors, invitees
or visitors shall be repaired by Lessor and the cost thereof shall be paid by
Lessee within ten (10) days after presentation of Lessor’s bill for same.
The cost and expense of Lessor’s obligations hereunder shall be Operating
Expenses as to which Lessee shall pay Lessee’s Share pursuant to Section 4.05
(except as otherwise provided herein); provided, however, that Lessor’s
obligation under this Section 6.02(b) in any instance where the
damage, other than normal wear and tear, was caused by Lessor or its employees,
agents or contractors shall not be recovered by Lessor from Lessee as an Operating
Expense or in any other manner. Notwithstanding anything to the contrary
contained herein, Lessee shall not be responsible for any cost or expense
pertaining solely to another Project Building, except for costs or expenses
pertaining to any Project Buildings which provide amenities for the Project or
any Project Building in which Lessee is a tenant.

 

Section 6.03  Alterations, Additions and Improvements

 

No alterations, additions,
or improvements (“Alterations”)
shall be made to the Premises by Lessee without the prior written consent of
Lessor, which Lessor will not unreasonably withhold, condition or delay;
provided, however, that Lessee may make Alterations which do not affect the
Building systems, exterior appearance or structural integrity of Building 9,
involve penetration of either the ceiling or floor of Building 9 and which do
not collectively exceed One Hundred Thousand Dollars ($100,000) in cost within
any twelve (12) month period, without Lessor’s prior written consent;
provided, further, that Lessee gives Lessor prior notice of such alterations
(which notice shall include the estimated value of such alterations) and such
alterations are otherwise performed in accordance with the terms of this Lease.
As a condition to Lessor’s obligation to consider any request for consent
hereunder, Lessee shall pay Lessor upon demand for the reasonable out of pocket
costs and expenses of consultants, engineers, architects and others (exclusive
of property management personnel for reviewing plans and specifications. Lessor
may require Lessee to remove any such Alterations at the expiration or sooner
termination of the Lease Term and to restore the Premises to their prior
condition pursuant to the terms of Section 17.09 hereof; provided that: (i) Lessor
shall make such election, if at all, at the time consent to such Alteration is
given, if such election is requested in writing of Lessor at such time by
Lessee, or if Lessor’s consent to such Alteration is not required, then Lessor
shall make such election within 30 days following a written request of Lessor
by Lessee, and (ii) in any event, at the end of the Lease Term or earlier
termination of the Lease, Lessee shall remove from the Premises the equipment
listed as “Equipment To Be Removed” on Schedule 3 attached hereto (the “Removal
Obligations Schedule”), and shall surrender to Lessor, and have no obligation
to remove, the equipment listed as “Equipment Left In Place” on the Removal
Obligations Schedule. Lessee shall furnish security or make other arrangement satisfactory
to Lessor to assure payment for the completion of all Alterations work free and
clear of liens. All Alterations to be made to the Premises shall be made under
the supervision of a competent, California licensed architect and/or competent
California licensed structural engineer (each of whom has been approved by
Lessor) and shall be made in accordance with plans and specifications which
have been furnished to and approved by Lessor in writing prior to commencement
of work. All Alterations shall be designed, constructed and installed at the
sole

 

19

 

cost and expense of Lessee by California licensed
architects, engineers, and contractors approved by Lessor in compliance with
all applicable law, and in good and workmanlike manner, and shall have been
approved in writing by Redwood City and any other applicable governmental
agencies, if so required. Such approvals shall not be unreasonably withheld,
conditioned or delayed by Lessor. Except as is provided for in the Removal
Obligations Schedule, subject to Lessor’s right to have Lessee retain ownership
and remove same, any Alteration, including, without limitation, all lighting,
electrical, heating, ventilation, air conditioning and full height partitioning,
drapery and carpeting installations made by Lessee, together with all property
that has become an integral part of the Premises such as fume hoods which
penetrate the roof or plenum area, built-in cold rooms, built-in warm rooms,
deionized water systems, glass washing equipment, autoclaves, chillers,
built-in plumbing, electrical and mechanical equipment and systems and any
power generator and transfer switches, shall not be deemed trade fixtures and
shall become the property of Lessor at the expiration or sooner termination of
the Lease, unless Lessor directs otherwise. Lessee shall retain title to all
furniture and trade fixtures placed on the Premises. Within thirty
(30) days after completion of any Alteration, Lessee shall provide Lessor
with a complete set of both hard copies and CAD drawings of “as built” plans
for same.

 

Section 6.04  Covenant Against Liens

 

Lessee shall not allow any
liens arising from any act or omission of Lessee to exist, attach to, be placed
on, or encumber Lessor’s or Lessee’s interest in the Premises, Building 9 or
Project, or any portion of either, by operation of law or otherwise. Lessee
shall not suffer or permit any lien of mechanics, material suppliers, or others
to be placed against the Premises, Building 9 or Project, or any portion of
either, with respect to work or services performed or claimed to have been
performed for Lessee or materials furnished or claimed to have been furnished
to Lessee or the Premises. Lessor has the right at all times to post and keep
posted on the Premises any notice that it considers necessary for protection
from such liens. At least ten (10) days before beginning construction of
any Alteration, Lessee shall give Lessor written notice of the expected
commencement date of that construction to permit Lessor to post and record a
notice of nonresponsibility. If any such lien attaches or Lessee receives
notice of any such lien, Lessee shall cause the lien to be immediately released
and removed of record by payment or bond. Despite any other provision of this
Lease, if the lien is not released and removed within twenty (20) days
after Lessor delivers notice of the lien to Lessee, Lessor may immediately take
all action necessary to release and remove the lien, without any duty to
investigate the validity of it. All expenses (including reasonable attorney
fees and the cost of any bond) incurred by Lessor in connection with a lien
incurred by Lessee or its removal shall be considered Additional Rent under
this Lease and be immediately due and payable by Lessee. Notwithstanding the
foregoing, if Lessee shall, in good faith, contest the validity of any such
lien, claim or demand, then Lessee shall, at its sole expense, defend and
protect itself, Lessor and the Premises, Building 9 and Project against the
same and shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof. If Lessor shall require, Lessee shall
furnish a surety bond in an amount equal to one hundred fifty percent
(150%) of the amount of such contested lien, claim or demand, indemnifying
Lessor against liability for the same. If Lessor elects to participate in or is
made a party to any such action, Lessee shall reimburse Lessor’s reasonable
attorneys’ fees and costs within ten (10) days after demand.

 

20

 

ARTICLE VII

INSURANCE

 

Section 7.01  Property/Rental Insurance for Premises

 

At all times during the
Lease Term, Lessor shall keep Building 9, any tenant improvements or
Alterations made by Lessee therein and the Project insured against loss or
damage by fire and those risks normally included in the term “all risk,”
extended coverage, fire and casualty insurance, including, without limitation,
coverage for (i) earthquake and earthquake sprinkler leakage, (ii) flood,
(iii) loss of rents and extra expense for eighteen (18) months,
including scheduled rent increases, (iv) boiler and machinery, and (v) fire
damage legal liability, including waiver of subrogation. Lessee shall pay
Lessee’s Share of any deductibles. The amount of such insurance shall not be
less than 100% of replacement cost. Insurance shall include a Building
Ordinance and Increased Cost of Construction Endorsement insuring the increased
cost of reconstructing the Premises incurred due to the need to comply with
applicable statutes, ordinances and requirements of all municipal, state and
federal authorities now in force, which or may be in force hereafter. Any
recovery received from said insurance policy shall be paid to Lessor and thereafter
applied by Lessor to the reconstruction of the Premises in accordance with the
provisions of Article VIII below. Lessee, as part of the Operating
Expenses, shall reimburse Lessor for Lessee’s Share of the cost of the premiums
for all such insurance in accordance with Article IV. Such reimbursement
shall be made within fifteen (15) days of Lessee’s receipt of a copy of
Lessor’s statement therefore. To the extent commercially available in Lessor’s
reasonable business judgment, Lessor’s insurance shall have a deductible not
greater than fifteen percent (15%) for earthquake and ten percent
(10%) for the basic “all risk” coverage.

 

Notwithstanding the
foregoing, Lessee may, at Lessee’s election, maintain at Lessee’s sole cost and
expense a separate, additional policy of insurance insuring the Improvements or
Alterations made by Lessee against loss or damage by fire and those risks
normally included in the term “all risk,” extended coverage, fire and casualty
insurance. Any recovery received from said insurance policy shall be paid to
Lessee in accordance with the provisions of Article VIII below.

 

Section 7.02  Property Insurance for Fixtures and
Inventory

 

At all times during the
Lease Term, Lessee shall, at its sole expense, maintain fire and casualty
insurance with “all risk” coverage which includes the same coverage as required
of Lessor in Section 7.01, above, on any trade fixtures, furnishings,
merchandise, equipment, artwork or other personal property, whether or not
presented to Lessor for its consent in or on the Premises, whether in place as
of the date hereof or installed hereafter. The amount of such insurance shall
not be less than one hundred percent (100%) of the replacement cost
thereof with commercially reasonable deductibles, and Lessor shall not have any
responsibility nor pay any cost for maintaining any types of such insurance.
Lessee shall pay all deductibles.

 

Section 7.03  Lessor’s Liability Insurance

 

During the Lease Term,
Lessor shall maintain a policy or policies of commercial general liability
insurance naming Lessor (and such others as designated by Lessor) against

 

21

 

claims and liability for bodily injury, personal
injury and property damage on or about the Premises and Project, with combined
single limit coverage in an amount determined by Lessor in its sole discretion
(which amount is currently Fifty Million Dollars ($50,000,000.00)); provided
that if such policy is a blanket policy that covers properties (other than the
Project) owned by Lessor, only that portion allocable to the Project shall be
payable hereunder. Lessee, in addition to the rent and other charges provided
herein, agrees to pay Lessee’s Share of the premiums for all such insurance in
accordance with Article IV.

 

Section 7.04  Liability Insurance Carried by Lessee

 

At all times during the
Lease Term (and any holdover period) Lessee shall obtain and keep in force a
commercial general liability policy of insurance protecting Lessee, Lessor and
any lender(s) whose names are provided to Lessee as additional insureds
against claims and liability for bodily injury, personal injury and property
damage based upon involving or arising out of ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such insurance
shall be on an occurrence basis providing a single limit coverage in amount of
not less than Ten Million Dollars ($10,000,000) per occurrence. The limits of
said insurance required by this Lease as carried by Lessee shall not, however, limit
the liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance to be carried by the Lessee shall be primary to and not contributory
with, any similar insurance carried by Lessor, whose insurance shall be
considered excess insurance only. Lessor may require Lessee’s liability
insurance policy limits to be raised to conform with requirements of Lessor’s
lender and/or to bring coverage limits to levels then being generally required
of new tenants within the Project.

 

Section 7.05  Proof of Insurance

 

Lessee shall furnish to
Lessor prior to the Commencement Date, and during the Lease Term, at least
thirty (30) days prior to the expiration date of any policy, certificates
indicating that the property insurance and liability insurance required to be
maintained by Lessee is in full force and effect for the twelve (12) month
period following such expiration date; that Lessor has been named as an
additional insured to the extent of contractual liability assumed in Section 7.07
and Section 7.08 and that all such policies will not be canceled unless
thirty (30) days’ prior written notice of the proposed cancellation has
been given to Lessor. The insurance shall be with insurers approved by Lessor,
provided, however, that such approval shall not be unreasonably withheld so
long as Lessee’s insurance carrier has a Best’s Insurance Guide rating not less
than A VIII and is licensed to do business in California. Lessor shall furnish
to Lessee reasonable evidence of its insurance coverage required hereunder
within fifteen (15) business days after demand made therefor, however, not
more than once in any calendar year.

 

Section 7.06  Mutual Waiver of Claims and Subrogation
Rights

 

Lessor and Lessee hereby
release and relieve the other, and waive their entire claim of recovery for
loss or damage to property arising out of or incident to fire, lightning, and
the other perils included in a standard “all risk” insurance policy of a type
described in Sections 7.01 and 7.02 above that is carried by the waiving party (or
that would have been if the waiving party had carried the insurance required
hereunder), when such property constitutes the Premises or Building 9 or the
Project, or is in, on or about the Premises or Building 9, whether or not such

 

22

 

loss or damage is due to the negligence of Lessor or
Lessee, or their respective agents, employees, guests, licensees, invitees, or
contractors. Lessee and Lessor waive all rights of subrogation against each
other on behalf of, and shall obtain a waiver of all subrogation rights from,
all property and casualty insurers referenced above.

 

Section 7.07  Indemnification and Exculpation

 

(a) Except as otherwise
provided in Section 7.07(b), Lessee shall indemnify and hold Lessor free
and harmless from any and all liability, claims, loss, damages, causes of
action (whether in tort or contract, law or equity, or otherwise), expenses,
charges, assessments, fines, and penalties of any kind, including without
limitation, reasonable attorney fees, expert witness fees and costs, arising by
reason of the death or injury of any person, including any person who is an
employee, agent, invitee, licensee, permittee, visitor, guest or contractor of
Lessee, or by reason of damage to or destruction of any property, including
property owned by Lessee or by any person who is an employee, agent, invitee,
permittee, visitor, or contractor of Lessee, caused or allegedly caused (1) while
that person or property is in or about the Premises; (2) by some condition
of the Premises (exclusive of structural defects or disrepair that are the sole
responsibility of Lessor under the terms of Section 5.04 and 6.01(b) of
this Lease); (3) by some act or omission by Lessee or its agent, employee,
licensee, invitee, guest, visitor or contractor or any person in, adjacent, on,
or about the Premises with the permission, consent or sufferance of Lessee; or (4) by
any breach or default in timely observance or performance of any obligation on
Lessee’s part to be observed or performed under this Lease.

 

(b) Notwithstanding the
provisions of Section 7.07(a) of this Lease, Lessee’s duty to
indemnify and hold Lessor harmless shall not apply to any liability, claims,
loss or damages, causes of action (whether in tort or contract, law or equity,
or otherwise), expenses, charges, assessments, fines and penalties of any kind,
including without limitation, reasonable attorney fees, expert witness fees and
costs arising by reason of Lessor’s, or its employees’, agents’ or contractors’,
negligence or willful act of misconduct.

 

(c) Lessee hereby
waives all claims against Lessor for damages to goods, wares and merchandise
and all other personal property in, on or about the Premises and for injury or
death to persons in, on or about the Premises from any cause other than the
intentionally misconduct of Lessor or Lessor’s agents, employees or
contractors, Notwithstanding the provisions of Section 7.07(b) above,
or any other provision of this Lease, in no event shall Lessor be liable (i) for
lost profits or other consequential damages arising from any cause, or (ii) for
any damage which is or could be covered by the insurance Lessee is required to
carry under this Lease.

 

Section 7.08  Lessor as Party Defendant

 

If by reason of an act or
omission of Lessee or any of its employees, agents, invitees, licensee,
visitors, guests or contractors, Lessor is made a party defendant or a cross
defendant to any action involving the Premises or this Lease, Lessee shall hold
harmless and indemnify Lessor from all liability or claims of liability,
including all damages, attorney fees and costs of suit.

 

23

 

ARTICLE VIII

DAMAGE OR DESTRUCTION

 

Section 8.01  Destruction of the Premises

 

(a) In the event of a
partial destruction of the Premises (i.e., less than fifty percent
(50%) of its Rentable Area) during the Lease Term from any cause, Lessor,
upon receipt of, and to the extent of, insurance proceeds paid in connection
with such casualty (or the proceeds that would have been received by Lessor had
Lessor maintained the insurance required of Lessor in Subsection 7.01 above, in
the event Lessor fails to maintain such insurance) and the deductible from
Lessee which Lessee shall pay Lessee’s Share to Lessor within thirty
(30) business days after demand, shall forthwith repair the same,
including without limitation all Tenant Improvements and Alterations, whether
or not originally paid for or constructed by Lessor or Lessee, provided the
repairs can be made within a reasonable time under state, federal, county and
municipal applicable law, but such partial destruction shall in no way annul or
void this Lease, (except as provided in Section 8.01(b) or 8.01(c) below)
provided that Lessee shall be entitled to a proportionate credit for rent equal
to rental income insurance proceeds received by Lessor (or the proceeds that
would have been received by Lessor had Lessor maintained the insurance required
of Lessor in subsection 7.01 above, in the event Lessor fails to maintain such
insurance) and provided further that Lessee shall repair all damage and
destruction to those items as to which Lessee is required to maintain fire and
casualty insurance under Section 7.02 above. Lessor and Lessee each shall
use diligence in making such repairs within a reasonable time period, subject
to the Force Majeure provisions of Section 17.21, in which instance the
time period shall be extended accordingly, and this Lease shall remain in full
force and effect, with the rent to be proportionately reduced as provided above
in this Section. If the Premises are damaged by any peril within six (6) months
prior to the last day of the Lease Term (or, if Lessee has delivered its Option
Notice pursuant to Section 3.03(a) above, within six (6) months
prior to the last day of the Extended Term) and, in the reasonable opinion of
the Lessor’s architect or construction consultant, the restoration of the
Premises cannot be substantially completed within thirty (30) days after
the date of such damage Lessor or Lessee may terminate this Lease on thirty
(30) days written notice to the other party.

 

(b) If the Premises are
damaged or destroyed by any cause to the extent of more than fifty percent
(50%) of their total Rentable Area during the Lease Term, Lessor shall notify
Lessee within thirty (30) days after such damage or destruction whether it
will repair the same. If Lessor states that it will not, or cannot, repair,
this Lease shall terminate thirty (30) business days after Lessor gives
its notice.

 

(c) Lessee shall have
the option to terminate this Lease if the Premises are affected by a casualty
not caused by Lessee and the time estimated to substantially complete the
restoration exceeds thirteen (13) months from the date Lessor’s architect’s
opinion of the repair time is delivered to Lessee. Such termination right shall
be (i) exercised by written notice to Lessor delivered within thirty
(30) days after delivery to Lessee of Lessor’s architect’s opinion and (ii) irrevocable
and automatically waived if not so timely exercised.

 

(d) In the event of a
termination of the Lease pursuant to this Section 8.01, Lessor shall be
entitled to any insurance proceeds received by Lessor under the policy of

 

24

 

insurance maintained by Lessor under Section 7.01
as a result of the damage or destruction and Lessee shall be entitled to any
insurance proceeds from any separate, additional policy obtained by Lessee as
described in Sections 7.01 and/or 7.02. The respective insurable interests of
Lessor and Lessee in the Lessee Improvements and Alterations shall not be
affected by any termination of the Lease following an event of damage or
destruction as described herein.

 

(e) If Lessor states
that it will repair the Premises, Lessor shall, upon receipt of and to the
extent of insurance proceeds paid in connection with such casualty and the
deductible amount from Lessee, forthwith conduct the repair and diligently
pursue the same to completion, but such destruction shall in no way annul or void
this Lease except upon a termination of the Lease pursuant to this Article VIII,
provided that Lessee shall be entitled to a proportionate credit for rent equal
to rental income insurance proceeds received by Lessor (or the proceeds that
would have been received by Lessor had Lessor maintained the insurance required
of Lessor in subsection 7.01(iii) above, in the event Lessor fails to
maintain such insurance).

 

Section 8.02  Waiver of Civil Code Remedies

 

Lessee hereby expressly
waives any rights to terminate this Lease upon damage or destruction to the
Premises, including without limitation any rights pursuant to the provisions of
Section 1932, Subdivisions 1 and 2 and Section 1933, Subdivision 4,
of the California Civil Code, as amended from time-to-time, and the provisions
of any similar law hereinafter enacted.

 

Section 8.03  Damages Incurred during Repair

 

The Base Rent, Additional
Rent and other charges due under this Lease shall not be reduced or abated by
reason of any damage or destruction to the Premises (but will be subject to
credit as provided in Section 8.01(a) and (b) above with respect
to rental loss insurance proceeds received), and Lessor shall be entitled to
all proceeds of the insurance maintained pursuant to Section 7.01 above
during the period of rebuilding pursuant to Section 8.01 above, or if the
Lease is terminated pursuant to Section 8.01 above. Lessee shall have no
claim against Lessor, including, without limitation, for compensation for
inconvenience or loss of business, profits or goodwill during any period of
repair or reconstruction.

 

Section 8.04  No Liability for Lessee’s Alterations or
Personal Property

 

In no event shall Lessor
have any liability for, nor shall it be required to repair or restore, any
injury or damage to Lessee’s Alterations or personal property or to any other
personal property of Lessee in or upon the Premises, Building 9 or Project.

 

ARTICLE IX

REAL PROPERTY TAXES

 

Section 9.01  Payment of Taxes

 

(a) Lessee shall pay to
Lessor Lessee’s Share, as an Operating Expense pursuant to Section 4.07
above, of all real property taxes, including any supplemental tax and any form
of real estate tax or assessment, general, special, ordinary or extraordinary,
and any license, fee, charge, excise or imposition (“real property tax”),
imposed, assessed or levied on or

 

25

 

with respect to the Premises and the Project Common
Areas by any Federal, State, County, City or other political subdivision or
public authority having the direct or indirect power to tax, including, without
limitation, any improvement district or any community facilities district
(including with respect to a district established for purposes of constructing
the Seaport Boulevard improvements and other improvements as required in the
Development Agreement or by the City of Redwood City (“Community Facility
District Bond”), as against any legal or equitable interest of Lessor in the
Project or against the Project or any part thereof applicable to the Project
for all periods of time included within the Lease Term (as the same may be
extended and during any holdover period), as well as any government or private
cost sharing agreement assessments made for the purpose of augmenting or
improving the quality of services and amenities normally provided by government
agencies and any tax, fee, charge, imposition or excise described in subsection
(b) below. Notwithstanding the foregoing, Lessee shall not be required to
pay any net income taxes, franchise taxes, or any succession, estate or
inheritance taxes of Lessor or any penalties due to Lessor’s late or
non-payment of any real property taxes, unless such failure is caused by Lessee’s
failure to pay Lessee’s Share of real property taxes due hereunder.

 

(b) If at any time during
the Lease Term, the State of California or any political subdivision of the
state, including any county, city, city and county, public corporation,
district, or any other political entity or public corporation of this state,
levies or assesses against Lessor a tax, fee, charge, imposition or excise on
rents under the Lease, the square footage of the Premises or Project, the act
of entering into this Lease, or the occupancy of Lessee, or levies or assesses
against Lessor any other tax, fee, or excise, however described, including,
without limitation, a so called value added, business license, transit,
commuter, environmental or energy tax fee, charge or excise or imposition
related to the Project as a direct substitution in whole or in part for, or in
addition to, any real property taxes on the Project the same shall be included
in real property taxes and paid in accordance with Section 9.01(a).

 

(c) Lessor shall
provide Lessee with copies of all tax and assessment bills on the Premises
promptly upon Lessor’s receipt of Lessee’s written request therefor. Lessor
shall also promptly provide to Lessee evidence of payment upon Lessor’s receipt
of Lessee’s written request therefor.

 

(d) With respect to
taxes and assessments which may lawfully be paid in installments, for the
purpose of this Section, real property tax in any period shall include only
such portion of the same which is payable within such period and any interest
payable thereon computed (whether or not such is the case) as if Lessor had
elected to pay the same over the longest period permitted by law.

 

(e) If Lessor shall
obtain any abatement or refund on account of any real property tax as to which
Lessee shall have paid payments hereunder, Lessor shall promptly refund to
Lessee Lessee’s portion of any such abatement or refund, after deducting
therefrom the reasonable costs and expenses incurred by Lessor in obtaining
such abatement or refund.

 

26

 

Section 9.02  Pro Ration for Partial Years

 

If any such taxes paid by
Lessee shall cover any period prior to the Commencement Date or after the
Expiration Date of the Lease Term, Lessee’s Share of such taxes shall be
equitably prorated to cover only the period of time within the tax fiscal year
during which this Lease shall be in effect, and Lessor shall reimburse Lessee
to any extent required.

 

Section 9.03  Personal Property Taxes

 

(a) Lessee shall pay
prior to delinquency all taxes imposed, assessed against and levied upon trade
fixtures, furnishings, equipment and all other personal property of Lessee
contained in the Premises or elsewhere. When possible, Lessee shall cause said
trade fixtures, furnishings, equipment and all other personal property to be
assessed and billed separately from the real property of Lessor.

 

(b) If any of Lessee’s
personal property shall be assessed with Lessor’s real property, Lessee shall
pay Lessor the taxes attributable to Lessee within thirty (30) days after
receipt of a written statement setting forth the amount of such tax bill
reasonably allocated to Lessee’s property.

 

(c) If Lessee shall
fail to pay any such taxes, Lessor shall have the right to pay the same, in
which case Lessee shall repay such amount to Lessor with Lessee’s next rent
installment together with interest at the Agreed Rate.

 

Section 9.04  Right to Contest Real Property Taxes

 

Lessee may, at any time
(unless Lessor is already doing so), and at its sole expense, contest the real
property taxes due with respect to the Premises in its own name and in a manner
set forth by appropriate judicial or administrative proceedings, provided that:
(i) Lessee gives Lessor prior written notice of such contest, (ii) Lessee
pays the real property taxes required by the applicable taxing authority while
such contest is occurring, (iii) pays any and all penalties, late interest
or other fines associated with any such contest and (iv) indemnifies,
defends, protects and holds Lessor harmless from any and all expenses
(including reasonable attorneys’ fees), causes of action, damages or liabilities
associated with such contest.

 

ARTICLE X

UTILITIES

 

Section 10.01  Lessee to Pay

 

Lessee shall pay prior to
delinquency and throughout the Lease Term, all charges for water, gas, heating,
cooling, sewer, telephone, electricity, garbage, air conditioning and
ventilation, janitorial service, landscaping and all other services and
utilities supplied to the Premises directly to the service provider in
question. The disruption, failure, lack or shortage of any service or utility
with respect to the Premises, Building 9 or Project due to any cause whatsoever
shall not affect any obligation of Lessee hereunder, and Lessee shall
faithfully keep

 

27

 

and observe all the terms, conditions and covenants
of this Lease and pay all rent due hereunder, all without diminution, credit or
deduction, provided that, to the extent the cause is the failure of Lessor to
observe or perform an obligation of Lessor, hereunder Lessor shall initiate the
cure of such failure immediately after receipt from Lessee of notice of the
failure and Lessor shall thereafter diligently prosecute said cure to
completion.

 

ARTICLE XI

ASSIGNMENT AND SUBLETTING

 

Section 11.01  Lessor’s Consent Required

 

Except as provided in Section 11.02,
Lessee shall not voluntarily or by operation of law assign, transfer, mortgage,
sublet, license or otherwise transfer or encumber all or any part of Lessee’s
interest in this Lease or in the Premises or any part thereof, without Lessor’s
prior written consent, which Lessor shall not unreasonably withhold, condition
or delay. Lessor shall respond in writing to Lessee’s request for consent
hereunder within fifteen (15) business days of Lessor’s receipt of Lessee’s
request therefor, or within any extended time period necessary in order for
Lessor to receive a response from Lessor’s lender, and any attempted
assignment, transfer, mortgage, encumbrance, subletting or licensing without
such consent shall be void, and shall constitute a breach of this Lease. If
Lessor refuses to consent to Lessee’s request, it shall specifically state in
its response to Lessee the reason(s) for denying such consent. By way of
example, but not limitation, reasonable grounds for denying consent include: (i) poor
credit history or insufficient financial strength of transferee, (ii) transferee’s
intended use of the Premises is inconsistent with the permitted use and will
materially and adversely affect Lessor’s interest. Lessee shall reimburse
Lessor upon demand for Lessor’s reasonable costs and expenses (including
attorneys’ fees, architect fees and engineering fees) involved in reviewing any
request for consent whether or not consent is granted. Notwithstanding any
other provisions of this Lease, if (i) the proposed assignee or sublessee
has been required by any prior landlord, lender or governmental authority to
take remedial action in connection with Hazardous Materials contaminating a
property, where the contamination resulted from such party’s action or use of
the property in question, (ii) the proposed assignee or sublessee is
subject to any enforcement order issued by any governmental authority in
connection with the use, storage, handling, treatment, generation, release or
disposal of hazardous materials (including, without limitation, any order
related to the failure to make a required reporting to any governmental
authority), or (iii) because of the existence of a pre-existing
environmental condition in the vicinity of or underlying the Project, the risk
that Lessor would be targeted as a responsible party in connection with the
remediation of such pre-existing environmental condition would be materially
increased or exacerbated by the proposed use of Hazardous Materials by such
proposed assignee or sublessee, Lessor shall have the absolute right to refuse
to consent to any assignment or subletting to any such party.

 

Section 11.02  Lessee Affiliates

 

Lessee may assign this
Lease, or sublet up to forty percent (40%) of the Premises, without the
need for Lessor’s consent (but with written notice to Lessor prior to such
transfer), to any corporation, limited liability company or partnership which
controls, is controlled by, or is under common control with Lessee, or to any
corporation, limited liability company or

 

28

 

partnership resulting from the merger or
consolidation with Lessee, or to any person or entity which acquires all of
Lessee’s stock or all, or substantially all of the assets of Lessee as a going
concern of the business that is being conducted on the Premises (collectively,
an “Affiliate”), provided that said assignee or sublessee (i) in the event
of an assignment of this Lease to an Affiliate only, has a net worth at least
equal to the net worth of Lessee as of the date of this Lease, and (ii) assumes,
in full, the obligations of Lessee under this Lease (or, in the case of a
sublease, the portion of the Premises subject to the Lease) and provided
further that the use to which the Premises will be put does not materially
change. Any such assignment shall not, in any way, affect or limit the
liability of Lessee under the terms of this Lease. Any portion of the Premises
which is assigned or sublet to an Affiliate of Lessee shall not be included in
the calculation of subleased, assigned or transferred Rentable Area for the
purposes of Section 11.06. In addition, the terms of Section 11.04,
below, shall not be applicable to any assignment or sublease pursuant to this
Section.

 

Section 11.03  No Release of Lessee

 

Regardless of Lessor’s
consent, no subletting or assignment shall release Lessee of Lessee’s
obligation or alter the primary liability of Lessee to pay the rent and to
perform all other obligations to be performed by Lessee hereunder. The
acceptance of rent by Lessor from any other person shall not be deemed consent
to any subsequent assignment or subletting. In the event of default by any
assignee of Lessee or any successor of Lessee, in the performance of any of the
terms hereof, Lessor may proceed directly against Lessee without the necessity
of exhausting remedies against said assignee.

 

Section 11.04  Excess Rent

 

In the event Lessor shall
consent to a sublease or an assignment, Lessee shall pay to Lessor with its
regularly scheduled Base Rent payments, fifty percent (50%) of all sums
and the fair market value of all consideration collected or received by Lessee
from a sublessee or assignee which are in excess of the Base Rent and
Additional Rent due and payable with respect to the subleased or assigned space
pursuant to Article IV for the time period encompassed by the sublease or
assignment term, after first deducting: leasing commissions, incurred by Lessee
in connection with such assignment or subletting.

 

Section 11.05  Information to be Provided

 

Lessee’s written request to
Lessor for consent to an assignment or subletting or other form of transfer
shall be accompanied by (a) the name and legal composition of the proposed
transferee; (b) the nature of the proposed transferee’s business to be
carried on in the Premises; (c) the terms and provisions of the proposed
transfer agreement; and (d) such financial and other information as Lessor
may reasonably request concerning the proposed transferee.

 

Section 11.06  Lessor’s Recapture Rights

 

(a) Lessor’s
Recapture Rights

 

Notwithstanding any other
provision of this Article 11, in the event that Lessee proposes to
sublease or assign or otherwise transfer to any person or entity not an

 

29

 

Affiliate of Lessee any interest in this Lease or
the Premises or any part thereof affecting (collectively with all other such
subleases, assignments, or transfers then in effect to parties which are not
Affiliates) more than fifty percent (50%) of the square footage of the
Rentable Area of the Premises for more than fifty percent (50%) of the
remaining Lease Term is hereafter designated “Recapture
Space”), then Lessor shall have the option to recapture the
Recapture Space by written notice to Lessee (“Recapture
Notice”) given within ten (10) business days after Lessor
receives any notice of such proposed assignment or sublease or other transfer (“Transfer Notice”). A timely Recapture
Notice terminates this Lease for the Recapture Space, effective as of the date
Lessee specified in the Transfer Notice, which date shall in no event be
shorter than thirty (30) days from the date of the Recapture Notice. If
Lessor declines or fails timely to deliver a Recapture Notice, Lessor shall
have no further right under this Section 11.06 to the Recapture Space
unless it becomes available again after transfer by Lessee. Lessor’s recapture
rights shall be subject to the rights of any sublessee, assignee or transferee
of Lessee set forth in any sublease, assignment or agreement of transfer to
which Lessor has consented, but subject to the terms and conditions set forth
in Lessor’s consent; any such sublease, assignment or agreement of transfer
shall be assigned to Lessor as of the effective date of the recapture.
Notwithstanding anything herein to the contrary, if Lessor elects to deliver a
Recapture Notice and terminate the Lease as set forth above, Lessee may negate
Lessor’s Recapture Notice by withdrawing its Transfer Notice by delivering
written notice thereof to Lessor within five (5) business days after
Lessee’s receipt of the Recapture Notice.

 

(b) Consequences of
Recapture

 

To determine the new Base
Rent under this Lease if Lessor recaptures the Recapture Space and Lessee does
not negate Lessor’s Recapture Notice within the time periods provided therefore
above, the then current Base Rent (immediately before Lessor’s recapture) under
the Lease shall be multiplied by a fraction, the numerator of which is the
square feet of the Rentable Area retained by Lessee after Lessor’s recapture
and the denominator of which is the total square feet of the Rentable Area
before Lessor’s recapture. The Additional Rent, to the extent that it is
calculated on the Rentable Area of the Premises, shall be reduced to reflect
Lessee’s Share based on the Rentable Areas of the Premises retained by Lessee
after Lessor’s recapture. This Lease as so amended shall continue thereafter in
full force and effect, except that Lessee shall be released from liability
under this Lease for future Base Rent and Additional Rent with respect to the
portion of the Premises subject to Lessor’s Recapture Notice. Either party may
require written confirmation of the amendments to this Lease necessitated by
Lessor’s recapture of the Recapture Space. If Lessor recaptures the Recapture
Space, Lessor shall, at Lessor’s sole expense, construct, paint, and furnish
any partitions required to segregate the Recapture Space from the remaining
Premises retained by Lessee as well as arrange separate metering of utilities.

 

30

 

ARTICLE XII

DEFAULTS; REMEDIES

 

Section 12.01  Defaults

 

The occurrence of any one or
more of the following events shall constitute a material default and breach of
this Lease by Lessee (each shall be an “Event of Lessee’s Default”):

 

(a) The abandonment of
the Premises by Lessee or the commission of waste at the Premises or the making
of an assignment or subletting in violation of Article XI, provided
however, abandonment shall be considered to not occur if the Premises are
maintained and occupied to the extent necessary to maintain the insurance on
each and every portion of the Premises;

 

(b) The failure by
Lessee to make any payment of rent or any other payment required to be made by
Lessee hereunder, as and when due, if such failure continues for a period of
five (5) business days after written notice thereof from Lessor to Lessee.
In the event that Lessor serves Lessee with a Notice to Pay Rent or Quit in the
form required by applicable Unlawful Detainer statutes such Notice shall
constitute the notice required by this paragraph, provided that the cure period
stated in the Notice shall be five (5) business days rather than the
statutory three (3) days;

 

(c) Lessee’s failure to
provide (i) any required Replacement Letter of Credit Security as required
by Section 4.06, (ii) an estoppel certificate as required by Section 15.01
or (iii) any document subordinating this Lease to a Lender’s deed of trust
as required by Section 17.13, if any such failure continues for five (5) business
days after written notice of the failure. In the event Lessor serves Lessee
with a Notice to Perform Covenant or Quit in the form required by applicable
Unlawful Detainer Statutes, such Notice shall constitute the notice required by
this paragraph, provided that the cure period stated in the Notice shall be five
(5) business days rather than the statutory three (3) days;

 

(d) The failure by
Lessee to observe or perform any of the covenants, conditions or provisions of
this Lease to be observed or performed by Lessee, other than described in
paragraph (a) (b) or (c) above, if such failure continues for a
period of fifteen (15) days after written notice thereof from Lessor to
Lessee; provided, however, that if the nature of Lessee’s default is such that
more than fifteen (15) days are reasonably required for its cure, then
Lessee shall not be deemed to be in default if Lessee commences such cure
within said fifteen (15) day period and thereafter diligently prosecutes
such cure to completion;

 

(e) (i) The making
by Lessee of any general arrangement or assignment for the benefit of
creditors; (ii) the filing by Lessee of a voluntary petition in bankruptcy
under Title 11 U.S.C. or the filing of an involuntary petition against Lessee
which remains uncontested for a period of sixty (60) days; (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Lessee’s assets located at the Premises or of Lessee’s interest in this Lease;
or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee’s assets located at the Premises or of Lessee’s
interest in this Lease, provided, however, in the event that any provisions of
this Section 12.01(e) is contrary to any applicable law, such
provision shall be of no force or effect;

 

31

 

(f) The discovery by
Lessor that Lessee delivered to Lessor a financial statement that was
materially false; and

 

(g) The occurrence of a
material default and breach under any other lease between Lessee (or an
Affiliate thereof) and Lessor (or an affiliate of Lessor) for premises in the
Project, including but not limited to the Building 10 Lease. 

 

Section 12.02  Remedies

 

If an Event of Lessee’s
Default shall occur, Lessor may at any time thereafter, and without limiting
Lessor in the exercise of any right or remedy which Lessor may have by reason
of such Event of Lessee’s Default:

 

(a) Terminate Lessee’s
right to possession of the Premises by any lawful means including by way of
unlawful detainer (and without any further notice if a notice in compliance with
the unlawful detainer statutes and in compliance with paragraphs (b), (c) and
(d) of Section 12.01 above has already been given), in which case
this Lease shall terminate and Lessee shall immediately surrender possession of
the Premises to Lessor. In such event Lessor shall be entitled to recover from
Lessee all damages incurred by Lessor by reason of an Event of Lessee’s Default
including, but not limited to, (i) the cost of recovering possession of
the Premises including reasonable attorney’s fees related thereto; (ii) the
worth at the time of the award of any unpaid rent that had been earned at the
time of the termination, to be computed by allowing interest at the Agreed Rate
but in no case greater than the maximum amount of interest permitted by law, (iii) the
worth at the time at the time of the award of the amount by which the unpaid
rent that would have been earned between the time of the termination and the
time of the award exceeds the amount of unpaid rent that Lessee proves could
reasonably have been avoided, to be computed by allowing interest at the Agreed
Rate but in no case greater than the maximum amount of interest permitted by
law, (iv) the worth at the time of the award of the amount by which the
unpaid rent for the balance of the Lease Term after the time of the award
exceeds the amount of unpaid rent that Lessee proves could reasonably have been
avoided, to be computed by discounting that amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award plus one per
cent (1%), (v) any other amount necessary to compensate Lessor for all the
detriment proximately caused by Lessee’s failure to perform obligations under
this Lease, including brokerage commissions and advertising expenses, and (vi) any
other amounts, in addition to or in lieu of those listed above, that may be
permitted by applicable law.

 

(b) Maintain Lessee’s
right to possession as provided in Civil Code Section 1951.4 in which case
this Lease shall continue in effect whether or not Lessee shall have abandoned
the Premises. In such event Lessor shall be entitled to enforce all of Lessor’s
rights and remedies under this Lease, including the right to recover the rent
as it becomes due hereunder.

 

32

 

(c) Pursue any other
remedy now or hereafter available to Lessor under the laws or judicial
decisions of the state of California. Unpaid amounts of rent and other unpaid
monetary obligations of Lessee under the terms of this Lease shall bear
interest from the date due at the Agreed Rate.

 

Section 12.03  Default by Lessor

 

Lessor shall not be in
default under this Lease unless Lessor fails to perform obligations required of
Lessor within a reasonable time, but in no event later than ten (10) business
days after written notice by Lessee to Lessor and to the holder of any first
mortgage or deed of trust covering the Premises whose name and address shall
have theretofore been furnished to Lessee in writing, specifying that Lessor
has failed to perform such obligation; provided, however, that if the nature of
Lessor’s obligation is such that more than ten (10) business days are
reasonably required for performance then Lessor shall not be in default if
Lessor commences performance within such ten (10) business day period and
thereafter diligently prosecutes the same to completion. In the event Lessor
does not commence performance within the ten (10) business day period
provided herein, or fails to diligently prosecute such cure to completion,
Lessee may perform such obligation and will be reimbursed for its expenses by
Lessor together with interest thereon at the Agreed Rate within thirty
(30) days following demand for such payment. Lessee waives any right to
terminate this Lease or to vacate the Premises on Lessor’s default under this
Lease. Lessee’s sole remedy on Lessor’s default is an action for damages or
injunctive or declaratory relief. Notwithstanding the foregoing, (i) any
default beyond any applicable cure period by Lessor under the terms of the
Building 10 Lease shall also be a default under this Lease for any period of
time during which Lessor or any affiliate thereof is also the landlord under
the Building 10 Lease, and (ii) nothing herein shall be deemed applicable in
the event of Lessor’s delay in delivery of the Premises, in which case Lessee’s
rights and remedies shall be determined under Section 3.01 above.

 

Section 12.04  Late Charges

 

Lessee hereby acknowledges
that late payment by Lessee to Lessor of rent and other sums due hereunder will
cause Lessor to incur costs not contemplated by this Lease, the exact amount of
which will be extremely difficult to ascertain. Such costs include, but are not
limited to, processing and accounting charges, and late charges which may be
imposed on Lessor by the terms of any mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any other sum due from
Lessee shall not be received by Lessor or Lessor’s designated agent within five
(5) business days after such amount is due and owing, Lessee shall pay to
Lessor a late charge equal to five percent (5%) of such overdue amount.
The parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of late payment by Lessee. Acceptance
of such late charge by Lessor shall in no event constitute a waiver of an Event
of Lessee’s Default with respect to such overdue amount, nor prevent Lessor
from exercising any of the other rights and remedies granted hereunder.
Notwithstanding the foregoing, Lessor shall grant Lessee one (1) late
payment during the first twelve (12) months of the Lease Term without late
charge, provided that Lessee shall pay the applicable delinquent amount within
five (5) business days following written notice from Lessor of such
delinquency.

 

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Section 12.05  Lessor’s Right to Perform Lessee’s
Obligations

 

All obligations to be
performed or observed by Lessee under this Lease shall be performed or observed
by Lessee at Lessee’s expense and without any reduction of rent. Lessor may
perform or observe any obligation of Lessee for which there exists an Event of
Lessee Default hereunder, without waiving Lessor’s other rights and remedies
for Lessee’s failure to perform or observe any obligations under this Lease and
without releasing Lessee from any such obligations. Within ten (10) days
after receiving a statement from Lessor, Lessee shall pay to Lessor the amount
of expense reasonably incurred by Lessor in performing or observing Lessee’s
obligation.

 

ARTICLE XIII

CONDEMNATION OF PREMISES.

 

Section 13.01  Total Condemnation

 

If the entire Premises,
whether by exercise of governmental power or the sale or transfer by Lessor to
any condemnor under threat of condemnation or while proceedings for
condemnation are pending, at any time during the Lease Term, shall be taken by
condemnation such that there does not remain a portion suitable for occupation,
this Lease shall then terminate as of the date transfer of possession is required.
Upon such condemnation, all rent shall be paid up to the date transfer of
possession is required, and Lessee shall have no claim against Lessor or the
award for the value of the unexpired portion of this Lease Term.

 

Section 13.02  Partial Condemnation

 

If any portion of the
Premises is taken by condemnation during the Lease Term, whether by exercise of
governmental power or the sale or transfer by Lessor to an condemnor under
threat of condemnation or while proceedings for condemnation are pending, this Lease
shall remain in full force and effect except that in the event a partial taking
(i) is more than thirty-three percent (33%) of the Rentable square
footage of the Premises; or (ii) leaves the Premises unfit for the conduct
of the business of Lessee, then Lessee shall have the right to terminate this
Lease effective upon the date transfer of possession is required. Moreover,
Lessor shall have the right to terminate this Lease effective on the date
transfer of possession is required if more than thirty three percent
(33%) of the total square footage of the Premises is taken by
condemnation. Lessee and Lessor may elect to exercise their respective rights
to terminate this Lease pursuant to this Section by serving written notice
to the other within thirty (30) days after receipt of notice of
condemnation (i.e., 30 days from the date on which Lessor received such notice
from the condemning authority for purposes of calculating the 30 days with
respect to Lessor, and 30 days from the date on which Lessee received a copy of
such notice from Lessor for purposes of calculating the 30 days with respect to
Lessee. All rent shall be paid up to the date of termination, and Lessee shall
have no claim against Lessor for the value of any unexpired portion of the
Lease Term. If this Lease shall not be terminated, then Base Rent after such
partial taking shall be that percentage of the adjusted Base Rent specified
herein, equal to the percentage which the rentable square footage of the
untaken part of the Premises, immediately after the taking, bears to the
rentable square footage of the entire Premises immediately before the taking.
If Lessee’s continued use of the Premises requires alterations and repair by
reason of a partial

 

34

 

taking, all such alterations and repair shall be
made by Lessor at Lessor’s expense. Lessee waives all rights it may have under
California Code of Civil Procedure Section 1265.130 or otherwise, to
terminate this Lease based on partial condemnation.

 

Section 13.03  Award to Lessee

 

In the event of any
condemnation, whether total or partial, Lessee shall have the right to claim
and recover from the condemning authority such compensation as may be
separately awarded or recoverable by Lessee for loss of its business fixtures,
or equipment belonging to Lessee immediately prior to the condemnation, moving
expenses and loss of good will, to the extent separately awarded by the
condemning authority. The balance of any condemnation award shall belong to
Lessor (including, without limitation, any amount attributable to any excess of
the market value of the Premises for the remainder of the Lease Term over the
then present value of the rent payable for the remainder of the Lease Term) and
Lessee shall have no further right to recover from Lessor or the condemning
authority for any claims arising out of such taking, provided that Lessee shall
have the right to make a separate claim in the condemnation proceeding, as long
as the award payable to Lessor is not reduced thereby, for (i) the taking
of the unamortized (using the Lease Term as the amortization period) value of
the Alterations paid for by Lessee which are not removed by Lessee, (ii) reasonable
removal and relocation costs for any Alterations that Lessee has the right to
remove and elects to remove (if condemnor approves the removal), and (iii) relocation
costs for Lessee’s business, provided that the awarding to Lessee of the items
described in (i), (ii) and (iii) above does not reduce the
condemnation award that would otherwise be awarded to Lessor.

 

ARTICLE XIV

ENTRY BY LESSOR

 

Section 14.01  Entry by Lessor Permitted

 

Lessee shall permit Lessor
and its employees, agents and contractors, if accompanied by Lessee (except in
cases of emergency), to enter the Premises and all parts thereof (i) upon
twenty-four (24) hours notice (or without notice in an emergency),
including without limitation, Building 9 and all parts thereof at all
reasonable times for any of the following purposes: to inspect the Premises; to
maintain the Premises; to make such repairs to the Premises as Lessor is
obligated or may elect to make; and (ii) upon twenty-four (24) hours
notice to show the Premises and post “To Lease” signs for the purposes of
re-letting during the last twelve (12) months of the Lease Term (provided
Lessee has failed to exercise any remaining Option to Extend) to show the
Premises as part of a prospective sale by Lessor or to post notices of
nonresponsibility. Lessor shall have such right of entry without any rebate of
rent to Lessee for any loss of occupancy or quiet enjoyment of the Premises
hereby occasioned, provided, Lessor shall use commercially reasonable efforts
not to interfere with Lessee’s business operations at the Premises or
unreasonably interfere with Lessee’s access to, or parking at, the Project or
materially increase Lessee’s obligations or decrease Lessee’s rights under this
Lease. Notwithstanding anything in this Lease to the contrary, in exercising
any right to undertake any renovations, alterations, additions, restoration,
inspections, repairs or maintenance as set forth in this Lease, Lessor shall
comply with Lessee’s reasonable security measures and operating procedures and
shall minimize any disruption to Lessee..

 

35

 

ARTICLE XV

ESTOPPEL CERTIFICATE

 

Section 15.01  Estoppel Certificate

 

(a) Either Lessor or
Lessee shall at any time upon not less than fifteen (15) days’ prior
written notice from the other execute, acknowledge and deliver to the requesting
party a statement in writing (i) certifying, if true, that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification and certifying, if true, that this Lease, as so modified, is
in full force and effect) and the date to which the rent and other charges are
paid in advance, if any, and (ii) acknowledging, if true, that there are
not, to Lessee’s (or Lessor’s, as relevant) knowledge, any uncured defaults on
the part of the requesting party hereunder, or specifying such defaults if any
are claimed and (iii) certifying or acknowledging, if true, such other
matters as are reasonably requested by any prospective lender or buyer which
are reasonably related to the loan or sale transaction. Any such statement may
be conclusively relied upon by any prospective purchaser or encumbrancer of the
Premises.

 

(b) Lessee’s failure to
deliver such statement within such time shall be conclusive upon Lessee (i) that
this Lease is in full force and effect, without modification except as may be
represented by Lessor, (ii) that there are no uncured defaults in Lessor’s
performance, and (iii) that not more than one month’s rent has been paid
in advance, if any, and stating whether or not to the actual knowledge of the
signer of such certificate Lessee is in default in the performance of any
covenant, agreement or condition contained in this Lease and, if so, specifying
each such default of which the signer may have knowledge, it being intended
that any such statement delivered pursuant to this Section 15.01(b) may
be relied upon by any prospective assignee of Lessee’s interest in this Lease
or any lender or prospective lender (or investor) or purchaser of any interest
in Lessee or its assets. Any failure of Lessee to deliver an estoppel
certificate as provided herein shall, at the option of Lessor, be an event of
default hereunder by Lessee without the requirement of any notice or grace
period, except as is provided for in Section 12.01(c) above. In
addition, Lessor may charge Lessee, and Lessee shall pay to Lessor, a fee equal
to Five Hundred Dollars ($500) per day for each day Lessee is late in
delivering such estoppel certificate.

 

ARTICLE XVI

LESSOR’S LIABILITY

 

Section 16.01  Limitations on Lessor’s Liability

 

The term “Lessor” as used
herein shall mean only the owner or owners at the time in question of the fee
title of the Premises. In the event of any transfer of such title or interest,
Lessor herein named (and in case of any subsequent transfers then the grantor)
shall be relieved from and after the date of such transfer of all liability as
respects Lessor’s obligations thereafter to be performed, provided that the
Letter of Credit and any funds in the hands of Lessor or the then grantor at
the time of such transfer, in which Lessee has an interest, shall be delivered
to the grantee. The obligations contained in this Lease to be performed by
Lessor shall, subject as aforesaid, be binding on Lessor’s successors and
assigns, only during their respective periods of ownership. For any breach of
this Lease by Lessor, the liability of Lessor (including all persons

 

36

 

and entities that comprise Lessor, and any successor
Lessor) and any recourse by Lessee against Lessor shall be limited to the
interest of Lessor, and Lessor’s successors in interest, in and to Building 9
and, to the extent Building 10 is owned by Lessor or any affiliate thereof,
Building 10, and the proceeds therefrom (including rents, insurance and
condemnation proceeds). On behalf of itself and all persons claiming by,
through, or under Lessee, Lessee expressly waives and releases Lessor and each
member, agent and employee of Lessor from any personal liability for breach of
this Lease.

 

ARTICLE XVII

GENERAL PROVISIONS

 

Section 17.01  Severability

 

The invalidity of any
provision of this Lease as determined by a court of competent jurisdiction,
shall in no way affect the validity of any other provision hereof.

 

Section 17.02  Agreed Rate Interest on Past Due
Obligations

 

Except as expressly herein
provided, any amount due to either party not paid when due shall bear interest
at the lesser of the Bank of America prime rate plus four percent (4%) or
the maximum amount of interest allowed by law (“Agreed Rate”). Payment of such interest shall not excuse or
cure any default by either party under this Lease. Despite any other provision
of this Lease, the total liability for interest payments shall not exceed the
limits, if any, imposed by the usury laws of the State of California. Any
interest paid in excess of those limits shall be refunded to the payor by
application of the amount of excess interest paid against any sums outstanding
in any order that payee requires. If the amount of excess interest paid exceeds
the sums outstanding, the portion exceeding those sums shall be refunded in
cash to the payor by the payee. To ascertain whether any interest payable exceeds
the limits imposed, any nonprincipal payment (including late charges) shall be
considered to the extent permitted by law to be an expense or a fee, premium,
or penalty rather than interest.

 

Section 17.03  Time of Essence

 

Time is of the essence in
the performance of all obligations under this Lease.

 

Section 17.04  Additional Rent

 

Any monetary obligations of
Lessee to Lessor under the terms of this Lease shall be deemed to be Additional
Rent and Lessor shall have all the rights and remedies for the nonpayment of
same as it would have for nonpayment of Base Rent. All references to “rent”
(except specific references to either Base Rent or Additional Rent) shall mean
Base Rent and Additional Rent.

