Document:

exv10wx2y

 

Exhibit 10(2)

NORTHROP GRUMMAN CORPORATION

SUPPLEMENTAL RETIREMENT REPLACEMENT PLAN

(Effective March 12, 2007)

     The Northrop Grumman Corporation Supplemental Retirement Replacement Plan (“Plan”) is hereby
adopted effective March 12, 2007 by Northrop Grumman Corporation to provide supplemental retirement
benefits to James F. Palmer pursuant to the terms and provisions set forth below.

     The Plan is intended (1) to comply with Code section 409A and official guidance issued
thereunder, and (2) to be “a plan which is unfunded and is maintained by an employer primarily for
the purpose of providing deferred compensation for a select group of management or highly
compensated employees” within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
Notwithstanding any other provision of this Plan, this Plan shall be interpreted, operated and
administered in a manner consistent with these intentions.

ARTICLE I

DEFINITIONS

     Wherever used herein the following terms shall have the meanings hereinafter set forth:

     “Affiliate” means any corporation or other entity that is treated as a single employer
with the Company under section 414 of the Code.

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Committee” means the Company’s Board of Directors or such other committee as may be
appointed by the Board of Directors from time to time.

     “Company” means Northrop Grumman Corporation or any successor corporation or other
entity.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

     “Key Employee” means an Employee treated as a “specified employee” under Code section
409A(a)(2)(B)(i) of the Company or its Affiliates if the Company’s stock is publicly traded on an
established securities market or otherwise (i.e., a key employee (as defined in Code
section 416(i) without regard to paragraph (5) thereof)).

     “Participant” means James F. Palmer.

     “Plan” means the Northrop Grumman Corporation Supplemental Retirement Replacement
Plan, as set forth herein and as amended from time to time.

 

 

     “Separation from Service” or “Separates from Service” means a “separation from
service” within the meaning of Code section 409A.

ARTICLE II

PARTICIPATION

     Participation in the Plan shall be limited to the Participant.

ARTICLE III

PLAN BENEFITS AND DISTRIBUTIONS

     3.1 Visteon Replacement Benefit. The amount of the benefit, if any, payable under
this section 3.1 to the Participant shall be equal to the amount by which the Visteon Present Value
exceeds the Northrop Grumman Present Value.

For purposes of this Section:

“Visteon Present Value” means the lesser of (1) the estimated present value of the
Participant’s non-vested Visteon Corporation supplemental and qualified pension benefits at
March 12, 2007, and (2) $588,500.

“Northrop Grumman Present Value” means the present value as of the Participant’s
Separation from Service of all vested qualified and nonqualified defined benefit pension
benefits payable to Participant by the Company, excluding the Boeing Replacement Benefits
described in section 3.3 below.

The actuarial assumptions used to calculate present values under this Section shall be as follows:

Interest: 6%

Mortality Table: GAR94 unisex

These are the assumptions used to calculate lump sum amounts under the Northrop Grumman
Supplemental Plan 2 as of March 12, 2007.

     3.2 Distribution of Visteon Replacement Benefit. Any benefit under section 3.1 shall
be distributed to the Particpant in a lump sum payment 30 days after the Participant Separates from
Service. In the event that the Participant is a Key Employee as of the date of his Separation from
Service, distribution to the Participant shall be made on the first day of the seventh month
following the date of his Separation from Service (or, if earlier, the date of the Participant’s
death), along with interest on the delayed payment. Interest shall be computed using the
retroactive annuity starting date rate in effect under the Northrop Grumman Pension Plan on a
month-by-month basis during such delay (i.e., the rate may change in the event the delay spans two
calendar years).

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     3.3 Boeing Replacement Benefit.

          (a) In-Service Benefit. Beginning April 1, 2007, Participant will receive $8,632.01
monthly in the form of a 100% joint and survivor annuity, with the Participant’s spouse as of March
12, 2007 (the “Spouse”) as the survivor annuitant. If the Spouse predeceases the Participant, the
monthly benefit will increase to $10,219.57 and will be payable only for the life of the
Participant.

          (b) Post-Termination Benefit. The monthly benefit provided for under Section
3.3(a) shall continue to be paid under the same terms after the Participant ceases to be employed
by the Company and its affiliates .

          (c) Forfeiture. The amount payable under Section 3.3(a) or (b) for a month will be
forfeited if an amount is actually paid to the Participant or the Spouse in the same month from the
Supplemental Executive Retirement Plan for Employees of the Boeing Company (“Boeing SERP”).

          (d) FICA Payment. In order to address FICA taxes he will owe on the monthly benefit
provided under this Section 3.3, the Participant will also receive a lump sum payment of $37,900.28
on June 15, 2007.

     3.4 Acceleration of Boeing Replacement Benefit. If a change in control event (as
described in IRS regulations or other guidance under Code section 409A(a)(2)(A)(v)) occurs that
also qualifies as a change in control as defined in the Participant’s March 2004 Special Agreement,
the Participant will receive a lump sum payment equal to the present value of all remaining
benefits under section 3.3. The lump sum amount will be paid 60 days after the change in control
event and will be calculated based on the actuarial assumptions used to calculate lump sums under
the Northrop Grumman CPC Supplemental Executive Retirement Program at the time of the change in
control event.

     3.5 Vesting. All benefits under this Plan shall be 100% vested at all times.

     3.6 Effect of Early Taxation. If the Participant’s benefits under the Plan are
includible in income pursuant to Code section 409A, such benefits shall be distributed immediately
to the Participant.

     3.7 Permitted Delays. Notwithstanding the foregoing, any payment to the Participant
under the Plan shall be delayed upon the Committee’s reasonable anticipation of one or more of the
following events:

	 	(a)	 	The Company’s deduction with respect to such payment would be
eliminated by application of Code section 162(m); or

	 	(b)	 	The making of the payment would violate Federal securities laws
or other applicable law;

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	 	 	 	provided, that any payment delayed pursuant to this Section 3.7 shall be paid in accordance with
Code section 409A.

ARTICLE IV

ADMINISTRATION

     4.1. General Administration. The Committee shall be responsible for the operation and
administration of the Plan and for carrying out the provisions hereof. The Committee shall have
the full authority and discretion to make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of this Plan and decide or resolve any and all questions,
including interpretations of this Plan, as may arise in connection with this Plan. Any such action
taken by the Committee shall be final and conclusive on any party. To the extent the Committee has
been granted discretionary authority under the Plan, the Committee’s prior exercise of such
authority shall not obligate it to exercise its authority in a like fashion thereafter. The
Committee shall be entitled to rely conclusively upon all tables, valuations, certificates,
opinions and reports furnished by any actuary, accountant, controller, counsel or other person
employed or engaged by the Company with respect to the Plan. The Committee may, from time to time,
employ agents and delegate to such agents, including employees of the Company, such administrative
or other duties as it sees fit.

     4.2. Indemnification. To the extent not covered by insurance, the Company shall
indemnify the Committee, each employee, officer, director, and agent of the Company, and all
persons formerly serving in such capacities, against any and all liabilities or expenses, including
all legal fees relating thereto, arising in connection with the exercise of their duties and
responsibilities with respect to the Plan, provided however that the Company shall not indemnify
any person for liabilities or expenses due to that person’s own gross negligence or willful
misconduct.

ARTICLE V

CLAIMS PROCEDURE

     5.1 Administrative Committee Decides Claims. No benefits will be paid under the Plan
unless a proper claim is submitted to the Administrative Committee for them. The Administrative
Committee consists of at least three members appointed by the Compensation and Management
Development Committee of the Board of Directors of Northrop Grumman Corporation. The
Administrative