 

Section 17.05  Incorporation of Prior Agreements,
Amendments and Exhibits

 

This Lease (including
Exhibits A, B, C, D, E, F, G, H and I and Schedules 1, 2, 3, 4, 5 and 6)
contains all agreements of the parties with respect to any matter mentioned
herein. No prior agreement or understanding pertaining to any such matter shall
be effective. This Lease

 

37

 

may be modified in writing only, signed by the
parties in interest at the time of the modification. Except as otherwise stated
in this Lease, Lessee hereby acknowledges that neither the Lessor nor any
employees or agents of the Lessor has made any oral or written warranties or
representations to Lessee relative to the condition or use by Lessee of said
Premises and Lessee acknowledges that Lessee assumes all responsibility
regarding the Occupational Safety Health Act, the legal use and adaptability of
the Premises and the compliance thereof with all applicable laws and
regulations in effect during the Lease Term except as otherwise specifically
stated in this Lease. Neither party has been induced to enter into this Lease
by, and neither party is relying on, any representation or warranty outside
those expressly set forth in this Lease.

 

Section 17.06  Notices

 

(a) Written Notice

 

Any notice required or
permitted to be given hereunder shall be in writing and shall be given by a
method described in paragraph (b) below and shall be addressed to Lessee
or to Lessor at the addresses noted below, next to the signature of the
respective parties, as the case may be. Either party may specify a different
address for notice purposes at any time by giving written notice of such change
to the other party in a manner provided herein at least ten (10) days
prior to the date such change is desired to be effective. A copy of all notices
required or permitted to be given to Lessor or Lessee (as applicable) hereunder
shall be concurrently transmitted to such party or parties at such addresses as
such party may from time to time hereafter designate by notice to the other,
but delay or failure of delivery to such person shall not affect the validity
of the delivery to Lessor or Lessee.

 

(b) Methods of Delivery

 

(i) When personally
delivered to the recipient, notice is effective on delivery. Delivery to the
person apparently designated to receive deliveries at the subject address is
personally delivered if made during business hours (e.g. receptionist).

 

(ii) When mailed by
certified mail with return receipt requested, notice is effective on receipt if
delivery is confirmed by a return receipt.

 

(iii) When delivery by
overnight delivery Federal Express/Airborne/United Parcel Service/DHL WorldWide
Express with charges prepaid or charged to the sender’s account, notice is
effective on delivery if delivery is confirmed by the delivery service.

 

(c) Refused,
Unclaimed or Undeliverable Notices

 

Any correctly addressed
notice that is refused, unclaimed, or undeliverable because of an act or
omission of the party to be notified shall be considered to be effective as of
the first date that the notice was refused, unclaimed, or considered
undeliverable by the postal authorities, messenger, or overnight delivery
service.

 

38

 

Section 17.07  Waivers

 

No waiver of any provision
hereof shall be deemed a waiver of any other provision hereof or of any
subsequent breach of the same or any other provisions. Any consent to, or
approval of, any act shall not be deemed to render unnecessary the obtaining of
consent to or approval of any subsequent act. The acceptance of rent hereunder
by Lessor shall not be a waiver of any preceding breach by Lessee of any
provision hereof, other than the failure of Lessee to pay the particular rent
so accepted, regardless of Lessor’s knowledge of such preceding breach at the
time of acceptance of such rent.

 

Section 17.08  Recording

 

Either Lessor or Lessee
shall, upon request of the other, execute, acknowledge and deliver to the other
a “short form” memorandum of this Lease for recording purposes for each of the
properties on which Building 6, Building 7, Building 8, Building 10 and
Building 9 are located, provided that Lessee simultaneously executes in
recordable form and delivers to Lessor a quit claim deed as to is leasehold and
any other interest in the Premises and hereby authorizes Lessor to date and
record the same only upon the expiration or sooner termination of this Lease
or, in the case of Buildings 6, 7 and 8, upon the termination of Lessee’s
expansion options with respect to each such property.

 

Section 17.09  Surrender of Possession; Holding Over

 

(a) At the expiration
or earlier termination of the Lease, Lessee shall remove all of Lessee’s signs
(pursuant to Section 17.15) and, subject to the terms of the Removal
Obligations Schedule and Section 6.03 of the Lease, shall remove all of
Lessee’s equipment, trade fixtures, supplies, wall decoration and other
personal property from within the Premises, Building 9 and the Common Area and
shall vacate, deliver up and surrender to Lessor possession of the Premises and
all improvements thereon, subject to the terms of Section 17.21 of this
Lease concerning Hazardous Materials brought upon, kept, used, stored, handled,
treated, generated in, or released or disposed of from the Premises by Lessee
or any of Lessee’s agents, employees or contractors (collectively, “Lessee
HazMat Operations”) and released of all clearances required by any governmental
authorities with respect to Lessee HazMat Operations, broom clean and, in good
order and condition, excepting only ordinary wear and tear (wear and tear which
could have been avoided by best maintenance practices customarily used at the
Project) and damage due to casualty not caused by Lessee or Lessee’s agents,
employees or contractors. Except for such ordinary wear and tear and damage due
to casualty not caused by Lessee’s agents, employees or contractors
(collectively, the “Lessee’s Parties”), Lessee shall (i) repair all damage
to the Premises, the interior and exterior of Building 9 and the Common Area
caused by Lessee’s removal of its property, (ii) patch and refinish, to
Lessor’s reasonable satisfaction, all penetrations made by Lessee or its
agents, contactors, employees or invitees to the roof, floor, interior or
exterior walls or ceiling of the Premises and Building 9, whether such
penetrations were made with Lessor’s approval or not, to the extent that the
equipment requiring such penetration is removed at the expiration or earlier
termination of the Lease, (iii) repair or replace all stained or damaged
ceiling tiles, wall coverings and floor coverings (unless such staining or

 

39

 

damage was caused by the actions of Lessor or the
tenant of a leased space above the Premises) to the reasonable satisfaction of
Lessor, (iv) repair all damage caused by Lessee to the exterior surface of
Building 9 and, where necessary, replace or resurface same. Upon expiration or
sooner termination of this Lease, Lessor may reenter the Premises and remove
all persons and property therefrom. If Lessee shall fail to surrender to Lessor
the Premises, Building 9 and the Common Area in the condition required by this
paragraph at the expiration or, if sooner terminated, within ten (10) days
after sooner termination, of this Lease, Lessor may, at Lessee’s expense,
remove Lessee’s signs, property and/or improvements not so removed and make
such repairs and replacements not so made or hire, at Lessee’s expense,
independent contractors to perform such work. Lessee shall be liable to Lessor
for all reasonable costs incurred by Lessor in returning the Premises, Building
9 and the Common Area to the required condition, together with interest thereon
at the Agreed Rate from the date incurred by Lessor until paid. Lessee shall
pay to Lessor the amount of all costs so incurred (including, without
limitation, costs of disposal, storage and insurance) together with interest at
the Agreed Rate within five (5) business days from Lessor’s delivery of a
statement therefor. If the Premises are not surrendered at the end of the Lease
Term, Lessee shall indemnify Lessor against loss or liability resulting from
delay by Lessee in so surrendering the Premises, including, without limitation,
actual damages for lost rent and with respect to any claims of a successor
occupant. Notwithstanding anything to the contrary contained in this Section 17.09,
and subject to the terms of the Removal Obligations Schedule, Lessee shall only
be required to remove those Alterations as Lessor shall have designated at the
time Lessor gave its consent to such Alterations to the extent required
pursuant to the terms of Section 6.03 hereof, or when consent was not
required, in response to Lessee’s written request for such determination.

 

(b) If Lessee, with
Lessor’s prior written consent, remains in possession of the Premises after
expiration of the Lease Term and if Lessor and Lessee have not executed an
express written agreement as to such holding over, then such occupancy shall be
a tenancy from month to month at a monthly Base Rent equivalent to one hundred
fifty percent (150%) of the higher of: (i) the monthly rental in
effect immediately prior to such expiration, or (ii) the Fair Market Rent
for the Premises, such payments to be made as herein provided for Base Rent. In
the event of such holding over, all of the terms of this Lease, including the
payment of Additional Rent all charges owing hereunder other than rent shall
remain in force and effect on said month to month basis.

 

(c) At least three (3) months
prior to the surrender of the Premises, Lessee shall deliver to Lessor a
narrative description of the actions proposed (or required by any governmental
authority) to be taken by Lessee in order to surrender the Premises (including
any Alterations permitted by Lessor to remain in the Premises) at the
expiration or earlier termination of the Lease Term, in accordance with the
requirements of any Environmental Laws or relevant governmental authority or,
in the absence thereof, the requirements of Lessor’s lender or any commercially
reasonable requirements of Lessor’s environmental consultant (collectively “HazMat
Requirements”) with respect to the Lessee HazMat Operations and otherwise
released for unrestricted use and occupancy (the “Surrender Plan”). Such
Surrender Plan shall be accompanied by a current listing of (i) all Hazardous
Materials licenses and permits held by or on behalf of any Lessee’s Parties
with respect to the Premises, and (ii) all Hazardous Materials used,
stored, handled, treated, generated, released or disposed of from the Premises,
and shall be subject to the review and approval of Lessor’s environmental
consultant. In connection with the

 

40

 

review and approval of the Surrender Plan, upon the
request of Lessor, Lessee shall deliver to Lessor or its consultant such
additional non-proprietary information concerning Lessee HazMat Operations as
Lessor shall request. On or before such surrender, Lessee shall deliver to
Lessor evidence that the approved Surrender Plan shall have been satisfactorily
completed and all HazMat Requirements have been met and Lessor shall have the
right, subject to reimbursement at Lessee’s expenses as set forth below, to
cause Lessor’s environmental consultant to inspect the Premises and perform
such additional procedures as may be deemed reasonably necessary to confirm
that the Premises are, as of the effective date of such surrender or early
termination of the Lease, in accordance with applicable HazMat Requirements.
Lessee shall reimburse Lessor, as Additional Rent, for the actual, out-of-pocket
expense incurred by Lessor for Lessor’s environmental consultant to review and
approve the Surrender Plan and to visit the Premises and verify satisfactory
completion of the same. Lessor shall have the unrestricted right to deliver
such Surrender Plan and any report by Lessor’s environmental consultant with
respect to the surrender of the Premises to third parties. If Lessee shall fail
to prepare or submit a Surrender Plan approved by Lessor, or if Lessee shall
fail to complete the approved Surrender Plan, or if such Surrender Plan,
whether or not approved by Lessor, shall fail to adequately address any
residual effect of Lessee HazMat Operations in, on or about the Premises in
violation of HazMat Requirements, Lessor shall have the right to take such
actions as Lessor may deem reasonable or appropriate to assure that the
Premises and the Project are surrendered free from any residual impact from
Lessee HazMat Operations, the cost of which actions shall be reimbursed by
Lessee as Additional Rent.

 

Section 17.10  Cumulative Remedies

 

No remedy or election
hereunder by Lessor shall be deemed exclusive but shall, wherever possible, be
cumulative with all other remedies at law or in equity, provided that notice
and cure periods set forth in Article XII are intended to extend and
modify statutory notice provisions to the extent expressly stated in Section 12.01.

 

Section 17.11  Covenants and Conditions

 

Each provision of this Lease
to be observed or performed by Lessee and Lessor shall be deemed both a covenant
and a condition.

 

Section 17.12  Binding Effect; Choice of Law

 

Subject to any provisions
hereof restricting assignment or subletting by Lessee and subject to the
provisions of Article XVI, this Lease shall bind the parties, their
personal representatives, successors and assigns. This Lease shall be governed
by the laws of the State of California and any legal or equitable action or
proceeding brought with respect to the Lease or the Premises shall be brought
in San Mateo County, California except for such actions or proceedings as are
required by California law to be brought in the County were the subject real
property is located.

 

Section 17.13  Lease to be Subordinate

 

Lessee agrees that this
Lease is and shall be, at all times, subject and subordinate to the lien of any
mortgage, deed of trust or other encumbrances which Lessor may create against

 

41

 

the Premises, including all renewals, replacements
and extensions thereof provided, however, that regardless of any default under
any such mortgage, deed of trust or other encumbrance or any sale of the
Premises under such mortgage, deed of trust or other encumbrance so long as,
subject to all applicable notice and cure periods, Lessee timely performs all covenants
and conditions of this Lease and continues to make all timely payments
hereunder, this Lease and Lessee’s possession and rights hereunder shall not be
disturbed by the mortgagee or beneficiary or anyone claiming under or through
such mortgagee or beneficiary. Lessee shall execute any documents which are
commercially reasonable (i.e., of a type customarily executed between lenders
and lessees for similar loans and leases) subordinating this Lease within ten (10) business
days after delivery of same by Lessor so long as the mortgagee or beneficiary
agrees therein that this Lease will not be terminated if Lessee is not in
default following a foreclosure, including, without limitation, any
Subordination Non-Disturbance and Attornment Agreement (“SNDA”) which is
substantially in the form attached hereto as Exhibit “C”. In any event,
Lessor and Lessee agree that Lessee may terminate this Lease upon written
notice thereof to Lessor at any time after the date that is twenty
(20) business days after the date of this Lease if Lessor and Lessor’s
lender have not executed and delivered an executed version of a SNDA in the
substantially the form attached hereto as Exhibit “C” to Lessee. In the
event that any mortgage or deed of trust is foreclosed or a conveyance in lieu
of foreclosure is made for any reason, and this Lease shall terminate, Lessee
shall, notwithstanding any subordination, attorn to and become the tenant of
such mortgagee or beneficiary or any successor to Lessor by foreclosure or
deed-in-lieu of foreclosure, at the option of such successor in interest,
provided however, that any such successor shall not (i) be liable for any
previous act or omission of Lessor under the Lease, (ii) be subject to any
offset, defense or counterclaim which shall theretofore have accrued to the
Lessee under the Lease against Lessor, or (iii) have any obligation with
respect to any security deposit unless it shall have been paid over or
physically delivered to such successor, or (iv) be bound by any rents paid
more than one month in advance to Lessor or any prior landlord or owner. Lessee
shall execute and deliver, upon reasonable prior notice from Lessor any
additional documents in such form as is designated by Lessor evidencing the
priority or subordination of the Lease with respect to any such lien of any
such mortgage or deed of trust.

 

Section 17.14  Attorneys’ Fees

 

If either party herein
brings an action to enforce the terms hereof or to declare rights hereunder,
the prevailing party in any such action, on trial or appeal, shall be entitled
to recover its reasonable attorney’s fees, expert witness fees and costs as
fixed by the Court.

 

Section 17.15  Signs

 

Lessee may, at Lessee’s sole
expense, place Lessee’s company name on the monument sign for Building 9 at a
location reasonably agreed by Lessee and Lessor and otherwise subject to the
terms of this Section 17.15. Lessee shall also be entitled, at Lessee’s
expense, to a pro rata share of directional signage at the Project for Building
9. Lessee shall not place any sign outside the Premises (or visible from
outside the Premises) without Lessor’s prior written consent, which consent
shall not be unreasonably withheld and subject to Lessee’s obtaining approval
by the City of Redwood City. Lessee, at its sole cost and expense, after
obtaining Lessor’s prior written consent, shall install, maintain and remove
prior to expiration of this Lease (or within ten (10) days after any
earlier termination of this Lease) all signage in full

 

42

 

compliance with (i) all applicable law,
statutes, ordinances and regulations and (ii) all provisions of this Lease
concerning Alterations, and (iii) Lessor’s signage policy set forth on Exhibit “D”
hereto.

 

Section 17.16  Merger

 

The voluntary or other
surrender of this Lease by Lessee, or a mutual cancellation thereof, or a
termination by Lessor, shall not work a merger, and shall, at the option of
Lessor, terminate all or any existing subtenancies or may, at the option of
Lessor, operate as an assignment to Lessor of any or all of such subtenancies.

 

Section 17.17  Quiet Possession

 

Upon Lessee timely paying
the rent for the Premises and timely observing and performing all of the
covenants, conditions and provisions on Lessee’s part to be observed and
performed hereunder, Lessee shall have quiet possession of the Premises for the
entire Lease Term, subject to all of the provisions of this Lease.

 

Section 17.18  Easements

 

Lessor reserves to itself
the right, from time to time, to grant such easements, rights and dedications
that Lessor deems necessary or desirable, and to cause the recordation of
Parcel Maps and conditions, covenants and restrictions, so long as such
easements, rights, dedications, Maps and conditions, covenants and restrictions
do not unreasonably interfere with or diminish the use of the Premises or
parking rights granted hereunder, including access thereto, by Lessee. Lessee
shall sign any of the aforementioned or other documents, and take such other
actions, which are reasonably necessary or appropriate to accomplish such
granting, recordation and subordination of the Lease to same, upon request of
Lessor, and failure to do so within ten (10) business days after a written
request to do so shall constitute a material breach of this Lease, provided
that Lessor shall reimburse Lessee for Lessee’s reasonable out-of-pocket
expenses (including reasonable attorneys’ fees) necessarily incurred in the
performance of Lessee’s obligations under this Section 17.18.

 

Section 17.19  Authority

 

Each individual executing
this Lease on behalf of a corporation, limited liability company or partnership
represents and warrants that he or she is duly authorized to execute and
deliver this Lease on behalf of such entity, and that this Lease, once fully
executed, shall be binding upon said entity in accordance with its terms.

 

Section 17.20  Force Majeure Delays

 

In any case where either
party hereto is required to do any act (other than the payment of money),
delays caused by or resulting from Acts of God or Nature, war, civil commotion,
fire, flood or other casualty, labor difficulties, shortages of labor or
materials or equipment, government regulations, delay by government or
regulatory agencies with respect to approval or permit process, unusually
severe weather, or other causes beyond such party’s reasonable control, the
time during which such act shall be completed, shall be deemed to be extended
by the period of such delay, whether such time be designated by a fixed date, a
fixed time or a “reasonable time.”

 

43

 

Section 17.21  Hazardous Materials

 

(a) Definition of
Hazardous Materials and Environmental Laws

 

“Hazardous Materials” means
any (a) substance, product, waste or other material of any nature
whatsoever which is or becomes listed regulated or addressed pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
sections 9601, et seq. (“CERCLA”); the Hazardous Materials Transportation Act (“HMTA”)
49 U.S.C. section 1801, et seq., the Resource Conservation and Recovery Act, 42
U.S.C. section 6901, et seq. (“RCRA”); the Toxic Substances Control Act, 15
U.S.C. sections 2601, et seq. (“TSCA”); the Clean Water Act, 33 U.S.C. sections
1251, et seq.; the California Hazardous Waste Control Act, Health and Safety
Code sections 25100, et seq.; the California Hazardous Substances Account Act,
Health and Safety Code sections 26300, et seq.; the California Safe Drinking
Water and Toxic Enforcement Act, Health and Safety Code sections 25249.5, et
seq.; California Health and Safety Code sections 25280, et seq.; (Underground
Storage of Hazardous Substances); the California Hazardous Waste Management
Act, Health and Safety Code sections 25170.1, et seq.; California Health and
Safety Code sections 25501. et seq. (Hazardous Materials Response Plans and
Inventory); or the Porter Cologne Water Quality Control Act, California Water
Code sections 13000, et seq., all as amended, or any other federal, state or
local statute, law, ordinance, resolution, code, rule, regulation, order or
decree regulating, relating to or imposing liability (including, but not
limited to, response, removal and remediation costs) or standards of conduct or
performance concerning any hazardous, toxic or dangerous waste, substance or
material, as now or at any time hereafter may be in effect (collectively, “Environmental
Laws”); (b) any substance, product, waste or other material of any nature
whatsoever whose presence in and of itself may give rise to liability under any
of the above statutes or under any statutory or common law theory based on
negligence, trespass, intentional tort, nuisance, strict or absolute liability
or under any reported decisions of a state or federal court, (c) petroleum
or crude oil, including but not limited to petroleum and petroleum products
contained within regularly operated motor vehicles and (d) asbestos.

 

(b) Lessor’s
Representations and Disclosures

 

Lessor represents that it
has provided Lessee with a description of the Hazardous Materials on or beneath
the Project as of the date hereof attached hereto as Exhibit “I” and
incorporated herein by reference and that except as described in the documents
identified in Exhibit “F,” Lessor has no actual knowledge of any Hazardous
Materials at the Project. Lessee acknowledges receipt of the attached Exhibit “F”,
which Lessor has provided pursuant to California Health & Safety Code Section 25359.7
which requires:

 

“Any owner of nonresidential
real property who knows, or has reasonable cause to believe, that any release
of hazardous substances has come to be located on or beneath that real property
shall, prior to the sale, lease or rental of the real property by that owner,
give written notice of that condition to the buyer, lessee or renter of the real
property.”

 

44

 

(c) Use of Hazardous
Materials

 

Lessee shall not cause or
permit any Hazardous Materials to be brought upon, kept or used in, on or about
the Project by Lessee or Lessee’s Parties without Lessor’s prior written
consent, except that Lessee may, without the need for Lessor’s prior written
consent, bring on, keep at and use in, on or about the Premises those Hazardous
Materials described in Schedule 4 attached hereto or any similar
Hazardous Materials used for substantially the same purposes in substitution
thereof in compliance with applicable Environmental Laws, even if they are
Hazardous Materials. All such Hazardous Materials will be used, kept and stored
by Lessee in a manner that complies with all applicable Environmental Laws.
Lessee shall, at all times, use, keep, test, store, handle, transport, treat or
dispose all such Hazardous Materials in or about the Project in compliance with
all applicable HazMat Requirements. Lessee shall remove Hazardous Materials
used or brought onto the Project during the Lease Term from the Project prior
to the expiration or earlier termination of the Lease in accordance with any
applicable HazMat Requirements and the Surrender Plan approved by Lessor.

 

(d) Lessee’s
Environmental Indemnity

 

Lessee agrees to indemnify,
defend, protect and hold Lessor harmless from any liabilities, losses, claims,
damages, penalties, fines, attorney fees, expert fees, court costs, remediation
costs, investigation costs, or other expenses resulting from or arising out of
the use, storage, treatment, transportation, release, presence, generation, or
disposal of Hazardous Materials on, from or about the Project, and/or
subsurface or ground water from an act or omission of Lessee (or Lessee’s
successor-in-interest), its agents, employees, invitees, vendors or
contractors.

 

(e) Lessee’s
Obligation to Promptly Remediate

 

If the presence of Hazardous
Materials on the Premises after the Commencement Date results from an act or
omission of Lessee (or Lessee’s successor-in-interest), its agents, employees,
invitees, vendors, contractors, guests, or visitors results in contamination of
the Project or any water or soil beneath the Project in violation of applicable
HazMat Requirements, Lessee shall promptly take all action necessary or
appropriate to test, investigate and remedy that contamination, at its sole
cost and expense, provided that Lessor’s consent to such action shall first be
obtained, which consent shall not be unreasonably withheld, conditioned or
delayed.

 

(f) Notification

 

Lessor and Lessee each agree
to promptly notify the other of any communication received from any
governmental entity concerning Hazardous Materials or the violation or alleged
violation of Environmental Laws that relate to the Project. In addition, Lessee
shall promptly provide to Lessor copies of any approvals or disapprovals
received from any relevant governmental agency in connection with permits,
licenses or periodic or episodic testing or remediation of the Premises by
Lessee required by HazMat Requirements, including but not limited to the plans,
permits and licenses described in Schedule 5 attached hereto or any

 

45

 

other such plans, permits and licenses instead
performed by Lessee pursuant to HazMat Requirements. Without limiting the
foregoing, Lessee shall deliver to Lessor any applications for decommissioning
the Premises pursuant to HazMat Requirements at the same time such application
is delivered to the relevant governmental agency. Lessor shall have the
opportunity to participate in, and comment on, any such decommission or
surrender plan application and the final version of such plan shall be subject
to Lessor’s written approval.

 

(g) Testing.

 

Lessor shall have the right
to conduct tests of the Premises at any time that Lessor seeks to sell or
refinance the Premises, or if Lessor has reasonable grounds to believe that
Hazardous Materials may exist at the Premises in violation of the terms of this
Lease. Such test shall be performed in order to determine whether any
contamination of the Premises or the Project has occurred as a result of Lessee’s
use. Lessee shall be required to pay the reasonable cost of such tests of the
Premises if they are performed due to Lessor’s reasonable grounds to believe
that Hazardous Materials may exist at the Premises in violation of the terms of
this Lease (Lessor shall pay the costs of such tests in the event of a sale or
refinancing); provided, however, that if Lessee conducts its own tests of the
Premises using third party contractors and test procedures acceptable to Lessor
which tests are certified to Lessor, Lessor shall accept such tests in lieu of
such tests to be paid for by Lessee. In connection with such testing, upon the
request of Lessor, Lessee shall deliver to Lessor or its consultant such
non-proprietary information concerning the use of Hazardous Materials in or
about the Premises by Lessee or any Lessee Parties. If contamination has
occurred in violation or excess of the HazMat Requirements for which Lessee is
liable under this Section 17.21, Lessee shall pay all costs to conduct
such tests. If no such contamination is found, Lessor shall pay the costs of
such tests. Lessee shall, at its sole cost and expense, promptly and
satisfactorily remediate any environmental conditions identified by such
testing in accordance with HazMat Requirements. Lessor’s receipt of or
satisfaction with any environmental assessment in no way waives any rights
which Lessor may have against Lessee. Notwithstanding anything herein to the
contrary, within thirty (30) days prior to the Expiration Date or any
earlier date on which the Lease terminates, Lessee shall, at Lessee’s sole
expense, deliver to Lessor a phase II environmental audit of the Premises
showing the environmental condition of the Premises and the completion of
Lessee’s Surrender Plan for the Premises.

 

(h) Dispute
Resolution. Notwithstanding anything herein to the contrary, if Lessor
requires Lessee to perform any testing, clean-up or remediation of Hazardous
Materials, or if Lessor requires Lessee to modify Lessee’s use of Hazardous
Materials at the Premises in a manner or in amounts other than as is required
by Environmental Laws pursuant to either this Section 17.21 or Section 17.09(c) above,
and Lessee believes that Lessor’s requirements are not commercially reasonable,
then if Lessee provides Lessor with written notice thereof (the “Dispute Notice”)
within fifteen (15) business days of the date on which Lessor first informs
Lessee in writing of such requirement, then such dispute shall be remedied
pursuant to the terms of this Subparagraph 17.22(h). If such a dispute exists,
Lessor and Lessee shall meet within ten (10) business days after the date
of the Dispute Notice and attempt in good faith to resolve the dispute. If,
despite such meeting, the parties cannot resolve the dispute, each of Lessor
and Lessee shall separately designate to the other in writing an environmental
expert to determine if the requirement in question is commercially reasonable.
The two (2) environmental experts shall

 

46

 

then each prepare a written proposal of a
commercially reasonable environmental requirement for the activity in question.
Each environmental expert designated shall have at least ten (10) years
experience in performing environmental audits of real property in San Mateo
County and shall be paid by the party choosing such expert. The failure of
either party to appoint an environmental expert within the time allowed shall
be deemed equivalent to appointing the environmental expert appointed by the
other party, who shall then determine whether the requirement in question is
commercially reasonable. If the two (2) environmental experts are unable
to agree on whether the requirement in question is commercially reasonable, or,
in lieu thereof, to come to agreement on a commercially reasonable
environmental requirement for the issue in question, within fifteen
(15) business days of their appointment, the two designated environmental
experts shall jointly designate a third similarly qualified environmental expert.
The third environmental expert shall within ten (10) business days
following its appointment, then determine which of the two environmental
experts’ determinations most closely reflects an appropriate, commercially
reasonable requirement with respect to the Hazardous Materials issue in
question. The third environmental expert shall have no rights to adjust, amend
or otherwise alter the determinations made by the environmental experts
selected by the parties, but must select one or the other of such experts’ submissions.
The determination by such third environmental expert shall be final and binding
upon the parties. Said third environmental expert shall, upon selecting the
determination, concurrently notify both parties hereto. The parties shall share
the expenses of the third environmental expert equally.

 

(i) Survival.

 

Lessee’s obligations
pursuant to this Section 17.21 shall survive the expiration or earlier
termination of this Lease.

 

Section 17.22  Modifications Required by Lessor’s Lender

 

If any lender of Lessor
requests a modification of this Lease that will not increase Lessee’s cost or
expense or materially and adversely change Lessee’s rights and obligations
hereunder, this Lease shall be so modified and Lessee shall execute whatever
documents are required by such lender and deliver them to Lessor within ten (10) days
after the request.

 

Section 17.23  Brokers

 

Lessor and Lessee each
represents to the other that it has had no dealings with any real estate broker
or agent in connection with the negotiation of this Lease, except for Cornish &
Carey Commercial, in the case of Lessor, and Cornish & Carey
Commercial in the case of Lessee (collectively, the “Brokers”) and that they
know of no other real estate broker or agent who is entitled to a commission or
finder’s fee in connection with this Lease. Each party shall indemnify,
protect, defend, and hold harmless the other party against all claims, demands,
losses, liabilities, lawsuits, judgments, and costs and expenses (including reasonable
attorney fees) for any leasing commission, finder’s fee, or equivalent
compensation alleged to be owning on account of the indemnifying party’s
dealings with any real estate broker or agent other than the Brokers. The terms
of this Section 17.23 shall survive the expiration or earlier termination
of the Lease.

 

47

 

Section 17.24  Acknowledgment of Notices

 

Lessor has provided and
Lessee hereby acknowledges receipt of the Notices attached as Exhibits “G” and “H”
hereto, concerning the presence of certain uses and operations of neighboring
parcels of land.

 

Section 17.25  Right of First Offer.

 

(a) Grant.

 

Subject to the terms of this
Section 17.25, Lessor grants to Lessee during the Right of First Offer
Term a continuing right of first offer (“Right of First Offer”) to lease any
space which is available for lease located in Building 6 in the Project (“Available
Space”). For the purposes of this Section 17.25, such space shall not be
deemed available for lease, and this Right of First Offer shall not apply, if
the space in question is already leased to a tenant thereof who leases or
re-leases such space pursuant to any then-existing or future agreement to
extend the term of its lease or expand the size of its premises between Lessor
and such tenant.

 

(b) Term.

 

The term of the Right of
First Offer (“Right of First Offer Term”) shall commence on the Commencement
Date of this Lease and shall terminate on the expiration or earlier termination
of this Lease.

 

(c) Covenants of
Lessor.

 

Subject to the conditions
precedent established by subsection (e) below, if at any time during the
Right of First Offer Term Lessor decides to offer any Available Space for lease
to the general public, Lessor shall first provide Lessee with a written notice
(“Offer Notice”) detailing (i) the rent at which said Available Space is
being offered, (ii) the rentable square footage and location thereof, (iii) the
date the Available Space will become available and (iv) all other material
economic terms upon which Lessor proposes to lease the Available Space to
Lessee. If Lessee does not deliver an Acceptance Notice (as defined below) in
response to such Offer Notice and Lessor subsequently decides to offer the
Available Space for lease to the general public at a lesser rental rate than
was described in the initial Offer Notice, then Lessor shall send Lessee a
subsequent Offer Notice and the terms of this Section 17.25 shall apply
again to such subsequent Offer Notice.

 

(d) Exercise of
Lessee’s Right of First Offer.

 

Subject to the conditions
precedent established by subsection (e) below, Lessee may exercise Lessee’s
Right of First Offer to lease all (but not less than all) of the Available
Space described in the Offer Notice by providing Lessor with written notice (“Acceptance
Notice”) thereof within ten (10) business days of Lessor’s delivery to
Lessee of the Offer Notice. If Lessee does not exercise its Right of First
Offer within said ten (10) business day period, Lessor shall be relieved
of Lessor’s obligation to lease the Available Space mentioned in the Offer
Notice to Lessee and the provisions of this Section 17.25 shall not apply
to Lessor.

 

48

 

(e) Conditions to
Right of First Offer.

 

Notwithstanding anything to
the contrary in this Section 17.25, Lessor shall have no obligation to
provide Lessee with an Offer Notice, and Lessee shall have no right to exercise
Lessee’s Right of First Offer, if: (i) Lessor has delivered a written
notice to Lessee that Lessee is in default hereunder or under the Building 10
Lease and such default has not yet been cured either: (a) at the time
Lessor seeks to lease the Available Space in question, or at the time Lessee
seeks to give Lessor an Acceptance Notice, whichever, is relevant, or (b) upon
the date Lessee seeks to take possession of the Available Space referenced in
the Offer Notice, (ii) Lessee has assigned this Lease or sublet more than
fifty percent (50%) of the rentable space located in the Premises to a
party other than an Affiliate, (iii) Lessee then occupies less than fifty
percent (50%) of the Premises, (iv) Lessee has received more than
three (3) written notices of monetary default and more than one (1) written
notice of a non-monetary default from Lessor hereunder during the Lease Term or
under the Building 10 Lease during the “Lease Term” of that lease, (v) as
of the date of such Offer Notice, Lessee does not meet the financial tests set
forth in Schedule 6 attached hereto, or (vi) Lessor’s lender does
not consent to Lessee’s expansion into the Available Space.. Lessee’s Right of
First Offer shall be personal to Lessee and Lessee’s Affiliate and shall not be
transferable with any assignment of this Lease or subletting of the Premises.

 

(f) Terms for Right
of First Offer.

 

In the event that Lessee
exercises Lessee’s Right of First Offer, Lessee’s occupancy of the Available
Space taken shall be on all of the same terms and conditions described in the
Offer Notice. In such event, Lessee’s Share due hereunder shall also be adjusted
accordingly.

 

(g) New Lease.

 

Lessor and Lessee hereby
agree to execute a new lease for such Available Space in the same form and,
except for the business terms of the Offer Notice and terms made necessary as a
result of the different space, having the same content as this Lease (“New
Lease”) prior to Lessee’s occupancy of the Available Space in question. The New
Lease shall specify, among other things, the Rent, date of occupancy, increase
in Lessee’s Share and square footage of the Available Space taken in connection
with Lessee’s exercise of Lessee’s Right of First Offer, and shall otherwise be
on the terms of this Lease, except for whatever changes are required in
connection with any differing uses of the Available Space by Lessee. If Lessee
does not execute such a New Lease within ten (10) business days after the
date on which Lessor provides Lessee with a form of New Lease as described in
this Subsection (g), then, at Lessor’s option, Lessee’s right to lease the
Available Space on the terms referenced in the Offer Notice shall be void and
terminated, provided that such termination shall not affect Lessee’s ongoing
rights pursuant to the terms of this Section 17.25.

 

49

 

Section 17.26 Right of
First Refusal.

 

(a) Grant.

 

Subject to the terms of this
Section 17.26, Lessor grants to Lessee during the Right of First Refusal
Term a continuing right of first refusal (“Right of First Refusal”) to lease
any space which is available for lease in either Building 7 or Building 8 in
the Project (“Available ROFR Space”). For the purposes of this Section 17.26,
such space shall not be deemed available for lease, and this Right of First
Refusal shall not apply, if the space in question is already leased to a tenant
thereof who leases such space pursuant to any then-existing or future agreement
to extend the term of its lease or expand the size of its premises between
Lessor and such tenant.

 

(b) Covenants of
Lessor.

 

Subject to the conditions
precedent established by subsection (d) below, if at any time during the
Lease Term Lessor receives an offer which Lessor is willing to accept from a
bona fide third party to lease any space in the Available ROFR Space, Lessor
shall first provide Lessee with a written notice (“Refusal Offer Notice”)
detailing (i) the rent at which said Available ROFR Space is to be leased
to the third party, (ii) the rentable square footage and location thereof,
(iii) the date the Available ROFR Space will become available and the term
of the proposed lease and (iv) all other material economic terms upon
which Lessor is willing to lease the Available ROFR Space in question to such
third party.

 

(c) Exercise of
Lessee’s Right of First Refusal.

 

Subject to the conditions
precedent established by subsection (d) below, Lessee may exercise Lessee’s
Right of First Refusal to lease all (but not less than all) of the Available
ROFR Space described in the Refusal Offer Notice by providing Lessor with
written notice (“ROFR Acceptance Notice”) thereof within five (5) business
days of Lessor’s delivery to Lessee of the Refusal Offer Notice. If Lessee does
not exercise its Right of First Refusal within said five (5) business day
period, Lessor shall be relieved of Lessor’s obligation to lease the Available
ROFR Space mentioned in the Refusal Offer Notice, to Lessee and the provisions
of this Section 17.26 shall not apply to Lessor. If the transaction
described in the ROFR Offer Notice is not consummated, then, prior to entering
into a new lease for the Available ROFR Space, Lessor shall repeat the process
described in this Section 17.26.

 

(d) Conditions to
Right of First Refusal.

 

Notwithstanding anything to
the contrary in this Section 17.26, Lessor shall have no obligation to
provide Lessee with a Refusal Offer Notice, and Lessee shall have no right to
exercise Lessee’s Right of First Refusal, if: (i) Lessor has delivered to
Lessee a written notice that Lessee is in default hereunder or under the
Building 10 Lease and such default has not yet been cured either: (a) at
the time Lessor seeks to lease the Available ROFR Space in question, or at the
time Lessee seeks to give Lessor an ROFR Acceptance Notice, whichever, is
relevant, or (b) upon the date Lessee seeks to take possession of the
Available ROFR Space referenced in the Refusal Offer Notice, (ii) Lessee
has assigned this Lease or sublet more than fifty percent (50%)

 

50

 

of the rentable space located in the Premises to a
party other than an Affiliate, (iii) Lessee then occupies less than fifty
percent (50%) of the Premises, (iv) Lessee has received more than
three (3) written notices of monetary default and one (1) written
notice of non-monetary default from Lessor hereunder during the Lease Term or
under the Building 10 Lease during the “Lease Term” of that lease, (v) at
the time of the Refusal Offer Notice Lessee fails to meet the financial tests
set forth in Schedule 6 attached hereto, or (vi) Lessor’s lender
does not consent to Lessee’s expansion into the Available Space.. Lessee’s
Right of First Refusal shall be personal to Lessee and Lessee’s Affiliate and
shall not be transferable with any assignment of this Lease or subletting of
the Premises.

 

(e) Terms for Right
of First Refusal.

 

In the event that Lessee exercises
Lessee’s Right of First Refusal, Lessee’s occupancy of the Available ROFR Space
taken shall be on all of the same terms and conditions described in the Refusal
Offer Notice. In such event, Lessee’s Share due hereunder shall also be
adjusted accordingly.

 

(f) New Lease.

 

Lessor and Lessee hereby
agree to execute a new lease for such Available ROFR Space in the same form
and, except for the business terms of the ROFR Offer Notice and terms made
necessary as a result of the different space, having the same content as this
Lease (“ROFR Lease”) prior to Lessee’s occupancy of the Available ROFR Space in
question. The ROFR Lease shall specify, among other things, the Rent, date of
occupancy, increase in Lessee’s Share and square footage of the Available ROFR
Space taken in connection with Lessee’s exercise of Lessee’s Right of First
Refusal, and shall otherwise be on the terms of this Lease, except for whatever
changes are required in connection with any differing uses of the Available
ROFR Space by Lessee. If Lessee does not execute such a ROFR Lease within ten (10) business
days after the date on which Lessor provides Lessee with a form of ROFR Lease
as described in this Subsection (f), then, at Lessor’s option, Lessee’s right
to lease the Available ROFR Space on the terms referenced in the ROFR Offer
Notice shall be void and terminated, provided that such termination shall not
affect Lessee’s ongoing rights pursuant to the terms of this Section 17.26.

 

Section 17.27 Lessee’s
Expansion Right. If, during the Lease Term, Lessee desires to lease
additional space in the Project but there is no such space then available for
lease in the Project, and if Lessor (and Lessor’s lender) determines, in its
sole and absolute discretion, that it would not adversely affect the Project
and Lessor determines, in Lessor’s sole and absolute discretion, that Lessor
can construct an additional building in the Project, then, at Lessee’s written
request, Lessor shall use Lessor’s good faith efforts to gain the necessary
governmental approvals for, and shall construct, such an additional building
for Lessee’s use. The size, location and date of availability of such building,
and the economic terms on which Lessor shall lease such building to Lessee,
shall be subject to the mutual agreement of the Lessor and Lessee. Further,
Lessor shall have no obligations whatsoever to Lessee under this Section 17.27
if at the time of Lessee’s request for such building Lessee does not meet the
relevant financial tests set forth in Schedule 6 attached hereto or has
received a written notice of default hereunder or under the Building 10 Lease
and such default has not yet been cured. The terms of this Section 17.27
shall only be operative at any time that Pacific Shores Investors, LLC or any
affiliate thereof

 

51

 

owns the entire Project, and upon the sale or other
transfer of this Project or any portion thereof the terms of this Section 17.27
shall be rendered null and void and of no further effect, and the Lessor shall
then have no further obligations to the Lessee hereunder whatsoever.

 

Section 17.28 Notification
of Intention to Market. If Lessor shall decide to market the Project for
sale, Lessor shall provide Lessee with marketing materials therefore at the
same time and in a similar manner as Lessor provides such materials to the
general public. Nothing herein shall be deemed to create an obligation of
Lessor to sell the Project or enter into negotiations for the sale of the
Project with Lessee or keep Lessee informed of the status of any such
negotiations with a third party for the sale of the Project. The parties
acknowledge and agree that nothing herein shall be deemed to create any sort of
an option, right of first refusal, right of first offer, right of first
negotiation or any other type of option or right of Lessee to purchase the
Project or any portion thereof. The obligation of Lessor hereunder is limited
solely to notifying Lessee of Lessor’s marketing of the Project for a potential
sale, and Lessor reserves the right to sell the Project, or not sell it at all,
on any terms and conditions that Lessor shall deem appropriate, in Lessor’s
sole and absolute discretion. Lessee agrees to keep the notification delivered
to it by Lessor hereunder strictly and completely confidential, and shall not
disclose such notification to anyone whatsoever. The terms of this Section 17.28
shall only be operative at any time that Pacific Shores Investors, LLC or any
affiliate thereof owns the entire Project, and upon the sale or other transfer
of this Project or any portion thereof the terms of this Section 17.28
shall be rendered null and void and of no further effect, and the Lessor shall
then have no further obligations to the Lessee hereunder whatsoever.

 

Section 17.29 List
of Lease Expiration Dates. Upon written request therefor by Lessee, Lessor
shall deliver to Lessee a list of then current expiration dates (not taking
into account any extension or expansion rights that may or may not be exercised
by the tenants of the Project) of the current leases of space in the portion of
the Project then owned by Lessor, which list shall also describe the size and
location of the space in question. Nothing herein shall be deemed to create an
obligation of Lessor to lease such space to Lessee or enter into negotiations
for the lease of such space to Lessee or keep Lessee informed of the status of
any space for lease in the Project. The parties acknowledge and agree that
nothing in this Section 17.29 shall be deemed to create any sort of an
option, right of first refusal, right of first offer, right of first
negotiation or any other type of option or right of Lessee to lease space the
Project or any portion thereof. The obligation of Lessor hereunder is limited
solely to delivering to Lessee a list of the expiration dates of existing
leases of space in the Project.

 

Section 17.30
[Intentionally omitted.]

 

Section 17.31 Condition
Subsequent. Notwithstanding anything to the contrary herein, Lessor and
Lessee acknowledge and agree that the effectiveness of this Lease is
conditioned upon Lessee’s exercise of Lessee’s option to lease the Premises and
the Building 10 Premises (as defined therein) pursuant to the terms of that
certain Amended and Restated Option to Lease dated June 15, 2006 (the “Option
Agreement”) between Lessor, as optionor, and Lessee, as optionee.
Notwithstanding Lessor and Lessee’s execution of this Lease, if Lessee fails to
exercise such option by July 5, 2006, or if the Option Agreement is
terminated pursuant to its terms, then this Lease and all of the obligations of
the parties hereunder shall terminate and be null and void, and any amount
prepaid by Lessee to Lessor hereunder shall be promptly repaid to Lessee.

 

52

 

Section 17.32  List of Exhibits

 

	
  EXHIBIT A:

  	
  Premises

  
	
   

  	
   

  
	
  EXHIBIT B:

  	
  Memorandum of Commencement of Lease Term and Schedule of Base Rent

  
	
   

  	
   

  
	
  EXHIBIT C

  	
  SNDA

  
	
   

  	
   

  
	
  EXHIBIT D

  	
  Signage Exhibit

  
	
   

  	
   

  
	
  EXHIBIT E

  	
  Intentionally Deleted

  
	
   

  	
   

  
	
  EXHIBIT F

  	
  Hazardous Materials Disclosure

  
	
   

  	
   

  
	
  EXHIBIT G:

  	
  Notice to Tenants

  
	
   

  	
   

  
	
  EXHIBIT H:

  	
  Notice to Tenants

  
	
   

  	
   

  
	
  EXHIBIT I:

  	
  Rules and Regulations

  
	
   

  	
   

  
	
  SCHEDULE 1

  	
  License Agreement

  
	
   

  	
   

  
	
  SCHEDULE 2

  	
  Intentionally Deleted

  
	
   

  	
   

  
	
  SCHEDULE 3

  	
  Removal Obligations Standard

  
	
   

  	
   

  
	
  SCHEDULE 4

  	
  Permitted Hazardous Materials

  
	
   

  	
   

  
	
  SCHEDULE 5

  	
  Plans, Licenses and Permits

  
	
   

  	
   

  
	
  SCHEDULE 6

  	
  Financial Tests

  

 

53

 

LESSOR AND LESSEE EACH HAS CAREFULLY READ AND HAS
REVIEWED THIS LEASE AND BEEN ADVISED BY LEGAL COUNSEL OF ITS OWN CHOOSING AS TO
EACH TERM AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOWS
ITS INFORMED AND VOLUNTARY CONSENT THERETO. EACH PARTY HEREBY AGREE THAT, AT
THE TIME THIS LEASE IS EXECUTED, THE TERMS AND CONDITIONS OF THIS LEASE ARE
COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND
LESSEE WITH RESPECT TO THE PREMISES.

 

Executed at Redwood City,
California, as of the reference date.

 

(Signatures continued on
next page)

 

54

 

	
  LESSOR:

  	
  ADDRESS:

  
	
   

  	
   

  
	
  PACIFIC SHORES INVESTORS, LLC,

  	
  c/o Jay Paul Company

  
	
  a Delaware limited liability company

  	
  350 California Street, Suite 1905

  
	
   

  	
   

  	
  San Francisco, CA 94104-1432

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Pacific Shores Mezzanine, LLC,

  
	
   

  	
  a Delaware limited liability company,

  
	
   

  	
  its sole member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Pacific Shores Junior Mezz, LLC,

  
	
   

  	
   

  	
  a Delaware limited liability company  

  
	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Pacific Shores Junior Mezz Managers, LLC,

  
	
   

  	
   

  	
   

  	
  a Delaware limited liability company,

  
	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Pacific Shores Development, LLC,

  
	
   

  	
   

  	
   

  	
   

  	
  a Delaware limited liability company,  

  
	
   

  	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  TECHNOLOGY LAND LLC,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  a California limited liability company,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Operating Member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Jay Paul

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jay Paul, Sole Managing Member

  
									

 

 

	
  LESSEE:

  	
   

  	
  ADDRESS:

  
	
   

  	
   

  	
   

  
	
  PDL BIOPHARMA, INC.,

  	
   

  	
  (Before Commencement Date)

  
	
  a Delaware corporation

  	
   

  	
   

  
	
   

  	
   

  	
  34801 Campus Drive

  
	
  By:

  	
  /s/ Mark McDade

  	
   

  	
  Freemont, California 94555

  
	
   

  	
  Mark McDade

  	
   

  	
  Attention: Ms. Laurie Torres, VP Human Resources

  
	
   

  	
  (Type or Print Name)

  	
   

  	
   

  
	
  Its:

  	
  Chief Executive Officer

  	
   

  	
  (After Commencement Date)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Pacific Shores Center

  
	
   

  	
   

  	
  Building 9

  
	
   

  	
   

  	
  1400 Seaport Boulevard

  
	
   

  	
   

  	
  Redwood City, CA 94063

  

 

55

 

	
   

  	
   

  	
  With a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Silicon Valley Law Group

  
	
   

  	
   

  	
  25 Metro Drive, Suite 600

  
	
   

  	
   

  	
  San Jose, California 95110

  
	
   

  	
   

  	
  Attn: Lucy A. Lofrumento, Esq.

  

 

56

 

EXHIBIT A

to

PACIFIC
SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California
94063

 

REAL PROPERTY LEGAL
DESCRIPTION,

SITE PLAN AND PREMISES FLOOR
PLAN

 

(See Building Description
and Depiction of Property attached)

 

A-1

 

EXHIBIT A

 

LEGAL DESCRIPTION

 

Real property in the City of Redwood City, County of
San Mateo, State of California described as follows:

 

Lot 9 as shown on the certain Map of Pacific Shores
Center filed July 21, 2000 in Book 130 of Maps, pages 66-74, San
Mateo County Records.

 

A-2

 

Site Plan

 

 

 

EXHIBIT B

to

PACIFIC
SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California
94063

 

MEMORANDUM OF

COMMENCEMENT OF LEASE TERM

 

Pursuant to Article III,
Section 3.01, paragraph (a) of the above-referenced Lease, the
parties to said Lease agree to the following:

 

The Commencement Date of the
Lease
                    
and the Lease Term commenced on said date. The Expiration Date for the initial
Lease Term is
                    .

 

The date for commencement of
Base Rent for the Premises is
                    .

 

The date for commencement of
Additional Rent, including, without limitation, Operating Expenses is
                    .

 

Attached hereto as a part hereof
is a true and correct schedule of Base Rent. The total Rentable Area of the
Premises is an agreed
                                    
rentable square feet.

 

Each person executing this
Memorandum certifies that he or she is authorized to do so on behalf of and as
the act of the entity indicated. Executed as of
                    
        , 2006, at Redwood City (San Mateo County), California.

 

B-1

 

	
  “Lessor”

  	
   

  
	
   

  	
   

  
	
  PACIFIC SHORES INVESTORS, LLC

  	
   

  
	
  a Delaware limited liability company

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Pacific Shores Mezzanine, LLC,

  
	
   

  	
  a Delaware limited liability company,

  
	
   

  	
  its sole member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Pacific Shores Junior Mezz, LLC,

  
	
   

  	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Pacific Shores Junior Mezz Managers, LLC,

  
	
   

  	
   

  	
   

  	
  a Delaware limited liability company,

  
	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Pacific Shores Development, LLC,

  
	
   

  	
   

  	
   

  	
   

  	
  a Delaware limited liability company,

  
	
   

  	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  TECHNOLOGY LAND LLC,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  a California limited liability company,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Operating Member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jay Paul, Sole Managing Member

  
									

 

	
  “Lessee”

  	
   

  
	
   

  	
   

  
	
  PDL BIOPHARMA, INC.,

  	
   

  
	
  a Delaware corporation  

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  (Type or Print Name)

  	
   

  
	
   

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  

 

B-2

 

EXHIBIT C

to

PACIFIC
SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California
94063

 

SUBORDINATION,
NONDISTURBANCE

AND
ATTORNMENT AGREEMENT

 

 

	
  NOTICE:

  	
  THIS SUBORDINATION AGREEMENT RESULTS IN YOUR OPTION
  AGREEMENT, BUILDING 9 LEASE AND BUILDING 10 LEASE BECOMING SUBJECT TO AND OF
  LOWER PRIORITY THAN THE LIEN OF THE DEED OF TRUST (DEFINED BELOW).

  

 

THIS
AGREEMENT is dated
for reference as of the      day of
                    ,
2006, and is made between WELLS FARGO BANK, N.A., as Trustee for the Registered
Holders of Credit Suisse First Boston Mortgage Securities Corp., Commercial
Mortgage Pass-Through Certificates Series 2004-TFL2 (“Mortgagee”),
PACIFIC SHORES INVESTORS, LLC, a Delaware limited liability company (“Lessor”),
and PROTEIN DESIGN LABS, INC., a Delaware corporation (“Lessee”).

 

RECITALS

 

	
  A.

  	
  Lessor currently owns the Pacific Shores Center in Redwood City,
  California, which project includes that certain approximately 283,015 square
  foot building located at 1400 Seaport Boulevard and related real property
  referred to herein as the “Building 9 Premises”, and that certain
  approximately 164,732 square foot building located at 1500 Seaport Boulevard
  and related real property referred to herein as “Building 10 Premises.”

  
	
   

  	
   

  
	
  B.

  	
  Lessor and Lessee have entered into (a) that certain Triple Net
  Space Lease for the Building 9 Premises (“Building 9 Lease”), and
  (b) that certain Triple Net Space Lease for the Building 10 Premises (“Building
  10 Lease”).

  
	
   

  	
   

  
	
  C.

  	
  Mortgagee is the current holder of a loan made by Column
  Financial, Inc. to Lessor and secured by a deed of trust (the “Deed
  of Trust”) encumbering the real property of which the Building 9 Premises
  and the Building 10 Premises form a part (the “Property”), and the
  parties desire to set forth their agreement as hereinafter set forth.

  

 

C-1

 

NOW,
THEREFORE, in
consideration of the premises and of the sum of ONE DOLLAR ($1.00) by each
party in hand paid to the other, the receipt of which is hereby acknowledged,
the parties hereby agree as follows:

 

1. The Building 9 Lease and
the Building 10 Lease are and shall be subject and subordinate to the Deed of
Trust insofar as it affects the Property, and to all of Mortgagee’s rights
thereunder, including all renewals, modifications, consolidations, replacement
and extensions of the Deed of Trust, to the full extent of amounts secured
thereby and interest thereon.

 

2. Subject to the terms and
conditions of Paragraph 3 of this agreement, Lessee agrees that it will attorn
to and recognize any purchaser at a foreclosure sale under the Deed of Trust,
any transferee who acquires the Property by deed in lieu of foreclosure, and
the successors and assigns of such purchasers (the applicable party taking
title is referred to as the “New Owner”), as its landlord for the
unexpired balance (and any extensions, if exercised) of the term of said leases
upon the same terms and conditions set forth in the Building 9 Lease and the
Building 10 Lease.

 

3. Regardless of any default
under any such mortgage, deed of trust or other encumbrance or any sale of the
Property under such mortgage, deed of trust or other encumbrance, the Building
9 Lease and the Building 10 Lease and Lessee’s rights thereunder, shall not be
disturbed by the mortgagee or beneficiary or anyone claiming under or through
such mortgagee or beneficiary; provided, however that nothing contained herein
shall prevent Mortgagee from naming Lessee in any foreclosure or other action
or proceeding initiated in order for Mortgagee to avail itself of and complete
any such foreclosure or other remedy, so long as such joinder does not result
in a termination of the Building 9 Lease and/or the Building 10 Lease, or
diminish Lessee’s rights and privileges under the Building 9 Lease or the
Building 10 Lease. After acquisition of title by a New Owner, Building 9 Lease
and the Building 10 Lease shall be a direct agreement(s) between Lessee
and the New Owner. Lessee shall be obligated to perform for the New Owner under
the Building 9 Lease and the Building 10 Lease and the New Owner shall assume
the obligations of the Lessor under the Building 9 Lease and the Building 10
Lease, including without limitation any extension thereof pursuant to the terms
of the Building 9 Lease and the Building 10 Lease, in accordance with the terms
of the applicable document(s), subject to Section 4 below.

 

4. If any New Owner succeeds
to the interest of Lessor under the Building 9 Lease or the Building 10 Lease,
the New Owner shall not be:

 

(a) liable for any act or omission of any prior
lessor (including Lessor); provided, that nothing herein shall release the
lessor under the Building 9 Lease or the Building 10 Lease from the obligation
to perform maintenance or repair obligations or limit New Owner’s obligations
under said leases to correct any conditions in violation of the New Owner’s
obligations as lessor under the Building 9 Lease or the Building 10 Lease
provided that Lessee provides such New Owner with written notice of such
default and opportunity to cure pursuant to Section 6 below; or

 

C-2

 

(b) liable for the return of any security
deposit under either the Building 9 Lease or the Building 10 Lease not actually
received by Mortgagee or the New Owner; or

 

(c) subject to any offsets or claims which
Lessee might have against any prior lessor (including Lessor); or

 

(d) bound by any rent or additional rent which
Lessee might have paid under the Building 9 Lease or the Building 10 Lease for
more than the current month to any prior lessor (including Lessor) unless such
monies have been actually received by New Owner; or

 

(e) bound by any amendment or modification of
the Building 9 Lease or the Building 10 Lease (including an agreement to
terminate the Building 9 Lease or the Building 10 Lease, other than as
expressly contained in the Building 9 Lease or the Building 10 Lease) made
without its consent.

 

5. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
successors and assigns.

 

6. Lessee agrees to give
Mortgagee notice of any default by Lessor under the Building 9 Lease and the
Building 10 Lease (if and when executed by the parties). Lessee further agrees
that if Lessor shall have failed to cure such default within the time provided
for in the Building 9 Lease or the Building 10 Lease, then Mortgagee shall have
an additional thirty (30) days 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 thirty (30) days Mortgagee has commenced and is
diligently pursuing the remedies necessary to cure such default (including, but
not limited to, commencement of legal proceedings, if necessary to effect such
cure) in which event neither the Building 9 Lease nor the Building 10 Lease
shall be terminated while such remedies are being so diligently pursued. Lessee
shall accept performance by Mortgagee of any term, covenant, condition or
agreement to be performed by Lessor under the Building 9 Lease or the Building
10 Lease with the same force and effect as though performed by Lessor.

 

7. In the event Mortgagee
succeeds to the interest of Lessor in the Property, Lessee’s rights against
Mortgagee, as lessor, shall be limited to Mortgagee’s interest in the Property,
and Lessee shall have no recourse with regard to any other assets of Mortgagee.

 

8. Any notices which a party
may be obligated or elect to give hereunder shall be sufficient if sent by
certified mail, return receipt requested, postage prepaid or by Federal Express
or other established overnight courier addressed as follows:

 

	
  If to Mortgagee:

  	
   

  	
  Wells Fargo Bank, N.A., as Trustee for the
  Registered Holders of Credit Suisse First Boston Mortgage Securities Corp.,
  Commercial Mortgage Pass-Through Certificates Series 2004-TFL2

  c/o Wachovia Securities, Commercial Real Estate Services

  8739 Research Drive-URP4

  Charlotte, NC 28288-1075 (28262-1075 for overnight deliveries)

  Attn: Alex Aguilar Fax: 704-715-0036

  

 

C-3

 

	
  with a copy to:

  	
   

  	
  Alston & Bird LLP

  101 South Tryon Street, Suite 4000

  Charlotte, NC 28280-4000

  Attn: James A.L. Daniel, Jr., Esq.

  Fax: 704-444-1776

  
	
   

  	
   

  	
   

  
	
  If to Lessee:

  	
   

  	
  PDL BioPharma, Inc.

  34801 Campus Drive

  Fremont, California 94555

  Attention: Laurie Torres, VP Human Resources

  Facsimile: (510) 574-1661

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Silicon Valley Law Group

  25 Metro Drive, Suite 600

  San Jose, California 95110

  Attention: Lucy Lofrumento, Esq.

  Facsimile: (408) 573-5701

  

 

Any such notice shall be
deemed delivered on the earlier to occur of (a) receipt or (b) the
date of delivery, refusal or non-delivery indicated on the return receipt if sent
by certified mail. The above addresses may be changed by the persons identified
above from time to time designated by written notice given as herein required;
provided that no notice of a change of address shall be effective until actual
receipt of such notice.

 

9. In the event of the
bringing of any action or suit by any party or parties hereto against another
party or parties hereunder alleging a breach of any of the covenants,
conditions, agreements or provisions of this Agreement, the prevailing party or
parties shall recover all reasonable costs and expenses of suit, including
without limitation, reasonable attorneys’ fees, consultants fees and fees of
expert witnesses.

 

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

 

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

 

12. Neither Mortgagee nor
its designee or nominee shall become liable under the Building 9 Lease and
Building 10 Lease, unless and until Mortgagee or its designee or nominee
becomes, and then only with respect to periods in which Mortgagee or its
designee or nominee remains, the owner of the Property.

 

13. Lessee acknowledges that
Lessor has assigned (or will assign) to Mortgagee its right, title and interest
in the Building 9 Lease and the Building 10 Lease and to the rents, issues and
profits of the Property pursuant to the Deed of Trust, and that Lessor has been
granted the

 

C-4

 

license to collect such
rents provided no Event of Default has occurred under, and as defined in, the
Deed of Trust. Lessee agrees to pay all rents and other amounts due under the
Building 9 Lease and the Building 10 Lease directly to Mortgagee upon receipt
of written demand by Mortgagee following an Event of Default, and Lessor hereby
consents thereto and agrees that Lessee shall be released and discharged of all
liability to Lessor for any such payments made to Mortgagee. The assignment of
the Building 9 Lease and the Building 10 Lease to Mortgagee, or the collection
of rents by Mortgagee pursuant to such assignment, shall not obligate Mortgagee
to perform Lessor’s obligations under the Building 9 Lease and/or the Building
10 Lease.

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.

 

	
   

  	
  PDL BIOPHARMA, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK, N.A.,
  as Trustee for the Registered Holders of Credit Suisse First Boston Mortgage
  Securities Corp., Commercial Mortgage Pass-Through Certificates
  Series 2004-TFL2

  
	
   

  	
   

  
	
   

  	
  By:

  	
  WACHOVIA BANK NATIONAL  ASSOCIATION, solely in its capacity as  Master Servicer

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					

 

C-5

 

The
undersigned Lessor hereby consents to the foregoing Subordination,
Non-Disturbance and Attornment Agreement and confirms the facts stated in the
foregoing Subordination, Non-Disturbance and Attornment Agreement.

 

LESSOR:

 

PACIFIC SHORES INVESTORS,
LLC,

a Delaware limited
liability company

 

 

	
  By:

  	
  Pacific Shores
  Mezzanine, LLC,

  
	
   

  	
  a Delaware
  limited liability company,

  
	
   

  	
  its sole member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Pacific Shores
  Junior Mezz, LLC,

  
	
   

  	
   

  	
  a Delaware
  limited liability company

  
	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Pacific Shores
  Junior Mezz Managers, LLC,

  
	
   

  	
   

  	
   

  	
  a Delaware
  limited liability company,

  
	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Pacific Shores
  Development, LLC,

  
	
   

  	
   

  	
   

  	
   

  	
  a Delaware
  limited liability company,

  
	
   

  	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  TECHNOLOGY LAND
  LLC,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  a California
  limited liability company,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Operating Member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jay Paul, Sole
  Managing Member

  

 

C-6

 

ACKNOWLEDGMENTS

 

	
  STATE OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  ) ss.:

  	
   

  
	
  COUNTY OF
                      

  	
  )

  	
   

  

 

On                         ,
2006, before me,                                     
the undersigned, a notary public in and for said state, personally appeared                                         
            ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.

 

WITNESS my hand and official seal.

 

Notary Public

 

	
  STATE OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  ) ss.:

  	
   

  
	
  COUNTY OF
                      

  	
  )

  	
   

  

 

On                     
    , 2006, before me,                                         
the undersigned, a notary public in and for said state, personally appeared                                         
    , personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument.

 

WITNESS my hand and official seal.

 

Notary Public

 

C-7

 

	
  STATE OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  ) ss.:

  	
   

  
	
  COUNTY OF
                      

  	
  )

  	
   

  

 

On                     
    , 2006, before me,                                     
the undersigned, a notary public in and for said state, personally appeared                                         
            ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.

 

WITNESS my hand and official seal.

 

Notary Public

 

	
  STATE OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  ) ss.:

  	
   

  
	
  COUNTY OF
                      

  	
  )

  	
   

  

 

On                     
    , 2006, before me,                                       
the undersigned, a notary public in and for said state, personally appeared                                         
        , personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person whose name
is subscribed to the within instrument and acknowledged to me that he/she
executed the same in his/her authorized capacity, and that by his/her signature
on the instrument the person, or the entity upon behalf of which the person
acted, executed the instrument.

 

WITNESS my hand and official seal.

 

Notary Public

 

C-8

 

EXHIBIT D

TO

PACIFIC SHORES INVESTORS, LLC

LEASE

TO

PDL BIOPHARMA, INC.

as

LESSEE

For

Pacific Shores Center

Building 9

1400 Seaport Boulevard

Redwood City, California 94063

 

SIGNAGE EXHIBIT

 

SINGLE TENANT BUILDINGS

 

Each
tenant of a single tenant Building will be permitted (subject to compliance
with Section 17.15 of the Lease) to place one sign to be located near the
entrance to the parking lot associated with Building 9 (“Monument”). The exact size, design, color,
location and materials of the Monument, and of the Lessee’s sign on the
Monument, will be determined by Lessor in its sole and absolute discretion,
provided that Lessor will not unreasonably withhold its consent to a tenant
sign which employs a design and color commonly used by such tenant for
marketing purposes so long as it fits within the space allocated by Lessor, and
so long as it is in keeping with the overall design scheme of the Project. Each
such tenant will also be permitted (subject to compliance with Section 17.15
of the Lease) to place one sign on the exterior surface of Building 9. Lessor
reserves the right to allow different or additional signage anywhere in the
Project, provided that, so long as Lessor may lawfully do so, Lessor will not
reduce the size of space allocated on the Monument to a size smaller than that
permitted as of the commencement date of the Lease, unless the size of the
premises subject to the lease decreases from its size as of the lease
commencement date or unless Lessor provides alternate signage of reasonably
equivalent visibility. All signs shall comply with all applicable government
laws and regulations and with the Pacific Shores Signage Master Plan (City of
Redwood City Design Review Submittal dated November 11, 2000).

 

D-1

 

EXHIBIT E

 

To

 

PACIFIC SHORES INVESTORS, LLC.

 

LEASE

 

to

 

PDL BIOPHARMA, INC.,

 

For

 

PREMISES

 

at

 

1400 Seaport Drive

Building 9

Redwood City, California

 

INTENTIONALLY DELETED

 

E-1

 

EXHIBIT F

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

 

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

 

HAZARDOUS MATERIALS DISCLOSURE

 

Lessor
has provided Lessee, and Lessee acknowledges that it has received and pursuant
to Section 17.22(b) of the Lease, reviewed same, a copy of each of
those certain documents entitled: (i) PHASE I, ENVIRONMENTAL SITE
ASSESSMENT, PACIFIC SHORES CENTER, REDWOOD CITY, CALIFORNIA, Prepared for: The
Jay Paul Company, San Francisco, California, Prepared by: IRIS ENVIRONMENTAL,
Oakland, California, December 20, 1999, Job No. 99-122A; and (ii) PHASE
II, ENVIRONMENTAL SITE ASSESSMENT, PACIFIC SHORES CENTER, 1000 SEAPORT BOULEVARD,
REDWOOD CITY, CALIFORNIA, Prepared for: The Jay Paul Company, San Francisco,
California, Prepared by: IRIS ENVIRONMENTAL, Oakland, California, January 14,
1999, Job No. 99-122-B

 

 

	
   

  	
  LESSEE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PDL BIOPHARMA, INC.,

  a Delaware corporation

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Type or print name)

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  (Type or print name)

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
				

 

F-1

 

EXHIBIT G

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

 

NOTICE TO TENANTS AND TRANSFEREES OF

CURRENT OR FUTURE USES OF ADJACENT PORT PROPERTY

 

Notice
is hereby given to all lessees, tenants and transferees of land or interests in
land located within Pacific Shores Center of the presence or potential future
presence of Port related industrial activities on Port property adjacent to and
west of Pacific Shores Center. All recipients of this notice should be aware of
the following facts:

 

1. The
parcel of Port property adjacent to Pacific Shores Center to the northwest
shown on the Exhibit J-Figure One attached hereto (the “Port Parcel”) is
now or may be developed for Port related maritime and industrial uses similar
to those occupying other properties along the west side of Seaport Boulevard
and to the west of Pacific Shores Center.

 

2.
Such Port related maritime and industrial activities are those which are
permitted by the general industrial zoning of the City of Redwood City and may
include heavy industrial land uses, including uses which involve the receipt,
transport, storage or management of hazardous wastes, aggregates, cement,
gravel and similar materials, including the outdoor storage and handling of
such materials.

 

3.
Pacific Shores Center Limited Partnership, on behalf of itself, its successors
and assigns, has recognized, accepted and approved such uses of the Port Parcel
subject to the utilization of Best Available Management Practices in the
development and use of the Port Parcel. Best Available Management Practices are
defined on Schedule One to Exhibit G attached hereto.

 

4.
Despite the use of Best Available Management Practices on the Port Parcel by
the Port and its lessees and licensees and despite Pacific Shores Center
Limited Partnership’s efforts to ensure compatibility between such uses and
those in Pacific Shores Center, it is possible that such uses will cause
emissions into the air of dust or other particulate matter, or noise or odorous
substances which may be offensive to or be perceived as a nuisance by occupants
of Pacific Shores Center.

 

G-1

 

5.
Pursuant to covenants made by Pacific Shores Center Limited Partnership on
behalf of its successors and assigns, tenants and lessees, the tenants, lessees
and transferees of Pacific Shores Center Limited Partnership have approved and
accepted such neighboring uses subject to their utilization of Best Available
Management Practices.

 

6. Any
actions to enjoin the continuation of such uses or to recover any damages to
persons or property related to their operations are subject to a requirement
for prior notice found in recorded covenants by Pacific Shores Center Limited
Partnership. The following language is excerpted from such covenants:

 

“In the event that either party hereto believes that
the other has failed to perform any covenant made herein in favor of the other,
at least ten (10) days prior to the commencement of any action to enforce
the covenants hereunder or to recover damages for the breach thereof, that
party who believes that a failure to perform has occurred (the “Complaining
Party”) shall give written notice (the “Notice”) to the party alleged not to
have performed the covenant (the “Non-Complaining Party”) of the specific
nature of the alleged failure and of the intent of the Complaining Party to
take action to remedy the breach by the Non-Complaining Party. In the event
that the nature of the alleged failure to perform is such that the same cannot
reasonably be cured within ten (10) days after receipt of the Notice (the
“Notice Period”), the Non-Complaining Party shall not be deemed to be in
violation of its covenants and no action shall be commenced by the Complaining
Party if, within the Notice Period, the Non-Complaining Party commences such
cure and thereafter diligently and continuously prosecutes the same to
completion within a reasonable time. Provided, however, that the Complaining
Party shall not be precluded from recovering any actual damages suffered by reason
of the alleged failure to perform prior to or after delivery of the Notice,
whether or not such failure is thereafter cured.”

 

G-2

 

FIGURE ONE TO EXHIBIT G

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

 

G-3

 

 

G-4

 

SCHEDULE ONE TO EXHIBIT G

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

 

G-5

 

DEFINITION OF “BEST AVAILABLE MANAGEMENT PRACTICES”

(Exchange Parcel and New Road Access)

 

“Best
Available Management Practices (“BAMP”) means the following:

 

1.
Compliance with all laws, rules and regulations, and operating permits,
whether Federal, state or local, applicable to the uses of the Exchange Parcel
and industrial operations thereon, including without limitation all laws, rules and
regulations and operating permits applicable to emissions into the air of
gases, substances and particulate matter, the generation or release of odors or
odorous substances into the air, and the generation of noise.

 

2.
Initiation and maintenance of reasonable precautions to minimize emission and
transport of dust from the Exchange Parcel and the New Road Access onto the
Project Site. As used herein the term “reasonable precautions” shall mean the
use of materials, techniques and equipment reasonably available at the time of
commencement of a  use or
operation and designed to minimize emissions during predictably adverse
climatic conditions common in the area (collectively, ‘‘initial measures”) plus
the addition of one or more of the following additional measures if not already
in use and if initial measures prove inadequate to achieve minimization of
emission and transport of dust onto the Project Site:

 

(a) Paving
of surfaces used for active operations where the absence of such paving causes
emission and transport of dust onto the Project Site;

 

(b) Installation
of wind fences to a height of not less than 20 feet with 50% porosity around
areas of open storage and areas of active dust-generating uses causing emission
and transport of dust onto the Project Site;

 

(c) Use
of storage silos, open-ended enclosures or water spray equipment for the
outdoor storage and handling of materials, such as rock, concrete, soil,
mineral substances, and similar materials, causing emission and transport of
dust onto the Project Site;

 

(d) Installation
of enclosures or use of water or foam spray bars both above and below the belt
surface of all conveyors used for loading and unloading materials, causing
emission and transport of dust onto the Project Site; and

 

3.
Initiation of a reasonable, regularly scheduled sweeping program for the New
Road Access to minimize accumulation of dust and dirt and/or installation of
dust traps, wheel washers or other methods of minimizing the tracking of dust
onto the Road Access Area and resulting emission and transport of dust onto the
Project Site.

 

G-6

 

EXHIBIT H

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

 

NOTICE TO PACIFIC SHORES TENANTS, LESSEES, SUCCESSORS,
ASSIGNS AND

TRANSFEREES REGARDING CURRENT OR FUTURE USES OF
ADJACENT RMC

LONESTAR AND PORT PROPERTY

 

Notice
is hereby given to all tenants, lessees, successors, assigns and transferees of
land or interest in land located within the Pacific Shores Center of the
presence or potential future presence of maritime and industrial activities on
RMC Lonestar and Port of Redwood City property west and adjacent to Pacific
Shores Center. Recipients of this notice should be aware of the following:

 

1. The
RMC Lonestar property and parcels of port property adjacent to and west of
Pacific Shores Center are shown on the map attached to this notice. The RMC
Lonestar and Port properties are now devoted to, or will be developed for, maritime
and industrial uses.

 

2.
These maritime and industrial uses are those which are permitted by the “Heavy
Industry” General Plan designation and general industrial zoning of the City of
Redwood City. These uses include, by way of example and not limitation, uses
involving the receipt, transport, storage, handling, processing or management
of aggregates, cement, concrete, asphalt, soil or other landscaping materials,
recyclable metals and plastics, recyclable concrete and asphalt, chemicals,
petroleum products, hazardous wastes, and similar materials, including indoor
storage, mixing and handling of these materials.

 

3.
These uses may cause, on either a regular or intermittent basis, air emissions,
including without limitation, dust and other particulates, odors, vibrations,
loud noises, and heavy truck, rail or marine vessel traffic. These uses may
have visual, aesthetic or other aspects that may be offensive or perceived as a
nuisance by occupants of Pacific Shores Center.

 

H-1

 

EXHIBIT I

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

 

RULES AND REGULATIONS

 

1. Lessee and Lessee’s
employees shall not in any way obstruct the sidewalks, entry passages,
pedestrian passageways, driveways, entrances and exits to the Project or the
Building, and they shall use the same only as passageways to and from their
respective work areas.

 

2. Any sash doors,
sashes, windows, glass doors, lights and skylights that reflect or admit light
into the Common Area of the Project shall not be covered or obstructed by the
Lessee. Water closets, urinals and wash basins shall not be used for any
purpose other than those for which they were constructed, and no rubbish,
newspapers, food or other substance of any kind shall be thrown into them.
Except in connection with ordinary and customary interior decorating, Lessee
shall not mark, drive nails, screw or drill into, paint or in any way deface
the exterior walls, roof, foundations, bearing walls or pillars without the
prior written consent of Lessor, which consent may be withheld in Lessor’s sole
discretion. The reasonable and actual, out-of-pocket expense of repairing any
breakage, stoppage or damage resulting from a violation of the foregoing rule shall
be borne by Lessee.

 

3. No awning or shade
shall be affixed or installed over or in the windows or the exterior of the
Premises except with the consent of Lessor, which consent may not be
unreasonably withheld, conditioned or delayed.

 

4. Lessee shall not do
anything in the Premises, or bring or keep anything therein, which will in any
way increase the risk of fire or the rate of fire insurance or which shall
conflict with the regulations of the fire department or the law or with any
insurance policy on the Premises or any part thereof, or with any rules or
regulations established by any administrative body or official having
jurisdiction, and it shall not use any machinery therein, even though its
installation may have been permitted, which may cause any unreasonable noise,
jar, or tremor to the floors or walls, or which by its weight might injure the
floors of the Premises.

 

I-1

 

5. Lessor may reasonably
limit weight, size and position of all safes, fixtures and other equipment used
in the Premises. If Lessee shall require extra heavy equipment, Lessee shall
notify Lessor of such fact and shall pay the cost of structural bracing to accommodate
it. All damage done to the Premises or Project by installing, removing or
maintaining extra heavy equipment shall be repaired at the expense of Lessee.

 

6. Lessee and Lessee’s
officers, agents and employees shall not make nor permit any loud, unusual or
improper noises that unreasonably interfere with other lessees or those having
business with them, nor bring into or keep within the Project any animal or
bird or any bicycle or other vehicle, except such vehicle as Lessor may from
time to time permit and guide dogs.

 

7. No machinery of any
kind will be allowed in the Premises without the written consent of Lessor,
which consent may not be unreasonably withheld, conditioned or delayed. This
shall not apply, however, to customary office equipment or trade fixtures or
package handling equipment.

 

8. All freight must be
moved into, within and out of the Project only during such reasonable hours and
according to such reasonable regulations as may be posted from time to time by
Lessor.

 

9. Except as provided in
the Lease, no aerial or satellite dish or similar device shall be erected on
the roof or exterior walls of the Premises, or on the grounds, without in each
instance, the written consent of Lessor, which consent may not be unreasonably
withheld, conditioned or delayed. Any aerial so installed without such written
consent shall be subject to removal without notice at any time.

 

10. All garbage,
including wet garbage, refuse or trash shall be placed by the Lessee in the
receptacles appropriate for that purpose and only at locations prescribed by
the Lessor.

 

11. Lessee shall not burn
any trash or garbage at any time in or about the Premises or any area of the
Project.

 

12. Lessee shall observe
all security regulations issued by the Lessor and comply with instructions
and/or directions of the duly authorized security personnel for the protection
of the Project and all tenants therein, except to the extent such regulations
unreasonably and materially limit Lessee’s right of access to the Premises and
Project’s parking facilities or prohibit Lessor from entering “Secured Areas,” all as provided in the
Lease.

 

13. Any requirements of
the Lessee will be considered only upon written application to Lessor at Lessor’s
address set forth in the Lease.

 

14. No waiver of any rule or
regulation by Lessor shall be effective unless expressed in writing and signed
by Lessor or its authorized agent.

 

I-2

 

15. Lessor reserves the
right to exclude or expel from the Project any person who, in the reasonable
judgment of Lessor, is intoxicated or under the influence of liquor or drugs,
or who shall in any manner do any act in violation of the law or the rules and
regulations of the Project.

 

17. Lessor reserves the
right at any time to change or rescind any one or more of these rules and
regulations or make such other and further reasonable, non-discriminatory rules and
regulations as in Lessor’s judgment may from time to time be necessary for the
operation, management, safety, care and cleanliness of the Project and the
Premises, and for the preservation of good order therein, as well as for the
convenience of other occupants and tenants of the Project. Lessor shall not be
responsible to Lessee or the any other person for the non-observance or
violation of the rules and regulations by any other tenant or other
person. Lessee shall be deemed to have read these rules and have agreed to
abide by them as a condition to its occupancy of the Premises. Notwithstanding
anything to the contrary contained herein, Lessor agrees that the rules and
regulations for the Project shall not be (i) modified or enforced in any
way by Lessor so as to unreasonably and materially interfere with Lessee’s
permitted use set forth in this Lease or Lessee’s access to the Premises or
Project parking facility, or (ii) discriminatorily enforced against Lessee
and not against other tenants of the Project.

 

18. Lessee shall abide by
any additional rules or regulations which are ordered or requested by any
governmental or military authority.

 

19. In the event of any
conflict between these rules and regulations, or any further or modified rules and
regulations from time to time issued by Lessor, and the Lease provisions, the
Lease provisions shall govern and control.

 

I-3

 

SCHEDULE 1

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

 

PACIFIC SHORES CENTER

COMMON AREA LICENSE AGREEMENT

 

This
License Agreement (“Agreement”) is dated for reference purposes and entered
into by and between Pacific Shores Investors LLC (“PSI”) and PDL BioPharma, Inc.
(“Licensee”) as of                     ,
200    .

 

R E C I T A L S

 

A.
Licensee leases Building         
at Pacific Shores Center pursuant to a written Lease (“Lease”) and Licensee
desires to utilize a portion of the Pacific Shores Center Common Area for                                         
     (“Event”) on                     ,
200     during the hours of              p.m.
to              p.m.
(“Event Period”); and

 

B. PSI
is willing to grant a temporary license to Licensee for the Event during the
Event Period and on that portion of the Pacific Shores Center Common Area
depicted on Exhibit A hereto (“Event Location”) on the terms and
conditions set forth below.

 

1

 

AGREEMENT

 

1. Recitals.
The recitals set forth above are true and correct and incorporated into this
Agreement.

 

2. License
Granted. PSI hereby grants to Licensee a revocable, temporary license to
use the Event Area for the Event during the Event Period on all of the terms
and conditions hereof (“License”).

 

3. Contractors.
All contractors hired by Licensee to assist with the event shall be subject to
the prior written approval of PSI, which approval shall not be unreasonably
withheld.

 

4. Security.
Licensee shall provide security for the Event and for at least one hour prior
to and one hour after the Event Period and assumes all risk for the safety of
Event participants.

 

5. Signage.
Subject to the prior written approval of PSI as to location, size and
materials, Licensee may place signage on the Common Area to direct attendees to
the Event. Licensee shall remove and dispose of all such signage within             
(    ) hours after the expiration of the Event Period.

 

6. Clean
Up. Licensee shall initiate clean up of the Event Location and all other
affected areas of Pacific Shores Center immediately upon expiration of the
Event Period and complete such cleanup, such that no evidence of the Event
remains, no later than             
(    ) hours after the expiration of the Event Period.

 

7. Damage.
Licensee agrees to pay to PSI the cost of repair of any damage arising from or
in connection with the Event within five (5) business days after written
demand for same.

 

8. Insurance.
Licensee shall maintain in place at all times during the Event Period the
insurance required to be maintained by Licensee (as Lessee) under Article VII
of the Lease.

 

9. Indemnity.
Licensee shall indemnify and hold PSI free and harmless from any and all
liability, claims, loss, damages, causes of action (whether in tort or
contract, law or equity, or otherwise), expenses, charges, assessments, fines,
and penalties of any kind, including, without limitation, reasonable attorneys’
fees, expert witness fees and costs, arising by reason of the death or injury
of any person, including any person who is an employee, agent, invitee,
licensee, permittee, visitor, guest or contractor of Licensee, or by reason of
damage to or

 

2

 

destruction of any
property, including property owned by Licensee or any person who is an
employee, agent, invitee, permittee, visitor, or contractor of Licensee, caused
or allegedly caused (1) while that person or property is in or about the
Common Area in connection with the Event; (2) by some condition of the
Common Area caused by the Event; (3) by some act or omission by Licensee
or its agent, employee, licensee, invitee, guest, visitor or contractor or any
person in, adjacent, on, or about the Common Area with the permission, consent
or sufferance of Licensee in connection with the Event; (4) by any matter
connected to or arising out of Licensee’s occupation and use of the Common Area
in connection with the Event, or any breach or default in timely observance or
performance of any obligation on Licensee’s part to be observed or performed
under this License Agreement.

 

10. Acceptance
of Event Location “As-Is”. Licensee accepts the Event Location and all
other areas of Pacific Shores Center utilized for the Event (including, without
limitation, roadways, driveways and parking areas) “as-is” and “with all faults”
and acknowledges that PSI makes no representation or warranty as to the
condition of the Event Location or any other part of Pacific Shores Center or
as to its suitability for the Event. Licensee assumes all risk as to same,
including, without limitation, the risk of injury and property damage for
itself, its officers, employees, agents, contractors, invitees, guests and
visitors and Licensee waives all claims against PSI and its Affiliates with
respect to same except to the extent caused by the gross negligence or intentional
misconduct of PSI or its Affiliates.

 

11. Attorneys’
Fees. If either party herein brings an action to enforce the terms hereof
or to declare rights hereunder, the prevailing party in any such action, on
trial or appeal, shall be entitled to recover its reasonable attorneys’ fees,
expert witness fees and costs as fixed by Court.

 

12. Relation
to Lease. Money due from Licensee hereunder for any failure to perform its
obligations hereto shall be deemed due under the Lease.

 

13. List
of Exhibits.

 

Exhibit A
– Event Location

 

3

 

	
  By:

  	
  Pacific Shores
  Mezzanine, LLC,

  
	
   

  	
  a Delaware
  limited liability company,

  
	
   

  	
  its sole member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Pacific Shores
  Junior Mezz, LLC,

  
	
   

  	
   

  	
  a Delaware
  limited liability company

  
	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Pacific Shores
  Junior Mezz Managers, LLC,

  
	
   

  	
   

  	
   

  	
  a Delaware
  limited liability company,

  
	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Pacific Shores
  Development, LLC,

  
	
   

  	
   

  	
   

  	
   

  	
  a Delaware
  limited liability company,

  
	
   

  	
   

  	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  TECHNOLOGY LAND
  LLC,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  a California
  limited liability company,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Operating Member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jay Paul, Sole
  Managing Member

  

 

 

	
  PDL BIOPHARMA, INC.

  
	
  a Delaware corporation

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  

 

4

 

SCHEDULE 2

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

 

[Intentionally Deleted]

 

 

SCHEDULE 3

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

 

REMOVAL OBLIGATIONS SCHEDULE

 

 

SCHEDULE 4

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

 

PERMITTED HAZARDOUS MATERIALS

 

 

SCHEDULE 5

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

 

Pacific Shores Center

Building 9

Redwood City, California 94063

 

PDL BioPharma, Inc.
List of Plans, Licenses and Permits

 

	
  Plans

  	
   

  	
  Inspecting Authority

  	
   

  	
  Frequency

  	
   

  
	
  Injury Illness Prevention Plan

  	
   

  	
  Cal OSHA

  	
   

  	
  Anytime

  	
   

  
	
  Biosafety Plan

  	
   

  	
  “

  	
   

  	
  “

  	
   

  
	
  Radiation Safety Plan

  	
   

  	
  “

  	
   

  	
  “

  	
   

  
	
  Chemical Hygiene Plan

  	
   

  	
  “

  	
   

  	
  “

  	
   

  
	
  Hazard Communication Plan

  	
   

  	
  “

  	
   

  	
  “

  	
   

  
	
  Emergency Action Plan

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hazardous Materials Business Plan

  	
   

  	
  Fremont Fire

  	
   

  	
  Annual

  	
   

  
	
  AAALAC Accreditation program

  	
   

  	
  AAALAC

  	
   

  	
  Complaint

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Licenses

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CA – Business License

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DHS - Radiation Use License

  	
   

  	
  DHS

  	
   

  	
  Anytime

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Permits

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fremont City - Hazardous Materials Permits A/B/D

  	
   

  	
  Fremont Fire

  	
   

  	
  Annual

  	
   

  
	
  Alameda County - Medical waste Permits A/B/D

  	
   

  	
  Ala. County

  	
   

  	
  Annual

  	
   

  
	
  BAAQMD – Emergency Generator Permits A/B/D

  	
   

  	
  AQMD

  	
   

  	
  Complaint

  	
   

  
	
  DEA – Controlled Substances

  	
   

  	
  DEA

  	
   

  	
  Violation

  	
   

  

 

 

SCHEDULE 6

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 9

Redwood City, California 94063

 

FINANCIAL TESTS

 

In general, financial
terms have their GAAP defined meaning. Revenue, EBITDA (Earnings before
Interest, Taxes, Depreciation, and Amortization), and Cash and Cash equivalents
are to be derived from the financial statements in the Lessee’s most recent 10Q
or 10K filings, as appropriate.

 

Level 1 performance
numbers are sufficient to trigger rights of first refusal on buildings 7 and 8,
and the right of first offer on building 6 until an additional 285,000 square
feet has been leased beyond the space in buildings 9 and 10.

 

Level 2 performance
numbers are sufficient to trigger rights of first refusal on buildings 7 and 8,
and the right of first offer on building 6, if more than 285,000 square feet
has already been leased beyond the space in buildings 9 and 10, but less than
all of the square footage in buildings 6, 7, and 8.

 

Level 3 performance
numbers are required to trigger Lessor’s obligations pursuant to Section 17.27
of the Lease.

 

Cash and cash equivalents
may include marketable securities which can be converted to cash in less than 3
months.

 

All rights are subject to
lender approval independent of the Lessee’s performance level.

 

 

	
   

  	
   

  	
  Level 1

  	
   

  	
  Level 2

  	
   

  	
  Level 3

  
	
  Revenue

  	
   

  	
  At least $100
  million in

  each of the last four

  quarters

  	
   

  	
  At least $150
  million in

  each of the last four

  quarters

  	
   

  	
  At least $150
  million in

  each of the last four

  quarters

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EBITDA
  ratio to Revenue

  	
   

  	
  Ratio of EBITDA
  to

  Revenue greater than 0%

  in each of the last 3

  quarters

  	
   

  	
  Ratio of EBITDA
  to

  Revenue of at least 3% in

  each of the last 3 quarters

  	
   

  	
  Ratio of EBITDA
  to

  Revenue of at least 5%

  in each of the last 3

  quarters

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash
  and Cash

  Equivalents

  	
   

  	
  At least $250
  million for

  each of the last four

  quarters.

  	
   

  	
  At least $300
  million for

  each of the last 4

  quarters.

  	
   

  	
  At least $500
  million for

  each of last 4 quarters.Exhibit 10.11

 

TRIPLE NET SPACE LEASE

 

between

 

PACIFIC SHORES INVESTORS LLC,

 

as

 

LESSOR

 

and

 

PDL BIOPHARMA, INC.,

a Delaware corporation

 

as

 

LESSEE

 

for

 

PREMISES

 

at

 

Pacific Shores Center

 

BUILDING 10

1500 SEAPORT BOULEVARD

REDWOOD CITY, CALIFORNIA 94063

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page(s)

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I PARTIES

  	
  1

  
	
   

  	
   

  
	
   

  	
  Section 1.01

  	
  Parties

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II PREMISES

  	
  1

  
	
   

  	
   

  
	
   

  	
  Section 2.01

  	
  Demise of Premises

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.02

  	
  Common Area

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.03

  	
  Parking

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.04

  	
  Athletic Facility

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III TERM

  	
  3

  
	
   

  	
   

  
	
   

  	
  Section 3.01

  	
  Lease Term

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.02

  	
  Early Entry

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.03

  	
  Option to Extend

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV RENT: TRIPLE
  NET LEASE

  	
  6

  
	
   

  	
   

  
	
   

  	
  Section 4.01

  	
  Base Rent

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.02

  	
  Rent Adjustment

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.03

  	
  First Payment of Rent

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.04

  	
  Absolute Triple Net
  Lease

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.05

  	
  Additional Rent

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.06

  	
  Letter of Credit

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.07

  	
  Operating Expenses

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.08

  	
  Lessee’s Right to
  Review Supporting Data

  	
  13

  

 

 

	
  ARTICLE V USE

  	
  15

  
	
   

  	
   

  
	
   

  	
  Section 5.01

  	
  Permitted Use and
  Limitations on Use

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.02

  	
  Compliance with Laws

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.03

  	
  Condition of Premises
  at Delivery Date

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.04

  	
  Defective Condition at
  Delivery Date

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.05

  	
  Building Security

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.06

  	
  Rules and
  Regulations

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI MAINTENANCE,
  REPAIRS AND ALTERATIONS

  	
  18

  
	
   

  	
   

  
	
   

  	
  Section 6.01

  	
  Maintenance of Premises
  and Building

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.02

  	
  Maintenance of Project
  Common Areas

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.03

  	
  Alterations, Additions
  and Improvements

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.04

  	
  Covenant Against Liens

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII INSURANCE

  	
  22

  
	
   

  	
   

  
	
   

  	
  Section 7.01

  	
  Property/Rental
  Insurance for Premises

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.02

  	
  Property Insurance for
  Fixtures and Inventory

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.03

  	
  Lessor’s Liability
  Insurance

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.04

  	
  Liability Insurance
  Carried by Lessee

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.05

  	
  Proof of Insurance

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.06

  	
  Mutual Waiver of Claims
  and Subrogation Rights

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.07

  	
  Indemnification and
  Exculpation

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.08

  	
  Lessor as Party
  Defendant

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII DAMAGE OR
  DESTRUCTION

  	
  25

  
	
   

  	
   

  
	
   

  	
  Section 8.01

  	
  Destruction of the
  Premises

  	
  25

  

 

 

	
   

  	
  Section 8.02

  	
  Waiver of Civil Code
  Remedies

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.03

  	
  Damages Incurred during
  Repair

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.04

  	
  No Liability for
  Lessee’s Alterations or Personal Property

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX REAL
  PROPERTY TAXES

  	
  26

  
	
   

  	
   

  
	
   

  	
  Section 9.01

  	
  Payment of Taxes

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.02

  	
  Pro Ration for Partial
  Years

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.03

  	
  Personal Property Taxes

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.04

  	
  Right to Contest Real
  Property Taxes

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X UTILITIES

  	
  28

  
	
   

  	
   

  
	
   

  	
  Section 10.01

  	
  Lessee to Pay

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI ASSIGNMENT
  AND SUBLETTING

  	
  29

  
	
   

  	
   

  
	
   

  	
  Section 11.01

  	
  Lessor’s Consent
  Required

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.02

  	
  Lessee Affiliates

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.03

  	
  No Release of Lessee

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.04

  	
  Excess Rent

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.05

  	
  Information to be
  Provided

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.06

  	
  Lessor’s Recapture
  Rights

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII DEFAULTS;
  REMEDIES

  	
  32

  
	
   

  	
   

  
	
   

  	
  Section 12.01

  	
  Defaults

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 12.02

  	
  Remedies

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 12.03

  	
  Default by Lessor

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 12.04

  	
  Late Charges

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 12.05

  	
  Lessor’s Right to
  Perform Lessee’s Obligations

  	
  35

  

 

 

	
  ARTICLE XIII
  CONDEMNATION OF PREMISES

  	
  35

  
	
   

  	
   

  
	
   

  	
  Section 13.01

  	
  Total Condemnation

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.02

  	
  Partial Condemnation

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.03

  	
  Award to Lessee

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIV ENTRY BY
  LESSOR  

  	
  36

  
	
   

  	
   

  
	
   

  	
  Section 14.01

  	
  Entry by Lessor
  Permitted

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XV ESTOPPEL
  CERTIFICATE

  	
  37

  
	
   

  	
   

  
	
   

  	
  Section 15.01

  	
  Estoppel Certificate

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVI LESSOR’S
  LIABILITY

  	
  37

  
	
   

  	
   

  
	
   

  	
  Section 16.01

  	
  Limitations on Lessor’s
  Liability

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVII GENERAL
  PROVISIONS

  	
  38

  
	
   

  	
   

  
	
   

  	
  Section 17.01

  	
  Severability

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.02

  	
  Agreed Rate Interest on
  Past Due Obligations

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.03

  	
  Time of Essence

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.04

  	
  Additional Rent

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.05

  	
  Incorporation of Prior
  Agreements, Amendments and Exhibits

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.06

  	
  Notices

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.07

  	
  Waivers

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.08

  	
  Recording

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.09

  	
  Surrender of
  Possession; Holding Over

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.10

  	
  Cumulative Remedies

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.11

  	
  Covenants and
  Conditions

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.12

  	
  Binding Effect; Choice
  of Law

  	
  42

  

 

 

	
   

  	
  Section 17.13

  	
  Lease to be Subordinate

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.14

  	
  Attorneys’ Fees

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.15

  	
  Signs

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.16

  	
  Merger

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.17

  	
  Quiet Possession

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.18

  	
  Easements

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.19

  	
  Authority

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.20

  	
  Force Majeure Delays

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.21

  	
  Hazardous Materials

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.22

  	
  Modifications Required
  by Lessor’s Lender

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.23

  	
  Brokers

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.24

  	
  Acknowledgment of
  Notices

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.25

  	
  Right of First Offer

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.26

  	
  Right of First Refusal

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.27

  	
  Lessee’s Expansion
  Right

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.28

  	
  Notification of
  Intention to Market

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.29

  	
  List of Lease
  Expiration Dates

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.30

  	
  [Intentionally
  omitted.]

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.31

  	
  Condition Subsequent

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.32

  	
  List of Exhibits

  	
  54

  

 

 

ARTICLE I

PARTIES

 

Section 1.01  Parties

 

This
Lease, dated for reference purposes, and effective as of July 6, 2006, is
made by and between PACIFIC SHORES INVESTORS LLC (“Lessor”) and PDL BIOPHARMA,
INC., a Delaware corporation (“Lessee”).

 

ARTICLE II

PREMISES

 

Section 2.01  Demise of Premises

 

Lessor
hereby leases to Lessee and Lessee leases from Lessor for the Lease Term, at
the rental, and upon all of the terms and conditions set forth herein, certain
space consisting of the entire one hundred sixty-four thousand seven hundred
thirty-two (164,732) rentable square foot building sometimes known as “Building
10” and commonly known as 1500 Seaport Boulevard, Redwood City, California
94063 (“Building 10”), which is
one of ten free standing, office and research and development Project Buildings
(“Project Buildings”) on real
property situated in Redwood City, County of San Mateo, State of California and
commonly known as Pacific Shores Center. The Premises are more particularly
described and depicted herein in Exhibit “A.” The rentable square footage
of the Premises, Building 10 and other Project Buildings (the “Rentable Area”) has been determined and
certified by Lessor’s architect by a method described as “dripline,” whereby
the measurement encompasses the outermost perimeter of the constructed
building, including every projection thereof and all area beneath each such
projection, whether or not enclosed, with no deduction for any inward deviation
of structure and with the measurement being made floor by floor, but beginning
from the top of Building 10. The Premises, the Project Buildings and
appurtenances described herein, including Common Area (defined below), and all
other improvements at Pacific Shores Center together with the land on which the
same are located are together designated as the project (“Project”). Lessor and Lessee acknowledge
that Lessor, as landlord, and Lessee, as tenant, are also parties to that
certain Triple Net Space Lease of even date herewith (the “Building 9 Lease”) whereby Lessor
leases to Lessee, and Lessee leased from Lessor, Building 9 (“Building 9”) in the Project.

 

Section 2.02  Common Area

 

As of
the Delivery Date (as defined in Section 3.02 below), and thereafter,
during the Lease Term, Lessee shall have the non-exclusive right to use the
Common Area defined herein, including but not limited to the Athletic Facility.
Lessor reserves the right to modify the Common Area, including increasing or
reducing the size, adding additional Project Buildings, structures or other
improvements or changing the use, configuration and elements thereof in its
sole discretion and to close or restrict access from time to time for repair,
maintenance or construction or to prevent a dedication thereof, provided that
Lessee nonetheless (i) shall have reasonable access to parking and the
Premises during such activities; and (ii) such modifications, when
completed, shall not unreasonably interfere with or restrict Lessee’s
possession and use of the Premises. Lessor further reserves the right to
establish, repeal and amend from time to time

 

1

 

non-discriminatory rules and
regulations for the use of the Common Area and to grant reciprocal easements or
other rights to use the Common Area to owners of other property provided that
no amendment to the rules and regulations shall unreasonably interfere
with or restrict Lessee’s use of the Premises or the Common Area. “Common Area”
means all portions of the Project other than the Project Buildings, including
landscaping, sidewalks, walkways, driveways, curbs, parking lots (including
striping), roadways within the Project, sprinkler systems, lighting, surface
water drainage systems, an athletic facility to be available for use by Lessee’s
employees (the “Athletic Facility”),
as well as baseball and soccer fields, a water front park, and a perimeter
walking/biking trial, and additional or different facilities as Lessor may from
time to time designate or install or make available for the use by Lessee in
common with others. Lessee’s use of the Common Areas shall be subject to any
easements affecting the Project as of the date of this Lease. Notwithstanding
anything herein to the contrary, Lessee may, following the Delivery Date but
prior to the Commencement Date, use a portion of the Common Areas to be agreed
upon by Lessor and Lessee for the use of a construction trailer and a
construction staging and lay-down area in connection with the installation of
the Tenant Improvements in the Premises, provided that Lessee’s use of such
activities shall be subject to any reasonable rules and regulations
therefor promulgated by Lessor. In addition, subject to the rights of the other
tenants or users of the Project and the need for Lessee to execute a license
agreement therefor in the form attached hereto as Schedule 1, Lessee
shall have the right to use portions of the Common Areas for the hosting of
outdoor meetings, which meetings may include the use of tents and the catering
and/or barbeque of food for such meetings. The location, time and manner of
such meetings shall be subject to the prior written consent of Lessor, which
consent shall not be unreasonably withheld.

 

Section 2.03  Parking

 

Lessor
shall provide Lessee with three (3) parking spaces per one thousand
(1,000) square feet of area within the Premises, minus any parking spaces
eliminated due to the presence of the Yard Area described in Section 2.05
below. In the event Lessor elects or is required by any law to limit or control
parking at the Premises, whether by validation of parking tickets or any other
method of assessment, Lessee agrees to participate in such validation or
assessment program under such reasonable rules and regulations as are from
time to time established by Lessor. Lessor agrees that Lessee’s access to parking
shall not be unreasonably limited beyond any requirement of law by any such rules and
regulations. Parking shall be free of charge throughout the Lease Term
(including any extensions thereof) except as provided for in Article VI
(i.e., Operating Expenses payable hereunder) for reimbursement of repair,
replacement and maintenance costs and expenses, and in Article IX for
payment or reimbursement of any real property taxes including governmental or
public authority charges, fees or impositions of any nature hereafter imposed,
except as otherwise provided herein. Nothing herein shall prevent Lessee from
allowing two (2) company vans, along with up to ten (10) cars of
employees of Lessee on an occasional basis, to remain in the parking spaces for
the Premises on an overnight basis.

 

Section 2.04  Athletic Facility

 

Lessee
and its employees shall have access to the thirty-eight thousand
(38,000) square foot Athletic Facility and all of the amenities thereof at
no additional cost to Lessee or its employees, except that Lessee acknowledges
that the cost of operating and maintaining the Athletic Facility will be an
Operating Expense as described in Section 4.07 below.

 

2

 

Section 2.05  Yard Area

 

During
the Lease Term and any extensions thereof Lessee shall have the exclusive right
to use that portion of the Project immediately adjacent to Building 10 and more
particularly shown on Schedule 2 attached hereto (the “Yard Area”) for
truck and loading access to Building 10, and for the installation and use of
chillers and cooling towers, boilers, an emergency generator, liquid oxygen O2,
a LN2 tank and evaporator, a liquid CO2 tank, wastewater holding tank/pit, a
Hazardous Materials storage area, compressed dry air skid and vacuum pumps,
provided that all such items are installed in accordance with the terms of Section 6.03
and used in accordance with all of the terms of this Lease and relevant laws,
including Environmental Laws. At Lessor’s request, Lessee shall, at Lessee’s
sole expense, install Project standard screening for the Yard Area as
designated by Lessor’s architect. Lessee shall be solely responsible for
maintaining and repairing the Yard Area and all of the improvements therein.
Lessee shall obey any rules and regulations reasonably promulgated by
Lessor in connection with Lessee’s use of the Yard Area Lessor and Lessee
acknowledge and agree that the Yard Area will be located in an area that
otherwise would have consisted of seventeen (17) parking spaces for Lessee,
and Lessee agrees to the elimination of such parking spaces without
compensation or other provision to Lessee.

 

ARTICLE III

TERM

 

Section 3.01  Lease Term

 

The
term of this Lease (“Lease Term”)
shall be for fifteen (15) years, beginning on January 1, 2007 (the “Commencement Date”) and expiring, unless
sooner terminated as provided for herein, on December 31, 2021 (“Expiration Date”). The parties shall
execute a “Memorandum of Commencement of Lease Term” on the Commencement Date
which shall be substantially in the form attached hereto as Exhibit “B”.

 

Section 3.02  Early Entry

 

Notwithstanding
anything herein to the contrary, as of October 1, 2006 (the “Delivery Date”),
provided that Lessee has delivered to Lessor: (1) the first month’s Rent, (2) certificates
evidencing the insurance described in Article VII below, (3) the
Letter of Credit Security pursuant to Section 4.06 below, and (4) any
items required as of such time pursuant to the Work Letter Agreement attached
hereto as Exhibit E (the “Work
Letter”) between Lessor and Lessee, Lessee and Lessee’s invitees may
enter the Premises to the extent reasonably necessary, at Lessee’s sole risk,
for the sole purpose of installation of Lessee’s improvements, alterations,
furniture, trade fixtures, equipment, telecommunications systems and other
equipment thereon. Prior to the Delivery Date, Lessee shall have no right of
possession or occupancy of the Premises, and Lessor reserves the right to make
any use of the Premises that is not inconsistent with Lessor’s obligation to
deliver the Premises to Lessee as of the Delivery Date. Lessee’s occupancy of
the Premises following the Delivery Date but prior to the

 

3

 

Commencement Date shall
be on all of the terms and conditions of this Lease, except the obligation to
pay Base Rent or as is otherwise provided for in this Section 3.02. During
any time period prior to the Commencement Date that Lessee is occupying or
performing work in the Premises but is not conducting Lessee’s business therein
(exclusive of systems testing), Lessee shall be required to pay any utilities
or other costs incurred during such period in the operation of Building 10.
During any time period prior to the Commencement Date that Lessee is occupying
the Premises in order to conduct its business therein, in addition to such
expenses described in the preceding sentence, Lessee shall also pay all of the
Operating Expenses and other Additional Rent for the Project which would have
been due under this Lease as if the Commencement Date had occurred..

 

Section 3.03.
Option to Extend.

 

(a) Exercise.
Subject to the “Conditions to Extend” described in Section 3.03(d) below,
Lessee is given two (2) options to extend the Lease Term (each, an “Option
to Extend”) with respect to Building 10 for periods of five (5) years each
(each, an “Extended Term”) following the date on which the initial Lease Term
(or, in the case of the second Extended Term, the first Extended Term) would
otherwise expire, which option may be exercised only by written notice (“Option
Notice”) from Lessee to Lessor given not less than twelve (12) months nor
more than fifteen (15) months prior to the end of the initial Lease Term
or the first Extended Term, as relevant (“Option Exercise Date”).

 

(b) Extended
Term Rent. In the event Lessee exercises any Option to Extend set forth
herein, all the terms and conditions of this Lease shall continue to apply
except that Lessee shall no longer have the future right to exercise the Option
to Extend in question and the Base Rent payable by Lessee during the Extended
Term shall be determined in the following manner. If Lessee exercises Lessee’s
Option to Extend the Building 9 Lease at the same time as Lessee exercises
Lessee’s Option to Extend hereunder, then the Base Rent due hereunder during
such Extended Term shall be equal, on a per square foot basis, to the base rent
due under the Building 9 Lease. If Lessee exercises Lessee’s Option to Extend
hereunder, but does not exercise Lessee’s Option to Extend the Building 9
Lease, then the Base Rent due hereunder during such Extended Term shall be
equal to the greater of (i) ninety-five percent (95%) of Fair Market
Rent (defined below), as determined under subparagraph (c) below, or (ii) the
monthly Base Rent paid by Lessee during the last year of the initial Lease Term
or the first Extended Term, as relevant. “Fair Market Rent” shall mean the
effective rate being charged (including periodic adjustments thereto as
applicable during the period of the Extended Term, to the extent such
adjustments are determined to be part of the Fair Market Rent), for space
comparable to the space and level of tenant improvements in Building 9 in
similar buildings in the vicinity, i.e. of a similar age and quality as
Building 9, considering any recent renovations or modernization, and floor
plate size or, if such comparable space is not available, adjustments shall be
made in the determination of Fair Market Rent to reflect the age and quality of
Building 9 and Premises as contrasted to other buildings used for comparison
purposes, with similar amenities, taking into consideration: size, location,
floor level, leasehold improvements or allowances provided or to be provided,
term of the lease, extent of services to be provided, the time that the
particular rate under consideration became or is to become effective, and any
other relevant terms or conditions applicable to tenants.

 

4

 

(c) Determination
of Fair Market Rent.

 

(i) Negotiation.
If Lessee so exercises the Option to Extend in a timely manner, the parties
shall then meet in good faith to negotiate the Base Rent for the Premises for
the Extended Term during the first thirty (30) days after the date of the
delivery by Lessee of the Option Notice (the “Negotiation Period”). If, during
the Negotiation Period, the parties agree on the Base Rent applicable to the
Premises for the Extended Term, then such agreed amount shall be the Base Rent
payable by Lessee during the Extended Term.

 

(ii) Arbitration.
In the event that the parties are unable to agree on the Base Rent for the
Premises within the Negotiation Period, then within ten (10) days after
the expiration of the Negotiation Period, each party shall separately designate
to the other in writing an appraiser to make this determination. Each appraiser
designated shall be a member of MAI and shall have at least ten (10) years
experience in appraising commercial real property in Santa Clara County. The
failure of either party to appoint an appraiser within the time allowed shall
be deemed equivalent to appointing the appraiser appointed by the other party,
who shall then determine the Fair Market Rent for the Premises for the Extended
Term. Within five (5) business days of their appointment, the two designated
appraisers shall jointly designate a third similarly qualified appraiser.
Within thirty (30) days after their appointment, each of the two appointed
appraisers shall submit to the third appraiser a sealed envelope containing
such appointed appraiser’s good faith determination of the Fair Market Rent for
the Premises for the Extended Term; concurrently with such delivery, each such
appraiser shall deliver a copy of his or her determination to the other
appraiser. The third appraiser shall within ten (10) days following
receipt of such submissions, then determine which of the two appraisers’
determinations most closely reflects Fair Market Rent, as defined in Section 3.03(b) of
this Lease. The determination most closely reflecting the third appraiser’s
determination shall be deemed to be the Fair Market Rent for the Premises
during the Extended Term; the third appraiser shall have no rights to adjust,
amend or otherwise alter the determinations made by the appraisers selected by
the parties, but must select one or the other of such appraisers’ submissions.
The determination by such third appraiser shall be final and binding upon the
parties. Said third appraiser shall, upon selecting the determination which
most closely resembles Fair Market Rent, concurrently notify both parties
hereto. The parties shall share the appraisal expenses equally. If the Extended
Term begins prior to the determination of Fair Market Rent, Lessee shall pay
monthly installments of Base Rent equal to one hundred three and one half
percent (103.5%) of the monthly installment of Base Rent in effect for the
last year of the initial Lease Term or the first Extended Term, as relevant (in
lieu of “holdover rent” payable under Section 17.09(b)). Once a
determination is made, any over payment or under payment shall be reimbursed as
a credit against, or paid by adding to, the monthly installment of Base Rent
next falling due.

 

(d) Conditions
to Extend. Notwithstanding anything herein to the contrary, Lessee shall
have no right to exercise Lessee’s Option to Extend hereunder, and any Option
Notice delivered by Lessee shall be void and invalid if at the time Lessee
delivers such notice any of the following conditions (collectively, the “Conditions to Extend”) are not satisfied
both at the time such Option Notice is delivered and at the time the Extended
Term in question is to commence: (i) Lessee has not assigned this Lease or
the Building 9 Lease to any party other than an Affiliate (as defined in Section 11.02),
during any time in which Lessor or any affiliate

 

5

 

thereof owns Building 9
and the Building 9 Lease is in effect (ii) Lessee has not sublet more than
fifty percent (50%) of the Premises to anyone other than an Affiliate, (iii) Lessee
physically occupies at least fifty percent (50%) of the Premises, (iv) Lessor
has delivered a written notice of default under this Lease or the Building 9
Lease and the default specified therein has not yet been cured, and (v) Lessor
has not delivered a written notice to Lessee that Lessee has committed a
monetary default under this Lease more than three (3) times during the
Lease Term and delivered a written notice to Lessee that Lessee has committed a
non-monetary default under this Lease more than one (1) time during the
Lease Term.

 

ARTICLE IV

RENT: TRIPLE NET LEASE

Section 4.01  Base Rent

 

Lessee
shall pay to Lessor monthly Base Rent, in advance, on the first day of each
calendar month of the Lease Term, commencing on the Commencement Date, in the
initial amount of Two Hundred Seventy-One Thousand Eight Hundred Seven and
80/100 Dollars ($271,807.80) per month; but subject to increase pursuant to the
terms of Section 4.02 below. Base Rent for any period during the Lease
Term which is for less than one month shall be a pro rata portion of the
monthly installment (based on the actual days in that month).

 

Section 4.02  Rent Adjustment

 

The Base Rent set forth in Section 4.01 above shall be adjusted
upward at the following times and to the following amounts:

 

	
  Months

  	
   

  	
  Monthly Base Rent

  	
   

  
	
  13-24

  	
   

  	
  $

  	
  281,321.07

  	
   

  
	
  25-36

  	
   

  	
  $

  	
  291,167.31

  	
   

  
	
  37-48

  	
   

  	
  $

  	
  301,358.17

  	
   

  
	
  49-60

  	
   

  	
  $

  	
  311,905.70

  	
   

  
	
  61-72

  	
   

  	
  $

  	
  322,822.40

  	
   

  
	
  73-84

  	
   

  	
  $

  	
  334,121.19

  	
   

  
	
  85-90

  	
   

  	
  $

  	
  345,815.43

  	
   

  

 

As of the ninety-first
(91st) month of the Lease Term, the Base Rent due hereunder shall adjust
to the higher of: (i) Three Hundred Forty-Five Thousand Eight Hundred
Fifteen and 43/100 Dollars ($345,815.43), or (ii) one hundred percent
(100%) of the then existing Fair Market Rent (as determined pursuant to
Sections 3.03(b) and (c)), but in no event higher than Four Hundred
Thirty-Six Thousand Five Hundred Thirty-Nine and 80/100 ($436,539.80).
Thereafter, the Base Rent due hereunder shall increase by escalations as
determined in the Fair Market Rent determination, effective as of each
subsequent anniversary of the Commencement Date.

 

Section 4.03  First Payment of Rent

 

Lessee
shall pay in advance the first payment of Base Rent (for the first month of the
Lease Term) in the amount of Two Hundred Seventy-One Thousand Eight Hundred
Seven

 

6

 

and 80/100 Dollars
($271,807.80), together with Lessee’s Share of Additional Rent due hereunder
for the first month of the Lease Term, within three (3) business days
after the execution of this Lease.

 

Section 4.04  Absolute Triple Net Lease

 

This
Lease is what is commonly called a “Absolute Triple Net Lease,” it being
understood that Lessor shall receive the Base Rent set forth in Section 4.01
free and clear of any and all expenses, costs, impositions, taxes, assessments,
liens or charges of any nature whatsoever. Lessee shall pay all rent in lawful
money of the United States of America to Lessor at the notice address stated
herein or to such other persons or at such other places as Lessor may designate
in writing not later than ten (10) days before the due date specified for
same without prior demand, set-off or deduction of any nature whatsoever. It is
the intention of the parties hereto that this Lease shall not be terminable for
any reason by Lessee and that Lessee shall in no event be entitled to any
abatement of or reduction in rent payable under this Lease, except as herein
expressly provided in Articles VIII and XIII. Any present or future law to the
contrary shall not alter this agreement of the parties.

 

Section 4.05  Additional Rent

 

In
addition to the Base Rent reserved by Section 4.01, Lessee shall pay,
beginning on the Commencement Date (or any earlier date required pursuant to Section 3.02
above) and continuing throughout the Lease Term as Additional Rent (i) 100%
of amounts applicable solely to the Premises, and Lessee’s Share (as defined in
Section 4.07(c) below) of amounts applicable to Building 10, the
Project and the Common Area of all taxes, assessments, fees and other
impositions payable by Lessee in accordance with the provisions of Article IX
and insurance premiums in accordance with the provisions of Article VII, (ii) Lessee’s
Share of Operating Expenses (as defined below), and (iii) any other
applicable charges, costs and expenses whether or not contemplated which may
arise under any provision of this Lease during the Lease Term, as the same may
be extended, plus a Management Fee to Lessor equal to two percent (2%) of
the Base Rent. The Management Fee is due and payable, in advance, with each
installment of Base Rent. All of such charges, costs, expenses, Management Fee
and all other amounts payable by Lessee hereunder, shall constitute Additional
Rent, and upon the failure of Lessee to pay any of such charges, costs or
expenses, Lessor shall have the same rights and remedies as otherwise provided
in this Lease for the failure of Lessee to pay Base Rent.

 

Section 4.06  Letter of Credit

 

(a) Deposit
of Letter of Credit Security

 

Lessee
shall deposit with Lessor, not later than three (3) business days after
the execution of this Lease, an unconditional, irrevocable letter of credit (“Letter
of Credit”) on a form acceptable to Lessor and, if required, Lessor’s
lender(s), and in favor of Beneficiary (as defined below) in the amount of One
Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) (the “Letter
of Credit Security”). “Beneficiary,” as used herein refers to either: (x) Lessor
as beneficiary, or (y) if required by Lessor’s lender(s), Lessor and
Lessor’s lender(s) as co-beneficiaries under the Letter of Credit
Security. The Letter of Credit Security shall: (i) be

 

7

 

issued by a commercial
money center bank reasonably satisfactory to Lessor with retail branches in San
Francisco, California (the “Issuer”); (ii) be a standby, at-sight,
irrevocable letter of credit; (iii) be payable to Beneficiary; (iv) permit
multiple, partial draws, (v) provide that any draw on the Letter of Credit
Security shall be made upon receipt by the Issuer of a sight draft accompanied
by a letter from Lessor stating that Lessor is entitled, pursuant to the
provisions of this Lease, to draw on the Letter of Credit Security in the
amount of such draw; (vi) provide for automatic annual extensions, without
amendment (so-called “evergreen” provision) with a final expiry date no sooner
than ninety (90) days after the end of the Lease Term; (vii) provide
that it is governed by the Uniform Customs and Practice for Documentary Credits
(1993 revisions) International Chamber of Commerce Publication 500; and (viii) be
cancelable if, and only if, Issuer delivers to Beneficiary no less than sixty
(60) days advance written notice of Issuer’s intent to cancel. Lessee
shall pay all costs, expenses, points and/or fees incurred by Lessee in
obtaining the Letter of Credit Security.

 

(b) Lessor’s
Right to Draw on Letter of Credit Security

 

The
Letter of Credit Security shall be held by Lessor as security for the faithful
performance by Lessee of all of the terms, covenants, and conditions of this
Lease and, so long as Lessor or an affiliate thereof is the lessor under the
Building 9 Lease and the Building 9 Lease is in effect, all of the terms,
covenants and conditions of the Building 9 Lease, applicable to Lessee. Lessor
shall have the immediate right to draw upon the Letter of Credit Security, in
whole or in part and without prior notice to Lessee, other than as required
under this Lease, at any time and from time to time: (i) if an Event of
Lessee’s Default occurs under this Lease or, if Lessor or an affiliate thereof
is the lessor under the Building 9 Lease and the Building 9 Lease is in effect,
the Building 9 Lease (beyond any applicable notice and cure period), or (ii) Lessee
either files a voluntary bankruptcy petition or an involuntary bankruptcy
petition is filed against Lessee by an entity or entities other than Lessor,
under 11 U.S.C. §101 et seq., or Lessee executes an assignment for the benefit
of creditors. No condition or term of this Lease shall be deemed to render the
Letter of Credit Security conditional, thereby justifying the Issuer of the
Letter of Credit Security in failing to honor a drawing upon such Letter of
Credit Security in a timely manner. The Letter of Credit Security and its
proceeds shall constitute Lessor’s sole and separate property (and not Lessee’s
property or, in the event of a bankruptcy filing by or against Lessee, property
of Lessee’s bankruptcy estate) and Lessor may immediately upon any draw (and
without notice to Lessee) apply or offset the proceeds of the Letter of Credit
Security against: (A) any amounts payable by Lessee under the Lease that
are not paid when due, after the expiration of any applicable notice and cure
period; (B) all losses and damages that Lessor has suffered or may reasonably
estimate that it may suffer as a result of an Event of Lessee’s Default under
this Lease or the Building 9 Lease, including any damages arising under Section 1951.2
of the California Civil Code for rent due following termination of this Lease; (C) any
costs incurred by Lessor in connection an Event of Lessee’s Default under this
Lease (including attorney’s fees); and (D) any other amount that Lessor
may spend or become obligated to spend by reason of an Event of Lessee’s
Default under this Lease or the Building 9 Lease but in no event in excess
of amounts to which the Lessor would be entitled under the law. If any portion
of the Letter of Credit Security is so drawn upon or applied, Lessee shall,
within five (5) business days after written demand therefore, deposit cash
with Issuer in an amount sufficient to restore the Letter of Credit Security to
its original amount. Tenant’s failure to do so shall be a Default by Lessee. It
is expressly understood that Lessor shall be relying on Issuer rather than Lessee
for

 

8

 

the timely payment of
proceeds under the Letter of Credit Security and the rights of Lessor pursuant
to this Section are in addition to any rights which Lessor may have
against Lessee pursuant to Article XII below.  Lessor shall not be required to keep the
proceeds from the Letter of Credit Security separate from Lessor’s general
funds nor be deemed a trustee of same.

 

(c) Replacement
Letter of Credit Security

 

If,
for any reason whatsoever, the Letter of Credit Security becomes subject to
cancellation or expiration during the Lease Term, within forty-five
(45) days prior to expiration of the Letter of Credit Security, Lessee
shall cause the Issuer or another bank satisfying the conditions of Section 4.06(a) above
to issue and deliver to Lessor a Letter of Credit Security to replace the
expiring Letter of Credit Security (the “Replacement Letter of Credit Security”).
The Replacement Letter of Credit Security shall be in the same amount as the
original Letter of Credit Security (or such reduced amount as provided by the
terms of Section 4.06(g) of this Lease) and shall be on the terms and
conditions set forth in items (A) through (D) above. Failure of
Lessee to cause the Replacement Letter of Credit Security to be issued
forty-five (45) days prior to the then pending expiration or cancellation
shall entitle Lessor to fully draw down on the existing Letter of Credit
Security and, at Lessor’s election, shall be an event of default under this
Lease and/or the Building 9 Lease without any relevant notice and cure period.

 

(d) Transfer
of Beneficiary

 

During
the Lease Term Lessor may transfer its interest in the Lease or Lessor’s lender
may change. Lessor may request a change to Beneficiary under the Letter of
Credit Security to the successor of Lessor and/or Lessor’s lender (the “Transferee”).
Lessee agrees to cooperate and to cause Issuer, at Lessor’s cost, to timely
issue a new Letter of Credit Security on the same terms and conditions as the
original Letter of Credit Security, except that the new Letter of Credit Security
shall be payable to the Transferee. Lessor shall surrender the existing Letter
of Credit Security to Lessee simultaneously with Lessee’s delivery of the new
Letter of Credit Security to Transferee.

 

(e) Return
of the Letter of Credit Security

 

If Lessee
fully and faithfully performs every provision of this Lease to be performed by
it, the Letter of Credit Security or any balance thereof shall be returned
(without interest) to Lessee (or, at Lessee’s option, to the last assignee of
Lessee’s interests hereunder) within thirty (30) days after the expiration
or earlier termination of the Lease and after Lessee has vacated the Premises
and surrendered possession; provided that if prior to the Lease Expiration Date
a voluntary bankruptcy provision is filed by Lessee, or an involuntary
bankruptcy is filed against Lessee by any of Lessee’s creditors other than
Lessor, under 11 U.S.C. § 101 et seq., or Lessee executes an assignment for the
benefit of creditors, then to the fullest extent permitted by law Lessor shall
not be obligated to return the Letter of Credit Security or any proceeds of the
Letter of Credit Security until all statutes of limitations for any preference
avoidance statutes applicable to such bankruptcy or assignment for the benefit
of creditors have elapsed or the bankruptcy court or assignee, whichever is
applicable, has executed a binding release releasing Lessor of any and all
liability for the preferential transfers relating to payments made under this
Lease, and Lessor may retain and offset against any remaining Letter

 

9

 

of Credit Security
proceeds the full amount Lessor is required to pay to any third party on
account of preferential transfers relating to this Lease. Lessor agrees it will
cooperate in providing Issuer with a letter of cancellation or such other
reasonable documentation as Issuer requests to effect the return and
extinguishment of the credit issued under the Letter of Credit Security.

 

(f) Acknowledgment
of Parties

 

Lessor
and Lessee (a) acknowledge and agree that in no event or circumstance
shall the Letter of Credit Security or any renewal thereof or substitute
therefor or any proceeds thereof be deemed to be or treated as a “security
deposit” under any law applicable to security deposits in the commercial
context, including, but not limited to Section 1950.7 of the California
Civil Code, as such Section now exists or as it may be hereafter amended
or succeeded (the “Security Deposit Laws”), (b) acknowledge and agree that
the Letter of Credit Security (including any renewal thereof or substitute
therefor or any proceeds thereof) is not intended to serve as a security
deposit, and the Security Deposit Laws shall have no applicability or relevancy
thereto, and (c) waive any and all rights, duties and obligations that any
such party may now, or in the future will, have relating to or arising from the
Security Deposit Laws. Lessee hereby waives the provisions of Section 1950.7
of the California Civil Code and all other provisions of law, now or hereafter
in effect, which (i) establish the time frame by which a Lessor must
refund a security deposit under a lease, and/or (ii) provide that a Lessor
may claim from a security deposit only those sums reasonably necessary to
remedy defaults in the payment of rent, to repair damage caused by a Lessee or
to clean the premises, it being agreed that Lessor may, in addition, claim
those sums specified in this Section 4.06 and/or those sums reasonably
necessary to compensate Lessor for any loss or damage caused by Lessee’s breach
of this Lease, including any damages Lessor suffers.

 

(g) Scheduled
Reduction in Letter of Credit Security. Notwithstanding anything herein to
the contrary, as of the eighth (8th) anniversary of the Commencement Date,
the amount of the Letter of Credit Security shall be reduced to Seven Hundred
Fifty Thousand Dollars ($750,000), provided that (i) at such time Lessor
has not delivered a written notice of default by Lessee hereunder and such
default has not yet been cured, and (ii) Lessor has not delivered to
Lessee written notice that Lessee is in monetary default hereunder more than
three (3) times and written notice that Lessee is in non-monetary default
more than one (1) time during the Lease Term.

 

Section 4.07  Operating Expenses

 

(a) Definition

 

“Operating Expenses” shall mean and include
those actual costs or expenses of the Premises, Building 10 or Project
described in Articles VI, VII or IX, as well as all actual costs and expenses
of every kind and nature paid or incurred by Lessor (whether obligated to do so
or undertaken at Lessor’s discretion) in the ownership, operation, maintenance,
repair and replacement of the Common Areas, including Common Area Project
Buildings and improvements located within the Project as well as the Common
Areas of Building 10. Such cost and expenses shall include, but not be limited
to, costs of cleaning;

 

10

 

lighting; maintaining,
repairing and replacing all Common Area improvements and elements (replacing
shall be deemed to include but not be limited to the replacement of light poles
and fixtures, storm and sanitary sewers, parking lots, driveways and roads as
well as the Building 10 elevators, stairways, floors and walls in the Common
Area and Building 10, but not the Building 10 elements which are the
responsibility of Lessor to maintain, repair and replace under this Lease),
repairs to and maintenance of the structural and non-structural portions of the
Athletic Facility; supplies, tools, equipment and materials used in the
operation and maintenance of the Project; parking lot striping; removal of
trash, rubbish, garbage and other refuse; painting; removal of graffiti;
painting of exterior walls; landscaping; providing security to the extent
Lessor determines in its sole discretion to do so (including security systems
and/or systems designed to safeguard life or property against acts of God
and/or criminal and/or negligent acts, and the costs of maintaining of same);
personal property taxes; fire protection and fire hydrant charges (including
fire protection system signaling devices, now or hereafter required, and the
costs of maintaining of same); water and sewer charges; utility charges;
license and permit fees necessary to operate and maintain the Project; the
initial cost or the reasonable depreciation of equipment used solely in
operating and maintaining the Common Areas which is expensed or amortized,
respectively by Lessor in its good faith discretion using accounting practices commonly
utilized in the commercial real estate industry, consistently applied and rent
paid for leasing any such equipment; reasonable cost of on or off site storage
space of any and all items used in conjunction with the operation, maintenance
and management of the Project, including but not limited to tools, machinery,
records, decorations, tables, benches, supplies and meters; the cost of and
installation cost of any and all items which are installed for the purpose of
reducing Operating Expenses, increasing building or public safety or which may
be then required by governmental authority, laws, statutes, ordinances and/or
regulations, a use privilege for the Athletic Facility equal to: (A) the
product of 3,744 (Lessee’s Share of the Athletic Facility Square Footage) times
the monthly Base Rent per square foot then due hereunder, plus (B) Lessee’s
Share of the costs and expenses arising from the operation of same; total
compensation and benefits (including premiums for workers’ compensation and
other insurance) paid to or on behalf of Lessor’s employees, agents,
consultants and contractors, including but not limited to full or part time
on-site management or maintenance personnel, however, excluding any person with
a title greater than property manager, for work performed at the Project.

 

Notwithstanding
the above, if Lessee’s Share of the cost of any particular capital expenditure
to the Project or Premises exceeds Fifty Thousand Dollars ($50,000), then such
cost, together with interest thereon at the rate actually charged Lessor by any
lender or, if no such interest is relevant, with interest thereon at an
interest rate equal to the Bank of America prime rate plus two percent (2%),
shall be amortized over its useful life, and the amount includible in Operating
Expenses shall be limited to the monthly amortized cost thereof. The
determination of what constitutes a capital expenditure and the useful life
applicable thereto shall be made by Lessor in its good faith discretion using
accounting practices commonly utilized in the commercial real estate industry,
consistently applied

 

(b) Payment

 

Lessee
shall pay Lessee’s Share of Operating Expenses, as Additional Rent, in monthly
installments on the first day of each month in an amount set forth in a written
estimate by Lessor. Within ninety (90) days after the end of each calendar
year, Lessor shall

 

11

 

furnish to Lessee a
statement (hereinafter referred to as “Lessor’s Statement”) of the actual
amount of Lessee’s Share of such Operating Expenses for such period. Within
thirty (30) days after receipt thereof, Lessee shall pay to Lessor, as
Additional Rent, or Lessor shall apply as a credit to Additional Rent next
falling due (or if the Lease Term has expired or terminated and there remains
no money due to Lessor, remit to Lessee), as the case may be, the difference
between the estimated amounts paid by Lessee and the actual amount of Lessee’s
Share of Operating Expenses for such period as shown by such Lessor’s Statement.
Lessee’s Share of Operating Expenses for the ensuing estimation period shall be
adjusted upward or downward based upon Lessor’s Statement.

 

(c) Lessee’s
Share

 

For
purposes hereof, “Lessee’s Share” shall mean (i) as to amounts allocable
solely to Building 10 (and with respect to real property tax, also to the legal
parcel in which Building 10 is located), one hundred percent (100%), and (ii) as
to amounts allocable to the Project or Project Common Area, the Rentable Area
of the Premises divided by the Rentable Area of all Project Buildings at the
Project (irrespective of whether they are rented). Subject to being increased
or decreased (in an amount Lessor shall, in good faith, determine), upon the
increase or reduction in the Rentable Area of the Premises and the Project,
respectively, Lessee’s Share for each of the Building 10 items shall be 100%
and Lessee’s Share of Project items shall be nine and eighty five
one-hundredths percent (9.85%). The Rentable Area of all Project Buildings at
the Project shall not be reduced for vacancies in the ordinary course of
business.

 

(d) Exclusions

 

For
purposes of this Lease, the term Operating Expenses shall not include (and
Lessee shall have no liability for) any of the following:

 

(i) any
expenses incurred by Lessor for the sole benefit of Lessee, which expenses are
reimbursed by Lessee pursuant to the other terms of this Lease,

 

(ii) any
expenses incurred by Lessor for the benefit of the other tenants of the
Project, but not Lessee, which expenses are in fact reimbursed by such other
tenant(s),

 

(iii) any
payments of points, interest or principal relating to any debt secured by
Building 10 or the Project,

 

(iv) costs
associated with the operation of the business of the ownership or entity which
constitutes “Lessor,” as distinguished from the costs of Project operations,
including, but not limited to, partnership accounting and legal matters, costs
of defending any lawsuits with any mortgagee (except as the actions of Lessee
may be in issue), costs of selling syndicating, financing, mortgaging or
hypothecating any of Lessor’s interest in the Project, costs of any disputes
between Lessor and its employee (if any) not engaged in Project operation, or
outside fees paid in connection with disputes with other tenants,

 

(v) Legal
fees, space planners’ fees, real estate brokers’ leasing commissions, and
advertising expenses incurred in connection with leasing of the Project
Buildings,

 

12

 

(vi) Costs
for which Lessor is reimbursed by its insurance carrier or any tenant’s
insurance carrier,

 

(vii) any
bad debt loss, rent loss or reserves for bad debts or rent loss,

 

(viii) costs,
including permit, license and inspection costs, incurred with respect to the
installation of tenant improvements made for new tenants in the Project or
incurred in renovating or otherwise improving, decorating, painting or
redecorating vacant space for tenants or other occupants of the Project,

 

(ix) costs
of a capital nature, including, without limitation, capital improvements and
replacements, capital repairs, capital equipment and capital tools, unless such
costs are amortized pursuant to the terms of Subsection 4.07(a) above,

 

(x) any
interest or late fee resulting from any failure of Lessor to pay any item of
Operating Expense when it would have been due without such interest or late
fee, provided, however, that nothing herein shall be deemed from precluding
Lessor from passing through to Lessee as an Operating Expense any cost
associated with paying Operating Expenses on any permitted installment or other
periodic basis, even if such payment basis results in an increase in the
Operating Expense in question,

 

(xi)
overhead and profit increment paid to Lessor or to subsidiaries or affiliates
of Lessor for such services in the Building to the extent the same exceeds the
costs of such services rendered by unaffiliated third parties on a competitive
basis.

 

It is understood that
Operating Expenses shall be reduced by all cash discounts, trade discounts, or
quantity discounts received by Lessor or Lessor’s managing agent in the
purchase of any goods, utilities, or services in connection with the operation
of the Project. In the calculation of any expenses hereunder, it is understood
that Lessor will not charge Lessee more than one hundred percent (100%) of
any Operating Expense due hereunder. Lessor shall use its best efforts to
effect an equitable proration of bills for services rendered to Building 10 and
to any other property owned by Lessor.

 

Section 4.08  Lessee’s Right to Review Supporting
Data

 

(a) Exercise
of Right by Lessee

 

Provided
that Lessor has not delivered to Lessee written notice of any default by Lessee
hereunder, which default has not then been cured, and provided further that
Lessee strictly complies with the provisions of this Section 4.08, Lessee
shall have the right to reasonably review supporting data for any portion of a
Lessor’s Statement that Lessee believes may be incorrect. In order for Lessee
to exercise its right under this Section 4.08, Lessee shall, within: (i) forty-five
(45) days after any Lessor’s Statement is received, if Lessor includes a
copy of Lessor’s general ledger for Building 10 with such Lessor’s Statement,
or (ii) ninety (90) days after Lessor’s Statement is received, in all
other events, deliver a written notice to Lessor specifying the portions of the
Lessor’s Statement that it believes to be incorrect, and Lessee shall
simultaneously pay to Lessor all amounts due from Lessee to Lessor as specified
in the Lessor’s Statement, if applicable. Except as expressly set forth in
subparagraph (c) below, in no event

 

13

 

shall Lessee be entitled
to withhold, deduct, or offset any monetary obligation of Lessee to Lessor
under the Lease including, without limitation, Lessee’s obligation to make all
Base Rent payments and all payments for Additional Rent, pending the completion
of, and regardless of the results of, any review under this Section 4.08.
The right to review granted to Lessee under this Section 4.08 may only 

be exercised once for any
Lessor’s Statement, and if Lessee fails to meet any of the above conditions as
a prerequisite to the exercise of such right, the right of Lessee under this Section 4.08
for a particular Lessor’s Statement shall be deemed waived.

 

(b) Procedures
for Review

 

Lessee
acknowledges that Lessor maintains its records for Building 10 and the Project
at its offices in San Francisco, and Lessee therefore agrees that any review of
supporting data under this Section shall occur at such location. Any
review to be conducted under this Section shall be at the sole expense of
Lessee, except as otherwise provided herein, below, and shall be conducted by
an independent (i.e., not then engaged by Lessee for any other purposes) firm
of certified public accountants on a non-contingency fee basis. Lessee
acknowledges and agrees that any supporting data reviewed under this Section shall
constitute confidential information of Lessor, which shall not be disclosed to
anyone other than the accountants of national standing performing the review
and the principals or other employees or counsel of Lessee who receive the
results of the review. Except to the extent (i) required by law, (ii) in
connection with any legal proceeding concerning this Lease, or (iii) if
such information or results are otherwise publicly available, the disclosure of
such information or results of the review to any other person by Lessee or any
person or entity who received such information from or on behalf of Lessee
shall constitute a material breach of this Lease.

 

(c) Finding
of Error

 

Any
errors disclosed by the review of supporting data under this Section shall
be promptly corrected, provided that Lessor shall have the right to cause
another review of the supporting data to be made by an independent (i.e., not
then engaged by Lessor for any other purposes) firm of certified public
accountants of Lessor’s choice. If the results of the review of the supporting
data, taking into account (if applicable) the results of any additional review
caused by Lessor, reveal that Lessee has overpaid obligations for a preceding
period, the amount of such overpayment shall be credited against Lessee’s
subsequent installment obligations to pay its share of Additional Rent or, if
the Lease has terminated or expired, in cash within thirty (30) days after
the determination of overpayment is received by Lessor. In the event that such
results show that Lessee has underpaid its obligations for a preceding period,
the amount of such underpayment shall be paid by Lessee to Lessor with the next
succeeding installment obligation of Additional Rent or, if this Lease has
terminated or expired, in cash within thirty (30) days after the
determination of underpayment is received by Lessee. Each party shall pay all
the costs, and expenses of its chosen accounting firm; provided, however, if
Lessor and Lessee determine that Operating Expenses for the Project for the
year in question were less than those stated in Lessor’s Statement by more than
five percent (5%), Lessor shall reimburse Lessee for the reasonable amounts
paid by Lessee to third parties in connection with such review. If Lessor and
Lessee determine that Operating Expenses for the Project in the year in
question were not less than those stated in Lessor’s Statement by more than
five percent (5%), then Lessee shall reimburse Lessor for the reasonable
amounts paid by Lessor to third parties in connection with such review.

 

14

 

(d) Effect
of Lessee’s Default. In the event that Lessor has delivered a written
notice of default to Lessee hereunder and such default then remains uncured
during the pendency of a review of records under this Section, said right to
review shall immediately cease and the matters originally set forth in Lessor’s
Statement shall be deemed to be correct.

 

ARTICLE V

USE

 

Section 5.01  Permitted Use and Limitations on Use

 

(a) The
Premises shall be used and occupied only for general office purposes, research
and development, laboratory, biopharmaceutical research (including without
limitation, vivarium and animal colony facilities for rodents only, small scale
pilot fermentation and other pilot plant facilities) and other related legal
uses and for no other use without Lessor’s prior written consent, which shall
not be unreasonably withheld, conditioned or delayed so long as such use is
lawful and does not conflict with any other provision of this Lease, including,
without limitation, the restrictions set forth in the following provisions of
this Section. Lessee shall not use, suffer or permit the use of the Premises in
any manner that will tend to constitute waste, nuisance or unlawful acts or
void any warranties that Lessor has received with respect to Building 10, provided
that biological and chemical and other waste generated and disposed of in the
ordinary course of business for the permitted uses in full and timely
compliance with all applicable laws shall not be deemed a violation of this Section 5.01.
In no event shall it be unreasonable for Lessor to withhold its consent as to
uses other than those expressly permitted above which it determines would tend
to materially increase the wear of the Premises or any part thereof or increase
the potential liability of Lessor or decrease the marketability,
financeability, leaseability or value of the Premises or Project. Lessee shall
not do anything in or about the Premises which will (i) cause structural
injury to Building 10 or Premises, or (ii) cause damage to any part of Building
10 or Premises except to the extent reasonably necessary for the installation
of Lessee’s trade fixtures and Lessee’s Alterations, and then only in a manner
and to the extent consistent with this Lease. Lessee shall not operate any
equipment within Building 10 or Premises which will (A) materially damage
Building 10 or the Common Area, (B) overload existing electrical systems
or other mechanical equipment servicing Building 10, (C) impair the
efficient operation of the sprinkler system or the heating, ventilating or air
conditioning (“HVAC”) equipment within or servicing Building 10, (D) damage,
overload or corrode the sanitary sewer system, or (E) damage the Common
Area or any other part of the Project. Lessee shall not do any of the following
in excess of the load limits for which such items are designed (based on
structural reinforcements to be constructed by Lessee as part of the Tenant
Improvements): attach, hand or suspend anything from the ceiling, roof, walls
or columns of Building 10 or set any load on the floor. Lessee shall not
operate hard wheel forklifts within the Premises. Any dust, fumes, or waste
products generated by Lessee’s use of the Premises shall be contained and
disposed so that they do not (1) create an unreasonable fire or health
hazard, (2) damage the Premises, or (3) result in the violation of
any law. Except as approved by Lessor, Lessee shall not change the exterior of
Building 10, or the outside area of the Premises, or install any equipment or
antennas on or make any penetrations of the exterior or roof of Building 10.

 

15

 

Lessee shall not conduct,
on any portion of the Premises, any sale of any kind (but nothing herein is
meant to prohibit sales and marketing activities of Lessee’s products and
services in the normal course of business consistent with the permitted uses), including
any public or private auction, fire sale, going-out-of-business sale, distress
sale or other liquidation sale, and any such sale shall be an immediate event
of default hereunder without the benefit of a notice and cure period from
Lessor, notwithstanding anything to the contrary in this Lease. No materials,
supplies, tanks or containers, equipment, finished products or semi-finished
products, raw materials, inoperable vehicles or articles of any nature shall be
stored upon or permitted to remain within the outside areas of the Premises
except in fully fenced and screened areas outside Building 10 which have been
designed for such purpose and have been approved in writing by Lessor for such
use by Lessee and for which Lessee has obtained all appropriate permits from governmental
agencies having jurisdiction over such articles. Lessee shall also reimburse
Lessor for any increased premiums or additional insurance which Lessor
reasonably deems necessary as a result of Lessee’s use of the Premises.

 

Section 5.02  Compliance with Laws

 

Lessor
represents and warrants to Lessee that Building 10 was constructed in
accordance with all applicable laws, codes and regulations in effect as of the
date Building 10 was built. Except for any work necessary as a result of
the inaccuracy of the foregoing representation and warranty, Lessee shall, at
Lessee’s cost and expense, comply promptly with all statutes, ordinances,
codes, rules, regulations, orders, covenants and restrictions of record, and
requirements applicable to the Premises and Lessee’s use and occupancy of same
in effect during any part of the Lease Term, whether the same are presently
foreseeable or not, and without regard to the cost or expense of compliance
provided that any Alteration(s) required for compliance shall be subject
to the provisions of this Lease. By executing this Lease, Lessee acknowledges
that it has reviewed and satisfied itself as to its compliance, or intended
compliance with the applicable zoning and permit requirements, hazardous materials
and waste requirements, and all other statutes, laws, or ordinances relevant to
the uses stated in Section 5.01, above, or the occupancy of the Premises.

 

Section 5.03  Condition of Premises at Delivery
Date

 

As of
the Delivery Date, any then-existing Building plumbing, lighting, heating,
ventilating, air conditioning, gas, electrical and sprinkler systems, window
systems, roof, roof membrane and structural elements of Building 10 shall be in
water-tight condition and good working condition and repair. Except as is
provided in the preceding sentence, having made such inspection of the
Premises, Building 10 and Project as it deemed prudent and appropriate
(including, without limitation, testing for the presence of mold), Lessee
hereby accepts the Premises in their condition existing as of the date the
Premises is delivered to Lessee, “AS-IS” and “WITH ALL FAULTS” subject to all
applicable zoning, municipal, county and state laws, ordinances and regulations
governing and regulating the use and condition of the Premises, and any
covenants or restrictions, liens, encumbrances and title exceptions of record,
and accepts this Lease subject thereto and to all matters disclosed thereby and
by any exhibits attached hereto. Lessee acknowledges that neither Lessor nor
any agent of Lessor has made any representation or warranty as to the present
or future suitability of the Premises for the conduct of Lessee’s business,
except as otherwise provided herein.

 

16

 

Section 5.04  Defective Condition at Delivery Date

 

In the
event that it is determined, and Lessee notifies Lessor in writing within six (6) months
after the date the Premises is delivered to Lessee, that the Building systems
described in Section 5.03 above were not in water-tight condition and/or
good working condition and repair as of the date the Premises is delivered to
Lessee, and such failure was not caused by Lessee, then it shall be the
obligation of Lessor, and the sole right and remedy of Lessee, after receipt of
written notice from Lessee setting forth with specificity the nature of the
failed performance, to promptly, within a reasonable time and at Lessor’s sole
cost, to correct such failure. Lessee’s failure to give such written notice to
Lessor within six (6) months after the date the Premises were delivered to
Lessee shall constitute a conclusive presumption that such Building systems are
in good working condition and repair, and any required correction after that
date shall be performed by the party responsible for such repair pursuant to
the terms of this Lease.

 

Section 5.05  Building Security

 

Lessee
acknowledges and agrees that it assumes sole responsibility for security at the
Premises for its agents, employees, invitees, licensees, contractors, guests
and visitors and will provide such systems and personnel for same including,
without limitation, while such person(s) are using the Common Area, as it
deems necessary or appropriate and at its sole cost and expense. Lessor shall
have absolutely no liability whatsoever with respect to the security of Lessee’s
agents, employees, invitees or contractors or their respective personal
property at the Project, except to the extent that liability to such parties
arises out of the intentional misconduct of Lessor or Lessor’s agents,
employees, invitees or contractors. Lessee acknowledges and agrees that Lessor
does not intend to provide any security system or security personnel at the
Premises or Project, including, without limitation, at the Common Area, provided,
however, that nothing herein shall be deemed to prevent Lessor from providing
such system or personnel in the future, the cost of which will be included in
those items for which Lessee pays additional rent.

 

Section 5.06  Rules and Regulations

 

Lessor
may from time to time promulgate reasonable and nondiscriminatory rules and
regulations applicable for the care and orderly management of the Premises, the
Project and/or its Common Area. Such rules and regulations shall be
binding upon Lessee upon delivery of a copy thereof to Lessee, and Lessee
agrees to abide by such rules and regulations. A copy of the initial Rules and
Regulations is attached hereto as Exhibit “I.” If there is a conflict
between the rules and regulations and any of the provisions of this Lease,
the provisions of this Lease shall prevail. Lessor shall not be responsible for
the violation of any such rules and regulations by any person, including,
without limitation, Lessee or its employees, agents, invitees, licensees,
guests, visitors or contractors.

 

17

 

ARTICLE VI

MAINTENANCE, REPAIRS AND ALTERATIONS

 

Section 6.01  Maintenance of Premises and Building

 

(a) Throughout
the Lease Term, Lessee, at its sole cost and expense, shall keep, maintain,
repair and replace the Premises and every part thereof (except as provided in
5.04, 6.01(b), Article VIII (Damage and Destruction), Article XIII
(Eminent Domain) and also, except for uninsured maintenance, repairs or
replacement costs caused solely by an act of gross negligence or intentional
misconduct by Lessor, or its employees, agents or contractors during the Lease
Term), maintain and repair all improvements and appurtenances in the Premises,
including, without limitation, all interior walls, all doors and windows, all
wall surfaces and floor coverings, all Alterations, additions and improvements
installed by or on behalf of Lessee during the Lease Term, all sewer, plumbing,
electrical, lighting, heating, ventilation and cooling systems and fixtures,
fire sprinklers, fire safety and security systems and fixtures and all wiring
and glazing, in the same good order, condition and repair as they are in on the
Commencement Date, or may be improved during the Lease Term, reasonable wear
and tear excepted, provided that such wear and tear could not have been
reasonably prevented by best maintenance practices customarily used in the
Project.

 

(b) Lessor,
at its sole cost and expense, shall (i) repair defects, latent and patent,
in Building 10 (including all exterior glass which is damaged by structural
defects in exterior walls), and keep, maintain, repair and, if deemed necessary
by Lessor, replace (ii) (a) supporting pillars, (b) structural
walls, (c) the structural portions of Building 10 (including, but not
limited to, the roof and window systems, provided that Lessee, and not Lessor,
shall be responsible for washing the windows, and Lessee shall be responsible
for Lessee’s Share of any costs incurred by Lessee in repairing, maintaining or
replacing the roof membrane of Building 10 as an Operating Expense) and (d) foundations
of Building 10. Notwithstanding the foregoing, subject to the terms of Section 7.06
hereof, if the need for such repair is caused by Lessee, Lessor shall, at
Lessee’s sole cost and expense, repair same. Lessee shall give Lessor written
notice of any needed repairs which are the obligation of Lessor hereunder. It
shall then be the obligation of Lessor, after receipt of such notice, to
perform the same within fifteen (15) business days after such notice (or,
if the condition in need of repair constitutes an emergency which is causing
imminent and material risk of damage or injury to persons or property at
Building 10, Lessor must perform such repair within five (5) business days
after receipt of such notice); provided, however, that if the nature of the
repairs is such that more than fifteen (15) business days (or, in the case
of the emergency repairs described above, five (5) business days) are
reasonably required for performance, then Lessor shall not be deemed to be in
default hereunder if Lessor commences such repairs within said fifteen
(15) business day period and thereafter diligently completes them and
provided further, that for purposes of this sentence “commences” includes any
steps taken by Lessor to investigate, design, consult, bid or seek permit or
other governmental approval in connection with such repair. Should Lessor
default as provided in Section 12.03 with respect to its obligation to
make any of the repairs assumed by it hereunder with respect to the Premises or
Building 10, Lessee shall have the right to perform such repairs and Lessor
agrees that within thirty (30) days after written demand accompanied by
detailed invoice(s), it shall pay to Lessee the cost of any such repairs
together with accrued interest from the date of Lessee’s payment at the Agreed
Rate. Lessor shall not be liable to Lessee for any

 

18

 

damage to person or
property as a result of any failure to timely perform any of its obligations
with respect to the repair, maintenance or replacement of the Premises, Project
Buildings or Project or any part thereof, and Lessee’s sole right and remedy
(together with its rights under Section 12.03 below) shall be the performance
of said repairs by Lessee with right of reimbursement from Lessor of the
reasonable fair market cost of said repairs, not exceeding the out of pocket
sums actually expended by Lessee, together with accrued interest from the date
of Lessee’s payment at the Agreed Rate, provided that nothing herein shall be
deemed to create a right of setoff or withholding by Lessee of Base Rent or
Additional Rent or any other amounts due herein. Lessee hereby expressly waives
all rights under and benefits of Sections 1941 and 1942 of the California Civil
Code or under any similar law, statute or ordinance now or hereafter in effect
to make repairs and offset the cost of same against rent or to withhold or
delay any payment of rent or any other of its obligations hereunder as a result
of any default by Lessor under this Section 6.01(b).

 

(c) Lessee
agrees to keep the Premises, both inside and out, clean and in sanitary
condition as required by the health, sanitary and police ordinances and
regulations of any political subdivision having jurisdiction and to remove all
trash and debris which may be found in or around the Premises. Lessee further
agrees to keep the interior surfaces of the Premises, including, without
limitation, windows, floors, walls, doors, showcases and fixtures clean and
neat in appearance.

 

(d) If
Lessee refuses or neglects to commence such repairs and/or maintenance for
which Lessee is responsible under this Article VI within a ten (10) business
day period (or as soon as practical and in no event later than five (5) days,
if the failure to initiate the repair threatens to cause further damage to the
Premises) after written notice from Lessor and thereafter diligently prosecute
the same to completion, then Lessor may enter the Premises (except in an emergency,
upon at least 24 hours advance written notice) during Lessee’s business hours
and cause such repairs and/or maintenance to be made. Lessor shall not be
responsible to Lessee for any loss or damage occasioned thereby other than
physical damage to the Premises caused by the negligence of Lessor or Lesson’s
agents, employees or contractors which damage Lessor shall repair at its sole
cost as Lessor’s sole obligation and Lessee’s sole right and remedy with
respect to such damage. Lessee agrees that upon demand, it shall pay to Lessor
the reasonable cost of any such repairs subject to the terms of the preceding
sentence, not exceeding the amount of out-of-pocket expenses actually expended
by Lessor, together with accrued interest from the date of Lessor’s payment at
the Agreed Rate. Notwithstanding anything to the contrary contained herein,
above, if Lessor elects to enter the Premises as permitted herein, above, it
shall use commercially reasonable efforts to minimize any interference with
Lessee’s business at the Premises.

 

Section 6.02  Maintenance of Project Common Areas

 

Lessor
shall maintain, repair and replace all landscape, hardscape and other
improvements within the Project Common Area and shall operate and manage the
Athletic Facility and other Project Common Area features and facilities
described in Section 2.02 including, without limitation, all landscape,
hardscape and other improvements within the outside areas of Building 10 and
the other Project Buildings located within the Project, including without
limitation, landscaping, curbs, walkways, driveways, roadways, parking areas
and

 

19

 

lighting, sprinkler,
drainage, sewer, plumbing systems. Notwithstanding the foregoing, subject to
the terms of Section 7.06 below, any damage thereto, except for normal
wear, caused by Lessee or its employees, agents, contractors, invitees or
visitors shall be repaired by Lessor and the cost thereof shall be paid by
Lessee within ten (10) days after presentation of Lessor’s bill for same.
The cost and expense of Lessor’s obligations hereunder shall be Operating
Expenses as to which Lessee shall pay Lessee’s Share pursuant to Section 4.05
(except as otherwise provided herein); provided, however, that Lessor’s
obligation under this Section 6.02(b) in any instance where the
damage, other than normal wear and tear, was caused by Lessor or its employees,
agents or contractors shall not be recovered by Lessor from Lessee as an
Operating Expense or in any other manner. Notwithstanding anything to the
contrary contained herein, Lessee shall not be responsible for any cost or
expense pertaining solely to another Project Building, except for costs or
expenses pertaining to any Project Buildings which provide amenities for the Project
or any Project Building in which Lessee is a tenant.

 

Section 6.03  Alterations, Additions and
Improvements

 

No
alterations, additions, or improvements (“Alterations”)
shall be made to the Premises by Lessee without the prior written consent of
Lessor, which Lessor will not unreasonably withhold, condition or delay;
provided, however, that Lessee may make Alterations which do not affect the
Building systems, exterior appearance or structural integrity of Building 10,
involve penetration of either the ceiling or floor of Building 10 and which do
not collectively exceed One Hundred Thousand Dollars ($100,000) in cost within
any twelve (12) month period, without Lessor’s prior written consent;
provided, further, that Lessee gives Lessor prior notice of such alterations
(which notice shall include the estimated value of such alterations) and such
alterations are otherwise performed in accordance with the terms of this Lease.
As a condition to Lessor’s obligation to consider any request for consent
hereunder, Lessee shall pay Lessor upon demand for the reasonable out of pocket
costs and expenses of consultants, engineers, architects and others (exclusive
of property management personnel for reviewing plans and specifications..
Lessor may require Lessee to remove any such Alterations at the expiration or
sooner termination of the Lease Term and to restore the Premises to their prior
condition pursuant to the terms of Section 17.09 hereof; provided that: (i) Lessor
shall make such election, if at all, at the time consent to such Alteration is
given, if such election is requested in writing of Lessor at such time by
Lessee, or if Lessor’s consent to such Alteration is not required, then Lessor
shall make such election within 30 days following a written request of Lessor
by Lessee, and (ii) in any event, at the end of the Lease Term or earlier
termination of the Lease, Lessee shall remove from the Premises the equipment
listed as “Equipment To Be Removed” on Schedule 3 attached hereto (the “Removal
Obligations Schedule”), and shall surrender to Lessor, and have no obligation
to remove, the equipment listed as “Equipment Left In Place” on the Removal
Obligations Schedule. Lessee shall furnish security or make other arrangement
satisfactory to Lessor to assure payment for the completion of all Alterations
work free and clear of liens. All Alterations to be made to the Premises shall
be made under the supervision of a competent, California licensed architect
and/or competent California licensed structural engineer (each of whom has been
approved by Lessor) and shall be made in accordance with plans and
specifications which have been furnished to and approved by Lessor in writing
prior to commencement of work. All Alterations shall be designed, constructed
and installed at the sole cost and expense of Lessee by California licensed
architects, engineers, and contractors approved by Lessor in compliance with
all applicable law, and in good and workmanlike manner, and shall

 

20

 

have been approved in
writing by Redwood City and any other applicable governmental agencies, if so
required. Such approvals shall not be unreasonably withheld, conditioned or
delayed by Lessor. Except as is provided for in the Removal Obligations Schedule,
subject to Lessor’s right to have Lessee retain ownership and remove same, any
Alteration, including, without limitation, all lighting, electrical, heating,
ventilation, air conditioning and full height partitioning, drapery and
carpeting installations made by Lessee, together with all property that has
become an integral part of the Premises such as fume hoods which penetrate the
roof or plenum area, built-in cold rooms, built-in warm rooms, deionized water
systems, glass washing equipment, autoclaves, chillers, built-in plumbing,
electrical and mechanical equipment and systems and any power generator and
transfer switches, shall not be deemed trade fixtures and shall become the
property of Lessor at the expiration or sooner termination of the Lease, unless
Lessor directs otherwise. Lessee shall retain title to all furniture and trade
fixtures placed on the Premises. Within thirty (30) days after completion
of any Alteration, Lessee shall provide Lessor with a complete set of both hard
copies and CAD drawings of “as built” plans for same.

 

Section 6.04  Covenant Against Liens

 

Lessee
shall not allow any liens arising from any act or omission of Lessee to exist,
attach to, be placed on, or encumber Lessor’s or Lessee’s interest in the
Premises, Building 10 or Project, or any portion of either, by operation of law
or otherwise. Lessee shall not suffer or permit any lien of mechanics, material
suppliers, or others to be placed against the Premises, Building 10 or Project,
or any portion of either, with respect to work or services performed or claimed
to have been performed for Lessee or materials furnished or claimed to have
been furnished to Lessee or the Premises. Lessor has the right at all times to
post and keep posted on the Premises any notice that it considers necessary for
protection from such liens. At least ten (10) days before beginning
construction of any Alteration, Lessee shall give Lessor written notice of the
expected commencement date of that construction to permit Lessor to post and
record a notice of nonresponsibility. If any such lien attaches or Lessee
receives notice of any such lien, Lessee shall cause the lien to be immediately
released and removed of record by payment or bond. Despite any other provision
of this Lease, if the lien is not released and removed within twenty
(20) days after Lessor delivers notice of the lien to Lessee, Lessor may
immediately take all action necessary to release and remove the lien, without
any duty to investigate the validity of it. All expenses (including reasonable
attorney fees and the cost of any bond) incurred by Lessor in connection with a
lien incurred by Lessee or its removal shall be considered Additional Rent
under this Lease and be immediately due and payable by Lessee. Notwithstanding
the foregoing, if Lessee shall, in good faith, contest the validity of any such
lien, claim or demand, then Lessee shall, at its sole expense, defend and
protect itself, Lessor and the Premises, Building 10 and Project against the
same and shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof. If Lessor shall require, Lessee shall
furnish a surety bond in an amount equal to one hundred fifty percent
(150%) of the amount of such contested lien, claim or demand, indemnifying
Lessor against liability for the same. If Lessor elects to participate in or is
made a party to any such action, Lessee shall reimburse Lessor’s reasonable
attorneys’ fees and costs within ten (10) days after demand.

 

21

 

ARTICLE VII

INSURANCE

 

Section 7.01  Property/Rental Insurance for
Premises

 

At all
times during the Lease Term, Lessor shall keep Building 10, any Tenant
Improvements or Alterations made by Lessee therein and the Project insured
against loss or damage by fire and those risks normally included in the term “all
risk,” extended coverage, fire and casualty insurance, including, without
limitation, coverage for (i) earthquake and earthquake sprinkler leakage, (ii) flood,
(iii) loss of rents and extra expense for eighteen (18) months,
including scheduled rent increases, (iv) boiler and machinery, and (v) fire
damage legal liability, including waiver of subrogation. Lessee shall pay
Lessee’s Share of any deductibles. The amount of such insurance shall not be
less than 100% of replacement cost. Insurance shall include a Building
Ordinance and Increased Cost of Construction Endorsement insuring the increased
cost of reconstructing the Premises incurred due to the need to comply with
applicable statutes, ordinances and requirements of all municipal, state and
federal authorities now in force, which or may be in force hereafter. Any
recovery received from said insurance policy shall be paid to Lessor and
thereafter applied by Lessor to the reconstruction of the Premises in
accordance with the provisions of Article VIII below. Lessee, as part of
the Operating Expenses, shall reimburse Lessor for Lessee’s Share of the cost
of the premiums for all such insurance in accordance with Article IV. Such
reimbursement shall be made within fifteen (15) days of Lessee’s receipt
of a copy of Lessor’s statement therefore. To the extent commercially available
in Lessor’s reasonable business judgment, Lessor’s insurance shall have a
deductible not greater than fifteen percent (15%) for earthquake and ten
percent (10%) for the basic “all risk” coverage.

 

Notwithstanding
the foregoing, Lessee may, at Lessee’s election, maintain at Lessee’s sole cost
and expense a separate, additional policy of insurance insuring the Improvements
or Alterations made by Lessee against loss or damage by fire and those risks
normally included in the term “all risk,” extended coverage, fire and casualty
insurance. Any recovery received from said insurance policy shall be paid to
Lessee in accordance with the provisions of Article VIII below.

 

Section 7.02  Property Insurance for Fixtures and
Inventory

 

At all
times during the Lease Term, Lessee shall, at its sole expense, maintain fire
and casualty insurance with “all risk” coverage which includes the same
coverage as required of Lessor in Section 7.01, above, on any trade
fixtures, furnishings, merchandise, equipment, artwork or other personal
property, whether or not presented to Lessor for its consent in or on the
Premises, whether in place as of the date hereof or installed hereafter. The
amount of such insurance shall not be less than one hundred percent
(100%) of the replacement cost thereof with commercially reasonable
deductibles, and Lessor shall not have any responsibility nor pay any cost for
maintaining any types of such insurance. Lessee shall pay all deductibles.

 

Section 7.03  Lessor’s Liability Insurance

 

During
the Lease Term, Lessor shall maintain a policy or policies of commercial
general liability insurance naming Lessor (and such others as designated by
Lessor) against

 

22

 

claims and liability for
bodily injury, personal injury and property damage on or about the Premises and
Project, with combined single limit coverage in an amount determined by Lessor
in its sole discretion (which amount is currently Fifty Million Dollars
($50,000,000.00)); provided that if such policy is a blanket policy that covers
properties (other than the Project) owned by Lessor, only that portion
allocable to the Project shall be payable hereunder. Lessee, in addition to the
rent and other charges provided herein, agrees to pay Lessee’s Share of the
premiums for all such insurance in accordance with Article IV.

 

Section 7.04  Liability Insurance Carried by Lessee

 

At all
times during the Lease Term (and any holdover period) Lessee shall obtain and
keep in force a commercial general liability policy of insurance protecting
Lessee, Lessor and any lender(s) whose names are provided to Lessee as
additional insureds against claims and liability for bodily injury, personal
injury and property damage based upon involving or arising out of ownership,
use, occupancy or maintenance of the Premises and all areas appurtenant
thereto. Such insurance shall be on an occurrence basis providing a single
limit coverage in amount of not less than Ten Million Dollars ($10,000,000) per
occurrence. The limits of said insurance required by this Lease as carried by
Lessee shall not, however, limit the liability of Lessee nor relieve Lessee of
any obligation hereunder. All insurance to be carried by the Lessee shall be
primary to and not contributory with, any similar insurance carried by Lessor,
whose insurance shall be considered excess insurance only. Lessor may require
Lessee’s liability insurance policy limits to be raised to conform with
requirements of Lessor’s lender and/or to bring coverage limits to levels then
being generally required of new tenants within the Project.

 

Section 7.05  Proof of Insurance

 

Lessee
shall furnish to Lessor prior to the Commencement Date, and during the Lease
Term, at least thirty (30) days prior to the expiration date of any
policy, certificates indicating that the property insurance and liability
insurance required to be maintained by Lessee is in full force and effect for
the twelve (12) month period following such expiration date; that Lessor
has been named as an additional insured to the extent of contractual liability
assumed in Section 7.07 and Section 7.08 and that all such policies
will not be canceled unless thirty (30) days’ prior written notice of the
proposed cancellation has been given to Lessor. The insurance shall be with
insurers approved by Lessor, provided, however, that such approval shall not be
unreasonably withheld so long as Lessee’s insurance carrier has a Best’s
Insurance Guide rating not less than A VIII and is licensed to do business in
California. Lessor shall furnish to Lessee reasonable evidence of its insurance
coverage required hereunder within fifteen (15) business days after demand
made therefor, however, not more than once in any calendar year.

 

Section 7.06  Mutual Waiver of Claims and
Subrogation Rights

 

Lessor
and Lessee hereby release and relieve the other, and waive their entire claim
of recovery for loss or damage to property arising out of or incident to fire,
lightning, and the other perils included in a standard “all risk” insurance
policy of a type described in Sections 7.01 and 7.02 above that is carried by
the waiving party (or that would have been if the waiving party had carried the
insurance required hereunder), when such property constitutes the Premises or
Building 10 or the Project, or is in, on or about the Premises or Building 10,
whether or not

 

23

 

such loss or damage is
due to the negligence of Lessor or Lessee, or their respective agents,
employees, guests, licensees, invitees, or contractors. Lessee and Lessor waive
all rights of subrogation against each other on behalf of, and shall obtain a
waiver of all subrogation rights from, all property and casualty insurers
referenced above.

 

Section 7.07  Indemnification and Exculpation

 

(a) Except
as otherwise provided in Section 7.07(b), Lessee shall indemnify and hold
Lessor free and harmless from any and all liability, claims, loss, damages,
causes of action (whether in tort or contract, law or equity, or otherwise),
expenses, charges, assessments, fines, and penalties of any kind, including
without limitation, reasonable attorney fees, expert witness fees and costs,
arising by reason of the death or injury of any person, including any person
who is an employee, agent, invitee, licensee, permittee, visitor, guest or
contractor of Lessee, or by reason of damage to or destruction of any property,
including property owned by Lessee or by any person who is an employee, agent,
invitee, permittee, visitor, or contractor of Lessee, caused or allegedly
caused (1) while that person or property is in or about the Premises; (2) by
some condition of the Premises (exclusive of structural defects or disrepair
that are the sole responsibility of Lessor under the terms of Section 5.04
and 6.01(b) of this Lease); (3) by some act or omission by Lessee or
its agent, employee, licensee, invitee, guest, visitor or contractor or any
person in, adjacent, on, or about the Premises with the permission, consent or
sufferance of Lessee; or (4) by any breach or default in timely observance
or performance of any obligation on Lessee’s part to be observed or performed
under this Lease.

 

(b) Notwithstanding
the provisions of Section 7.07(a) of this Lease, Lessee’s duty to
indemnify and hold Lessor harmless shall not apply to any liability, claims,
loss or damages, causes of action (whether in tort or contract, law or equity,
or otherwise), expenses, charges, assessments, fines and penalties of any kind,
including without limitation, reasonable attorney fees, expert witness fees and
costs arising by reason of Lessor’s, or its employees’, agents’ or contractors’,
negligence or willful act of misconduct.

 

(c) Lessee
hereby waives all claims against Lessor for damages to goods, wares and
merchandise and all other personal property in, on or about the Premises and
for injury or death to persons in, on or about the Premises from any cause
other than the intentionally misconduct of Lessor or Lessor’s agents, employees
or contractors, Notwithstanding the provisions of Section 7.07(b) above,
or any other provision of this Lease, in no event shall Lessor be liable (i) for
lost profits or other consequential damages arising from any cause, or (ii) for
any damage which is or could be covered by the insurance Lessee is required to
carry under this Lease.

 

Section 7.08  Lessor as Party Defendant

 

If by
reason of an act or omission of Lessee or any of its employees, agents,
invitees, licensee, visitors, guests or contractors, Lessor is made a party
defendant or a cross defendant to any action involving the Premises or this
Lease, Lessee shall hold harmless and indemnify Lessor from all liability or
claims of liability, including all damages, attorney fees and costs of suit.

 

24

 

ARTICLE VIII

DAMAGE OR DESTRUCTION

 

Section 8.01  Destruction of the Premises

 

(a) In
the event of a partial destruction of the Premises (i.e., less than fifty
percent (50%) of its Rentable Area) during the Lease Term from any cause,
Lessor, upon receipt of, and to the extent of, insurance proceeds paid in
connection with such casualty (or the proceeds that would have been received by
Lessor had Lessor maintained the insurance required of Lessor in Subsection
7.01 above, in the event Lessor fails to maintain such insurance) and the
deductible from Lessee which Lessee shall pay Lessee’s Share to Lessor within
thirty (30) business days after demand, shall forthwith repair the same,
including without limitation all Tenant Improvements and Alterations, whether
or not originally paid for or constructed by Lessor or Lessee, provided the
repairs can be made within a reasonable time under state, federal, county and
municipal applicable law, but such partial destruction shall in no way annul or
void this Lease, (except as provided in Section 8.01(b) or 8.01(c) below)
provided that Lessee shall be entitled to a proportionate credit for rent equal
to rental income insurance proceeds received by Lessor (or the proceeds that
would have been received by Lessor had Lessor maintained the insurance required
of Lessor in subsection 7.01 above, in the event Lessor fails to maintain such
insurance) and provided further that Lessee shall repair all damage and
destruction to those items as to which Lessee is required to maintain fire and
casualty insurance under Section 7.02 above. Lessor and Lessee each shall
use diligence in making such repairs within a reasonable time period, subject
to the Force Majeure provisions of Section 17.21, in which instance the
time period shall be extended accordingly, and this Lease shall remain in full
force and effect, with the rent to be proportionately reduced as provided above
in this Section. If the Premises are damaged by any peril within six (6) months
prior to the last day of the Lease Term (or, if Lessee has delivered its Option
Notice pursuant to Section 3.03(a) above, within six (6) months
prior to the last day of the Extended Term) and, in the reasonable opinion of
the Lessor’s architect or construction consultant, the restoration of the
Premises cannot be substantially completed within thirty (30) days after
the date of such damage Lessor or Lessee may terminate this Lease on thirty
(30) days written notice to the other party.

 

(b) If
the Premises are damaged or destroyed by any cause to the extent of more than
fifty percent (50%) of their total Rentable Area during the Lease Term,
Lessor shall notify Lessee within thirty (30) days after such damage or
destruction whether it will repair the same. If Lessor states that it will not,
or cannot, repair, this Lease shall terminate thirty (30) business days
after Lessor gives its notice.

 

(c) Lessee
shall have the option to terminate this Lease if the Premises are affected by a
casualty not caused by Lessee and the time estimated to substantially complete
the restoration exceeds thirteen (13) months from the date Lessor’s
architect’s opinion of the repair time is delivered to Lessee. Such termination
right shall be (i) exercised by written notice to Lessor delivered within
thirty (30) days after delivery to Lessee of Lessor’s architect’s opinion
and (ii) irrevocable and automatically waived if not so timely exercised.

 

(d) In
the event of a termination of the Lease pursuant to this Section 8.01,
Lessor shall be entitled to any insurance proceeds received by Lessor under the
policy of

 

25

 

insurance maintained by
Lessor under Section 7.01 as a result of the damage or destruction and
Lessee shall be entitled to any insurance proceeds from any separate,
additional policy obtained by Lessee as described in Sections 7.01 and/or 7.02.
The respective insurable interests of Lessor and Lessee in the Lessee
Improvements and Alterations shall not be affected by any termination of the
Lease following an event of damage or destruction as described herein.

 

(e) If
Lessor states that it will repair the Premises, Lessor shall, upon receipt of
and to the extent of insurance proceeds paid in connection with such casualty
and the deductible amount from Lessee, forthwith conduct the repair and
diligently pursue the same to completion, but such destruction shall in no way
annul or void this Lease except upon a termination of the Lease pursuant to
this Article VIII, provided that Lessee shall be entitled to a
proportionate credit for rent equal to rental income insurance proceeds
received by Lessor (or the proceeds that would have been received by Lessor had
Lessor maintained the insurance required of Lessor in subsection 7.01(iii) above,
in the event Lessor fails to maintain such insurance).

 

Section 8.02  Waiver of Civil Code Remedies

 

Lessee
hereby expressly waives any rights to terminate this Lease upon damage or
destruction to the Premises, including without limitation any rights pursuant
to the provisions of Section 1932, Subdivisions 1 and 2 and Section 1933,
Subdivision 4, of the California Civil Code, as amended from time-to-time, and
the provisions of any similar law hereinafter enacted.

 

Section 8.03  Damages Incurred during Repair

 

The
Base Rent, Additional Rent and other charges due under this Lease shall not be
reduced or abated by reason of any damage or destruction to the Premises (but
will be subject to credit as provided in Section 8.01(a) and (b) above
with respect to rental loss insurance proceeds received), and Lessor shall be
entitled to all proceeds of the insurance maintained pursuant to Section 7.01
above during the period of rebuilding pursuant to Section 8.01 above, or
if the Lease is terminated pursuant to Section 8.01 above. Lessee shall
have no claim against Lessor, including, without limitation, for compensation
for inconvenience or loss of business, profits or goodwill during any period of
repair or reconstruction.

 

Section 8.04  No Liability for Lessee’s Alterations
or Personal Property

 

In no
event shall Lessor have any liability for, nor shall it be required to repair
or restore, any injury or damage to Lessee’s Alterations or personal property
or to any other personal property of Lessee in or upon the Premises, Building
10 or Project.

 

ARTICLE IX

REAL PROPERTY TAXES

 

Section 9.01  Payment of Taxes

 

(a) Lessee
shall pay to Lessor Lessee’s Share, as an Operating Expense pursuant to Section 4.07
above, of all real property taxes, including any supplemental tax and any form
of real estate tax or assessment, general, special, ordinary or extraordinary,
and any license, fee, charge, excise or imposition (“real property tax”),
imposed, assessed or levied on or

 

26

 

with respect to the
Premises and the Project Common Areas by any Federal, State, County, City or
other political subdivision or public authority having the direct or indirect
power to tax, including, without limitation, any improvement district or any
community facilities district (including with respect to a district established
for purposes of constructing the Seaport Boulevard improvements and other
improvements as required in the Development Agreement or by the City of Redwood
City (“Community Facility District Bond”), as against any legal or equitable
interest of Lessor in the Project or against the Project or any part thereof
applicable to the Project for all periods of time included within the Lease
Term (as the same may be extended and during any holdover period), as well as
any government or private cost sharing agreement assessments made for the
purpose of augmenting or improving the quality of services and amenities
normally provided by government agencies and any tax, fee, charge, imposition
or excise described in subsection (b) below. Notwithstanding the
foregoing, Lessee shall not be required to pay any net income taxes, franchise
taxes, or any succession, estate or inheritance taxes of Lessor or any
penalties due to Lessor’s late or non-payment of any real property taxes,
unless such failure is caused by Lessee’s failure to pay Lessee’s Share of real
property taxes due hereunder.

 

(b) If
at any time during the Lease Term, the State of California or any political
subdivision of the state, including any county, city, city and county, public
corporation, district, or any other political entity or public corporation of
this state, levies or assesses against Lessor a tax, fee, charge, imposition or
excise on rents under the Lease, the square footage of the Premises or Project,
the act of entering into this Lease, or the occupancy of Lessee, or levies or
assesses against Lessor any other tax, fee, or excise, however described, including,
without limitation, a so called value added, business license, transit,
commuter, environmental or energy tax fee, charge or excise or imposition
related to the Project as a direct substitution in whole or in part for, or in
addition to, any real property taxes on the Project the same shall be included
in real property taxes and paid in accordance with Section 9.01(a).

 

(c) Lessor
shall provide Lessee with copies of all tax and assessment bills on the
Premises promptly upon Lessor’s receipt of Lessee’s written request therefor.
Lessor shall also promptly provide to Lessee evidence of payment upon Lessor’s
receipt of Lessee’s written request therefor.

 

(d) With
respect to taxes and assessments which may lawfully be paid in installments,
for the purpose of this Section, real property tax in any period shall include
only such portion of the same which is payable within such period and any
interest payable thereon computed (whether or not such is the case) as if
Lessor had elected to pay the same over the longest period permitted by law.

 

(e) If
Lessor shall obtain any abatement or refund on account of any real property tax
as to which Lessee shall have paid payments hereunder, Lessor shall promptly
refund to Lessee Lessee’s portion of any such abatement or refund, after
deducting therefrom the reasonable costs and expenses incurred by Lessor in
obtaining such abatement or refund.

 

27

 

Section 9.02  Pro Ration for Partial Years

 

If any
such taxes paid by Lessee shall cover any period prior to the Commencement Date
or after the Expiration Date of the Lease Term, Lessee’s Share of such taxes
shall be equitably prorated to cover only the period of time within the tax
fiscal year during which this Lease shall be in effect, and Lessor shall
reimburse Lessee to any extent required.

 

Section 9.03  Personal Property Taxes

 

(a) Lessee
shall pay prior to delinquency all taxes imposed, assessed against and levied
upon trade fixtures, furnishings, equipment and all other personal property of
Lessee contained in the Premises or elsewhere. When possible, Lessee shall
cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.

 

(b) If
any of Lessee’s personal property shall be assessed with Lessor’s real
property, Lessee shall pay Lessor the taxes attributable to Lessee within
thirty (30) days after receipt of a written statement setting forth the
amount of such tax bill reasonably allocated to Lessee’s property.

 

(c) If
Lessee shall fail to pay any such taxes, Lessor shall have the right to pay the
same, in which case Lessee shall repay such amount to Lessor with Lessee’s next
rent installment together with interest at the Agreed Rate.

 

Section 9.04  Right to Contest Real Property Taxes

 

Lessee
may, at any time (unless Lessor is already doing so), and at its sole expense,
contest the real property taxes due with respect to the Premises in its own
name and in a manner set forth by appropriate judicial or administrative
proceedings, provided that: (i) Lessee gives Lessor prior written notice
of such contest, (ii) Lessee pays the real property taxes required by the
applicable taxing authority while such contest is occurring, (iii) pays
any and all penalties, late interest or other fines associated with any such
contest and (iv) indemnifies, defends, protects and holds Lessor harmless
from any and all expenses (including reasonable attorneys’ fees), causes of
action, damages or liabilities associated with such contest.

 

ARTICLE X

UTILITIES

 

Section 10.01  Lessee to Pay

 

Lessee
shall pay prior to delinquency and throughout the Lease Term, all charges for
water, gas, heating, cooling, sewer, telephone, electricity, garbage, air
conditioning and ventilation, janitorial service, landscaping and all other
services and utilities supplied to the Premises directly to the service
provider in question. The disruption, failure, lack or shortage of any service
or utility with respect to the Premises, Building 10 or Project due to any
cause whatsoever shall not affect any obligation of Lessee hereunder, and
Lessee shall faithfully keep and observe all the terms, conditions and
covenants of this Lease and pay all rent due hereunder, all without diminution,
credit or deduction, provided that, to the extent the cause is the failure of

 

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Lessor to observe or
perform an obligation of Lessor, hereunder Lessor shall initiate the cure of
such failure immediately after receipt from Lessee of notice of the failure and
Lessor shall thereafter diligently prosecute said cure to completion.

 

ARTICLE XI

ASSIGNMENT AND SUBLETTING

 

Section 11.01  Lessor’s Consent Required

 

Except
as provided in Section 11.02, Lessee shall not voluntarily or by operation
of law assign, transfer, mortgage, sublet, license or otherwise transfer or
encumber all or any part of Lessee’s interest in this Lease or in the Premises
or any part thereof, without Lessor’s prior written consent, which Lessor shall
not unreasonably withhold, condition or delay. Lessor shall respond in writing
to Lessee’s request for consent hereunder within fifteen (15) business
days of Lessor’s receipt of Lessee’s request therefor, or within any extended
time period necessary in order for Lessor to receive a response from Lessor’s
lender, and any attempted assignment, transfer, mortgage, encumbrance,
subletting or licensing without such consent shall be void, and shall
constitute a breach of this Lease. If Lessor refuses to consent to Lessee’s
request, it shall specifically state in its response to Lessee the reason(s) for
denying such consent. By way of example, but not limitation, reasonable grounds
for denying consent include: (i) poor credit history or insufficient
financial strength of transferee, (ii) transferee’s intended use of the
Premises is inconsistent with the permitted use and will materially and
adversely affect Lessor’s interest. Lessee shall reimburse Lessor upon demand
for Lessor’s reasonable costs and expenses (including attorneys’ fees,
architect fees and engineering fees) involved in reviewing any request for
consent whether or not consent is granted. Notwithstanding any other provisions
of this Lease, if (i) the proposed assignee or sublessee has been required
by any prior landlord, lender or governmental authority to take remedial action
in connection with Hazardous Materials contaminating a property, where the
contamination resulted from such party’s action or use of the property in
question, (ii) the proposed assignee or sublessee is subject to any
enforcement order issued by any governmental authority in connection with the
use, storage, handling, treatment, generation, release or disposal of hazardous
materials (including, without limitation, any order related to the failure to
make a required reporting to any governmental authority), or (iii) because
of the existence of a pre-existing environmental condition in the vicinity of
or underlying the Project, the risk that Lessor would be targeted as a
responsible party in connection with the remediation of such pre-existing
environmental condition would be materially increased or exacerbated by the
proposed use of Hazardous Materials by such proposed assignee or sublessee,
Lessor shall have the absolute right to refuse to consent to any assignment or
subletting to any such party.

 

Section 11.02  Lessee Affiliates

 

Lessee
may assign this Lease, or sublet up to forty percent (40%) of the
Premises, without the need for Lessor’s consent (but with written notice to
Lessor prior to such transfer), to any corporation, limited liability company
or partnership which controls, is controlled by, or is under common control
with Lessee, or to any corporation, limited liability company or partnership
resulting from the merger or consolidation with Lessee, or to any person or
entity which acquires all of Lessee’s stock or all, or substantially all of the
assets of Lessee as a going

 

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concern of the business
that is being conducted on the Premises (collectively, an “Affiliate”),
provided that said assignee or sublessee (i) in the event of an assignment
of this Lease to an Affiliate only, has a net worth at least equal to the net
worth of Lessee as of the date of this Lease, and (ii) assumes, in full,
the obligations of Lessee under this Lease (or, in the case of a sublease, the
portion of the Premises subject to the Lease) and provided further that the use
to which the Premises will be put does not materially change. Any such
assignment shall not, in any way, affect or limit the liability of Lessee under
the terms of this Lease. Any portion of the Premises which is assigned or
sublet to an Affiliate of Lessee shall not be included in the calculation of
subleased, assigned or transferred Rentable Area for the purposes of Section 11.06.
In addition, the terms of Section 11.04, below, shall not be applicable to
any assignment or sublease pursuant to this Section.

 

Section 11.03  No Release of Lessee

 

Regardless
of Lessor’s consent, no subletting or assignment shall release Lessee of Lessee’s
obligation or alter the primary liability of Lessee to pay the rent and to
perform all other obligations to be performed by Lessee hereunder. The
acceptance of rent by Lessor from any other person shall not be deemed consent
to any subsequent assignment or subletting. In the event of default by any
assignee of Lessee or any successor of Lessee, in the performance of any of the
terms hereof, Lessor may proceed directly against Lessee without the necessity
of exhausting remedies against said assignee.

 

Section 11.04  Excess Rent

 

In the
event Lessor shall consent to a sublease or an assignment, Lessee shall pay to
Lessor with its regularly scheduled Base Rent payments, fifty percent
(50%) of all sums and the fair market value of all consideration collected
or received by Lessee from a sublessee or assignee which are in excess of the
Base Rent and Additional Rent due and payable with respect to the subleased or
assigned space pursuant to Article IV for the time period encompassed by
the sublease or assignment term, after first deducting: (i) leasing
commissions, and (ii) the unamortized cost (based on a straight-line
amortization over the entire Lease Term) of Tenant Improvements paid for by
Lessee over and above the Tenant Improvement Allowance and allocable to such
subleased or assigned premises (based on the rentable square footage of the
space assigned or sublet compared to the Premises).

 

Section 11.05  Information to be Provided

 

Lessee’s
written request to Lessor for consent to an assignment or subletting or other
form of transfer shall be accompanied by (a) the name and legal
composition of the proposed transferee; (b) the nature of the proposed
transferee’s business to be carried on in the Premises; (c) the terms and
provisions of the proposed transfer agreement; and (d) such financial and
other information as Lessor may reasonably request concerning the proposed
transferee.

 

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Section 11.06  Lessor’s Recapture Rights

 

(a) Lessor’s
Recapture Rights

 

Notwithstanding
any other provision of this Article 11, in the event that Lessee proposes
to sublease or assign or otherwise transfer to any person or entity not an
Affiliate of Lessee any interest in this Lease or the Premises or any part
thereof affecting (collectively with all other such subleases, assignments, or
transfers then in effect to parties which are not Affiliates) more than fifty
percent (50%) of the square footage of the Rentable Area of the Premises
for more than fifty percent (50%) of the remaining Lease Term is hereafter
designated “Recapture Space”),
then Lessor shall have the option to recapture the Recapture Space by written
notice to Lessee (“Recapture Notice”)
given within ten (10) business days after Lessor receives any notice of
such proposed assignment or sublease or other transfer (“Transfer Notice”). A timely Recapture
Notice terminates this Lease for the Recapture Space, effective as of the date
Lessee specified in the Transfer Notice, which date shall in no event be
shorter than thirty (30) days from the date of the Recapture Notice. If
Lessor declines or fails timely to deliver a Recapture Notice, Lessor shall
have no further right under this Section 11.06 to the Recapture Space
unless it becomes available again after transfer by Lessee. Lessor’s recapture
rights shall be subject to the rights of any sublessee, assignee or transferee
of Lessee set forth in any sublease, assignment or agreement of transfer to
which Lessor has consented, but subject to the terms and conditions set forth
in Lessor’s consent; any such sublease, assignment or agreement of transfer
shall be assigned to Lessor as of the effective date of the recapture.
Notwithstanding anything herein to the contrary, if Lessor elects to deliver a
Recapture Notice and terminate the Lease as set forth above, Lessee may negate
Lessor’s Recapture Notice by withdrawing its Transfer Notice by delivering
written notice thereof to Lessor within five (5) business days after
Lessee’s receipt of the Recapture Notice.

 

(b) Consequences
of Recapture

 

To
determine the new Base Rent under this Lease if Lessor recaptures the Recapture
Space and Lessee does not negate Lessor’s Recapture Notice within the time
periods provided therefore above, the then current Base Rent (immediately
before Lessor’s recapture) under the Lease shall be multiplied by a fraction,
the numerator of which is the square feet of the Rentable Area retained by
Lessee after Lessor’s recapture and the denominator of which is the total square
feet of the Rentable Area before Lessor’s recapture. The Additional Rent, to
the extent that it is calculated on the Rentable Area of the Premises, shall be
reduced to reflect Lessee’s Share based on the Rentable Areas of the Premises
retained by Lessee after Lessor’s recapture. This Lease as so amended shall
continue thereafter in full force and effect, except that Lessee shall be
released from liability under this Lease for future Base Rent and Additional
Rent with respect to the portion of the Premises subject to Lessor’s Recapture
Notice. Either party may require written confirmation of the amendments to this
Lease necessitated by Lessor’s recapture of the Recapture Space. If Lessor
recaptures the Recapture Space, Lessor shall, at Lessor’s sole expense,
construct, paint, and furnish any partitions required to segregate the
Recapture Space from the remaining Premises retained by Lessee as well as
arrange separate metering of utilities.

 

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ARTICLE XII

DEFAULTS; REMEDIES

 

Section 12.01  Defaults

 

The
occurrence of any one or more of the following events shall constitute a
material default and breach of this Lease by Lessee (each shall be an “Event of
Lessee’s Default”):

 

(a) The
abandonment of the Premises by Lessee or the commission of waste at the
Premises or the making of an assignment or subletting in violation of Article XI,
provided however, abandonment shall be considered to not occur if the Premises
are maintained and occupied to the extent necessary to maintain the insurance
on each and every portion of the Premises;

 

(b) The
failure by Lessee to make any payment of rent or any other payment required to
be made by Lessee hereunder, as and when due, if such failure continues for a
period of five (5) business days after written notice thereof from Lessor
to Lessee. In the event that Lessor serves Lessee with a Notice to Pay Rent or
Quit in the form required by applicable Unlawful Detainer statutes such Notice
shall constitute the notice required by this paragraph, provided that the cure
period stated in the Notice shall be five (5) business days rather than
the statutory three (3) days;

 

(c) Lessee’s
failure to provide (i) any required Replacement Letter of Credit Security
as required by Section 4.06, (ii) an estoppel certificate as required
by Section 15.01 or (iii) any document subordinating this Lease to a
Lender’s deed of trust as required by Section 17.13, if any such failure
continues for five (5) business days after written notice of the failure.
In the event Lessor serves Lessee with a Notice to Perform Covenant or Quit in
the form required by applicable Unlawful Detainer Statutes, such Notice shall
constitute the notice required by this paragraph, provided that the cure period
stated in the Notice shall be five (5) business days rather than the
statutory three (3) days;

 

(d) The
failure by Lessee to observe or perform any of the covenants, conditions or
provisions of this Lease to be observed or performed by Lessee, other than
described in paragraph (a) (b) or (c) above, if such failure
continues for a period of fifteen (15) days after written notice thereof
from Lessor to Lessee; provided, however, that if the nature of Lessee’s
default is such that more than fifteen (15) days are reasonably required
for its cure, then Lessee shall not be deemed to be in default if Lessee
commences such cure within said fifteen (15) day period and thereafter
diligently prosecutes such cure to completion;

 

(e) (i) The
making by Lessee of any general arrangement or assignment for the benefit of
creditors; (ii) the filing by Lessee of a voluntary petition in bankruptcy
under Title 11 U.S.C. or the filing of an involuntary petition against Lessee
which remains uncontested for a period of sixty (60) days; (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Lessee’s assets located at the Premises or of Lessee’s interest in this Lease;
or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee’s assets located at the Premises or of Lessee’s
interest in this Lease, provided, however, in the event that any provisions of
this Section 12.01(e) is contrary to any applicable law, such
provision shall be of no force or effect;

 

32

 

(f) The
discovery by Lessor that Lessee delivered to Lessor a financial statement that
was materially false; and

 

(g) The
occurrence of a material default and breach under any other lease between
Lessee (or an Affiliate thereof) and Lessor (or an affiliate of Lessor) for
premises in the Project, including but not limited to the Building 9 Lease.

 

Section 12.02  Remedies

 

If an
Event of Lessee’s Default shall occur, Lessor may at any time thereafter, and
without limiting Lessor in the exercise of any right or remedy which Lessor may
have by reason of such Event of Lessee’s Default:

 

(a) Terminate
Lessee’s right to possession of the Premises by any lawful means including by
way of unlawful detainer (and without any further notice if a notice in compliance
with the unlawful detainer statutes and in compliance with paragraphs (b), (c) and
(d) of Section 12.01 above has already been given), in which case
this Lease shall terminate and Lessee shall immediately surrender possession of
the Premises to Lessor. In such event Lessor shall be entitled to recover from
Lessee all damages incurred by Lessor by reason of an Event of Lessee’s Default
including, but not limited to, (i) the cost of recovering possession of
the Premises including reasonable attorney’s fees related thereto; (ii) the
worth at the time of the award of any unpaid rent that had been earned at the
time of the termination, to be computed by allowing interest at the Agreed Rate
but in no case greater than the maximum amount of interest permitted by law, (iii) the
worth at the time at the time of the award of the amount by which the unpaid
rent that would have been earned between the time of the termination and the
time of the award exceeds the amount of unpaid rent that Lessee proves could reasonably
have been avoided, to be computed by allowing interest at the Agreed Rate but
in no case greater than the maximum amount of interest permitted by law, (iv) the
worth at the time of the award of the amount by which the unpaid rent for the
balance of the Lease Term after the time of the award exceeds the amount of
unpaid rent that Lessee proves could reasonably have been avoided, to be
computed by discounting that amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of the award plus one per cent (1%), (v) any
other amount necessary to compensate Lessor for all the detriment proximately
caused by Lessee’s failure to perform obligations under this Lease, including
brokerage commissions and advertising expenses, and (vi) any other
amounts, in addition to or in lieu of those listed above, that may be permitted
by applicable law.

 

(b) Maintain
Lessee’s right to possession as provided in Civil Code Section 1951.4 in
which case this Lease shall continue in effect whether or not Lessee shall have
abandoned the Premises. In such event Lessor shall be entitled to enforce all
of Lessor’s rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder.

 

33

 

(c) Pursue
any other remedy now or hereafter available to Lessor under the laws or
judicial decisions of the state of California. Unpaid amounts of rent and other
unpaid monetary obligations of Lessee under the terms of this Lease shall bear
interest from the date due at the Agreed Rate.

 

Section 12.03  Default by Lessor

 

Lessor
shall not be in default under this Lease unless Lessor fails to perform
obligations required of Lessor within a reasonable time, but in no event later
than ten (10) business days after written notice by Lessee to Lessor and
to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to Lessee in
writing, specifying that Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor’s obligation is such that more
than ten (10) business days are reasonably required for performance then
Lessor shall not be in default if Lessor commences performance within such ten (10) business
day period and thereafter diligently prosecutes the same to completion. In the
event Lessor does not commence performance within the ten (10) business
day period provided herein, or fails to diligently prosecute such cure to
completion, Lessee may perform such obligation and will be reimbursed for its
expenses by Lessor together with interest thereon at the Agreed Rate within
thirty (30) days following demand for such payment. Lessee waives any
right to terminate this Lease or to vacate the Premises on Lessor’s default
under this Lease. Lessee’s sole remedy on Lessor’s default is an action for
damages or injunctive or declaratory relief. Notwithstanding the foregoing, (i) any
default beyond any applicable cure period by Lessor under the terms of the
Building 9 Lease shall also be a default under this Lease for any period of
time during which Lessor or any affiliate thereof is also the landlord under
the Building 9 Lease, and (ii) nothing herein shall be deemed applicable
in the event of Lessor’s delay in delivery of the Premises, in which case
Lessee’s rights and remedies shall be determined under Section 3.01 above.

 

Section 12.04  Late Charges

 

Lessee
hereby acknowledges that late payment by Lessee to Lessor of rent and other
sums due hereunder will cause Lessor to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain. Such
costs include, but are not limited to, processing and accounting charges, and
late charges which may be imposed on Lessor by the terms of any mortgage or
trust deed covering the Premises. Accordingly, if any installment of rent or
any other sum due from Lessee shall not be received by Lessor or Lessor’s
designated agent within five (5) business days after such amount is due
and owing, Lessee shall pay to Lessor a late charge equal to five percent
(5%) of such overdue amount. The parties hereby agree that such late
charge represents a fair and reasonable estimate of the costs Lessor will incur
by reason of late payment by Lessee. Acceptance of such late charge by Lessor
shall in no event constitute a waiver of an Event of Lessee’s Default with
respect to such overdue amount, nor prevent Lessor from exercising any of the
other rights and remedies granted hereunder. Notwithstanding the foregoing,
Lessor shall grant Lessee one (1) late payment during the first twelve
(12) months of the Lease Term without late charge, provided that Lessee
shall pay the applicable delinquent amount within five (5) business days
following written notice from Lessor of such delinquency.

 

34

 

Section 12.05  Lessor’s Right to Perform Lessee’s
Obligations

 

All
obligations to be performed or observed by Lessee under this Lease shall be
performed or observed by Lessee at Lessee’s expense and without any reduction
of rent. Lessor may perform or observe any obligation of Lessee for which there
exists an Event of Lessee Default hereunder, without waiving Lessor’s other
rights and remedies for Lessee’s failure to perform or observe any obligations
under this Lease and without releasing Lessee from any such obligations. Within
ten (10) days after receiving a statement from Lessor, Lessee shall pay to
Lessor the amount of expense reasonably incurred by Lessor in performing or
observing Lessee’s obligation.

 

ARTICLE XIII

CONDEMNATION OF PREMISES.

 

Section 13.01  Total Condemnation

 

If the
entire Premises, whether by exercise of governmental power or the sale or
transfer by Lessor to any condemnor under threat of condemnation or while
proceedings for condemnation are pending, at any time during the Lease Term,
shall be taken by condemnation such that there does not remain a portion
suitable for occupation, this Lease shall then terminate as of the date
transfer of possession is required. Upon such condemnation, all rent shall be
paid up to the date transfer of possession is required, and Lessee shall have
no claim against Lessor or the award for the value of the unexpired portion of
this Lease Term.

 

Section 13.02  Partial Condemnation

 

If any
portion of the Premises is taken by condemnation during the Lease Term, whether
by exercise of governmental power or the sale or transfer by Lessor to an
condemnor under threat of condemnation or while proceedings for condemnation
are pending, this Lease shall remain in full force and effect except that in
the event a partial taking (i) is more than thirty-three percent
(33%) of the Rentable square footage of the Premises; or (ii) leaves
the Premises unfit for the conduct of the business of Lessee, then Lessee shall
have the right to terminate this Lease effective upon the date transfer of
possession is required. Moreover, Lessor shall have the right to terminate this
Lease effective on the date transfer of possession is required if more than
thirty three percent (33%) of the total square footage of the Premises is
taken by condemnation. Lessee and Lessor may elect to exercise their respective
rights to terminate this Lease pursuant to this Section by serving written
notice to the other within thirty (30) days after receipt of notice of
condemnation (i.e., 30 days from the date on which Lessor received such notice
from the condemning authority for purposes of calculating the 30 days with
respect to Lessor, and 30 days from the date on which Lessee received a copy of
such notice from Lessor for purposes of calculating the 30 days with respect to
Lessee. All rent shall be paid up to the date of termination, and Lessee shall
have no claim against Lessor for the value of any unexpired portion of the
Lease Term. If this Lease shall not be terminated, then Base Rent after such
partial taking shall be that percentage of the adjusted Base Rent specified
herein, equal to the percentage which the rentable square footage of the
untaken part of the Premises, immediately after the taking, bears to the
rentable square footage of the entire Premises immediately before the taking.
If Lessee’s continued use of the Premises requires alterations and repair by
reason of a partial

 

35

 

taking, all such
alterations and repair shall be made by Lessor at Lessor’s expense. Lessee
waives all rights it may have under California Code of Civil Procedure Section 1265.130
or otherwise, to terminate this Lease based on partial condemnation.

 

Section 13.03  Award to Lessee

 

In the
event of any condemnation, whether total or partial, Lessee shall have the
right to claim and recover from the condemning authority such compensation as
may be separately awarded or recoverable by Lessee for loss of its business
fixtures, or equipment belonging to Lessee immediately prior to the
condemnation, moving expenses and loss of good will, to the extent separately
awarded by the condemning authority. The balance of any condemnation award
shall belong to Lessor (including, without limitation, any amount attributable
to any excess of the market value of the Premises for the remainder of the
Lease Term over the then present value of the rent payable for the remainder of
the Lease Term) and Lessee shall have no further right to recover from Lessor
or the condemning authority for any claims arising out of such taking, provided
that Lessee shall have the right to make a separate claim in the condemnation
proceeding, as long as the award payable to Lessor is not reduced thereby, for (i) the
taking of the unamortized (using the Lease Term as the amortization period)
value of the Tenant Improvements paid for by Lessee which are not removed by
Lessee, (ii) reasonable removal and relocation costs for any Tenant
Improvements or Alterations that Lessee has the right to remove and elects to
remove (if condemnor approves the removal), and (iii) relocation costs for
Lessee’s business, provided that the awarding to Lessee of the items described
in (i), (ii) and (iii) above does not reduce the condemnation award
that would otherwise be awarded to Lessor.

 

ARTICLE XIV

ENTRY BY LESSOR

 

Section 14.01  Entry by Lessor Permitted

 

Lessee
shall permit Lessor and its employees, agents and contractors, if accompanied
by Lessee (except in cases of emergency), to enter the Premises and all parts
thereof (i) upon twenty-four (24) hours notice (or without notice in
an emergency), including without limitation, Building 10 and all parts thereof
at all reasonable times for any of the following purposes: to inspect the
Premises; to maintain the Premises; to make such repairs to the Premises as
Lessor is obligated or may elect to make; and (ii) upon twenty-four
(24) hours notice to show the Premises and post “To Lease” signs for the
purposes of re-letting during the last twelve (12) months of the Lease
Term (provided Lessee has failed to exercise any remaining Option to Extend) to
show the Premises as part of a prospective sale by Lessor or to post notices of
nonresponsibility. Lessor shall have such right of entry without any rebate of
rent to Lessee for any loss of occupancy or quiet enjoyment of the Premises
hereby occasioned, provided, Lessor shall use commercially reasonable efforts
not to interfere with Lessee’s business operations at the Premises or
unreasonably interfere with Lessee’s access to, or parking at, the Project or
materially increase Lessee’s obligations or decrease Lessee’s rights under this
Lease. Notwithstanding anything in this Lease to the contrary, in exercising
any right to undertake any renovations, alterations, additions, restoration,
inspections, repairs or maintenance as set forth in this Lease, Lessor shall
comply with Lessee’s reasonable security measures and operating procedures and
shall minimize any disruption to Lessee..

 

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ARTICLE XV

ESTOPPEL CERTIFICATE

 

Section 15.01  Estoppel Certificate

 

(a) Either
Lessor or Lessee shall at any time upon not less than fifteen (15) days’
prior written notice from the other execute, acknowledge and deliver to the
requesting party a statement in writing (i) certifying, if true, that this
Lease is unmodified and in full force and effect (or, if modified, stating the
nature of such modification and certifying, if true, that this Lease, as so modified,
is in full force and effect) and the date to which the rent and other charges
are paid in advance, if any, and (ii) acknowledging, if true, that there
are not, to Lessee’s (or Lessor’s, as relevant) knowledge, any uncured defaults
on the part of the requesting party hereunder, or specifying such defaults if
any are claimed and (iii) certifying or acknowledging, if true, such other
matters as are reasonably requested by any prospective lender or buyer which
are reasonably related to the loan or sale transaction. Any such statement may
be conclusively relied upon by any prospective purchaser or encumbrancer of the
Premises.

 

(b) Lessee’s
failure to deliver such statement within such time shall be conclusive upon
Lessee (i) that this Lease is in full force and effect, without
modification except as may be represented by Lessor, (ii) that there are
no uncured defaults in Lessor’s performance, and (iii) that not more than
one month’s rent has been paid in advance, if any, and stating whether or not
to the actual knowledge of the signer of such certificate Lessee is in default
in the performance of any covenant, agreement or condition contained in this
Lease and, if so, specifying each such default of which the signer may have
knowledge, it being intended that any such statement delivered pursuant to this
Section 15.01(b) may be relied upon by any prospective assignee of
Lessee’s interest in this Lease or any lender or prospective lender (or
investor) or purchaser of any interest in Lessee or its assets. Any failure of
Lessee to deliver an estoppel certificate as provided herein shall, at the
option of Lessor, be an event of default hereunder by Lessee without the
requirement of any notice or grace period, except as is provided for in Section 12.01(c) above.
In addition, Lessor may charge Lessee, and Lessee shall pay to Lessor, a fee
equal to Five Hundred Dollars ($500) per day for each day Lessee is late in
delivering such estoppel certificate.

 

ARTICLE XVI

LESSOR’S LIABILITY

 

Section 16.01  Limitations on Lessor’s Liability

 

The
term “Lessor” as used herein shall mean only the owner or owners at the time in
question of the fee title of the Premises. In the event of any transfer of such
title or interest, Lessor herein named (and in case of any subsequent transfers
then the grantor) shall be relieved from and after the date of such transfer of
all liability as respects Lessor’s obligations thereafter to be performed,
provided that the Letter of Credit and any funds in the hands of Lessor or the
then grantor at the time of such transfer, in which Lessee has an interest,
shall be delivered to the

 

37

 

grantee. The obligations
contained in this Lease to be performed by Lessor shall, subject as aforesaid,
be binding on Lessor’s successors and assigns, only during their respective
periods of ownership. For any breach of this Lease by Lessor, the liability of
Lessor (including all persons and entities that comprise Lessor, and any
successor Lessor) and any recourse by Lessee against Lessor shall be limited to
the interest of Lessor, and Lessor’s successors in interest, in and to Building
10 and, to the extent Building 9 is owned by Lessor or any affiliate thereof,
Building 9, and the proceeds therefrom (including rents, insurance and
condemnation proceeds). On behalf of itself and all persons claiming by,
through, or under Lessee, Lessee expressly waives and releases Lessor and each
member, agent and employee of Lessor from any personal liability for breach of
this Lease.

 

ARTICLE XVII

GENERAL PROVISIONS

 

Section 17.01  Severability

 

The
invalidity of any provision of this Lease as determined by a court of competent
jurisdiction, shall in no way affect the validity of any other provision
hereof.

 

Section 17.02  Agreed Rate Interest on Past Due
Obligations

 

Except
as expressly herein provided, any amount due to either party not paid when due
shall bear interest at the lesser of the Bank of America prime rate plus four
percent (4%) or the maximum amount of interest allowed by law (“Agreed Rate”). Payment of such interest
shall not excuse or cure any default by either party under this Lease. Despite
any other provision of this Lease, the total liability for interest payments
shall not exceed the limits, if any, imposed by the usury laws of the State of
California. Any interest paid in excess of those limits shall be refunded to
the payor by application of the amount of excess interest paid against any sums
outstanding in any order that payee requires. If the amount of excess interest
paid exceeds the sums outstanding, the portion exceeding those sums shall be
refunded in cash to the payor by the payee. To ascertain whether any interest
payable exceeds the limits imposed, any nonprincipal payment (including late
charges) shall be considered to the extent permitted by law to be an expense or
a fee, premium, or penalty rather than interest.

 

Section 17.03  Time of Essence

 

Time
is of the essence in the performance of all obligations under this Lease.

 

Section 17.04  Additional Rent

 

Any
monetary obligations of Lessee to Lessor under the terms of this Lease shall be
deemed to be Additional Rent and Lessor shall have all the rights and remedies
for the nonpayment of same as it would have for nonpayment of Base Rent. All
references to “rent” (except specific references to either Base Rent or
Additional Rent) shall mean Base Rent and Additional Rent.

 

38

 

Section 17.05  Incorporation of Prior Agreements,
Amendments and Exhibits

 

This
Lease (including Exhibits A, B, C, D, E, F, G, H and I and Schedules 1, 2, 3,
4, 5 and 6) contains all agreements of the parties with respect to any matter
mentioned herein. No prior agreement or understanding pertaining to any such
matter shall be effective. This Lease may be modified in writing only, signed
by the parties in interest at the time of the modification. Except as otherwise
stated in this Lease, Lessee hereby acknowledges that neither the Lessor nor
any employees or agents of the Lessor has made any oral or written warranties
or representations to Lessee relative to the condition or use by Lessee of said
Premises and Lessee acknowledges that Lessee assumes all responsibility
regarding the Occupational Safety Health Act, the legal use and adaptability of
the Premises and the compliance thereof with all applicable laws and
regulations in effect during the Lease Term except as otherwise specifically
stated in this Lease. Neither party has been induced to enter into this Lease
by, and neither party is relying on, any representation or warranty outside
those expressly set forth in this Lease.

 

Section 17.06  Notices

 

(a) Written
Notice

 

Any
notice required or permitted to be given hereunder shall be in writing and
shall be given by a method described in paragraph (b) below and shall be
addressed to Lessee or to Lessor at the addresses noted below, next to the
signature of the respective parties, as the case may be. Either party may
specify a different address for notice purposes at any time by giving written
notice of such change to the other party in a manner provided herein at least
ten (10) days prior to the date such change is desired to be effective. A
copy of all notices required or permitted to be given to Lessor or Lessee (as
applicable) hereunder shall be concurrently transmitted to such party or
parties at such addresses as such party may from time to time hereafter
designate by notice to the other, but delay or failure of delivery to such
person shall not affect the validity of the delivery to Lessor or Lessee.

 

(b) Methods
of Delivery

 

(i) When
personally delivered to the recipient, notice is effective on delivery.
Delivery to the person apparently designated to receive deliveries at the
subject address is personally delivered if made during business hours (e.g.
receptionist).

 

(ii) When
mailed by certified mail with return receipt requested, notice is effective on
receipt if delivery is confirmed by a return receipt.

 

(iii) When
delivery by overnight delivery Federal Express/Airborne/United Parcel
Service/DHL WorldWide Express with charges prepaid or charged to the sender’s
account, notice is effective on delivery if delivery is confirmed by the
delivery service.

 

(c) Refused,
Unclaimed or Undeliverable Notices

 

Any
correctly addressed notice that is refused, unclaimed, or undeliverable because
of an act or omission of the party to be notified shall be considered to be
effective as of the first date that the notice was refused, unclaimed, or
considered undeliverable by the postal authorities, messenger, or overnight
delivery service.

 

39

 

Section 17.07  Waivers

 

No
waiver of any provision hereof shall be deemed a waiver of any other provision
hereof or of any subsequent breach of the same or any other provisions. Any
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of consent to or approval of any subsequent act. The acceptance
of rent hereunder by Lessor shall not be a waiver of any preceding breach by
Lessee of any provision hereof, other than the failure of Lessee to pay the
particular rent so accepted, regardless of Lessor’s knowledge of such preceding
breach at the time of acceptance of such rent.

 

Section 17.08  Recording

 

Either
Lessor or Lessee shall, upon request of the other, execute, acknowledge and
deliver to the other a “short form” memorandum of this Lease for recording
purposes for each of the properties on which Building 6, Building 7, Building
8, Building 9 and Building 10 are located, provided that Lessee simultaneously
executes in recordable form and delivers to Lessor a quit claim deed as to is
leasehold and any other interest in the Premises and hereby authorizes Lessor
to date and record the same only upon the expiration or sooner termination of
this Lease or, in the case of Buildings 6, 7 and 8, upon the termination of
Lessee’s expansion options with respect to each such property.

 

Section 17.09  Surrender of Possession; Holding Over

 

(a) At
the expiration or earlier termination of the Lease, Lessee shall remove all of
Lessee’s signs (pursuant to Section 17.15) and, subject to the terms of
the Removal Obligations Schedule and Section 6.03 of the Lease, shall
remove all of Lessee’s equipment, trade fixtures, supplies, wall decoration and
other personal property from within the Premises, Building 10 and the Common
Area and shall vacate, deliver up and surrender to Lessor possession of the
Premises and all improvements thereon, subject to the terms of Section 17.21
of this Lease concerning Hazardous Materials brought upon, kept, used, stored,
handled, treated, generated in, or released or disposed of from the Premises by
Lessee or any of Lessee’s agents, employees or contractors (collectively, “Lessee
HazMat Operations”) and released of all clearances required by any governmental
authorities with respect to Lessee HazMat Operations, broom clean and, in good
order and condition, excepting only ordinary wear and tear (wear and tear which
could have been avoided by best maintenance practices customarily used at the Project)
and damage due to casualty not caused by Lessee or Lessee’s agents, employees
or contractors. Except for such ordinary wear and tear and damage due to
casualty not caused by Lessee’s agents, employees or contractors (collectively,
the “Lessee’s Parties”), Lessee shall (i) repair all damage to the
Premises, the interior and exterior of Building 10 and the Common Area caused
by Lessee’s removal of its property, (ii) patch and refinish, to Lessor’s
reasonable satisfaction, all penetrations made by Lessee or its agents,
contactors, employees or invitees to the roof, floor, interior or exterior
walls or ceiling of the Premises and Building 10, whether such penetrations
were made with Lessor’s approval or not, to the extent that the equipment
requiring such penetration is removed at the expiration or earlier termination
of the Lease, (iii) repair or

 

40

 

replace all stained or
damaged ceiling tiles, wall coverings and floor coverings (unless such staining
or damage was caused by the actions of Lessor or the tenant of a leased space
above the Premises) to the reasonable satisfaction of Lessor, (iv) repair
all damage caused by Lessee to the exterior surface of Building 10 and, where
necessary, replace or resurface same. Upon expiration or sooner termination of
this Lease, Lessor may reenter the Premises and remove all persons and property
therefrom. If Lessee shall fail to surrender to Lessor the Premises, Building
10 and the Common Area in the condition required by this paragraph at the
expiration or, if sooner terminated, within ten (10) days after sooner
termination, of this Lease, Lessor may, at Lessee’s expense, remove Lessee’s
signs, property and/or improvements not so removed and make such repairs and
replacements not so made or hire, at Lessee’s expense, independent contractors
to perform such work. Lessee shall be liable to Lessor for all reasonable costs
incurred by Lessor in returning the Premises, Building 10 and the Common Area
to the required condition, together with interest thereon at the Agreed Rate
from the date incurred by Lessor until paid. Lessee shall pay to Lessor the
amount of all costs so incurred (including, without limitation, costs of
disposal, storage and insurance) together with interest at the Agreed Rate
within five (5) business days from Lessor’s delivery of a statement
therefor. If the Premises are not surrendered at the end of the Lease Term,
Lessee shall indemnify Lessor against loss or liability resulting from delay by
Lessee in so surrendering the Premises, including, without limitation, actual
damages for lost rent and with respect to any claims of a successor occupant.
Notwithstanding anything to the contrary contained in this Section 17.09,
and subject to the terms of the Removal Obligations Schedule, Lessee shall only
be required to remove those Tenant Improvements and Alterations as Lessor shall
have designated at the time Lessor gave its consent to such Tenant Improvements
and/or Alterations to the extent required pursuant to the terms of Section 6.03
hereof, or when consent was not required, in response to Lessee’s written
request for such determination.

 

(b) If
Lessee, with Lessor’s prior written consent, remains in possession of the
Premises after expiration of the Lease Term and if Lessor and Lessee have not
executed an express written agreement as to such holding over, then such
occupancy shall be a tenancy from month to month at a monthly Base Rent
equivalent to one hundred fifty percent (150%) of the higher of: (i) the
monthly rental in effect immediately prior to such expiration, or (ii) the
Fair Market Rent for the Premises, such payments to be made as herein provided
for Base Rent. In the event of such holding over, all of the terms of this
Lease, including the payment of Additional Rent all charges owing hereunder
other than rent shall remain in force and effect on said month to month basis.

 

(c) At
least three (3) months prior to the surrender of the Premises, Lessee
shall deliver to Lessor a narrative description of the actions proposed (or
required by any governmental authority) to be taken by Lessee in order to
surrender the Premises (including any Alterations permitted by Lessor to remain
in the Premises) at the expiration or earlier termination of the Lease Term, in
accordance with the requirements of any Environmental Laws or relevant
governmental authority or, in the absence thereof, the requirements of Lessor’s
lender or any commercially reasonable requirements of Lessor’s environmental
consultant (collectively “HazMat Requirements”) with respect to the Lessee
HazMat Operations and otherwise released for unrestricted use and occupancy
(the “Surrender Plan”). Such Surrender Plan shall be accompanied by a current
listing of (i) all Hazardous Materials licenses and permits held by or on
behalf of any Lessee’s Parties with respect to the Premises, and (ii) all
Hazardous Materials

 

41

 

used, stored, handled,
treated, generated, released or disposed of from the Premises, and shall be
subject to the review and approval of Lessor’s environmental consultant. In
connection with the review and approval of the Surrender Plan, upon the request
of Lessor, Lessee shall deliver to Lessor or its consultant such additional
non-proprietary information concerning Lessee HazMat Operations as Lessor shall
request. On or before such surrender, Lessee shall deliver to Lessor evidence
that the approved Surrender Plan shall have been satisfactorily completed and
all HazMat Requirements have been met and Lessor shall have the right, subject
to reimbursement at Lessee’s expenses as set forth below, to cause Lessor’s
environmental consultant to inspect the Premises and perform such additional
procedures as may be deemed reasonably necessary to confirm that the Premises
are, as of the effective date of such surrender or early termination of the
Lease, in accordance with applicable HazMat Requirements. Lessee shall
reimburse Lessor, as Additional Rent, for the actual, out-of-pocket expense
incurred by Lessor for Lessor’s environmental consultant to review and approve
the Surrender Plan and to visit the Premises and verify satisfactory completion
of the same. Lessor shall have the unrestricted right to deliver such Surrender
Plan and any report by Lessor’s environmental consultant with respect to the
surrender of the Premises to third parties. If Lessee shall fail to prepare or
submit a Surrender Plan approved by Lessor, or if Lessee shall fail to complete
the approved Surrender Plan, or if such Surrender Plan, whether or not approved
by Lessor, shall fail to adequately address any residual effect of Lessee
HazMat Operations in, on or about the Premises in violation of HazMat
Requirements, Lessor shall have the right to take such actions as Lessor may
deem reasonable or appropriate to assure that the Premises and the Project are
surrendered free from any residual impact from Lessee HazMat Operations, the
cost of which actions shall be reimbursed by Lessee as Additional Rent.

 

Section 17.10  Cumulative Remedies

 

No
remedy or election hereunder by Lessor shall be deemed exclusive but shall,
wherever possible, be cumulative with all other remedies at law or in equity,
provided that notice and cure periods set forth in Article XII are
intended to extend and modify statutory notice provisions to the extent
expressly stated in Section 12.01.

 

Section 17.11  Covenants and Conditions

 

Each
provision of this Lease to be observed or performed by Lessee and Lessor shall
be deemed both a covenant and a condition.

 

Section 17.12  Binding Effect; Choice of Law

 

Subject
to any provisions hereof restricting assignment or subletting by Lessee and
subject to the provisions of Article XVI, this Lease shall bind the
parties, their personal representatives, successors and assigns. This Lease
shall be governed by the laws of the State of California and any legal or
equitable action or proceeding brought with respect to the Lease or the
Premises shall be brought in San Mateo County, California except for such
actions or proceedings as are required by California law to be brought in the
County were the subject real property is located.

 

42

 

Section 17.13  Lease to be Subordinate

 

Lessee
agrees that this Lease is and shall be, at all times, subject and subordinate
to the lien of any mortgage, deed of trust or other encumbrances which Lessor
may create against the Premises, including all renewals, replacements and
extensions thereof provided, however, that regardless of any default under any
such mortgage, deed of trust or other encumbrance or any sale of the Premises
under such mortgage, deed of trust or other encumbrance so long as, subject to
all applicable notice and cure periods, Lessee timely performs all covenants
and conditions of this Lease and continues to make all timely payments
hereunder, this Lease and Lessee’s possession and rights hereunder shall not be
disturbed by the mortgagee or beneficiary or anyone claiming under or through
such mortgagee or beneficiary. Lessee shall execute any documents which are
commercially reasonable (i.e., of a type customarily executed between lenders
and lessees for similar loans and leases) subordinating this Lease within ten (10) business
days after delivery of same by Lessor so long as the mortgagee or beneficiary
agrees therein that this Lease will not be terminated if Lessee is not in
default following a foreclosure, including, without limitation, any
Subordination Non-Disturbance and Attornment Agreement (“SNDA”) which is
substantially in the form attached hereto as Exhibit “C”. In any event,
Lessor and Lessee agree that Lessee may terminate this Lease upon written
notice thereof to Lessor at any time after the date that is twenty
(20) business days after the date of this Lease if Lessor and Lessor’s
lender have not executed and delivered an executed version of a SNDA in the
substantially the form attached hereto as Exhibit “C” to Lessee. In the
event that any mortgage or deed of trust is foreclosed or a conveyance in lieu
of foreclosure is made for any reason, and this Lease shall terminate, Lessee
shall, notwithstanding any subordination, attorn to and become the tenant of
such mortgagee or beneficiary or any successor to Lessor by foreclosure or
deed-in-lieu of foreclosure, at the option of such successor in interest,
provided however, that any such successor shall not (i) be liable for any
previous act or omission of Lessor under the Lease, (ii) be subject to any
offset, defense or counterclaim which shall theretofore have accrued to the
Lessee under the Lease against Lessor, or (iii) have any obligation with
respect to any security deposit unless it shall have been paid over or
physically delivered to such successor, or (iv) be bound by any rents paid
more than one month in advance to Lessor or any prior landlord or owner. Lessee
shall execute and deliver, upon reasonable prior notice from Lessor any
additional documents in such form as is designated by Lessor evidencing the
priority or subordination of the Lease with respect to any such lien of any such
mortgage or deed of trust.

 

Section 17.14  Attorneys’ Fees

 

If
either party herein brings an action to enforce the terms hereof or to declare
rights hereunder, the prevailing party in any such action, on trial or appeal,
shall be entitled to recover its reasonable attorney’s fees, expert witness
fees and costs as fixed by the Court.

 

Section 17.15  Signs

 

Lessee
may, at Lessee’s sole expense, place Lessee’s company name on the monument sign
for Building 10 at a location reasonably agreed by Lessee and Lessor and
otherwise subject to the terms of this Section 17.15. Lessee shall also be
entitled, at Lessee’s expense, to a pro rata share of directional signage at
the Project for Building 10. Lessee shall not place any sign outside the
Premises (or visible from outside the Premises) without Lessor’s prior

 

43

 

written consent, which
consent shall not be unreasonably withheld and subject to Lessee’s obtaining
approval by the City of Redwood City. Lessee, at its sole cost and expense,
after obtaining Lessor’s prior written consent, shall install, maintain and
remove prior to expiration of this Lease (or within ten (10) days after
any earlier termination of this Lease) all signage in full compliance with (i) all
applicable law, statutes, ordinances and regulations and (ii) all
provisions of this Lease concerning Alterations, and (iii) Lessor’s
signage policy set forth on Exhibit “D” hereto.

 

Section 17.16  Merger

 

The
voluntary or other surrender of this Lease by Lessee, or a mutual cancellation
thereof, or a termination by Lessor, shall not work a merger, and shall, at the
option of Lessor, terminate all or any existing subtenancies or may, at the
option of Lessor, operate as an assignment to Lessor of any or all of such
subtenancies.

 

Section 17.17  Quiet Possession

 

Upon
Lessee timely paying the rent for the Premises and timely observing and
performing all of the covenants, conditions and provisions on Lessee’s part to
be observed and performed hereunder, Lessee shall have quiet possession of the
Premises for the entire Lease Term, subject to all of the provisions of this
Lease.

 

Section 17.18  Easements

 

Lessor
reserves to itself the right, from time to time, to grant such easements,
rights and dedications that Lessor deems necessary or desirable, and to cause
the recordation of Parcel Maps and conditions, covenants and restrictions, so
long as such easements, rights, dedications, Maps and conditions, covenants and
restrictions do not unreasonably interfere with or diminish the use of the
Premises or parking rights granted hereunder, including access thereto, by
Lessee. Lessee shall sign any of the aforementioned or other documents, and
take such other actions, which are reasonably necessary or appropriate to
accomplish such granting, recordation and subordination of the Lease to same,
upon request of Lessor, and failure to do so within ten (10) business days
after a written request to do so shall constitute a material breach of this
Lease, provided that Lessor shall reimburse Lessee for Lessee’s reasonable
out-of-pocket expenses (including reasonable attorneys’ fees) necessarily
incurred in the performance of Lessee’s obligations under this Section 17.18.

 

Section 17.19  Authority

 

Each
individual executing this Lease on behalf of a corporation, limited liability
company or partnership represents and warrants that he or she is duly
authorized to execute and deliver this Lease on behalf of such entity, and that
this Lease, once fully executed, shall be binding upon said entity in
accordance with its terms.

 

Section 17.20  Force Majeure Delays

 

In any
case where either party hereto is required to do any act (other than the
payment of money), delays caused by or resulting from Acts of God or Nature,
war, civil

 

44

 

commotion, fire, flood or
other casualty, labor difficulties, shortages of labor or materials or
equipment, government regulations, delay by government or regulatory agencies
with respect to approval or permit process, unusually severe weather, or other
causes beyond such party’s reasonable control, the time during which such act
shall be completed, shall be deemed to be extended by the period of such delay,
whether such time be designated by a fixed date, a fixed time or a “reasonable
time.”

 

Section 17.21  Hazardous Materials

 

(a) Definition
of Hazardous Materials and Environmental Laws

 

“Hazardous
Materials” means any (a) substance, product, waste or other material of
any nature whatsoever which is or becomes listed regulated or addressed
pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. sections 9601, et seq. (“CERCLA”); the Hazardous
Materials Transportation Act (“HMTA”) 49 U.S.C. section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. section 6901, et seq. (“RCRA”);
the Toxic Substances Control Act, 15 U.S.C. sections 2601, et seq. (“TSCA”);
the Clean Water Act, 33 U.S.C. sections 1251, et seq.; the California Hazardous
Waste Control Act, Health and Safety Code sections 25100, et seq.; the
California Hazardous Substances Account Act, Health and Safety Code sections
26300, et seq.; the California Safe Drinking Water and Toxic Enforcement Act,
Health and Safety Code sections 25249.5, et seq.; California Health and Safety
Code sections 25280, et seq.; (Underground Storage of Hazardous Substances);
the California Hazardous Waste Management Act, Health and Safety Code sections
25170.1, et seq.; California Health and Safety Code sections 25501. et seq.
(Hazardous Materials Response Plans and Inventory); or the Porter Cologne Water
Quality Control Act, California Water Code sections 13000, et seq., all as
amended, or any other federal, state or local statute, law, ordinance,
resolution, code, rule, regulation, order or decree regulating, relating to or
imposing liability (including, but not limited to, response, removal and
remediation costs) or standards of conduct or performance concerning any
hazardous, toxic or dangerous waste, substance or material, as now or at any
time hereafter may be in effect (collectively, “Environmental Laws”); (b) any
substance, product, waste or other material of any nature whatsoever whose
presence in and of itself may give rise to liability under any of the above
statutes or under any statutory or common law theory based on negligence,
trespass, intentional tort, nuisance, strict or absolute liability or under any
reported decisions of a state or federal court, (c) petroleum or crude
oil, including but not limited to petroleum and petroleum products contained
within regularly operated motor vehicles and (d) asbestos.

 

(b) Lessor’s
Representations and Disclosures

 

Lessor
represents that it has provided Lessee with a description of the Hazardous
Materials on or beneath the Project as of the date hereof attached hereto as Exhibit “I”
and incorporated herein by reference and that except as described in the
documents identified in Exhibit “F,” Lessor has no actual knowledge of any
Hazardous Materials at the Project. Lessee acknowledges receipt of the attached
Exhibit “F”, which Lessor has provided pursuant to California Health &
Safety Code Section 25359.7 which requires:

 

“Any
owner of nonresidential real property who knows, or has reasonable cause to
believe, that any release of hazardous substances has come to be located on or
beneath that real property shall, prior to the sale, lease or rental of the
real property by that owner, give written notice of that condition to the
buyer, lessee or renter of the real property.”

 

45

 

(c) Use
of Hazardous Materials

 

Lessee
shall not cause or permit any Hazardous Materials to be brought upon, kept or
used in, on or about the Project by Lessee or Lessee’s Parties without Lessor’s
prior written consent, except that Lessee may, without the need for Lessor’s
prior written consent, bring on, keep at and use in, on or about the Premises
those Hazardous Materials described in Schedule 4 attached hereto or any
similar Hazardous Materials used for substantially the same purposes in
substitution thereof in compliance with applicable Environmental Laws, even if
they are Hazardous Materials. All such Hazardous Materials will be used, kept
and stored by Lessee in a manner that complies with all applicable
Environmental Laws. Lessee shall, at all times, use, keep, test, store, handle,
transport, treat or dispose all such Hazardous Materials in or about the
Project in compliance with all applicable HazMat Requirements. Lessee shall
remove Hazardous Materials used or brought onto the Project during the Lease
Term from the Project prior to the expiration or earlier termination of the
Lease in accordance with any applicable HazMat Requirements and the Surrender
Plan approved by Lessor.

 

(d) Lessee’s
Environmental Indemnity

 

Lessee
agrees to indemnify, defend, protect and hold Lessor harmless from any
liabilities, losses, claims, damages, penalties, fines, attorney fees, expert
fees, court costs, remediation costs, investigation costs, or other expenses
resulting from or arising out of the use, storage, treatment, transportation,
release, presence, generation, or disposal of Hazardous Materials on, from or
about the Project, and/or subsurface or ground water from an act or omission of
Lessee (or Lessee’s successor-in-interest), its agents, employees, invitees, vendors
or contractors.

 

(e) Lessee’s
Obligation to Promptly Remediate

 

If the
presence of Hazardous Materials on the Premises after the Commencement Date
results from an act or omission of Lessee (or Lessee’s successor-in-interest),
its agents, employees, invitees, vendors, contractors, guests, or visitors
results in contamination of the Project or any water or soil beneath the
Project in violation of applicable HazMat Requirements, Lessee shall promptly
take all action necessary or appropriate to test, investigate and remedy that
contamination, at its sole cost and expense, provided that Lessor’s consent to
such action shall first be obtained, which consent shall not be unreasonably
withheld, conditioned or delayed.

 

(f) Notification

 

Lessor
and Lessee each agree to promptly notify the other of any communication
received from any governmental entity concerning Hazardous Materials or the
violation or alleged violation of Environmental Laws that relate to the
Project. In addition,

 

46

 

Lessee shall promptly
provide to Lessor copies of any approvals or disapprovals received from any
relevant governmental agency in connection with permits, licenses or periodic
or episodic testing or remediation of the Premises by Lessee required by HazMat
Requirements, including but not limited to the plans, permits and licenses
described in Schedule 5 attached hereto or any other such plans, permits
and licenses instead performed by Lessee pursuant to HazMat Requirements. Without
limiting the foregoing, Lessee shall deliver to Lessor any applications for
decommissioning the Premises pursuant to HazMat Requirements at the same time
such application is delivered to the relevant governmental agency. Lessor shall
have the opportunity to participate in, and comment on, any such decommission
or surrender plan application and the final version of such plan shall be
subject to Lessor’s written approval.

 

(g) Testing.

 

Lessor
shall have the right to conduct tests of the Premises at any time that Lessor
seeks to sell or refinance the Premises, or if Lessor has reasonable grounds to
believe that Hazardous Materials may exist at the Premises in violation of the
terms of this Lease. Such test shall be performed in order to determine whether
any contamination of the Premises or the Project has occurred as a result of
Lessee’s use. Lessee shall be required to pay the reasonable cost of such tests
of the Premises if they are performed due to Lessor’s reasonable grounds to
believe that Hazardous Materials may exist at the Premises in violation of the
terms of this Lease (Lessor shall pay the costs of such tests in the event of a
sale or refinancing); provided, however, that if Lessee conducts its own tests
of the Premises using third party contractors and test procedures acceptable to
Lessor which tests are certified to Lessor, Lessor shall accept such tests in
lieu of such tests to be paid for by Lessee. In connection with such testing,
upon the request of Lessor, Lessee shall deliver to Lessor or its consultant
such non-proprietary information concerning the use of Hazardous Materials in
or about the Premises by Lessee or any Lessee Parties. If contamination has
occurred in violation or excess of the HazMat Requirements for which Lessee is
liable under this Section 17.21, Lessee shall pay all costs to conduct
such tests. If no such contamination is found, Lessor shall pay the costs of
such tests. Lessee shall, at its sole cost and expense, promptly and
satisfactorily remediate any environmental conditions identified by such
testing in accordance with HazMat Requirements. Lessor’s receipt of or
satisfaction with any environmental assessment in no way waives any rights
which Lessor may have against Lessee. Notwithstanding anything herein to the
contrary, within thirty (30) days prior to the Expiration Date or any
earlier date on which the Lease terminates, Lessee shall, at Lessee’s sole
expense, deliver to Lessor a phase II environmental audit of the Premises
showing the environmental condition of the Premises and the completion of
Lessee’s Surrender Plan for the Premises.

 

(h) Dispute
Resolution. Notwithstanding anything herein to the contrary, if Lessor
requires Lessee to perform any testing, clean-up or remediation of Hazardous
Materials, or if Lessor requires Lessee to modify Lessee’s use of Hazardous
Materials at the Premises in a manner or in amounts other than as is required
by Environmental Laws pursuant to either this Section 17.21 or Section 17.09(c) above,
and Lessee believes that Lessor’s requirements are not commercially reasonable,
then if Lessee provides Lessor with written notice thereof (the “Dispute Notice”)
within fifteen (15) business days of the date on which Lessor first
informs Lessee in writing of such requirement, then such dispute shall be
remedied pursuant to the terms of this Subparagraph 17.22(h). If such a dispute
exists, Lessor and Lessee shall meet within ten

 

47

 

(10) business days
after the date of the Dispute Notice and attempt in good faith to resolve the
dispute. If, despite such meeting, the parties cannot resolve the dispute, each
of Lessor and Lessee shall separately designate to the other in writing an
environmental expert to determine if the requirement in question is commercially
reasonable. Each environmental expert designated shall have at least ten (10) years
experience in performing environmental audits of real property in San Mateo
County and shall be paid by the party choosing such expert. The failure of
either party to appoint an environmental expert within the time allowed shall
be deemed equivalent to appointing the environmental expert appointed by the
other party, who shall then determine whether the requirement in question is
commercially reasonable. The two (2) environmental experts shall then each
prepare a written proposal of what a commercially reasonable environmental
requirement for the activity in question. If the two (2) environmental
experts are unable to agree on whether the requirement in question is
commercially reasonable, or, in lieu thereof, to come to agreement on a
commercially reasonable environmental requirement for the issue in question,
within fifteen (15) business days of their appointment, the two designated
environmental experts shall jointly designate a third similarly qualified
environmental expert. The third environmental expert shall within ten (10) business
days following its appointment, then determine which of the two environmental
experts’ determinations most closely reflects an appropriate, commercially
reasonable requirement with respect to the Hazardous Materials issue in
question. The third environmental expert shall have no rights to adjust, amend
or otherwise alter the determinations made by the environmental experts selected
by the parties, but must select one or the other of such experts’ submissions.
The determination by such third environmental expert shall be final and binding
upon the parties. Said third environmental expert shall, upon selecting the
determination, concurrently notify both parties hereto. The parties shall share
the expenses of the third environmental expert equally.

 

(i) Survival.

 

Lessee’s
obligations pursuant to this Section 17.21 shall survive the expiration or
earlier termination of this Lease.

 

Section 17.22  Modifications Required by Lessor’s
Lender

 

If any
lender of Lessor requests a modification of this Lease that will not increase
Lessee’s cost or expense or materially and adversely change Lessee’s rights and
obligations hereunder, this Lease shall be so modified and Lessee shall execute
whatever documents are required by such lender and deliver them to Lessor
within ten (10) days after the request.

 

Section 17.23  Brokers

 

Lessor
and Lessee each represents to the other that it has had no dealings with any
real estate broker or agent in connection with the negotiation of this Lease,
except for Cornish & Carey Commercial, in the case of Lessor, and
Cornish & Carey Commercial in the case of Lessee (collectively, the “Brokers”)
and that they know of no other real estate broker or agent who is entitled to a
commission or finder’s fee in connection with this Lease. Each party shall
indemnify, protect, defend, and hold harmless the other party against all
claims, demands, losses, liabilities, lawsuits, judgments, and costs and
expenses (including reasonable attorney fees) for any leasing commission,
finder’s fee, or equivalent compensation alleged to be owning on

 

48

 

account of the
indemnifying party’s dealings with any real estate broker or agent other than
the Brokers. The terms of this Section 17.23 shall survive the expiration
or earlier termination of the Lease.

 

Section 17.24  Acknowledgment of Notices

 

Lessor
has provided and Lessee hereby acknowledges receipt of the Notices attached as
Exhibits “G” and “H” hereto, concerning the presence of certain uses and
operations of neighboring parcels of land.

 

Section 17.25  Right of First Offer.

 

(a) Grant.

 

Subject
to the terms of this Section 17.25, Lessor grants to Lessee during the
Right of First Offer Term a continuing right of first offer (“Right of First
Offer”) to lease any space which is available for lease located in Building 6
in the Project (“Available Space”). For the purposes of this Section 17.25,
such space shall not be deemed available for lease, and this Right of First
Offer shall not apply, if the space in question is already leased to a tenant
thereof who leases or re-leases such space pursuant to any then-existing or
future agreement to extend the term of its lease or expand the size of its
premises between Lessor and such tenant.

 

(b) Term.

 

The
term of the Right of First Offer (“Right of First Offer Term”) shall commence
on the Commencement Date of this Lease and shall terminate on the expiration or
earlier termination of this Lease.

 

(c) Covenants
of Lessor.

 

Subject
to the conditions precedent established by subsection (e) below, if at any
time during the Right of First Offer Term Lessor decides to offer any Available
Space for lease to the general public, Lessor shall first provide Lessee with a
written notice (“Offer Notice”) detailing (i) the rent at which said
Available Space is being offered, (ii) the rentable square footage and
location thereof, (iii) the date the Available Space will become available
and (iv) all other material economic terms upon which Lessor proposes to
lease the Available Space to Lessee. If Lessee does not deliver an Acceptance
Notice (as defined below) in response to such Offer Notice and Lessor
subsequently decides to offer the Available Space for lease to the general
public at a lesser rental rate than was described in the initial Offer Notice,
then Lessor shall send Lessee a subsequent Offer Notice and the terms of this Section 17.25
shall apply again to such subsequent Offer Notice.

 

(d) Exercise
of Lessee’s Right of First Offer.

 

Subject
to the conditions precedent established by subsection (e) below, Lessee
may exercise Lessee’s Right of First Offer to lease all (but not less than all)
of the Available Space described in the Offer Notice by providing Lessor with
written notice (“Acceptance Notice”) thereof within ten (10) business days
of Lessor’s delivery to Lessee of the Offer Notice.

 

49

 

If Lessee does not
exercise its Right of First Offer within said ten (10) business day
period, Lessor shall be relieved of Lessor’s obligation to lease the Available
Space mentioned in the Offer Notice to Lessee and the provisions of this Section 17.25
shall not apply to Lessor.

 

(e) Conditions
to Right of First Offer.

 

Notwithstanding
anything to the contrary in this Section 17.25, Lessor shall have no
obligation to provide Lessee with an Offer Notice, and Lessee shall have no
right to exercise Lessee’s Right of First Offer, if: (i) Lessor has
delivered a written notice to Lessee that Lessee is in default hereunder or
under the Building 9 Lease and such default has not yet been cured either: (a) at
the time Lessor seeks to lease the Available Space in question, or at the time
Lessee seeks to give Lessor an Acceptance Notice, whichever, is relevant, or (b) upon
the date Lessee seeks to take possession of the Available Space referenced in
the Offer Notice, (ii) Lessee has assigned this Lease or sublet more than
fifty percent (50%) of the rentable space located in the Premises to a
party other than an Affiliate, (iii) Lessee then occupies less than fifty
percent (50%) of the Premises, (iv) Lessee has received more than
three (3) written notices of monetary default and more than one (1) written
notice of a non-monetary default from Lessor during the Lease Term or under the
Building 9 Lease during the “Lease Term” of that lease, (v) as of the date
of such Offer Notice, Lessee does not meet the financial tests set forth in Schedule
6 attached hereto, or (vi) Lessor’s lender does not consent to Lessee’s
expansion into the Available Space.. Lessee’s Right of First Offer shall be
personal to Lessee and Lessee’s Affiliate and shall not be transferable with
any assignment of this Lease or subletting of the Premises.

 

(f) Terms
for Right of First Offer.

 

In the
event that Lessee exercises Lessee’s Right of First Offer, Lessee’s occupancy
of the Available Space taken shall be on all of the same terms and conditions
described in the Offer Notice. In such event, Lessee’s Share due hereunder
shall also be adjusted accordingly.

 

(g) New
Lease.

 

Lessor
and Lessee hereby agree to execute a new lease for such Available Space in the
same form and, except for the business terms of the Offer Notice and terms made
necessary as a result of the different space, having the same content as this
Lease (“New Lease”) prior to Lessee’s occupancy of the Available Space in
question. The New Lease shall specify, among other things, the Rent, date of
occupancy, increase in Lessee’s Share and square footage of the Available Space
taken in connection with Lessee’s exercise of Lessee’s Right of First Offer,
and shall otherwise be on the terms of this Lease, except for whatever changes
are required in connection with any differing uses of the Available Space by
Lessee. If Lessee does not execute such a New Lease within ten (10) business
days after the date on which Lessor provides Lessee with a form of New Lease as
described in this Subsection (g), then, at Lessor’s option, Lessee’s right to
lease the Available Space on the terms referenced in the Offer Notice shall be
void and terminated, provided that such termination shall not affect Lessee’s
ongoing rights pursuant to the terms of this Section 17.25.

 

50

 

Section 17.26  Right of First Refusal.

 

(a) Grant.

 

Subject
to the terms of this Section 17.26, Lessor grants to Lessee during the
Right of First Refusal Term a continuing right of first refusal (“Right of
First Refusal”) to lease any space which is available for lease in either
Building 7 or Building 8 in the Project (“Available ROFR Space”). For the
purposes of this Section 17.26, such space shall not be deemed available
for lease, and this Right of First Refusal shall not apply, if the space in
question is already leased to a tenant thereof who leases such space pursuant
to any then-existing or future agreement to extend the term of its lease or
expand the size of its premises between Lessor and such tenant.

 

(b) Covenants
of Lessor.

 

Subject
to the conditions precedent established by subsection (d) below, if at any
time during the Lease Term Lessor receives an offer which Lessor is willing to
accept from a bona fide third party to lease any space in the Available ROFR
Space, Lessor shall first provide Lessee with a written notice (“Refusal Offer
Notice”) detailing (i) the rent at which said Available ROFR Space is to
be leased to the third party, (ii) the rentable square footage and
location thereof, (iii) the date the Available ROFR Space will become
available and the term of the proposed lease and (iv) all other material
economic terms upon which Lessor is willing to lease the Available ROFR Space
in question to such third party.

 

(c) Exercise
of Lessee’s Right of First Refusal.

 

Subject
to the conditions precedent established by subsection (d) below, Lessee
may exercise Lessee’s Right of First Refusal to lease all (but not less than
all) of the Available ROFR Space described in the Refusal Offer Notice by
providing Lessor with written notice (“ROFR Acceptance Notice”) thereof within
five (5) business days of Lessor’s delivery to Lessee of the Refusal Offer
Notice. If Lessee does not exercise its Right of First Refusal within said five
(5) business day period, Lessor shall be relieved of Lessor’s obligation
to lease the Available ROFR Space mentioned in the Refusal Offer Notice, to
Lessee and the provisions of this Section 17.26 shall not apply to Lessor.
If the transaction described in the ROFR Offer Notice is not consummated, then,
prior to entering into a new lease for the Available ROFR Space, Lessor shall
repeat the process described in this Section 17.26.

 

(d) Conditions
to Right of First Refusal.

 

Notwithstanding
anything to the contrary in this Section 17.26, Lessor shall have no
obligation to provide Lessee with a Refusal Offer Notice, and Lessee shall have
no right to exercise Lessee’s Right of First Refusal, if: (i) Lessor has
delivered to Lessee a written notice that Lessee is in default hereunder and
such default has not yet been cured either: (a) at the time Lessor seeks
to lease the Available ROFR Space in question, or at the time Lessee seeks to
give Lessor an ROFR Acceptance Notice, whichever, is relevant, or (b) upon
the date Lessee seeks to take possession of the Available ROFR Space referenced
in the Refusal Offer Notice, (ii) Lessee has assigned this Lease or sublet
more than fifty percent (50%) of the rentable space located in the
Premises to a party other than an Affiliate, (iii) Lessee then occupies
less than fifty percent

 

51

 

(50%) of the Premises, (iv) Lessee
has received more than three (3) written notices of monetary default and
one (1) written notice of non-monetary default from Lessor during the
Lease Term or under the Building 9 Lease during the “Lease Term” of that lease,
(v) at the time of the Refusal Offer Notice Lessee fails to meet the
financial tests set forth in Schedule 6 attached hereto, or (vi) Lessor’s
lender does not consent to Lessee’s expansion into the Available Space.. Lessee’s
Right of First Refusal shall be personal to Lessee and Lessee’s Affiliate and
shall not be transferable with any assignment of this Lease or subletting of
the Premises.

 

(e) Terms
for Right of First Refusal.

 

In the
event that Lessee exercises Lessee’s Right of First Refusal, Lessee’s occupancy
of the Available ROFR Space taken shall be on all of the same terms and
conditions described in the Refusal Offer Notice. In such event, Lessee’s Share
due hereunder shall also be adjusted accordingly.

 

(f) New
Lease.

 

Lessor
and Lessee hereby agree to execute a new lease for such Available ROFR Space in
the same form and, except for the business terms of the ROFR Offer Notice and
terms made necessary as a result of the different space, having the same
content as this Lease (“ROFR Lease”) prior to Lessee’s occupancy of the
Available ROFR Space in question. The ROFR Lease shall specify, among other
things, the Rent, date of occupancy, increase in Lessee’s Share and square
footage of the Available ROFR Space taken in connection with Lessee’s exercise
of Lessee’s Right of First Refusal, and shall otherwise be on the terms of this
Lease, except for whatever changes are required in connection with any
differing uses of the Available ROFR Space by Lessee. If Lessee does not
execute such a ROFR Lease within ten (10) business days after the date on
which Lessor provides Lessee with a form of ROFR Lease as described in this
Subsection (f), then, at Lessor’s option, Lessee’s right to lease the Available
ROFR Space on the terms referenced in the ROFR Offer Notice shall be void and
terminated, provided that such termination shall not affect Lessee’s ongoing
rights pursuant to the terms of this Section 17.26.

 

Section 17.27  Lessee’s Expansion Right. If,
during the Lease Term, Lessee desires to lease additional space in the Project
but there is no such space then available for lease in the Project, and if
Lessor (and Lessor’s lender) determines, in its sole and absolute discretion,
that it would not adversely affect the Project and Lessor determines, in Lessor’s
sole and absolute discretion, that Lessor can construct an additional building
in the Project, then, at Lessee’s written request, Lessor shall use Lessor’s
good faith efforts to gain the necessary governmental approvals for, and shall
construct, such an additional building for Lessee’s use. The size, location and
date of availability of such building, and the economic terms on which Lessor
shall lease such building to Lessee, shall be subject to the mutual agreement
of the Lessor and Lessee. Further, Lessor shall have no obligations whatsoever
to Lessee under this Section 17.27 if at the time of Lessee’s request for
such building Lessee does not meet the relevant financial tests set forth in Schedule
6 attached hereto or has received a written notice of default hereunder or
under the Building 9 Lease and such default has not yet been cured. The terms
of this Section 17.27 shall only be operative at any time that Pacific
Shores Investors, LLC or any affiliate thereof owns the entire Project, and
upon the sale or other transfer of this Project or any portion thereof the
terms of this Section 17.27 shall be rendered null and void and of no
further effect, and the Lessor shall then have no further obligations to the
Lessee hereunder whatsoever.

 

52

 

Section 17.28  Notification of Intention to Market.
If Lessor shall decide to market the Project for sale, Lessor shall provide
Lessee with marketing materials therefore at the same time and in a similar
manner as Lessor provides such materials to the general public. Nothing herein
shall be deemed to create an obligation of Lessor to sell the Project or enter
into negotiations for the sale of the Project with Lessee or keep Lessee
informed of the status of any such negotiations with a third party for the sale
of the Project. The parties acknowledge and agree that nothing herein shall be
deemed to create any sort of an option, right of first refusal, right of first offer,
right of first negotiation or any other type of option or right of Lessee to
purchase the Project or any portion thereof. The obligation of Lessor hereunder
is limited solely to notifying Lessee of Lessor’s marketing of the Project for
a potential sale, and Lessor reserves the right to sell the Project, or not
sell it at all, on any terms and conditions that Lessor shall deem appropriate,
in Lessor’s sole and absolute discretion. Lessee agrees to keep the
notification delivered to it by Lessor hereunder strictly and completely
confidential, and shall not disclose such notification to anyone whatsoever.
The terms of this Section 17.28 shall only be operative at any time that
Pacific Shores Investors, LLC or any affiliate thereof owns the entire Project,
and upon the sale or other transfer of this Project or any portion thereof the
terms of this Section 17.28 shall be rendered null and void and of no
further effect, and the Lessor shall then have no further obligations to the
Lessee hereunder whatsoever.

 

Section 17.29  List of Lease Expiration Dates.
Upon written request therefor by Lessee, Lessor shall deliver to Lessee a list
of then current expiration dates (not taking into account any extension or
expansion rights that may or may not be exercised by the tenants of the
Project) of the current leases of space in the portion of the Project then
owned by Lessor, which list shall also describe the size and location of the
space in question. Nothing herein shall be deemed to create an obligation of
Lessor to lease such space to Lessee or enter into negotiations for the lease
of such space to Lessee or keep Lessee informed of the status of any space for
lease in the Project. The parties acknowledge and agree that nothing in this Section 17.29
shall be deemed to create any sort of an option, right of first refusal, right
of first offer, right of first negotiation or any other type of option or right
of Lessee to lease space the Project or any portion thereof. The obligation of
Lessor hereunder is limited solely to delivering to Lessee a list of the
expiration dates of existing leases of space in the Project.

 

Section 17.30 [Intentionally omitted.]

 

Section 17.31  Condition Subsequent.
Notwithstanding anything to the contrary herein, Lessor and Lessee acknowledge
and agree that the effectiveness of this Lease is conditioned upon Lessee’s
exercise of Lessee’s option to lease the Premises and the Building 9 Premises
(as defined therein) pursuant to the terms of that certain Amended and Restated
Option to Lease dated June 15, 2006 (the “Option Agreement”) between
Lessor, as optionor, and Lessee, as optionee. Notwithstanding Lessor and Lessee’s
execution of this Lease, if Lessee fails to exercise such option by July 5,
2006, or if the Option Agreement is terminated pursuant to its terms, then this
Lease and all of the obligations of the parties hereunder shall terminate and
be null and void, and any amount prepaid by Lessee to Lessor hereunder shall be
promptly repaid to Lessee.

 

53

 

Section 17.32
List of Exhibits

 

	
  EXHIBIT A:

  	
   

  	
  Premises

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B:

  	
   

  	
  Memorandum of
  Commencement of Lease Term and Schedule of Base Rent

  
	
   

  	
   

  	
   

  
	
  EXHIBIT C

  	
   

  	
  SNDA

  
	
   

  	
   

  	
   

  
	
  EXHIBIT D

  	
   

  	
  Signage Exhibit

  
	
   

  	
   

  	
   

  
	
  EXHIBIT E

  	
   

  	
  Work Letter Agreement

  
	
   

  	
   

  	
   

  
	
  EXHIBIT F

  	
   

  	
  Hazardous Materials
  Disclosure

  
	
   

  	
   

  	
   

  
	
  EXHIBIT G:

  	
   

  	
  Notice to Tenants

  
	
   

  	
   

  	
   

  
	
  EXHIBIT H:

  	
   

  	
  Notice to Tenants

  
	
   

  	
   

  	
   

  
	
  EXHIBIT I:

  	
   

  	
  Rules and
  Regulations

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 1

  	
   

  	
  License Agreement

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 2

  	
   

  	
  Yard Area

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 3

  	
   

  	
  Removal Obligations
  Standard

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 4

  	
   

  	
  Permitted Hazardous
  Materials

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 5

  	
   

  	
  Plans, Licenses and
  Permits

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6

  	
   

  	
  Financial Tests

  

 

54

 

LESSOR AND LESSEE EACH
HAS CAREFULLY READ AND HAS REVIEWED THIS LEASE AND BEEN ADVISED BY LEGAL
COUNSEL OF ITS OWN CHOOSING AS TO EACH TERM AND PROVISION CONTAINED HEREIN AND,
BY EXECUTION OF THIS LEASE, SHOWS ITS INFORMED AND VOLUNTARY CONSENT THERETO.
EACH PARTY HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS AND
CONDITIONS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT
AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.

 

Executed
at Redwood City, California, as of the reference date.

 

(Signatures continued on next page)

 

55

 

	
  LESSOR:

  	
   

  	
  ADDRESS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c/o Jay Paul Company

  
	
  PACIFIC SHORES
  INVESTORS, LLC,

  	
   

  	
  350 California Street,
  Suite 1905

  
	
  a Delaware limited
  liability company

  	
   

  	
  San Francisco, CA
  94104-1432

  

 

	
   

  	
   

  
	
  By:

  	
  Pacific Shores
  Mezzanine, LLC,

  a Delaware limited liability company,

  its sole member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Pacific Shores Junior
  Mezz, LLC,

  a Delaware limited liability company

  its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Pacific Shores Junior
  Mezz Managers, LLC,

  a Delaware limited liability company

  its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Pacific Shores
  Development, LLC,

  a Delaware limited liability company,

  its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  TECHNOLOGY LAND LLC,

  a California limited liability company,

  Operating Member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Jay Paul

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jay Paul, Sole Managing
  Member

  

 

 

	
  LESSEE:

  	
  ADDRESS:

  
	
   

  	
   

  
	
  PDL BIOPHARMA, INC.,

  a Delaware corporation

  	
  (Before Commencement
  Date)

  
	
   

  	
  34801 Campus Drive

  
	
  By:

  	
  /s/ Mark McDade

  	
   

  	
  Freemont, California
  94555

  
	
   

  	
  Mark McDade

  	
  Attention:
  Ms. Laurie Torres, VP Human 

  
	
   

  	
  (Type or Print Name)

  	
  Resources

  
	
  Its:

  	
  Chief Executive Officer

  	
  (After Commencement
  Date)

  
	
   

  	
   

  	
   

  
	
   

  	
  Pacific Shores Center

  
	
   

  	
   

  	
  Building 10

  
	
   

  	
   

  	
  1500 Seaport Boulevard

  
	
   

  	
   

  	
  Redwood City, CA 94063

  
					

 

56

 

	
   

  	
  With a copy to:

  
	
   

  	
   

  
	
   

  	
  Silicon Valley Law
  Group

  
	
   

  	
  25 Metro Drive,
  Suite 600

  
	
   

  	
  San Jose, California
  95110

  
	
   

  	
  Attn: Lucy A.
  Lofrumento, Esq.

  

 

57

 

EXHIBIT A

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 10

Redwood City, California 94063

 

REAL PROPERTY LEGAL DESCRIPTION,

SITE PLAN AND PREMISES FLOOR PLAN

 

(See Building Description and Depiction of Property attached)

 

A-1

 

EXHIBIT A

 

LEGAL DESCRIPTION

 

Real property in the City
of Redwood City, County of San Mateo, State of California described as follows:

 

Lot 10 and 10P as shown
on the certain Map of Pacific Shores Center filed July 21, 2000 in Book
130 of Maps, pages 66-74, San Mateo County Records.

 

A-2

 

Site Plan

 

 

 

EXHIBIT B

to

PACIFIC SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 10

Redwood City, California 94063

 

MEMORANDUM OF

COMMENCEMENT OF LEASE TERM

 

Pursuant
to Article III, Section 3.01, paragraph (a) of the
above-referenced Lease, the parties to said Lease agree to the following:

 

The
Commencement Date of the Lease                     
and the Lease Term commenced on said date. The Expiration Date for the initial
Lease Term is                     .

 

The
date for commencement of Base Rent for the Premises is                     .

 

The
date for commencement of Additional Rent, including, without limitation,
Operating Expenses is                     .

 

Attached
hereto as a part hereof is a true and correct schedule of Base Rent. The total
Rentable Area of the Premises is an agreed                     
rentable square feet.

 

Each
person executing this Memorandum certifies that he or she is authorized to do
so on behalf of and as the act of the entity indicated. Executed as of                     ,
200    , at Redwood City (San Mateo County), California.

 

B-1

 

	
  “Lessor”

  
	
   

  
	
  PACIFIC SHORES
  INVESTORS, LLC

  a Delaware limited liability company

  
	
   

  	
   

  
	
  By:

  	
  Pacific Shores
  Mezzanine, LLC,

  a Delaware limited liability company,

  its sole member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Pacific Shores Junior
  Mezz, LLC,

  a Delaware limited liability company

  its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Pacific Shores Junior
  Mezz Managers, LLC,

  a Delaware limited liability company,

  its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Pacific Shores
  Development, LLC,

  a Delaware limited liability company,

  its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  TECHNOLOGY LAND LLC,

  a California limited liability company,

  Operating Member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jay Paul, Sole
  Managing Member

  

 

 

	
  “Lessee”

  	
   

  
	
   

  	
   

  
	
  PDL BIOPHARMA, INC.,

  a Delaware corporation

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  (Type or Print Name)

  	
   

  
	
   

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  

 

B-2

 

EXHIBIT C

to

PACIFIC
SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 10

Redwood City, California 94063

 

SNDA

SUBORDINATION,
NONDISTURBANCE

AND
ATTORNMENT AGREEMENT

 

	
  NOTICE:

  	
  THIS SUBORDINATION AGREEMENT RESULTS IN YOUR OPTION
  AGREEMENT, BUILDING 9 LEASE AND BUILDING 10 LEASE BECOMING SUBJECT TO AND OF
  LOWER PRIORITY THAN THE LIEN OF THE DEED OF TRUST (DEFINED BELOW).

  

 

THIS AGREEMENT is dated for reference as of the
     day of
                    ,
2006, and is made between WELLS FARGO BANK, N.A., as Trustee for the Registered
Holders of Credit Suisse First Boston Mortgage Securities Corp., Commercial
Mortgage Pass-Through Certificates Series 2004-TFL2 (“Mortgagee”),
PACIFIC SHORES INVESTORS, LLC, a Delaware limited liability company (“Lessor”),
and PROTEIN DESIGN LABS, INC., a Delaware corporation (“Lessee”).

 

RECITALS

 

	
  A.

  	
   

  	
  Lessor
  currently owns the Pacific Shores Center in Redwood City, California, which
  project includes that certain approximately 283,015 square foot building
  located at 1400 Seaport Boulevard and related real property referred to
  herein as the “Building 9 Premises”, and that certain approximately
  164,732 square foot building located at 1500 Seaport Boulevard and related
  real property referred to herein as “Building 10 Premises.”

  

 

	
  B.

  	
   

  	
  Lessor
  and Lessee have entered into (a) that certain Triple Net Space Lease for
  the Building 9 Premises (“Building 9 Lease”), and (b) that
  certain Triple Net Space Lease for the Building 10 Premises (“Building 10
  Lease”).

  

 

	
  C.

  	
   

  	
  Mortgagee
  is the current holder of a loan made by Column Financial, Inc. to Lessor
  and secured by a deed of trust (the “Deed of Trust”) encumbering the
  real property of which the Building 9 Premises and the Building 10 Premises
  form a part (the “Property”), and the parties desire to set forth
  their agreement as hereinafter set forth.

  

 

C-1

 

NOW, THEREFORE, in consideration of the premises and of the
sum of ONE DOLLAR ($1.00) by each party in hand paid to the other, the receipt
of which is hereby acknowledged, the parties hereby agree as follows:

 

1. The Building 9 Lease and the Building 10 Lease
are and shall be subject and subordinate to the Deed of Trust insofar as it
affects the Property, and to all of Mortgagee’s rights thereunder, including
all renewals, modifications, consolidations, replacement and extensions of the
Deed of Trust, to the full extent of amounts secured thereby and interest
thereon.

 

2. Subject to the terms and conditions of Paragraph
3 of this agreement, Lessee agrees that it will attorn to and recognize any
purchaser at a foreclosure sale under the Deed of Trust, any transferee who
acquires the Property by deed in lieu of foreclosure, and the successors and
assigns of such purchasers (the applicable party taking title is referred to as
the “New Owner”), as its landlord for the unexpired balance (and any
extensions, if exercised) of the term of said leases upon the same terms and
conditions set forth in the Building 9 Lease and the Building 10 Lease.

 

3. Regardless of any default under any such
mortgage, deed of trust or other encumbrance or any sale of the Property under
such mortgage, deed of trust or other encumbrance, the Building 9 Lease and the
Building 10 Lease and Lessee’s rights thereunder, shall not be disturbed by the
mortgagee or beneficiary or anyone claiming under or through such mortgagee or
beneficiary; provided, however that nothing contained herein shall prevent
Mortgagee from naming Lessee in any foreclosure or other action or proceeding
initiated in order for Mortgagee to avail itself of and complete any such
foreclosure or other remedy, so long as such joinder does not result in a
termination of the Building 9 Lease and/or the Building 10 Lease, or diminish
Lessee’s rights and privileges under the Building 9 Lease or the Building 10
Lease. After acquisition of title by a New Owner, Building 9 Lease and the
Building 10 Lease shall be a direct agreement(s) between Lessee and the
New Owner. Lessee shall be obligated to perform for the New Owner under the
Building 9 Lease and the Building 10 Lease and the New Owner shall assume the
obligations of the Lessor under the Building 9 Lease and the Building 10 Lease,
including without limitation any extension thereof pursuant to the terms of the
Building 9 Lease and the Building 10 Lease, in accordance with the terms of the
applicable document(s), subject to Section 4 below.

 

4. If any New Owner succeeds to the interest of
Lessor under the Building 9 Lease or the Building 10 Lease, the New Owner shall
not be:

 

(a) liable
for any act or omission of any prior lessor (including Lessor); provided, that
nothing herein shall release the lessor under the Building 9 Lease or the
Building 10 Lease from the obligation to perform maintenance or repair
obligations or limit New Owner’s obligations under said leases to correct any
conditions in violation of the New Owner’s obligations as lessor under the

 

Building
9 Lease or the Building 10 Lease provided that Lessee provides such New Owner
with written notice of such default and opportunity to cure pursuant to Section 6
below; or

 

C-2

 

(b) liable
for the return of any security deposit under either the Building 9 Lease or the
Building 10 Lease not actually received by Mortgagee or the New Owner; or

 

(c) subject
to any offsets or claims which Lessee might have against any prior lessor
(including Lessor); or

 

(d) bound
by any rent or additional rent which Lessee might have paid under the Building
9 Lease or the Building 10 Lease for more than the current month to any prior
lessor (including Lessor) unless such monies have been actually received by New
Owner; or

 

(e) bound
by any amendment or modification of the Building 9 Lease or the Building 10
Lease (including an agreement to terminate the Building 9 Lease or the Building
10 Lease, other than as expressly contained in the Building 9 Lease or the
Building 10 Lease) made without its consent.

 

5. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their successors and assigns.

 

6. Lessee agrees to give Mortgagee notice of any
default by Lessor under the Building 9 Lease and the Building 10 Lease (if and
when executed by the parties). Lessee further agrees that if Lessor shall have
failed to cure such default within the time provided for in the Building 9
Lease or the Building 10 Lease, then Mortgagee shall have an additional thirty
(30) days 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
thirty (30) days Mortgagee has commenced and is diligently pursuing the
remedies necessary to cure such default (including, but not limited to,
commencement of legal proceedings, if necessary to effect such cure) in which
event neither the Building 9 Lease nor the Building 10 Lease shall be
terminated while such remedies are being so diligently pursued. Lessee shall
accept performance by Mortgagee of any term, covenant, condition or agreement
to be performed by Lessor under the Building 9 Lease or the Building 10 Lease
with the same force and effect as though performed by Lessor.

 

7. In the event Mortgagee succeeds to the interest
of Lessor in the Property, Lessee’s rights against Mortgagee, as lessor, shall
be limited to Mortgagee’s interest in the Property, and Lessee shall have no
recourse with regard to any other assets of Mortgagee.

 

8. Any notices which a party may be obligated or
elect to give hereunder shall be sufficient if sent by certified mail, return
receipt requested, postage prepaid or by Federal Express or other established
overnight courier addressed as follows:

 

	
  If to Mortgagee:

  	
   

  	
  Wells
  Fargo Bank, N.A., as Trustee for the Registered Holders of Credit Suisse
  First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through
  Certificates

  Series 2004-TFL2

  c/o
  Wachovia Securities, Commercial Real Estate Services

  8739
  Research Drive-URP4

  Charlotte,
  NC 28288-1075 (28262-1075 for overnight deliveries)

  Attn:
  Alex Aguilar

  Fax:
  704-715-0036

  

 

C-3

 

	
  with a copy to:

  	
   

  	
  Alston &
  Bird LLP

  101
  South Tryon Street, Suite 4000

  Charlotte,
  NC 28280-4000

  Attn:
  James A.L. Daniel, Jr., Esq.

  Fax:
  704-444-1776

  
	
   

  	
   

  	
   

  
	
  If
  to Lessee:

  	
   

  	
  PDL
  BioPharma, Inc.

  34801
  Campus Drive

  Fremont,
  California 94555

  Attention:
  Laurie Torres, VP Human Resources

  Facsimile:
  (510) 574-1661

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Silicon
  Valley Law Group

  25
  Metro Drive, Suite 600

  San
  Jose, California 95110

  Attention:
  Lucy Lofrumento, Esq.

  Facsimile:
  (408) 573-5701

  

 

Any such notice shall be deemed delivered on the
earlier to occur of (a) receipt or (b) the date of delivery, refusal
or non-delivery indicated on the return receipt if sent by certified mail. The
above addresses may be changed by the persons identified above from time to
time designated by written notice given as herein required; provided that no
notice of a change of address shall be effective until actual receipt of such
notice.

 

9. In the event of the bringing of any action or
suit by any party or parties hereto against another party or parties hereunder
alleging a breach of any of the covenants, conditions, agreements or provisions
of this Agreement, the prevailing party or parties shall recover all reasonable
costs and expenses of suit, including without limitation, reasonable attorneys’
fees, consultants fees and fees of expert witnesses.

 

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

 

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

 

12. Neither Mortgagee nor its designee or nominee
shall become liable under the Building 9 Lease and Building 10 Lease, unless
and until Mortgagee or its designee or nominee becomes, and then only with
respect to periods in which Mortgagee or its designee or nominee remains, the
owner of the Property.

 

C-4

 

13. Lessee acknowledges that Lessor has assigned (or
will assign) to Mortgagee its right, title and interest in the Building 9 Lease
and the Building 10 Lease and to the rents, issues and profits of the Property
pursuant to the Deed of Trust, and that Lessor has been granted the license to
collect such rents provided no Event of Default has occurred under, and as
defined in, the Deed of Trust. Lessee agrees to pay all rents and other amounts
due under the Building 9 Lease and the Building 10 Lease directly to Mortgagee
upon receipt of written demand by Mortgagee following an Event of Default, and
Lessor hereby consents thereto and agrees that Lessee shall be released and
discharged of all liability to Lessor for any such payments made to Mortgagee.
The assignment of the Building 9 Lease and the Building 10 Lease to Mortgagee,
or the collection of rents by Mortgagee pursuant to such assignment, shall not
obligate Mortgagee to perform Lessor’s obligations under the Building 9 Lease
and/or the Building 10 Lease.

 

IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

 

	
   

  	
  PDL
  BIOPHARMA, INC., a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WELLS
  FARGO BANK, N.A., as Trustee for the Registered Holders of Credit Suisse First
  Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates
  Series 2004-TFL2

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  WACHOVIA
  BANK NATIONAL ASSOCIATION, solely in its capacity as Master Servicer

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

C-5

 

The undersigned Lessor hereby consents to the
foregoing Subordination, Non-Disturbance and Attornment Agreement and confirms
the facts stated in the foregoing Subordination, Non-Disturbance and Attornment
Agreement.

 

 

	
  LESSOR:

  
	
   

  
	
  PACIFIC
  SHORES INVESTORS, LLC,

  a Delaware limited liability company

  	
   

  
	
   

  	
   

  
	
  By:

  	
  Pacific
  Shores Mezzanine, LLC,

  a Delaware limited liability
  company,

  its sole member

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Pacific
  Shores Junior Mezz, LLC,

  a Delaware limited liability company

  its sole member

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Pacific
  Shores Junior Mezz Managers, LLC,

  a Delaware limited liability company,

  its sole member

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Pacific
  Shores Development, LLC,

  a Delaware limited liability company,

  its sole member

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  TECHNOLOGY
  LAND LLC,

  a California limited liability company,

  Operating Member

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jay
  Paul, Sole Managing Member

  	
   

  
									

 

C-6

 

ACKNOWLEDGMENTS

 

	
   

  	
   

  	
   

  
	
  STATE OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.:

  
	
  COUNTY OF

  	
  )

  	
   

  

 

On
                    
        , 2006, before me,
                    
the undersigned, a notary public in and for said state, personally appeared                     ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.

 

WITNESS my hand and official seal.

 

            Notary
Public

 

	
   

  	
   

  	
   

  
	
  STATE OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.:

  
	
  COUNTY OF

  	
  )

  	
   

  

 

On                     
        , 2006, before me,                     
the undersigned, a notary public in and for said state, personally appeared                     ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.

 

WITNESS my hand and official seal.

 

            Notary
Public

 

C-7

 

	
   

  	
   

  	
   

  
	
  STATE OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.:

  
	
  COUNTY OF

  	
  )

  	
   

  

 

On                     
        , 2006, before me,
                            
the undersigned, a notary public in and for said state, personally appeared
                            ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.

 

WITNESS my hand and official seal.

 

            Notary
Public

 

	
   

  	
   

  	
   

  
	
  STATE OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.:

  
	
  COUNTY OF

  	
  )

  	
   

  

 

On
                    
        , 2006, before me,
                            
the undersigned, a notary public in and for said state, personally appeared
                            ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.

 

WITNESS my hand and official seal.

 

            Notary
Public

 

C-8

 

EXHIBIT D

TO

PACIFIC
SHORES INVESTORS, LLC

LEASE

TO

PDL BIOPHARMA, INC.

as

LESSEE

For

Pacific Shores Center

Building 10

1500 Seaport Boulevard

Redwood City, California 94063

 

SIGNAGE
EXHIBIT

 

SINGLE
TENANT BUILDINGS

 

Each tenant of a single tenant Building will
be permitted (subject to compliance with Section 17.15 of the Lease) to
place one sign to be located near the entrance to the parking lot associated
with Building 10 (“Monument”). The
exact size, design, color, location and materials of the Monument, and of the
Lessee’s sign on the Monument, will be determined by Lessor in its sole and
absolute discretion, provided that Lessor will not unreasonably withhold its
consent to a tenant sign which employs a design and color commonly used by such
tenant for marketing purposes so long as it fits within the space allocated by
Lessor, and so long as it is in keeping with the overall design scheme of the
Project. Each such tenant will also be permitted (subject to compliance with Section 17.15
of the Lease) to place one sign on the exterior surface of Building 10. Lessor
reserves the right to allow different or additional signage anywhere in the Project,
provided that, so long as Lessor may lawfully do so, Lessor will not reduce the
size of space allocated on the Monument to a size smaller than that permitted
as of the commencement date of the Lease, unless the size of the
premises subject to the lease decreases from its size as of the lease
commencement date or unless Lessor provides alternate signage of reasonably
equivalent visibility. All signs shall comply with all applicable government
laws and regulations and with the Pacific Shores Signage Master Plan (City of
Redwood City Design Review Submittal dated November 11, 2000).

 

D-1

 

EXHIBIT E

 

To

PACIFIC SHORES INVESTORS, LLC.

LEASE

to

PDL BIOPHARMA, INC.,

For

PREMISES

at

1500 Seaport Drive

Building 10

Redwood City, California

 

WORK LETTER
AGREEMENT FOR LESSEE IMPROVEMENTS

AND INTERIOR SPECIFICATION STANDARDS

 

This Work Letter Agreement (“Work Letter”) shall set
forth the terms and conditions relating to the construction of Lessee
Improvements within the Premises. This Work Letter is essentially organized
chronologically and is intended to address the issues of the construction of
Lessee Improvements at the Premises, in sequence, as such issues will arise
during the actual construction of the Premises. All references in this Work
Letter to Articles or Sections of “the Lease” shall mean the relevant portions
of the above referenced Lease to which this Work Letter is attached as Exhibit “E,”
and all references in this Work Letter to Sections of “this Work Letter” shall
mean the relevant portions of Sections 1 through 5 of this Work Letter. “Lessor”
herein shall have the same meaning as “Lessor” in the Lease and “Lessee” herein
shall have the same meaning as “Lessee” in the Lease.

 

SECTION I

DELIVERY OF THE BASE BUILDING

 

1.1
Delivery by Lessor. On the Delivery Date, following the full execution
and delivery of the Lease and this Work Letter by Lessor and Lessee, Lessor
shall deliver Building 10 to Lessee, and Lessee shall accept Building 10 from
Lessor in accordance with the terms and conditions of the Lease.

 

SECTION 2

LESSEE IMPROVEMENTS

 

2.1
Lessee to Construct. At Lessee’s sole cost and expense, including
payment to Landlord of an amount equal to One Hundred and Fifty Thousand
Dollars ($150,000) (the “Construction Management Fee”) as an oversight fee,
Lessee shall construct certain interior improvements in conformance with the
Approved Working Drawings described below (“Lessee
Improvements”) and subject to all the terms and conditions of the
Lease and this Work Letter. Regardless of whether the Lessee Improvements are
completed by the Commencement Date, said

 

E-1

 

Commencement
Date shall not be extended, even if the Lessee Improvements are not completed
by such date. The Construction Management Fee is to be paid in four (4) equal
payments of Thirty-Seven Thousand Five Hundred Dollars ($37,500) each. The
first of such payments shall be paid on the Delivery Date and the remaining
three (3) payments shall be made on the 90th, 180th and 270th day after the
Delivery Date.

 

2.2
Lessee Improvement Allowance. Lessor shall provide a lessee improvement
allowance (the “Lessee Improvement Allowance”) in the amount of Two Million One
Hundred Eighteen Thousand Three Hundred and 00/100 Dollars ($2,118,300.00) to
be used by Lessee solely for improving the Premises pursuant to the Design
Drawings (as defined in Section 3.2 below). The Lessee Improvement
Allowance shall be used towards the costs of Lessee Improvement Allowance Items
(defined below) and Lessor shall be under no obligation to fund costs relating
to furniture, equipment, including, without limitation, screening or viewing
equipment, trade fixtures, moving expenses and other personal property. In no
event shall Lessor be obligated to make disbursements of Lessor’s funds
pursuant to this Work Letter in a total amount which exceeds the cost of the Lessee
Improvement Allowance Items. All such improvements shall be subject to all of
the terms of this Exhibit E. The Lessee Improvement Allowance must be used
on or before November 1, 2007 or any unused portion of the Lessee
Improvement Allowance shall be waived and forfeit as to Lessee. Also, if the
actual cost of such improvements is less than the amount of the Allowance, the
unused portion of the Allowance shall be forfeited by Lessee.

 

2.3
Disbursement of the Lessee Improvement Allowance.

 

2.3.1 Lessee Improvement Allowance Items.
Except as otherwise set forth in this Work Letter, the Lessee Improvement
Allowance shall be disbursed by Lessor (pursuant to Lessor’s disbursement
process as described below) for costs of the demolition, design and
construction of the Lessee Improvements, including the following items and
costs (collectively, the “Lessee Improvement Allowance
Items”):

 

2.3.1.1 payment of fees of the “Architect,” and the “Engineers,”
as those terms are defined in Section 3.1 of this Work Letter and any fees
paid by Lessee to a project manager and other construction and/or design
consultants as well as all other reasonable, actual and documented
out-of-pocket costs reasonably expended by Lessor or Lessee in connection with
the construction of the Lessee Improvements;

 

2.3.1.2 the payment of plan check, permit and
license fees relating to construction of the Lessee Improvements;

 

2.3.1.3 the cost of construction of the Lessee
Improvements, including, without limitation, contractor’s fees and general conditions,
costs of materials and services, testing and inspection costs, costs of trash
removal, demolition, utility hook-up charges, hoist fees, parking fees and
utilities usage;

 

2.3.1.4 the cost of any changes to the Construction
Drawings or Lessee Improvements required by the applicable laws; and

 

2.3.1.5 sales and use taxes, gross receipts taxes
and Title 24 fees.

 

2.3.2 Disbursement of the Lessee Improvement
Allowance. During the design and construction of the Lessee Improvements,
Lessor shall make monthly disbursements of the Lessee Improvement Allowance for
Lessee Improvement Allowance Items for the benefit of

 

E-2

 

Lessee
and shall authorize the release of monies for the benefit of Lessee pursuant to
the disbursement process set forth below. On or before the twenty-fifth
(25th) day of each month (a “Submittal
Date”), Lessee shall deliver to Lessor: (i) an application and
certification ( the “Payment Application”) for payment of the “Contractor,” as that term is defined in Section 4.1
of this Work Letter (or reimbursement to Lessee if Lessee has already paid the
Contractor or other person or entity entitled to payment) or Lessee, as 

applicable
in the form of AIA Document G702 with AIA G703 backup; (ii) appropriate
executed progress mechanics’ lien releases which comply with the applicable
provisions of California Civil Code Section 3262(d), and unconditional
releases (with respect to payments previously made); and (iii) other
information and documentation reasonably requested in good faith by Lessor or
Lessor’s lender. On or before the date occurring thirty (30) days after
the Submittal Date, and assuming Lessor receives all of the information
described in items (i) through (iii), above, Lessor shall deliver a check
to Lessee made payable to Lessee or if Lessee elects, to the Contractor,
subcontractor, Architect, Engineer or consultant designated by Lessee for
payment, up to the amount of the Lessee Improvement Allowance, in an amount
equal to Lessor’s Share of the Payment Application. As used herein, the term “Lessor’s
Share” shall mean eight and one half percent (8.50%). Notwithstanding the
foregoing, with respect to fees and expenses of the Architect or Engineers or
any other pre-construction items for which the payment scheme set forth in
items (i) and (ii) of the immediately preceding sentence is not
applicable but which fees, expenses and items are expressly included in
Subsection 2.3.1 (above) as “Lessee
Improvement Allowance Items” (collectively, the “Non-Construction Allowance Items”), Lessor
shall make disbursements of the Lessee Improvement Allowance therefor on a
monthly basis in an amount equal to Lessor’s Share of such Non-Construction
Allowance Items following Lessor’s receipt of invoices and other reasonable
evidence that Lessee has incurred the cost for the applicable Non-Construction
Allowance Items, (unless Lessor has received a preliminary notice in connection
with such costs, in which event conditional lien releases must be submitted in
connection with such costs) and such other information and documentation
reasonably required by Lessor or Lessor’s lender.

 

2.4
Lessee Improvement Specifications. Lessor has established specifications
(the “Specifications”) for
Building 10 standard components to be used in the construction of any
non-laboratory Lessee Improvements in the Premises. The Specifications are set
forth on Schedule One hereto. The quality of any non-laboratory Lessee
Improvements in the Premises shall be equal to or of greater quality than the
quality of the Specifications. Lessor may make changes to the Specifications
for the non-laboratory Lessee Improvements from time to time which changes
shall not be retroactive.

 

2.5
Improvements Letter of Credit.

 

2.5.1 Deposit of Improvements Letter of Credit
Security

 

Lessee shall deposit with Lessor in accordance with
the terms of Section 4.2.1 of this Work Letter an unconditional,
irrevocable Improvements Letter of Credit (“Improvements Letter of Credit”) on
a form acceptable to Lessor and, if required, Lessor’s lender(s), and in favor
of Beneficiary (as defined below) in the amount of Fifteen Million and 00/100
Dollars ($15,000,000.00) (the “Improvements Letter of Credit Security”). “Beneficiary,”
as used herein refers to either: (x) Lessor as beneficiary, or (y) if
required by Lessor’s lender(s), Lessor and Lessor’s lender(s), as directed by
Lessor, as co-beneficiaries under the Improvements

 

E-3

 

Letter
of Credit Security. The Improvements Letter of Credit Security shall: (i) be
issued by a commercial money center bank reasonably satisfactory to Lessor with
retail branches in San Francisco, California (the “Issuer”); (ii) be a
standby, at-sight, irrevocable Improvements Letter of Credit; (iii) be
payable to Beneficiary; (iv) permit multiple, partial draws , (v) provide
that any draw on the Improvements Letter of Credit Security shall be made upon
receipt by the Issuer of a sight draft accompanied by a letter from Lessor
stating that Lessor is entitled, pursuant to the provisions of this Lease, to
draw on the Improvements Letter of Credit Security in the amount of such draw; (vi) provide
for automatic annual extensions, without amendment (so-called “evergreen”
provision) with a final expiry date no sooner than March 31, 2007; (vii) provide
that it is governed by the Uniform Customs and Practice for Documentary Credits
(1993 revisions) International Chamber of Commerce Publication 500; and (viii) be
cancelable if, and only if, Issuer delivers to Beneficiary no less than sixty
(60) days advance written notice of Issuer’s intent to cancel. Lessee
shall pay all costs, expenses, points and/or fees incurred by Lessee in
obtaining the Improvements Letter of Credit Security.

 

2.5.2 Lessor’s Right to Draw on Improvements
Letter of Credit Security

 

The Improvements Letter of Credit Security shall be
held by Lessor as security for the completion by Lessee of the Lessee
Improvements described in the Approved Working Drawings. Lessor shall have the
immediate right to draw upon the Improvements Letter of Credit Security, in
whole or in part and without prior notice to Lessee, other than as required
under this Lease, at any time and from time to time: (i) if Lessee stops
work on the Lessee Improvements for a period of time in excess of sixty
(60) days, (ii) the Lessee Improvements are not completed and the
Improvements Letter of Credit Security will expire in less than forty-five
(45) days, or (iii) Lessee either files a voluntary bankruptcy
petition or an involuntary bankruptcy petition is filed against Lessee by an
entity or entities other than Lessor, under 11 U.S.C. §101 et seq., or Lessee
executes an assignment for the benefit of creditors. No condition or term of
this Lease shall be deemed to render the Improvements Letter of Credit Security
conditional, thereby justifying the Issuer of the Improvements Letter of Credit
Security in failing to honor a drawing upon such Improvements Letter of Credit
Security in a timely manner. The Improvements Letter of Credit Security and its
proceeds shall constitute Lessor’s sole and separate property (and not Lessee’s
property or, in the event of a bankruptcy filing by or against Lessee, property
of Lessee’s bankruptcy estate) and Lessor may immediately upon any draw (and
without notice to Lessee) use, apply or retain the proceeds of such draw to
compensate Lessor for any loss or damage which Lessor suffers by reason of
Lessee’s failure to perform the terms, covenants, or conditions of this Work
Letter applicable to Lessee (including, but not limited to, damages recoverable
under Civil Code § 1951.2), but in no event in excess of amounts to which the
Lessor would be entitled under the law. It is expressly understood that Lessor
shall be relying on Issuer rather than Lessee for the timely payment of
proceeds under the Improvements Letter of Credit Security and the rights of
Lessor pursuant to this Section are in addition to any rights which Lessor
may have against Lessee pursuant to Article XII of the Lease. Lessor shall
not be required to keep the proceeds of any draw upon the Improvements Letter
of Credit Security separate from Lessor’s general funds nor be deemed a trustee
of same.

 

E-4

 

2.5.3 Replacement Improvements Letter of Credit
Security

 

If, for any reason whatsoever, the Improvements
Letter of Credit Security becomes subject to cancellation or expiration while
such Improvements Letter of Credit Security is required to be posted during the
Lease Term, within forty-five (45) days prior to expiration of the
Improvements Letter of Credit Security, Lessee shall cause the Issuer or
another bank satisfying the conditions of Section 2.5.1 above to issue and
deliver to Lessor a Improvements Letter of Credit Security to replace the expiring
Improvements Letter of Credit Security (the “Replacement Improvements Letter of
Credit Security”). The Replacement Improvements Letter of Credit Security shall
be in the same amount as the original Improvements Letter of Credit Security.
Failure of Lessee to cause the Replacement Improvements Letter of Credit
Security to be issued forty-five (45) days prior to the then pending
expiration or cancellation shall entitle Lessor to fully draw down on the
existing Improvements Letter of Credit Security and, at Lessor’s election,
shall be an event of default under this Lease without any relevant notice and
cure period.

 

2.5.4 Transfer of Beneficiary

 

During the Lease Term Lessor may transfer its
interest in the Lease or Lessor’s lender may change. Lessor may request a
change to Beneficiary under the Improvements Letter of Credit Security to the
successor of Lessor and/or Lessor’s lender (the “Transferee”). Lessee agrees to
cooperate and to cause Issuer, at Lessor’s cost, to timely issue a new
Improvements Letter of Credit Security on the same terms and conditions as the
original Improvements Letter of Credit Security, except that the new
Improvements Letter of Credit Security shall be payable to the Transferee.
Lessor shall surrender the existing Improvements Letter of Credit Security to
Lessee simultaneously with Lessee’s delivery of the new Improvements Letter of
Credit Security to Transferee.

 

2.5.5 Return of the Improvements Letter of Credit
Security

 

Once Lessee has completed the Lessee Improvements
described in the Approved Working Drawings, the Improvements Letter of Credit
Security or any balance thereof drawn upon and held (and not used or applied)
by Lessor at the time shall be returned (without interest) to Lessee (or, at
Lessee’s option, to the last assignee of Lessee’s interests hereunder) no later
than the earlier to occur of the following: (i) ninety-one (91) days
after Lessee or Lessor files a Notice of Completion (as described in Section 4.3
hereof) or (ii) thirty (30) days after Lessee has delivered to Lessor
final, unconditional lien releases for all of the Lessee Improvements, along
with all of the documentation required of Lessee pursuant to Section 4.3
of this Work Letter; provided that if prior to the Lease Expiration Date a
voluntary bankruptcy provision is filed by Lessee, or an involuntary bankruptcy
is filed against Lessee by any of Lessee’s creditors other than Lessor, under
11 U.S.C. § 101 et seq., or Lessee executes an assignment for the benefit of
creditors, then to the fullest extent permitted by law Lessor shall not be
obligated to return the Improvements Letter of Credit Security or any proceeds
of the Improvements Letter of Credit Security until all statutes of limitations
for any preference avoidance statutes applicable to such bankruptcy or
assignment for the benefit of creditors have elapsed or the bankruptcy court or
assignee, whichever is applicable, has executed a binding release releasing
Lessor of any and all liability for the preferential transfers relating to
payments

 

E-5

 

made
under this Lease, and Lessor may retain and offset against any remaining
Improvements Letter of Credit Security proceeds the full amount Lessor is
required to pay to any third party on account of preferential transfers
relating to this Lease. Lessor agrees it will cooperate in providing Issuer
with a letter of cancellation or such other reasonable documentation as Issuer
requests to effect the return and extinguishment of the credit issued under the
Improvements Letter of Credit Security.

 

2.5.6 Acknowledgment of Parties

 

Lessor and Lessee (a) acknowledge and agree
that in no event or circumstance shall the Improvements Letter of Credit
Security or any renewal thereof or substitute therefor or any proceeds thereof
be deemed to be or treated as a “security deposit” under any law applicable to
security deposits in the commercial context, including, but not limited to Section 1950.7
of the California Civil Code, as such Section now exists or as it may be
hereafter amended or succeeded (the “Security Deposit Laws”), (b) acknowledge
and agree that the Improvements Letter of Credit Security (including any
renewal thereof or substitute therefor or any proceeds thereof) is not intended
to serve as a security deposit, and the Security Deposit Laws shall have no
applicability or relevancy thereto, and (c) waive any and all rights,
duties and obligations that any such party may now, or in the future will, have
relating to or arising from the Security Deposit Laws. Lessee hereby waives the
provisions of Section 1950.7 of the California Civil Code and all other
provisions of law, now or hereafter in effect, which (i) establish the
time frame by which a Lessor must refund a security deposit under a lease,
and/or (ii) provide that a Lessor may claim from a security deposit only
those sums reasonably necessary to remedy defaults in the payment of rent, to
repair damage caused by a Lessee or to clean the premises, it being agreed that
Lessor may, in addition, claim those sums specified in this Section 2.5
and/or those sums reasonably necessary to compensate Lessor for any loss or
damage caused by Lessee’s breach of this Lease, including any damages Lessor
suffers.

 

SECTION 3

CONSTRUCTION DRAWINGS

 

3.1
Preparation of Drawings. Lessee shall retain an architect/space planner
reasonably approved by Lessor (the “Architect”)
and engineering consultants reasonably approved by Lessor (the “Engineers”) to prepare all plans and
engineering working drawings relating to the structural, mechanical,
electrical, plumbing, HVAC, life safety, sprinkler and any other work to be
conducted in the Premises. The plans and drawings to be prepared by Architect
and the Engineers hereunder shall be referenced collectively as the “Construction Drawings.” All Construction
Drawings shall comply with drawing content and specifications determined by
Lessor, and shall be subject to Lessor’s reasonable approval, which
Construction Drawings shall contain the information listed on Schedule Two
attached hereto. Lessee and Architect shall verify, in the field, the
dimensions and conditions as shown on the relevant portions of the base
building plans, and Lessee and Architect shall be solely responsible for the
same, and Lessor shall have no responsibility in connection therewith. Lessor’s
review of the Construction Drawings, as set forth in this Section 3, shall
be for its sole purpose and shall not imply Lessor’s review of the same, or
obligate Lessor to review the same, for quality, design, Code compliance or
other like matters. Accordingly, notwithstanding that any Construction Drawings
are

 

E-6

 

reviewed
by Lessor or its space planner, architect, engineers and consultants, and
notwithstanding any advice or assistance which may be rendered to Lessee by
Lessor or Lessor’s space planner, architect, engineers, and consultants, Lessor
shall have no liability whatsoever in connection therewith and shall not be
responsible for any omissions or errors contained in the Construction Drawings,
and Lessee’s waiver and indemnity set forth in Section 7.07(a) of the
Lease shall specifically apply to the Construction Drawings.

 

3.2
Design Drawings. Lessee shall supply Lessor with four (4) copies
signed by Lessee of its design development drawings for the Premises. The
design development drawings which shall be 50% complete (the “Design Drawings”) shall include, to the
extent then currently available, all major elements of design for the Premises
including a layout and designation of all offices, rooms and other
partitioning, their intended use, equipment specifications and location,
mechanical, electrical and plumbing design, general finishes, access and
egress, structural modifications (if any), including supporting structural
calculations, fire alarm and fire protection, any modifications to the building
exterior, roof screen design (based on project standard) and layout, including
line of site study for any equipment that extends above roof screen, equipment
yard layout including equipment specifications and location. Lessor may request
clarification or more specific drawings for special use items not included in
the Design Drawings. Lessor shall advise Lessee within ten (10) business
days after Lessor’s receipt of the Design Drawings for the Premises if the same
is reasonably unsatisfactory or incomplete in any respect. If Lessee is so
advised, Lessee shall cause the Design Drawings to be revised to correct any
deficiencies or other matters Lessor may reasonably require and submit the revised
Design Drawings to Lessor for its approval no later than five (5) business
days after Lessor delivers its advice. If Lessor makes any objections to the
Design Drawings, and provided such objections are reasonable, Lessee shall
revise the Design Drawings and cause such objections to be remedied in the
revised Design Drawings. Within five (5) business days after Lessor
receives the revised Design Drawings, Lessor shall approve or reasonably
disapprove such revised Design Drawings. This procedure shall be repeated until
the Design Drawings is finally approved by Lessor and written approval has been
delivered to and received by Lessee. Lessor’s failure to advise timely shall be
deemed approval.

 

3.3
Final Working Drawings. Lessee shall promptly cause the Architect and
the Engineers to complete the architectural and engineering drawings for the
Premises, and whenever Architect has compiled a set of architectural,
structural, mechanical, electrical or plumbing working drawings with complete
specifications in a form to be used to obtain permits for the work specified in
such drawings (in each case, a “Final Working
Drawings”), Lessee shall submit to Lessor for Lessor’s approval,
four (4) copies signed by Lessee of such Final Working Drawings. The Final
Working Drawings shall substantially reflect the intent of the Design Drawings
approved by Lessor. Lessor shall advise Lessee within ten (10) business
days after Lessor’s receipt of any Final Working Drawings for the Premises if
the same is reasonably unsatisfactory or incomplete in any respect. If Lessor
makes any objections to the Final Working Drawings, and provided such
objections are reasonable, Lessee shall revise the Final Working Drawings and
cause such objections to be remedied in the revised Final Working Drawings.
Within five (5) business days after Lessor receives the revised Final
Working Drawings, Lessor shall approve or reasonably disapprove such revised
Final Working Drawings. This procedure shall be repeated until the Final
Working Drawings is finally approved by Lessor and written approval has been
delivered to and received by Lessee. Lessor’s failure to advise timely shall be
deemed approval. In addition, if the Final Working Drawings are modified,
amended or supplemented in

 

E-7

 

any
way after Lessor’s approval thereof, or if Lessee prepares a separate set of
Final Working Drawings in order to receive applicable permits with respect to
any element of the Lessee Improvements, this procedure shall be repeated until
such amended or additional Final Working Drawings are finally approved by
Lessor and written approval has been delivered to and received by Lessee.

 

3.4
Approved Working Drawings. The Final Working Drawings, as approved by
Lessor, are hereinafter referred to as the “Approved
Working Drawings.” Lessee shall obtain all applicable permits from
the City of Redwood City necessary to complete the tenant improvements in
substantial conformance with the Approved Working Drawings. Lessee hereby
agrees that neither Lessor nor Lessor’s consultants shall be responsible for
obtaining any building permit or certificate of occupancy for the Premises and
that obtaining the same shall be Lessee’s responsibility; provided, however,
that Lessor shall cooperate with Lessee in a timely manner in executing permit
applications and performing other ministerial acts reasonably necessary to
enable Lessee to obtain any such permit or certificate of occupancy. No
changes, modifications or alterations in the Approved Working Drawings which
will require a permit or other governmental approval may be made without the
prior written consent of Lessor, which consent may not be unreasonably
withheld, conditioned or delayed.

 

SECTION 4

CONSTRUCTION OF THE LESSEE IMPROVEMENTS

 

4.1
Lessee’s Selection of Contractors.

 

4.1.1 The Contractor. A general contractor
shall be retained by Lessee to construct the Lessee Improvements pursuant to a
written construction contract (“Construction
Contract”). Such general contractor (“Contractor”) shall be selected by Lessee subject to Lessor’s
consent, which consent shall not be unreasonably withheld, conditioned or
delayed provided that such contractor is a California licensed contractor with
a successful track record of constructing first class Lessee improvements in
first class office buildings and has never been involved in a material dispute
with Lessor.

 

4.1.2 Lessee’s Agents. All subcontractors
performing mechanical, electrical, plumbing, fire alarm, fire sprinkler,
structural and exterior wall work used by Lessee must be approved in writing by
Lessor, which approval shall not be unreasonably withheld or conditioned and
shall either be given or denied within five (5) business days of Lessor’s
receipt of request therefor. Notwithstanding anything herein to the contrary,
Lessee may submit to Lessor a list of potential Contractors and subcontractors
for the Lessee Improvements for pre-approval by Lessor. So long as Lessee uses
a Contractor or subcontractor approved by Lessor from such list, no further
consent of Lessor to the use of such person or entity shall be necessary.
Lessee shall utilize the subcontractor who completed the original construction
of the Premises curtain wall system, exterior glass and GFRC panels for any
modification of those building systems. If Lessor does not approve any of
Lessee’s proposed subcontractors, Lessee shall submit other proposed
subcontractors for Lessor’s written approval. Such approved subcontractors,
along with all laborers, materialmen and suppliers are collectively referred to
herein, along with the Contractor, as the “Lessee’s Agents.” Notwithstanding
the foregoing, Lessee shall retain subcontractors, laborers, materialmen and
suppliers of good reputation with the requisite skills, qualifications and
experience in connection with any work to be performed in the Premises.

 

E-8

 

4.2
Construction of Lessee Improvements by Lessee’s Agents.

 

4.2.1 Construction Contract, Cost Budget.
Within two (2) business days of its execution by Lessee and Contractor,
Lessee shall deliver to Lessor a copy of the Construction Contract, along with
a budget for the construction of the Lessee Improvements. Prior to the earlier
to occur of: (i) two (2) business days after execution by Lessee and
Contractor of the Construction Contract, or (ii) the date on which Lessee
receives any permits necessary to commence to build the Lessee Improvements,
Lessee shall deliver to Lessor, the Improvements Letter of Credit Security.

 

4.2.2 Lessee’s Agents.

 

4.2.2.1 Lessor’s General Conditions for Lessee’s
Agents and Lessee Improvement Work. Lessee’s and Lessee’s Agent’s
construction of the Lessee Improvements shall comply with the following: (i) the
Lessee Improvements shall be constructed in accordance with the Approved
Working Drawings; and (ii) Lessee shall abide by and cause all of Lessee’s
Agents to abide by all rules made by Lessor’s Building manager with
respect to the use of freight, loading dock and service elevators, storage of
materials, coordination of work with the contractors of other Lessees, and any
other matter in connection with this Work Letter, including, without
limitation, the construction of the Lessee Improvements. Subject to the terms
of Section 7.06 of the Lease, Lessee shall reimburse Lessor within ten (10) business
days after demand, for all costs of repair and cleanup incurred by Lessor for
damage to the Project, the Premises, Building 10 or any contents thereof
(including, without limitation Furniture) caused by Lessee or Lessee’s Agents
or debris, litter or other materials or matter left within the premises at any
time.

 

4.2.2.2 Indemnity. Lessee’s indemnity of
Lessor as set forth in Section 7.07(a) of the Lease shall also apply
with respect to any and all costs, losses, damages, injuries and liabilities
related in any way to any act or omission of Lessee or Lessee’s Agents, or
anyone directly or indirectly employed by any of them, or in connection with
Lessee’s non-payment of any amount arising out of the Lessee Improvements
and/or Lessee’s disapproval of all or any portion of any request for payment.
Such indemnity by Lessee, as set forth in Section 7.07(a) of the
Lease, shall also apply with respect to any and all costs, losses, damages,
injuries and liabilities related in any way to Lessor’s performance of any
ministerial acts reasonably necessary (i) to permit Lessee to complete the
Lessee Improvements, and (ii) to enable Lessee to obtain any building
permit or certificate of occupancy for the Premises.

 

4.2.2.3 Requirements of Lessee’s Agents. Each
of Lessee’s Agents shall guarantee to Lessee and for the benefit of Lessor that
the portion of the Lessee Improvements for which it is responsible shall be
free from any defects in workmanship and materials for a period of not less
than one (1) year from the date of completion thereof. Each of Lessee’s
Agents shall be responsible for the replacement or repair, without additional
charge, of all work done or furnished in accordance with its contract that
shall become defective within one (1) year after the completion of the
work performed by such contractor or subcontractors. The correction of such work
shall include, without additional charge, all additional expenses and damages
incurred in connection with such removal or replacement of all or any part of
the Lessee Improvements, and/or Building, and/or Furniture and/or Common Areas
that may be damaged or disturbed

 

E-9

 

thereby.
All such warranties or guarantees as to materials or workmanship of or with
respect to the Lessee Improvements shall be contained in the contract and shall
be written such that such guarantees or warranties shall inure to the benefit
of both Lessor and Lessee, as their respective interests may appear, and can be
directly enforced by either. Lessee covenants to give to Lessor any assignment
or other assurances which may be necessary to effect such right of direct
enforcement.

 

4.2.2.4 Insurance Requirements.

 

4.2.2.4.1 General Coverages. Lessee’s
Contractor shall carry worker’s compensation insurance covering all of their
respective employees, and shall also carry commercial general liability
insurance, including property damage, all with limits, in form and with
companies as are required to be carried by Lessee as set forth in Section 7.04
of the Lease.

 

4.2.2.4.2 Special Coverages. Lessor shall
carry “Builder’s Risk” insurance covering the construction of the Lessee
Improvements, it being understood and agreed that the Lessee Improvements shall
be insured by Lessor pursuant to Section 7.01 of the Lease immediately
upon completion thereof. Lessee shall carry extended coverage endorsements as
may be reasonably required by Lessor including, but not limited to, the
requirement that all of Lessee’s Agents shall carry excess liability insurance,
each in amounts not less than $1,000,000 per incident, $2,000,000 in aggregate,
and in form and with companies as are required to be carried by Lessee as set
forth in Section 7.05 of the Lease. Lessor and Lessee shall each deliver
evidence of the insurance required hereunder to the other upon demand therefor.

 

4.2.2.4.3 General Terms. Certificates for all
insurance carried pursuant to this Section 4.2.2.4 shall be delivered to
Lessor before the commencement of construction of the Lessee Improvements and
before the Contractor’s equipment is moved onto the Project. All such policies
of insurance must contain a provision that the company writing said policy will
give Lessor thirty (30) days prior written notice of any cancellation or
lapse of the effective date or any reduction in the amounts of such insurance.
In the event that the Lessee Improvements are damaged by any cause during the
course of the construction thereof, Lessee shall immediately repair the same at
Lessee’s sole cost and expense, but subject to reimbursement under the Builder’s
Risk Insurance.. The Contractor and each of its subcontractors shall maintain
all of the foregoing insurance coverage in force until the Lessee Improvements
are fully completed and accepted by Lessor. All policies carried under this Section 4.2.2.4
shall insure Lessor and Lessee, as their interests may appear, as well as
Contractor and its subcontractors. All insurance, except Workers’ Compensation,
maintained by Contractor and its subcontractors shall preclude subrogation
claims by the insurer against anyone insured thereunder. Such insurance shall
provide that it is primary insurance as respects the Lessor and that any other
insurance maintained by Lessor is excess and noncontributing with the insurance
required hereunder. The requirements for the foregoing insurance shall not
derogate from the provisions for indemnification of Lessor by Lessee under Section 4.2.2.2
of this Work Letter.

 

4.2.3 Governmental Compliance. The Lessee
Improvements shall comply in all respects with the following: (i) the Code
and other state, federal, city or quasi-governmental laws, codes, ordinances
and regulations, as each may apply according to the rulings of the

 

E-10

 

controlling
public official, agent or other person; (ii) applicable standards of the
American Insurance Association (formerly, the National Board of Fire
Underwriters) and the National Electrical Code; and (iii) building
material manufacturer’s specifications.

 

4.2.4 Inspection by Lessor. Lessor shall have
the right to inspect the Lessee Improvements at all reasonable times, provided
however, that Lessor’s failure to inspect the Lessee Improvements shall in no
event constitute a waiver of any of Lessor’s rights hereunder nor shall Lessor’s
inspection of the Lessee Improvements constitute Lessor’s approval of the same.
Should Lessor reasonably disapprove any portion of the Lessee Improvements,
Lessor shall notify Lessee in writing of such disapproval and shall specify the
items disapproved. Any defects or deviations in, and/or disapproval by Lessor
of, the Lessee Improvements shall be rectified by Lessee at no expense to
Lessor, provided however, that in the event Lessor determines that a defect or
deviation exists or disapproves of any matter in connection with any portion of
the Lessee Improvements and such defect, deviation or matter might adversely
affect the mechanical, electrical, plumbing, heating, ventilating and
air-conditioning or life-safety systems of Building 10, the structure or
exterior appearance of Building 10, Lessor may take such action as Lessor deems
reasonably necessary, at Lessee’s expense and without incurring any liability
on Lessor’s part, to correct any such defect, deviation and/or matter,
including, without limitation, causing the cessation of performance of the
construction of the Lessee Improvements until such time as the defect,
deviation and/or matter is corrected to Lessor’s satisfaction.

 

4.2.5 Meetings. Commencing upon the delivery
of the Premises to Lessee, Lessee shall hold periodic meetings at a reasonable
time with the Architect and the Contractor regarding the progress of the
preparation of Construction Drawings and the construction of the Lessee
Improvements. Lessee shall provide Lessor with reasonable advance notice of all
such meetings to enable Lessor’s representative to attend and participate.

 

4.3
Notice of Completion; Copy of Record Set of Plans. Within ten (10) days
after completion of construction of the Lessee Improvements, Lessee shall cause
a Notice of Completion to be recorded in the office of the Recorder of the
County of San Mateo in accordance with Section 3093 of the Civil Code of the
State of California or any successor statute, and shall furnish a copy thereof
to Lessor upon such recordation. If Lessee fails to do so, Lessor may execute
and file the same on behalf of Lessee as Lessee’s agent for such purpose, at
Lessee’s sole cost and expense. Concurrent with Lessor’s delivery of Building
10 to Lessee, Lessor shall deliver to Lessee a “record set” of “as-built”
drawings for the building shell. At the conclusion of construction, (i) Lessee
shall cause the Architect and Contractor (A) to prepare a “record set” of “as-built”
drawings, (B) to certify to the best of their knowledge that the “record-set”
of mylar “as-built” drawings are true and correct, which certification shall
survive the expiration or termination of this Lease, and (C) deliver to
Lessor two (2) printed sets and one (1) electronic set in CAD format
on CD of such record drawings within sixty (60) days following issuance of
a final permit accepting the work of Lessee Improvements or similar final
sign-off, and (ii) Lessee shall deliver to Lessor a copy of all
warranties, guaranties, and operating manuals and information relating to the
improvements, equipment, and systems in the Premises.

 

E-11

 

SECTION 5

MISCELLANEOUS

 

5.1
Lessee’s Representative. Lessee has designated Bruce Laprade as its sole
representative with respect to the matters set forth in this Work Letter, who
shall have full authority and responsibility to act on behalf of the Lessee as
required in this Work Letter.

 

5.2
Lessor’s Representative. Lessor has designated Janette Sammartino as its
sole representatives with respect to the matters set forth in this Work Letter,
who, until further notice to Lessee, shall have full authority and
responsibility to act on behalf of the Lessor as required in this Work Letter.

 

5.3
Time of the Essence in This Lessee Work Letter. Unless otherwise
indicated, all references herein to a “number of days” shall mean and refer to
calendar days. If any item requiring approval is timely disapproved by Lessor,
the procedure for preparation of the document and approval thereof shall be
repeated until the document is approved by Lessor.

 

5.4
Lessee’s Lease Default. Notwithstanding any provision to the contrary
contained in this Lease, if any material default as described in Section 12.01
of Lease or failure by Lessee to timely observe or perform an obligation under
this Work Letter has occurred at any time on or before the substantial
completion of the Lessee Improvements, then (i) in addition to all other
rights and remedies granted to Lessor pursuant to the Lease, Lessor shall have
the right to cause Contractor to cease the construction of the Lessee
Improvements (in which case, Lessee shall be responsible for any further delay
in the substantial completion of the Lessee Improvements caused by such work
stoppage), and (ii) all other obligations of Lessor under the terms of
this Work Letter shall be forgiven until such time as such default is cured
pursuant to the terms of the Lease (in which case, Lessee shall be responsible
for any delay in the substantial completion of the Lessee Improvements caused
by such inaction by Lessor), and (iii) the date on which payment of Base
Rent is to commence under the Lease shall not be affected.

 

5.5
Lessee’s Agents. All subcontractors, laborers, materialmen, and
suppliers retained directly by Lessee shall conduct their activities in and
around the Project, the Premises, Building 10 or any contents thereof in a
harmonious relationship with all other subcontractors, laborers, materialmen
and suppliers at the Project and the Premises.

 

5.6
Change Orders. No material changes, modifications or alterations in the
Approved Working Drawings in the Lessee Improvement work pursuant thereto
(collectively referred to as “Change Orders”)
shall be made by Lessee without the prior written consent of Lessor, which
consent shall not be unreasonably withheld or delayed. Lessor will respond to
Lessee’s submission of all requests for Change Orders for Lessor approval
within three (3) business days from Lessor’s actual receipt. All requests
for Change Orders shall be made in writing. Once approved in writing, such
Change Orders shall become a part of the Approved Working Drawings. For
purposes of this Section 5.6, a Change Order shall be deemed “material” if
such Change Order will require a permit or other governmental approval or if it
affects the structural elements of Building 10.

 

5.7
Assumption of the Risk. Lessee accepts, assumes and shall be solely
responsible for all risks for the construction and installation of the Lessee
Improvements other than for risks resulting from the gross negligence or
willful misconduct of Lessor or Lessor’s employees, agents, contractors or
subcontractors or risks covered by Builder’s Risk Insurance.

 

E-12

 

5.8
No Partnership. Nothing in this Agreement shall cause Lessor and Lessee
to be partners or joint venturers.

 

5.9
Hazardous Materials. If the construction of the Lessee Improvements or
Lessee’s move into the Premises will involve the use of Hazardous Materials,
Lessee shall comply with Lessor’s rules and regulations concerning such
Hazardous Materials.

 

5.10
Schedules. Attached hereto and incorporated herein by reference are the
following schedules:

 

Schedule One to Exhibit “C” - B Abbreviated
Specifications

 

Schedule Two to Exhibit “C” - B Construction
Drawing Requirements

 

E-13

 

SCHEDULE ONE

 

TO

EXHIBIT E

TO

PACIFIC
SHORES INVESTORS, LLC

LEASE

TO

PDL
BIOPHARMA, INC

FOR

Pacific Shores Center

Building 10

1500 Seaport Boulevard

Redwood City, California

 

INTERIOR
SPECIFICATION STANDARDS

 

ABBREVIATED
BUILDING STANDARDS

 

For Pacific
Shores

 

Note: The Tenant Improvements shall be Class “A” and,
their quality must be at a minimum, per the following standards:

 

GENERAL OFFICE

 

CUSTOM CABINETRY

 

SCOPE: All materials and
labor for the construction and installation of Cabinetry and all related
accessories per WIC Standards.

 

	
  A.

  	
  Trade
  Standards: Woodworking Institute of California (WIC) latest edition
  Section 15 and 16 for plastic laminated casework and plastic laminated
  countertops. Color of plastic laminate to be selected by Architect

  
	
   

  	
   

  
	
  B.

  	
  All
  cabinetry to be constructed to “Custom-Grade” Specifications. Cabinetry to be
  flush overlay construction. 

  
	
   

  	
   

  
	
  C.

  	
  Plastic
  Laminate: High Pressure thermoset laminated plastic surfacing material to
  equal or surpass NEMA LD3, Nevamar, WilsonArt or approved equal.

  

 

	
   

  	
  1.

  	
  Countertops,
  shelf-tops, splashes, and edges: Grade GP 50, 0.050 inches thick. 

  

 

	
   

  	
  2.

  	
  All
  other exposed vertical surfaces: Grade GP 28, 0.028 inches thick 

  

 

	
   

  	
  3.

  	
  Semi-exposed
  backing sheet: Grade CL 20, 0.020 inches thick 

  

 

	
   

  	
  4.

  	
  Concealed
  backing sheet: Grade BK 20, 0.020 inches thick 

  

 

	
  D.

  	
  Adhesives:
  Bond surfaces to Type 11 as recommend by Plastic Laminate Manufacturer.

  
	
   

  	
   

  
	
  E.

  	
  Hinges:
  Heavy-duty concealed self-closing hinges. Amount of hinges per Door per WIC.
  Stanley or approved equal

  
	
   

  	
   

  
	
  F.

  	
  Door
  and Drawer Pulls: Wire-pull with 4-inch centers; Dull Chrome finish; Stanley
  4483 or approved equal.

  
	
   

  	
   

  
	
  G.

  	
  Drawer
  slides: Heavy-duty grade with ball-bearings. Stanley, Klein, or approved
  equal

  
	
   

  	
   

  
	
  H.

  	
  Door
  Catches: Heavy-duty commercial friction type.

  

 

	
   

  	
  1.

  	
  Recessed
  Adjustable Shelf Standards: Aluminum or zinc-plated recessed type;
  Knape & Vogt with clips or approved equal.

  

 

E-14

 

	
  I.

  	
  Base
  and Wall Cabinets including doors: 3/4-inch thick medium density particleboard:
  

  

 

	
   

  	
  1.

  	
  Conceal
  all fastenings. 

  

 

	
   

  	
  2.

  	
  Provide
  clear spaces as required for mechanical and electrical fittings 

  

 

	
   

  	
  3.

  	
  Plastic
  laminate and self-edge all shelves. 

  

 

	
   

  	
  4.

  	
  Provide
  3/4-inch thick doors and drawer faces. 

  

 

	
   

  	
  5.

  	
  Unless
  indicated otherwise, all shelving to be adjustable. 

  

 

	
   

  	
  6.

  	
  Provide
  back and ends on all cabinets. 

  

 

	
   

  	
  7.

  	
  All
  exposed cabinet faces to be plastic-laminated. 

  

 

	
  J.

  	
  Countertops
  and Shelving: 3/4-inch thick medium density particleboard. Backsplash to be
  3/4 inches thick, glued and screwed into top with scribed edges. Joints in
  countertop to be not closer than 24 inches from sinks. Joints shall be shop
  fitted, splined, glued and mechanically fastened.

  

 

	
  K.

  	
  Installation
  of Cabinetry shall be per WIC instructions, Custom Grade. 

  

 

WOOD DOORS

 

SCOPE:
All materials and labor necessary for the installation of Wood Doors, required
accessories and preparations for hardware.

 

	
  A.

  	
  Non-rated
  Wood Doors: 1-3/4 inch thick, flush, solid core, plain sliced Birch veneer
  with Birch edge. Cores may be either of the following: Glued block Hardwood
  Core per NWMA or Particleboard Core per NWMA. Manufacturer: Algoma,
  Weyerhaeuser, or approved equal.

  
	
   

  	
   

  
	
  B.

  	
  Fire-rated
  Wood Doors: 1-3/4 inch thick, flush, solid core, plain sliced Birch face
  veneer with Birch Edge with mineral core per rating. Manufacturer: Algoma,
  Weyerhaeuser, or approved equal. Doors shall have a permanent UL label. 

  
	
   

  	
   

  
	
  C.

  	
  Vision
  Panels (where applies): Fire rated vision panel where required. Set in square
  metal stop to match metal doorstops as provided by doorframe manufacturer. 

  
	
   

  	
   

  
	
  D.

  	
  Doors
  shall be 8’- 0” x 3’-0” leafs typical. 

  

 

ALUMINUM DOOR AND WINDOW FRAMES

 

SCOPE:
All materials and labor necessary for the installation of Aluminum Door Frames.

 

	
  A.

  	
  Frame
  Manufacturers: Raco, or Ragland Manufacturing Company, Inc. 

  
	
   

  	
   

  
	
  B.

  	
  Door
  Frames: Non-rated and 20-minute label, Raco “Trimstyle” frame with Trim 700
  (3/8 inch by 1- 1/2 inch) with no exposed fasteners.

  
	
   

  	
   

  
	
  C.

  	
  Finish,
  Door and Window Frame Extrusions, Wall Trim: 

  

 

	
   

  	
  1.

  	
  Painted
  and oven-cured with “Duralaq” finish.

  
	
   

  	
   

  	
   

  
	
   

  	
  2.

  	
  Color:
  Clear. 

  
	
   

  	
   

  	
   

  
	
   

  	
  3.

  	
  Finish
  shall meet or exceed requirements of AAMA Specifications 603. 

  

 

	
   

  	
  4.

  	
  Coat
  inside of frame profile with bituminous coating to a thickness of 1/16 inch
  where in contact with dissimilar materials. 

  

 

DOOR HARDWARE

 

SCOPE:
All materials and labor for the installation of all Door Hardware, locksets,
closers, hinges, miscellaneous door hardware.

 

	
  A.

  	
  Swinging
  Door Lockset and Cylinder: Schlage “L” series with lever handle with 6 pin cylinder.
  

  

 

	
  B.

  	
  Keyway:
  Furnish blank keyways to match existing master-key system. Match existing
  keyways. 

  

 

	
  C.

  	
  Finishes:
  Satin Chrome, 626 finish. Paint closers to match. 

  

 

	
  D.

  	
  Kickplates:
  16 gauge stainless steel; 10 inches high: width to equal door width less 2
  inches. 

  

 

E-15

 

HARDWARE
SCHEDULE

 

Hardware Group A (Typical, rated, single door)

 

	
  1

  	
   

  	
  Lockset

  	
   

  	
  Schlage

  	
   

  	
  L9050PD

  
	
  1 1/2 pair

  	
   

  	
  Butt
  Hinges

  	
   

  	
  Hager

  	
   

  	
  BB1279

  
	
  1

  	
   

  	
  Closer

  	
   

  	
  Norton

  	
   

  	
  700
  Series

  
	
  1

  	
   

  	
  Stop

  	
   

  	
  Quality

  	
   

  	
  (332
  @ carpet)

  
	
  1

  	
   

  	
  Smoke
  Seal

  	
   

  	
  Pemko

  	
   

  	
   

  

 

Hardware Group B (Typical, rated, closet/service door)

 

	
  1

  	
   

  	
  Lockset

  	
   

  	
  Schlage

  	
   

  	
  L9080PD

  
	
  11/2 pair

  	
   

  	
  Butt
  Hinges

  	
   

  	
  Hager

  	
   

  	
  BB1279

  
	
  1

  	
   

  	
  Closer

  	
   

  	
  Norton

  	
   

  	
  700
  Series w/ hold-open

  
	
  1

  	
   

  	
  Stop

  	
   

  	
  Quality

  	
   

  	
  (332
  @ carpet)

  
	
  1

  	
   

  	
  Smoke
  Seal

  	
   

  	
  Pemko

  	
   

  	
   

  

 

Hardware Group C (Typical, non-rated door)

 

	
  1

  	
   

  	
  Lockset

  	
   

  	
  Schlage

  	
   

  	
  L9050PD

  
	
  1 1/2 pair

  	
   

  	
  Butt
  Hinges

  	
   

  	
  Hager

  	
   

  	
  BB1279

  
	
  1

  	
   

  	
  Stop

  	
   

  	
  Quality

  	
   

  	
  (332
  @ carpet)

  

 

Hardware Group D (Typical, non-rated, closet/service door)

 

	
  1

  	
   

  	
  Lockset

  	
   

  	
  Schlage

  	
   

  	
  L9080PD

  
	
  1 1/2 pair

  	
   

  	
  Butt
  Hinges

  	
   

  	
  Hager

  	
   

  	
  BB1279

  
	
  1

  	
   

  	
  Stop

  	
   

  	
  Quality

  	
   

  	
  (332
  @ carpet)

  

 

Hardware Group E (Card-access door)

 

	
  1

  	
   

  	
  Electric
  Lockset

  	
   

  	
  Schlage

  	
   

  	
  L9080PDGU

  
	
  1 1/2 pair

  (2
  pr @ 8’ door)

  	
   

  	
  Butt
  Hinges

  	
   

  	
  Hager

  	
   

  	
  BB1279
  — NRP

  
	
  1

  	
   

  	
  Electric
  Butt

  	
   

  	
  Hager

  	
   

  	
   

  
	
  1

  	
   

  	
  Closer

  	
   

  	
  Norton

  	
   

  	
  700
  Series w/ hold-open

  
	
  1

  	
   

  	
  Stop

  	
   

  	
  Quality

  	
   

  	
  (332
  @ carpet)

  

 

Hardware Group F (Typical, double door)

 

	
  1

  	
   

  	
  Electric
  Lockset

  	
   

  	
  Schlage

  	
   

  	
  L9050PD

  
	
  3 pair

  	
   

  	
  Butt
  Hinges

  	
   

  	
  Hager

  	
   

  	
  BB1270

  
	
  1

  	
   

  	
  Auto
  Flush Bolt

  	
   

  	
  Glyn
  Johnson

  	
   

  	
  FB-8

  
	
  1

  	
   

  	
  Dustproof
  Strike

  	
   

  	
  Glyn
  Johnson

  	
   

  	
  DP2

  
	
  2

  	
   

  	
  Closer

  	
   

  	
  Norton

  	
   

  	
  7700
  Series

  
	
  2

  	
   

  	
  Stop

  	
   

  	
  Quality

  	
   

  	
  (332
  @ carpet)

  
	
  1

  	
   

  	
  Astragal

  	
   

  	
  Pemko

  	
   

  	
   

  
	
  1

  	
   

  	
  Coordinator

  	
   

  	
  Glyn
  Johnson

  	
   

  	
   

  
	
  1

  	
   

  	
  Smoke
  Seal

  	
   

  	
  Pemko

  	
   

  	
   

  

 

E-16

 

GLAZING

 

SCOPE:
All materials and labor for the installation of Glass.

 

	
  A.

  	
  Manufacturers:
  PPG Industries, or Viracon, Inc. See glazing schedule below. 

  

 

	
  B.

  	
  Shop
  prepares all glazing. Edges to have no chips or fissures. 

  

 

	
  C.

  	
  Glazing
  Materials: 

  

 

	
   

  	
  1.

  	
  Safety
  Glass: ASTM C1048, fully tempered with horizontal tempering, Condition A
  uncoated, Type 1 transparent flat, Class 1 clear, Quality q3 glazing
  select, conforming to ANSI Z97.1

  
	
   

  	
   

  	
   

  
	
   

  	
  2.

  	
  Mirror
  Glass: Clear float type with copper and silver coating, organic overcoating,
  square polished edges, 1/4-inch thick, 

  
	
   

  	
   

  	
   

  
	
   

  	
  3.

  	
  Wire
  Glass: Clear, polished both sides, square wire mesh of woven stainless steel
  wire 1/2 inch x 1/2 inch grid; 1/4 inch thick. 

  
	
   

  	
   

  	
   

  
	
   

  	
  4.

  	
  Tempered
  Glass: 1/4 inch thick, no tong marks. UL rated for 1 -hour rating. 

  
	
   

  	
   

  	
   

  
	
   

  	
  5.

  	
  Spacers:
  Neoprene. 

  
	
   

  	
   

  	
   

  
	
   

  	
  6.

  	
  Tape
  to be poly-iso-butylene. 

  

 

	
  D.

  	
  Schedule:
  

  

 

	
   

  	
  1.

  	
  Type
  A: 1/4-inch thick mirror, annealed, heat strengthened, or full tempered as
  required. 

  
	
   

  	
   

  	
   

  
	
   

  	
  2.

  	
  Type
  B: 1/4 inch thick clear float glass, annealed, heat strengthened, or full
  tempered as required. 

  
	
   

  	
   

  	
   

  
	
   

  	
  3.

  	
  Type
  C: 1/4-inch thick wire glass plate, square pattern “Baroque” 

  

 

LIGHT GAUGE METAL FRAMING

 

SCOPE:
All materials and labor necessary for the installation of metal framing and
related accessories.

 

	
  A.

  	
  Structural
  Studs: 14 gauge punched channel studs with knurled screw-type flanges,
  prime-coated steel. Manufacturer: United States Gypsum SJ or approved equal.
  Submit cut-sheet of material.

  

 

	
  B.

  	
  Partition
  Studs: 20 gauge studs with key-hole shaped punch-outs at 24 inches on center.
  Manufacturer: United States Gypsum ST or approved equal.

  

 

	
  C.

  	
  Fasteners
  for Structural Studs: Metal screws as recommended by metal system
  manufacturer. Weld at all structural connection points.

  

 

	
  D.

  	
  Reinforce
  framed door and window openings with double studs at each jamb
  (flange-to-flange and weld) and fasten to runners with screws and weld.
  Reinforce head with 14 gauge double stud same width as wall. Screw and weld.

  

 

	
  E.

  	
  Provide
  all accessories as required to fasten metal-framing per manufacturers
  recommendations.

  

 

	
  F.

  	
  Provide
  and install flat-strapping at all structural walls (walls with concrete
  footings beneath the walls). Minimum bracing shall be 25% of structural walls
  shall be braced with flat-strapping per Manufacturers recommendations. Weld
  at all strap ends and at all intermediate studs.

  

 

	
  G.

  	
  Provide
  foundation clips at 4’-0” on center at structural walls. Anchor with 1/2 inch
  diameter by 10 inch long anchor bolts.

  

 

	
  H.

  	
  Non-structural
  interior partitions shall be anchored with power-driven fasteners at 4’-0” on
  center at the concrete slab.

  

 

ACOUSTIC CEILING SYSTEM

 

SCOPE:
All materials and labor for the installation of the Acoustic Ceiling System
including T-Bar system, Acoustic Ceiling Panels, Suspension wiring and
fastening devices and Glued-down Ceiling Panels.

 

	
  A.

  	
  Manufacturer:
  Armstrong, or approved equal. Exposed T-bar system; factory painted; steel
  construction; rated for intermediate duty.

  

 

	
  D.

  	
  Acoustical
  Tile: “Second Look”, conforming to the following:

  

 

	
   

  	
  1.

  	
  Size:
  24 x 48 inches. 

  

 

	
   

  	
  2.

  	
  Thickness:
  3/4 inches. 

  

 

E-17

 

	
   

  	
  3.

  	
  Composition:
  Mineral. 

  

 

	
   

  	
  4.

  	
  NRC
  Range: .55 to .60. 

  

 

	
   

  	
  5.

  	
  STC
  Range: 35 to 39. 

  

 

	
   

  	
  6.

  	
  Flame
  Spread: ASTME84,0-25. UL Label, 25 or under. 

  

 

	
   

  	
  7.

  	
  Edge:
  Tegular, Lay-in. 

  

 

	
   

  	
  8.

  	
  Surface
  Color: White. 

  

 

	
   

  	
  9.

  	
  Surface
  Finish: Factory-applied washable vinyl latex paint. 

  

 

	
  G.

  	
  Installation
  to be per ASTM C636 structural testing. Lateral support for each 96 square
  feet of ceiling flared at 45 degrees in 4 directions.

  

 

	
  H.

  	
  Provide
  clips for panel uplift restraints at all panels, 2 per panel.

  

 

GYPSUM WALLBOARD

 

SCOPE:
Provide all materials and labor for the installation of Gypsum Wallboard
including all accessories and finishes.

 

	
  A.

  	
  Standard
  Gypsum Wallboard: ASTM C36;. Ends square cut, tapered edges.

  

 

	
  B.

  	
  Fire
  Resistant Gypsum Wallboard: ASTM C36, 5/8 inches thick Type X. Ends square
  cut, tapered edges. See Drawings for locations.

  

 

	
  C.

  	
  Moisture-resistant
  gypsum wallboard: ASTM C630-90.

  

 

	
  D.

  	
  Joint-reinforcing
  Tape and Joint Compound: ASTM C475, as manufactured by or recommended by
  wallboard manufacturer. Minimum 3 coat application for a smooth finish.

  

 

	
  E.

  	
  Corner
  Bead: Provide at all exposed outside corners;

  

 

	
  F.

  	
  L-shaped
  edge trim: Provide at all exposed intersections with different materials.

  

 

	
  G.

  	
  All
  work shall be done in accordance with the USG recommended method of
  installation.

  

 

	
   

  	
  1.

  	
  Finish:
  smooth. 

  

 

PAINTING

 

	
  A.

  	
  Paint
  Manufacturers: ICI, Dunn-Edwards Corporation, Kelly Moore. 

  

 

	
  B.

  	
  Paint
  colors shall be selected by the Architect. 

  

 

	
  C.

  	
  Painting
  Schedule: Provide for 4 different color applications 

  

 

	
   

  	
  1.

  	
  P-1:
  “Field”. Color to be selected. 

  

 

	
   

  	
  2.

  	
  P-2:
  “Accent”. Color to be selected. 

  

 

	
   

  	
  3.

  	
  P-3:
  “Accent”. Color to be selected. 

  

 

	
   

  	
  4.

  	
  P-4:
  “Accent”. Color to be selected. 

  

 

	
  D.

  	
  Interior
  Gypsum Wallboard: 

  

 

	
   

  	
  1.

  	
  Primer:
  Vinyl Wall Primer/Sealer. 

  

 

	
   

  	
  2.

  	
  1
  stand 2nd Coat: Eggshell Acrylic Latex. 

  

 

	
  E.

  	
  Metal
  Framing: 

  

 

	
   

  	
  1.

  	
  Primer:
  Red Oxide, shop-primed (for non-galvanized) if exposed. 

  

 

	
  F.

  	
  Wood
  Work, Wood Doors: 

  

 

	
   

  	
  1.

  	
  Two
  coats of transparent finish. Sand lightly between coats with steel wool. 

  

 

INSULATION

 

	
  A.

  	
  R-15
  in exterior walls. 

  

 

	
  B.

  	
  R-25
  on Roof. 

  

 

	
  C.

  	
  Sound
  batts in conference, restroom and lobby walls. 

  

 

E-18

 

ROOF EQUIPMENT

 

	
  A.

  	
  Stainless
  steel mechanical platform and associated access stairs and guard rail system 

  

 

	
  B.

  	
  EIFS
  roof screen to match detail of exterior GFRC Panel. 

  

 

FULL HEIGHT GLAZED PARTITION

 

	
  A.

  	
   1/4” glazed
  partition, in building standard aluminum frame 

  

 

FINISHES

 

	
  A.

  	
  Vinyl
  Composite Tile: Armstrong stonetex, 12” x 12” 

  

 

	
  B.

  	
  Resilient
  Base: Burke rubber wall base, 4” top set or cove, as appropriate for VCT or
  carpet. 

  

 

	
  C.

  	
  Window
  Coverings: Miniblinds, Levelor, color: TBD 

  

 

	
  D.

  	
  Carpet:
  

  

 

	
  Option 1:

  	
   

  	
  Designweave,
  Windswept Classic 30 oz. (Direct glue installation) or equal

  
	
   

  	
   

  	
   

  
	
  Option 2: (cut pile)

  Upgrade

  	
   

  	
  Designweave,
  Tempest Classic 32 oz. (Direct glue installation) or equal.

  
	
   

  	
   

  	
   

  
	
  Option 3: (cut pile)

  Upgrade

  	
   

  	
  Designweave,
  Sabre Classic, 38 oz. (Direct glue installation) or equal.

  

 

KITCHEN FIXTURES

 

	
  A.

  	
  Sink:
  Ekkay stainless steel, GECR-2521-L&R, 20 gauge, 25”w x 21  1/4” D x 5 3/8” D, ADA
  compliant.

  

 

	
  B.

  	
  Kitchen
  Faucet: American Standard, Silhouette Single control, #4205 series, spout 9  3/4”. 

  

 

KITCHEN APPLIANCES

 

	
  A.

  	
  Dishwasher:
  

  

 

	
  Option 1:

  	
    

  	
  GE
  GSD463DZWW, 24’W x 24  3/4” D x 34-35”
  H, 9 gallons/wash

  
	
   

  	
   

  	
   

  
	
  Option
  2:

  	
    

  	
  Bosch,
  SHU5300 series, 5.4 gallons/wash-with water heater

  

 

	
  B.

  	
  Refrigerator:
  

  

 

	
  Full Size:

  	
   

  	
  GE,
  “S” series top-mount, TBX16SYZ, 16.4 cubic feet, recessed, recessed handles,
  28” W x 29 1/8” D x 66  3/4” H, white, optional
  factory installed ice-maker.

  

 

Under-counter:

 

	
  Option 1:

  	
    

  	
  U-Line,
  #29R, 3.5 cubic feet, white

  
	
   

  	
   

  	
   

  
	
  Option 2:

  	
    

  	
  U-Line,
  Combo 29FF, Frost Free with factory installed icemaker, 2.1 cubic feet, white

  

 

	
  C.

  	
  Microwave:
  GE, Spacemaker II JEM25WY, Midsize, 9 cubic feet, 800 watts, 23 13/16” W x 11
  13/16”D x 12 5/16” H 

  

 

	
  Option
  1:

  	
    

  	
  Under
  counter Mounting Kit, #4AD19-4

  
	
   

  	
   

  	
   

  
	
  Option 2:

  	
    

  	
  Accessory
  Trim Kit # JXB37WN, 26 1/8” W X 18 1/4” H (built-in application)

  

 

	
  D.

  	
  Garbage
  Disposal: ISE #77,  3/4” horsepower 

  

 

	
  E.

  	
  Water
  Heater: To be selected by DES. 

  

 

E-19

 

PUBLIC SPACES

 

FRONT BUILDING LOBBY

 

	
  Walk
  Off Matts:

  	
   

  	
  Design
  Materials, Sisel, Calcetta #68. Natural, 100% coir

  
	
   

  	
   

  	
   

  
	
  Floor
  Tile:

  	
   

  	
  3/8”
  x 18” x 18” Stone or Marble set in mortar bed in recessed slab as approved by
  Owner

  
	
   

  	
   

  	
   

  
	
  Transition
  Strips:

  	
   

  	
  5/16”
  x 1  1/2” x random length
  strips, cherry wood flooring

  
	
   

  	
   

  	
   

  
	
  Corridor
  Carpeting:

  	
   

  	
  Carpet
  over pad, Atlas, New Vista or as approved by Owner

  
	
   

  	
   

  	
   

  
	
  Lobby
  Ceiling:

  	
   

  	
  Suspended
  gypsum board ceiling, Painted

  
	
   

  	
   

  	
   

  
	
  Building
  Lobby: Pendant Fixture

  	
   

  	
  Akarl
  shades hanging #J1-9  3/4” x 5’-2” or
  equal as approved by owner.

  
	
   

  	
   

  	
   

  
	
  Stairs &
  Mezzanine Railing:

  	
   

  	
  P &
  P Railing, Modesto with custom cherry guard rail Rep: Oliver Capp (805)
  241-8810. Hand and guard railing P & P Railings, Modesto stainless
  steel railing with horizontal spirals and custom cherry guard rail cap by
  others, fittings dark gray metallic or equal as approved by Owner.

  

 

BACK BUILDING LOBBY & EMERGENCY STAIRS

 

	
  Walk
  Off Matts:

  	
   

  	
  Design
  Materials, Sisal, Calcutta #68, Natural, 100% coir.

  
	
   

  	
   

  	
   

  
	
  Treads &
  Landings:

  	
   

  	
  Carpet
  covered concrete, as approved by Owner

  
	
   

  	
   

  	
   

  
	
  Stringers,
  Risers & Handrails

  	
   

  	
  Painted
  steel stringer, eggshell finish enamel.

  
	
   

  	
   

  	
   

  
	
  Ceiling:

  	
   

  	
  Suspended
  gypsum board ceiling.

  

 

ELEVATORS

 

	
  Cars:

  	
   

  	
  (1) 3800
  lb, (1) 3500 lb 150 ft/min by Otis

  
	
   

  	
   

  	
   

  
	
  Elevator
  Doors:

  	
   

  	
  Stainless
  Steel

  
	
   

  	
   

  	
   

  
	
  Elevator
  Interior Paneling:

  	
   

  	
  Cherry
  veneer with stainless steel reveals and railing

  
	
   

  	
   

  	
   

  
	
  Elevator
  Floor:

  	
   

  	
  Slate
  3/8” x 18” x 18” tile as approved by Owner.

  

 

RESTROOMS

 

	
  Counter
  tops:

  	
   

  	
  Stone/marble
  or equal as approved by Owner

  
	
   

  	
   

  	
   

  
	
  Walls
  at Lavatories:

  	
   

  	
  Eggshell
  finish, latex paint, Benjamin Moore

  
	
   

  	
   

  	
   

  
	
  Floor
  at Toilets:

  	
   

  	
  2”
  x 2” matte porcelain ceramic floor tiles, thin set, Dal-tile.

  
	
   

  	
   

  	
   

  
	
  Walls
  at Toilets:

  	
   

  	
  2”
  x 2” matte porcelain ceramic floor tiles, thin set, Dal-tile.

  
	
   

  	
   

  	
   

  
	
  Ceiling:

  	
   

  	
  Suspended
  gypsum board ceiling.

  

 

E-20

 

Toilet compartments:

 

	
   

  	
  A.

  	
  Manufactured
  floor-anchored metal toilet compartments and wall-hung urinal screens.

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  Approved
  Manufacturer, Global Steel Products Corp, or approved equal.

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  Toilet
  Partitions: Stainless Steel finish.

  
	
   

  	
   

  	
   

  
	
   

  	
  D.

  	
  Hardware:
  Hinges: Manufacturer’s standard self-closing type that can be adjusted to
  hold door open at any angle up to 90 degrees. Latch and Keeper:
  Surface-mounted latch unit, designed for emergency access, with combination
  rubber-faced door strike and keeper. Coat Hook: Combination hook and
  rubber-tipped bumper. Door Pull: Manufacturer’s standard.

  

 

Ceramic Tile

 

	
   

  	
  A.

  	
  Manufacturer:
  Dal-Tile or approved equal.

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  Size:
  4-1/4” x 4-1/4” for walls, 8 x 8 for floors,  3/4” liner strip as
  accent.

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  Glaze:
  Satin glaze for walls, unglazed tile for floors.

  
	
   

  	
   

  	
   

  
	
   

  	
  D.

  	
  Color:
  As selected by Architect.

  
	
   

  	
   

  	
   

  
	
   

  	
  E.

  	
  Accessories:
  Base, corners, coved cap and glazed to match

  
	
   

  	
   

  	
   

  
	
   

  	
  F.

  	
  Wall
  and floor installation: per applicable TCA

  
	
   

  	
   

  	
   

  
	
   

  	
  G.

  	
  Waterproof
  Membrane: Chloraloy or approved equal.

  
	
   

  	
   

  	
   

  
	
   

  	
  H.

  	
  Tile
  Backer Board: 1/2 inch thick wonderboard

  
	
   

  	
   

  	
   

  
	
   

  	
  I.

  	
  Grout:
  Commercial Portland Cement Grout; Custom Building Products or approved equal

  
	
   

  	
   

  	
   

  
	
   

  	
  J.

  	
  Mortar:
  Latex-Portland cement mortar; Custom Building Products or approved equal.

  

 

RESTROOM:

 

	
  Toilet:

  	
   

  	
  Kohler/American
  Standard, commercial quality.

  
	
   

  	
   

  	
   

  
	
  Urinal:

  	
   

  	
  Kohler/American
  Standard, commercial quality.

  
	
   

  	
   

  	
   

  
	
  Lavatory:

  	
   

  	
  Kohler/American
  Standard, undercounter.

  
	
   

  	
   

  	
   

  
	
  Lavatory
  Faucet:

  	
   

  	
  Kroin
  handicap lavatory faucet #HV1LH, polished chrome.

  
	
   

  	
   

  	
   

  
	
  Soap
  Dispenser Counter:

  	
   

  	
  Bobrick,
  8226, Lavatory mounted for soaps, 34 fl oz.

  
	
   

  	
   

  	
   

  
	
  Toilet
  accessories:

  	
   

  	
   

  

 

	
   

  	
  A.

  	
  Manufacturer:
  Bobrick Washroom Equipment, or approved equal. 

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  Schedule:
  Model numbers used in this schedule are Bobrick (134) unless otherwise
  noted.

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  Combination
  Paper Towel Dispenser/Waste Receptacle: Recessed, Model B-3944, one per
  restroom #7151 and 7152, and two per restroom #7050 and 7061.

  
	
   

  	
   

  	
   

  
	
   

  	
  D.

  	
  Feminine
  Napkin Vendor: Recessed, combination napkin/tampon vendor, Model B-3500, with
  25 cent operation, one per each women’s toilet room.

  

 

E-21

 

	
   

  	
  E.

  	
  Soap
  Dispenser: Lavatory mounted dispenser, Model B-822, one per each lavatory. 

  
	
   

  	
   

  	
   

  
	
   

  	
  F.

  	
  Toilet
  Paper Dispenser: Surface-mounted, Model JRT, JR Escort, “In-Sight” by Scott
  Paper Company, one per stall. 

  
	
   

  	
   

  	
   

  
	
   

  	
  G.

  	
  Toilet
  Seat Cover Dispenser: Recessed, wall-mounted, Model B-301, one per stall. 

  
	
   

  	
   

  	
   

  
	
   

  	
  H.

  	
  Sanitary
  Napkin Disposal: Recessed, wall-mounted, Model B-353, one per each women’s
  handicapped and odd stall. 

  
	
   

  	
   

  	
   

  
	
   

  	
  I.

  	
  Sanitary
  Napkin Disposal: Partition-mounted, Model B-354 (serves two stalls). 

  
	
   

  	
   

  	
   

  
	
   

  	
  J.

  	
  Grab
  Bars: Horizontal 36”, B6206-36: 42”, B62-6-42: one per each handicapped
  stall. 

  
	
   

  	
   

  	
   

  
	
   

  	
  K.

  	
  Mop/Broom
  Holders: B223-24 (one per janitor closet). 

  
	
   

  	
   

  	
   

  
	
   

  	
  L.

  	
  Paper
  Towel Dispensers: Recessed mounted, Model B-359, one at side wall adjacent to
  sink. 

  

 

TENANT CORRIDORS

 

	
  Walls:

  	
   

  	
  Eggshell
  finish, latex paint, Benjamin Moore.

  
	
   

  	
   

  	
   

  
	
  Floors:

  	
   

  	
  Level
  loop carpet over pad with 4” resilient base as approved by Owner.

  
	
   

  	
   

  	
   

  
	
  Ceiling:

  	
   

  	
  24”
  x 24” x  3/4” thick fine fissured
  type mineral fiber, Armstrong Cirus acoustical tile (beveled regular edge) in
  a 24” x 24” Donn Fineline suspended grid, white finish.

  
	
   

  	
   

  	
   

  
	
  Water
  Fountain:

  	
   

  	
  Haws
  Model #1114 Stainless Steel #4.

  
	
   

  	
   

  	
   

  
	
  Cross
  Corridor Smoke Detector:

  	
   

  	
  3’-6”
  x full height, 20 minute rated, pocket assembly, on magnetic hold opens.

  
	
   

  	
   

  	
   

  
	
  Corridor
  Wall Sconce

  	
   

  	
  Carpyen
  “Berta” 35cm x 33 cm, engraved curved opaque glass, 2 x 7-9W, #G-23.or equal
  as approved by owner

  

 

ELECTRICAL

 

	
  A.

  	
  50
  foot candles at working surface. 

  
	
   

  	
   

  
	
  B.

  	
  3
  Bulb 2x4 parbolic fixtures 

  
	
   

  	
   

  
	
  C.

  	
   1/2 20 Amp circuit for each hard wall office 

  
	
   

  	
   

  
	
  D.

  	
  Electrical
  Devices: Recessed wall mounted devices with plastic cover plate. Color:
  white, multi-gang plate 80400 Series duplex wall outlets. 

  
	
   

  	
   

  
	
  E.

  	
  Telephone/Data
  Outlets: Recessed wall mounted, Standard 2x4 wall box with  3/4” EMT conduit from box
  to sub out above ceiling walls pull string, cabling, terminations and
  cover-plates, color: white, provided by tenant’s vendor. Tenant shall furnish
  telephone backboard.

  

 

	
  F.

  	
  Light
  Switches: Dual level rocker type, mounted at standard locations, with plastic
  cover plate, 5325-W cover plate single switch B0401-W, double switch B0409-W.
  Decors by Leviton, colors: white, and will comply with Title 24 Energy Codes.
  Decors by Leviton.

  

 

E-22

 

MECHANICAL

 

	
  A.

  	
  VAV
  Reheat system — design/build. Each floor to have a minimum of thirty zones.
  Provide reheat boxes on all zones on top floor and at all exterior zones on
  lower floor. System shall meet T-24 for ventilation. Design shall be for 73
  deg. Ambient interior temperature and 2 1/2 watts per sq. ft. min.

  

 

FIRE SPRINKLER SYSTEM

 

As
required by NFPA & factory mutual standard hazard, seismically braced.

 

END

 

E-23

 

SCHEDULE
TWO

TO

EXHIBIT E

TO

PACIFIC
SHORES INVESTORS, LLC

LEASE

TO

PDL BIOPHARMA

FOR

Pacific Shores Center

Building 10

1500 Seaport Boulevard

Redwood City, California

 

CONSTRUCTION
DRAWINGS REQUIREMENTS

 

	
  I.

  	
  Floor
  Plans Showing: 

  
	
   

  	
   

  	
   

  
	
   

  	
  1.

  	
  Location
  and type of all partitions.

  
	
   

  	
   

  	
   

  
	
   

  	
  2.

  	
  Location
  and type of all doors. Indicate hardware and provide keying schedule.

  
	
   

  	
   

  	
   

  
	
   

  	
  3.

  	
  Location
  and type of glass partitions, windows, and doors. Indicate framing and
  reference full-height partitions.

  
	
   

  	
   

  	
   

  
	
   

  	
  4.

  	
  Locations
  of telephone equipment room.

  
	
   

  	
   

  	
   

  
	
   

  	
  5.

  	
  Critical
  dimensions necessary for construction, with indication of required
  clearances.

  
	
   

  	
   

  	
   

  
	
   

  	
  6.

  	
  Location
  and types of all electrical items: outlets, switches, telephone outlets and
  lighting.

  
	
   

  	
   

  	
   

  
	
   

  	
  7.

  	
  Location
  and type of equipment that will require special electrical requirements.
  Provide manufacturers’ specifications for use and operation, including heat
  output.

  
	
   

  	
   

  	
   

  
	
   

  	
  8.

  	
  Location,
  weight per square foot, and description of any heavy equipment or filing
  system.

  
	
   

  	
   

  	
   

  
	
   

  	
  9.

  	
  Requirements
  for special air-conditioning or ventilation.

  
	
   

  	
   

  	
   

  
	
   

  	
  10.

  	
  Location
  and type of plumbing.

  
	
   

  	
   

  	
   

  
	
   

  	
  11.

  	
  Location
  and type of kitchen equipment.

  
	
   

  	
   

  	
   

  
	
   

  	
  12.

  	
  Location,
  type and color of floor covering, wall covering, paint and finishes.

  
	
   

  	
   

  	
   

  
	
  II.

  	
   

  	
  Details
  Showing

  
	
   

  	
   

  	
   

  
	
   

  	
  1.

  	
  All
  millwork with verified dimensions of all equipment to be built in.

  
	
   

  	
   

  	
   

  
	
   

  	
  2.

  	
  Corridor
  entrance.

  
	
   

  	
   

  	
   

  
	
   

  	
  3.

  	
  Bracing
  or support of special walls, glass partitions, etc., if desired. If not
  included with the plans, Tenant’s engineer will design all support or bracing
  required at Tenant’s expense.

  

 

E-24

 

	
  III.

  	
  Additional
  Information 

  

 

	
   

  	
  1.

  	
  Provide
  Landlord with Title 24 energy calculations. 

  

 

E-25

 

EXHIBIT F

to

PACIFIC
SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

 

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 10

Redwood City, California 94063

 

HAZARDOUS MATERIALS
DISCLOSURE

 

Lessor has provided Lessee, and Lessee acknowledges
that it has received and pursuant to Section 17.22(b) of the Lease,
reviewed same, a copy of each of those certain documents entitled: (i) PHASE
I, ENVIRONMENTAL SITE ASSESSMENT, PACIFIC SHORES CENTER, REDWOOD CITY,
CALIFORNIA, Prepared for: The Jay Paul Company, San Francisco, California,
Prepared by: IRIS ENVIRONMENTAL, Oakland, California, December 20, 1999,
Job No. 99-122A; and (ii) PHASE II, ENVIRONMENTAL SITE ASSESSMENT,
PACIFIC SHORES CENTER, 1000 SEAPORT BOULEVARD, REDWOOD CITY, CALIFORNIA,
Prepared for: The Jay Paul Company, San Francisco, California, Prepared by:
IRIS ENVIRONMENTAL, Oakland, California, January 14, 1999, Job No. 99-122-B

 

	
   

  	
   

  	
   

  
	
   

  	
  LESSEE

  
	
   

  	
   

  
	
   

  	
  PDL
  BIOPHARMA, INC.,

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Type
  or print name)

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  (Type
  or print name)

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  

 

F-1

 

EXHIBIT G

to

PACIFIC
SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 10

Redwood City, California 94063

 

NOTICE TO TENANTS AND
TRANSFEREES OF

CURRENT OR FUTURE USES OF
ADJACENT PORT PROPERTY

 

Notice is hereby given to all lessees, tenants and
transferees of land or interests in land located within Pacific Shores Center
of the presence or potential future presence of Port related industrial
activities on Port property adjacent to and west of Pacific Shores Center. All
recipients of this notice should be aware of the following facts:

 

1. The parcel of Port property adjacent to Pacific
Shores Center to the northwest shown on the Exhibit J-Figure One attached
hereto (the “Port Parcel”) is now or may be developed for Port related maritime
and industrial uses similar to those occupying other properties along the west
side of Seaport Boulevard and to the west of Pacific Shores Center.

 

2. Such Port related maritime and industrial
activities are those which are permitted by the general industrial zoning of
the City of Redwood City and may include heavy industrial land uses, including
uses which involve the receipt, transport, storage or management of hazardous wastes,
aggregates, cement, gravel and similar materials, including the outdoor storage
and handling of such materials.

 

3. Pacific Shores Center Limited Partnership, on
behalf of itself, its successors and assigns, has recognized, accepted and
approved such uses of the Port Parcel subject to the utilization of Best
Available

 

 

Management Practices in the development and use of
the Port Parcel. Best Available Management Practices are defined on Schedule
One to Exhibit G attached hereto.

 

4. Despite the use of Best Available Management
Practices on the Port Parcel by the Port and its lessees and licensees and
despite Pacific Shores Center Limited Partnership’s efforts to ensure
compatibility between such uses and those in Pacific Shores Center, it is
possible that such uses will cause emissions into the air of dust or other
particulate matter, or noise or odorous substances which may be offensive to or
be perceived as a nuisance by occupants of Pacific Shores Center.

 

G-1

 

5. Pursuant to covenants made by Pacific Shores
Center Limited Partnership on behalf of its successors and assigns, tenants and
lessees, the tenants, lessees and transferees of Pacific Shores Center Limited
Partnership have approved and accepted such neighboring uses subject to their
utilization of Best Available Management Practices.

 

6. Any actions to enjoin the continuation of such
uses or to recover any damages to persons or property related to their
operations are subject to a requirement for prior notice found in recorded
covenants by Pacific Shores Center Limited Partnership. The following language
is excerpted from such covenants:

 

“In the event that either
party hereto believes that the other has failed to perform any covenant made
herein in favor of the other, at least ten (10) days prior to the
commencement of any action to enforce the covenants hereunder or to recover
damages for the breach thereof, that party who believes that a failure to
perform has occurred (the “Complaining Party”) shall give written notice (the “Notice”)
to the party alleged not to have performed the covenant (the “Non-Complaining
Party”) of the specific nature of the alleged failure and of the intent of the
Complaining Party to take action to remedy the breach by the Non-Complaining
Party. In the event that the nature of the alleged failure to perform is such
that the same cannot reasonably be cured within ten (10) days after
receipt of the Notice (the “Notice Period”), the Non-Complaining Party shall
not be deemed to be in violation of its covenants and no action shall be
commenced by the Complaining Party if, within the Notice Period, the
Non-Complaining Party commences such cure and thereafter diligently and
continuously prosecutes the same to completion within a reasonable time.
Provided, however, that the Complaining Party shall not be precluded from
recovering any actual damages suffered by reason of the alleged failure to
perform prior to or after delivery of the Notice, whether or not such failure
is thereafter cured.”

 

G-2

 

FIGURE ONE TO EXHIBIT G

to

PACIFIC
SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 10

Redwood City, California 94063

 

G-3

 

 

G-4

 

SCHEDULE ONE TO EXHIBIT G

to

PACIFIC
SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 10

Redwood City, California 94063

 

G-5

 

DEFINITION OF “BEST AVAILABLE MANAGEMENT
PRACTICES”

(Exchange Parcel and New Road Access)

 

“Best Available Management Practices (“BAMP”) means
the following:

 

1. Compliance with all laws, rules and
regulations, and operating permits, whether Federal, state or local, applicable
to the uses of the Exchange Parcel and industrial operations thereon, including
without limitation all laws, rules and regulations and operating permits
applicable to emissions into the air of gases, substances and particulate
matter, the generation or release of odors or odorous substances into the air,
and the generation of noise.

 

2. Initiation and maintenance of reasonable
precautions to minimize emission and transport of dust from the Exchange Parcel
and the New Road Access onto the Project Site. As used herein the term “reasonable
precautions” shall mean the use of materials, techniques and equipment
reasonably available at the time of commencement of a  use or operation and designed to minimize emissions during
predictably adverse climatic conditions common in the area (collectively, ‘‘initial
measures”) plus the addition of one or more of the following additional measures
if not already in use and if initial measures prove inadequate to achieve
minimization of emission and transport of dust onto the Project Site:

 

(a) Paving of surfaces used for active
operations where the absence of such paving causes emission and transport of
dust onto the Project Site;

 

(b) Installation of wind fences to a height of
not less than 20 feet with 50% porosity around areas of open storage and areas
of active dust-generating uses causing emission and transport of dust onto the
Project Site;

 

(c) Use of storage silos, open-ended enclosures
or water spray equipment for the outdoor storage and handling of materials,
such as rock, concrete, soil, mineral substances, and similar materials,
causing emission and transport of dust onto the Project Site;

 

(d) Installation of enclosures or use of water
or foam spray bars both above and below the belt surface of all conveyors used
for loading and unloading materials, causing emission and transport of dust
onto the Project Site; and

 

3. Initiation of a reasonable, regularly scheduled
sweeping program for the New Road Access to minimize accumulation of dust and
dirt and/or installation of dust traps, wheel washers or other methods of
minimizing the tracking of dust onto the Road Access Area and resulting emission
and transport of dust onto the Project Site.

 

G-6

 

EXHIBIT H

to

PACIFIC
SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 10

Redwood City, California 94063

 

NOTICE TO PACIFIC SHORES
TENANTS, LESSEES, SUCCESSORS, ASSIGNS AND

TRANSFEREES REGARDING
CURRENT OR FUTURE USES OF ADJACENT RMC

LONESTAR AND PORT PROPERTY

 

Notice is hereby given to all tenants, lessees,
successors, assigns and transferees of land or interest in land located within
the Pacific Shores Center of the presence or potential future presence of
maritime and industrial activities on RMC Lonestar and Port of Redwood City
property west and adjacent to Pacific Shores Center. Recipients of this notice
should be aware of the following:

 

1. The RMC Lonestar property and parcels of port
property adjacent to and west of Pacific Shores Center are shown on the map
attached to this notice. The RMC Lonestar and Port properties are now devoted
to, or will be developed for, maritime and industrial uses.

 

2. These maritime and industrial uses are those
which are permitted by the “Heavy Industry” General Plan designation and
general industrial zoning of the City of Redwood City. These uses include, by
way of example and not limitation, uses involving the receipt, transport,
storage, handling, processing or management of aggregates, cement, concrete,
asphalt, soil or other landscaping materials, recyclable metals and plastics, recyclable
concrete and asphalt, chemicals, petroleum products, hazardous wastes, and
similar materials, including indoor storage, mixing and handling of these
materials.

 

3. These uses may cause, on either a regular or
intermittent basis, air emissions, including without limitation, dust and other
particulates, odors, vibrations, loud noises, and heavy truck, rail or marine
vessel traffic. These uses may have visual, aesthetic or other aspects that may
be offensive or perceived as a nuisance by occupants of Pacific Shores Center.

 

H-1

 

EXHIBIT I

to

PACIFIC
SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 10

Redwood City, California 94063

 

RULES AND REGULATIONS

 

1.
Lessee and Lessee’s employees shall not in any way obstruct the sidewalks,
entry passages, pedestrian passageways, driveways, entrances and exits to the
Project or the Building, and they shall use the same only as passageways to and
from their respective work areas.

 

2.
Any sash doors, sashes, windows, glass doors, lights and skylights that reflect
or admit light into the Common Area of the Project shall not be covered or
obstructed by the Lessee. Water closets, urinals and wash basins shall not be
used for any purpose other than those for which they were constructed, and no
rubbish, newspapers, food or other substance of any kind shall be thrown into
them. Except in connection with ordinary and customary interior decorating,
Lessee shall not mark, drive nails, screw or drill into, paint or in any way
deface the exterior walls, roof, foundations, bearing walls or pillars without
the prior written consent of Lessor, which consent may be withheld in Lessor’s
sole discretion. The reasonable and actual, out-of-pocket expense of repairing
any breakage, stoppage or damage resulting from a violation of the
foregoing rule shall be borne by Lessee.

 

3.
No awning or shade shall be affixed or installed over or in the windows or the
exterior of the Premises except with the consent of Lessor, which consent may
not be unreasonably withheld, conditioned or delayed.

 

4.
Lessee shall not do anything in the Premises, or bring or keep anything
therein, which will in any way increase the risk of fire or the rate of fire
insurance or which shall conflict with the regulations of the fire department
or the law or with any insurance policy on the Premises or any part thereof, or
with any rules or regulations established by any administrative body or
official having jurisdiction, and it shall not use any machinery therein, even
though its installation may have been permitted, which may cause any
unreasonable noise, jar, or tremor to the floors or walls, or which by its
weight might injure the floors of the Premises.

 

I-1

 

5.
Lessor may reasonably limit weight, size and position of all safes, fixtures
and other equipment used in the Premises. If Lessee shall require extra heavy
equipment, Lessee shall notify Lessor of such fact and shall pay the cost of
structural bracing to accommodate it. All damage done to the Premises or
Project by installing, removing or maintaining extra heavy equipment shall be
repaired at the expense of Lessee.

 

6.
Lessee and Lessee’s officers, agents and employees shall not make nor permit
any loud, unusual or improper noises that unreasonably interfere with other
lessees or those having business with them, nor bring into or keep within the
Project any animal or bird or any bicycle or other vehicle, except such vehicle
as Lessor may from time to time permit and guide dogs.

 

7.
No machinery of any kind will be allowed in the Premises without the written
consent of Lessor, which consent may not be unreasonably withheld, conditioned
or delayed. This shall not apply, however, to customary office equipment or
trade fixtures or package handling equipment.

 

8.
All freight must be moved into, within and out of the Project only during such
reasonable hours and according to such reasonable regulations as may be posted
from time to time by Lessor.

 

9.
Except as provided in the Lease, no aerial or satellite dish or similar device
shall be erected on the roof or exterior walls of the Premises, or on the
grounds, without in each instance, the written consent of Lessor, which consent
may not be unreasonably withheld, conditioned or delayed. Any aerial so
installed without such written consent shall be subject to removal without
notice at any time.

 

10.
All garbage, including wet garbage, refuse or trash shall be placed by the
Lessee in the receptacles appropriate for that purpose and only at locations
prescribed by the Lessor.

 

11.
Lessee shall not burn any trash or garbage at any time in or about the Premises
or any area of the Project.

 

12.
Lessee shall observe all security regulations issued by the Lessor and comply
with instructions and/or directions of the duly authorized security personnel
for the protection of the Project and all tenants therein, except to the extent
such regulations unreasonably and materially limit Lessee’s right of access to
the Premises and Project’s parking facilities or prohibit Lessor from entering “Secured Areas,” all as provided in the
Lease.

 

13.
Any requirements of the Lessee will be considered only upon written application
to Lessor at Lessor’s address set forth in the Lease.

 

14.
No waiver of any rule or regulation by Lessor shall be effective unless
expressed in writing and signed by Lessor or its authorized agent.

 

I-2

 

15.
Lessor reserves the right to exclude or expel from the Project any person who,
in the reasonable judgment of Lessor, is intoxicated or under the influence of
liquor or drugs, or who shall in any manner do any act in violation of the law
or the rules and regulations of the Project.

 

17.
Lessor reserves the right at any time to change or rescind any one or more of
these rules and regulations or make such other and further reasonable,
non-discriminatory rules and regulations as in Lessor’s judgment may from
time to time be necessary for the operation, management, safety, care and
cleanliness of the Project and the Premises, and for the preservation of good
order therein, as well as for the convenience of other occupants and tenants of
the Project. Lessor shall not be responsible to Lessee or the any other person
for the non-observance or violation of the rules and regulations by any
other tenant or other person. Lessee shall be deemed to have read these rules and
have agreed to abide by them as a condition to its occupancy of the Premises.
Notwithstanding anything to the contrary contained herein, Lessor agrees that
the rules and regulations for the Project shall not be (i) modified
or enforced in any way by Lessor so as to unreasonably and materially interfere
with Lessee’s permitted use set forth in this Lease or Lessee’s access to the
Premises or Project parking facility, or (ii) discriminatorily enforced
against Lessee and not against other tenants of the Project.

 

18.
Lessee shall abide by any additional rules or regulations which are
ordered or requested by any governmental or military authority.

 

19.
In the event of any conflict between these rules and regulations, or any
further or modified rules and regulations from time to time issued by
Lessor, and the Lease provisions, the Lease provisions shall govern and
control.

 

I-3

 

SCHEDULE 1

to

PACIFIC
SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 10

Redwood City, California 94063

 

PACIFIC SHORES CENTER

COMMON AREA LICENSE AGREEMENT

 

This License Agreement (“Agreement”) is dated for
reference purposes and entered into by and between Pacific Shores Investors LLC
(“PSI”) and PDL BioPharma, Inc. (“Licensee”) as of
                    ,
200  .

 

R E C I T A L S

 

A. Licensee leases Building     
at Pacific Shores Center pursuant to a written Lease (“Lease”) and Licensee
desires to utilize a portion of the Pacific Shores Center Common Area for
                                
(“Event”) on
                    ,
200   during the hours of
         p.m. to
         p.m. (“Event Period”);
and

 

B. PSI is willing to grant a temporary license to
Licensee for the Event during the Event Period and on that portion of the
Pacific Shores Center Common Area depicted on Exhibit A hereto (“Event
Location”) on the terms and conditions set forth below.

 

1

 

AGREEMENT

 

1. Recitals. The recitals set forth above are
true and correct and incorporated into this Agreement.

 

2. License Granted. PSI hereby grants to
Licensee a revocable, temporary license to use the Event Area for the Event
during the Event Period on all of the terms and conditions hereof (“License”).

 

3. Contractors. All contractors hired by
Licensee to assist with the event shall be subject to the prior written
approval of PSI, which approval shall not be unreasonably withheld.

 

4. Security. Licensee shall provide security
for the Event and for at least one hour prior to and one hour after the Event
Period and assumes all risk for the safety of Event participants.

 

5. Signage. Subject to the prior written
approval of PSI as to location, size and materials, Licensee may place signage
on the Common Area to direct attendees to the Event. Licensee shall remove and
dispose of all such signage within
         (    )
hours after the expiration of the Event Period.

 

6. Clean Up. Licensee shall initiate clean up
of the Event Location and all other affected areas of Pacific Shores Center
immediately upon expiration of the Event Period and complete such cleanup, such
that no evidence of the Event remains, no later than         
(    ) hours after the expiration of the Event Period.

 

7. Damage. Licensee agrees to pay to PSI the
cost of repair of any damage arising from or in connection with the Event
within five (5) business days after written demand for same.

 

8. Insurance. Licensee shall maintain in
place at all times during the Event Period the insurance required to be
maintained by Licensee (as Lessee) under Article VII of the Lease.

 

9. Indemnity. Licensee shall indemnify and
hold PSI free and harmless from any and all liability, claims, loss, damages,
causes of action (whether in tort or contract, law or equity, or otherwise),
expenses, charges, assessments, fines, and penalties of any kind, including,
without limitation, reasonable attorneys’ fees, expert witness fees and costs,
arising by reason of the death or injury of any person, including any person
who is an employee, agent, invitee,

 

2

 

licensee,
permittee, visitor, guest or contractor of Licensee, or by reason of damage to
or destruction of any property, including property owned by Licensee or any
person who is an employee, agent, invitee, permittee, visitor, or contractor of
Licensee, caused or allegedly caused (1) while that person or property is
in or about the Common Area in connection with the Event; (2) by some
condition of the Common Area caused by the Event; (3) by some act or
omission by Licensee or its agent, employee, licensee, invitee, guest, visitor
or contractor or any person in, adjacent, on, or about the Common Area with the
permission, consent or sufferance of Licensee in connection with the Event; (4) by
any matter connected to or arising out of Licensee’s occupation and use of the
Common Area in connection with the Event, or any breach or default in timely
observance or performance of any obligation on Licensee’s part to be observed
or performed under this License Agreement.

 

10. Acceptance of Event Location “As-Is”.
Licensee accepts the Event Location and all other areas of Pacific Shores
Center utilized for the Event (including, without limitation, roadways,
driveways and parking areas) “as-is” and “with all faults” and acknowledges
that PSI makes no representation or warranty as to the condition of the Event Location
or any other part of Pacific Shores Center or as to its suitability for the
Event. Licensee assumes all risk as to same, including, without limitation, the
risk of injury and property damage for itself, its officers, employees, agents,
contractors, invitees, guests and visitors and Licensee waives all claims
against PSI and its Affiliates with respect to same except to the extent caused
by the gross negligence or intentional misconduct of PSI or its Affiliates.

 

11. Attorneys’ Fees. If either party herein
brings an action to enforce the terms hereof or to declare rights hereunder,
the prevailing party in any such action, on trial or appeal, shall be entitled
to recover its reasonable attorneys’ fees, expert witness fees and costs as
fixed by Court.

 

12. Relation to Lease. Money due from
Licensee hereunder for any failure to perform its obligations hereto shall be
deemed due under the Lease.

 

13. List of Exhibits.

 

Exhibit A – Event Location

 

3

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  Pacific
  Shores Mezzanine, LLC,

  a Delaware limited liability company,

  its sole member

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Pacific
  Shores Junior Mezz, LLC,

  a Delaware limited liability company

  its sole member

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Pacific
  Shores Junior Mezz Managers, LLC,

  a Delaware limited liability company,

  its sole member

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Pacific
  Shores Development, LLC,

  a Delaware limited liability company,

  its sole member

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  TECHNOLOGY
  LAND LLC,

  a California limited liability company,

  Operating Member

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jay Paul, Sole Managing Member

  	
   

  

 

 

	
  PDL
  BIOPHARMA, INC.

  a Delaware corporation

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Its:

  	
   

  	
   

  

 

4

 

SCHEDULE 2

to

PACIFIC
SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 10

Redwood City, California 94063

 

YARD AREA

 

 

SCHEDULE 3

to

PACIFIC
SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 10

Redwood City, California 94063

 

REMOVAL OBLIGATIONS SCHEDULE

 

 

SCHEDULE 4

to

PACIFIC
SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 10

Redwood City, California 94063

 

PERMITTED HAZARDOUS MATERIALS

 

 

SCHEDULE 5

to

PACIFIC
SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 10

Redwood City, California 94063

 

PDL
BioPharma, Inc. List of Plans, Licenses and Permits

 

	
  Plans

  	
   

  	
  Inspecting Authority

  	
   

  	
  Frequency

  
	
  Injury
  Illness Prevention Plan

  	
   

  	
  Cal OSHA

  	
   

  	
  Anytime

  
	
  Biosafety
  Plan

  	
   

  	
  “

  	
   

  	
  “

  
	
  Radiation
  Safety Plan

  	
   

  	
  “

  	
   

  	
  “

  
	
  Chemical
  Hygiene Plan

  	
   

  	
  “

  	
   

  	
  “

  
	
  Hazard
  Communication Plan

  	
   

  	
  “

  	
   

  	
  “

  
	
  Emergency
  Action Plan

  	
   

  	
   

  	
   

  	
   

  
	
  Hazardous
  Materials Business Plan

  	
   

  	
  Fremont Fire

  	
   

  	
  Annual

  
	
  AAALAC
  Accreditation program

  	
   

  	
  AAALAC

  	
   

  	
  Complaint

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Licenses

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CA
  – Business License

  	
   

  	
   

  	
   

  	
   

  
	
  DHS
  - Radiation Use License

  	
   

  	
  DHS

  	
   

  	
  Anytime

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Permits

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fremont
  City - Hazardous Materials Permits A/B/D

  	
   

  	
  Fremont
  Fire

  	
   

  	
  Annual

  
	
  Alameda
  County - Medical waste Permits A/B/D

  	
   

  	
  Ala.
  County

  	
   

  	
  Annual

  
	
  BAAQMD
  – Emergency Generator Permits A/B/D

  	
   

  	
  AQMD

  	
   

  	
  Complaint

  
	
  DEA
  – Controlled Substances

  	
   

  	
  DEA

  	
   

  	
  Violation

  

 

 

SCHEDULE 6

to

PACIFIC
SHORES INVESTORS, LLC

LEASE

to

PDL BIOPHARMA, INC.,

a Delaware corporation

as

LESSEE

for

PREMISES

at

Pacific Shores Center

Building 10

Redwood City, California 94063

 

FINANCIAL TESTS

 

In
general, financial terms have their GAAP defined meaning. Revenue, EBITDA
(Earnings before Interest, Taxes, Depreciation, and Amortization), and Cash and
Cash equivalents are to be derived from the financial statements in the
Lessee’s most recent 10Q or 10K filings, as appropriate.

 

Level
1 performance numbers are sufficient to trigger rights of first refusal on
buildings 7 and 8, and the right of first offer on building 6 until an
additional 285,000 square feet has been leased beyond the space in buildings 9
and 10.

 

Level
2 performance numbers are sufficient to trigger rights of first refusal on
buildings 7 and 8, and the right of first offer on building 6, if more than
285,000 square feet has already been leased beyond the space in buildings 9 and
10, but less than all of the square footage in buildings 6, 7, and 8.

 

Level
3 performance numbers are required to trigger Lessor’s obligations pursuant to Section 17.27
of the Lease.

 

Cash
and cash equivalents may include marketable securities which can be converted
to cash in less than 3 months.

 

All
rights are subject to lender approval independent of the Lessee’s performance
level.

 

 

	
   

  	
   

  	
  Level 1

  	
   

  	
  Level 2

  	
   

  	
  Level 3

  
	
  Revenue

  	
   

  	
  At least $100 million in each of the last four quarters

  	
   

  	
  At least $150 million in each of the last four quarters

  	
   

  	
  At least $150 million in each of the last four quarters

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EBITDA ratio to Revenue

  	
   

  	
  Ratio of EBITDA to Revenue greater than 0% in each of the last 3
  quarters

  	
   

  	
  Ratio of EBITDA to Revenue of at least 3% in each of the last 3
  quarters

  	
   

  	
  Ratio of EBITDA to Revenue of at least 5% in each of the last 3
  quarters

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash and Cash Equivalents

  	
   

  	
  At least $250 million for each of the last four quarters.

  	
   

  	
  At least $300 million for each of the last 4 quarters.

  	
   

  	
  At least $500 million for each of last 4 quarters.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00146-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00146-of-00352.parquet"}]]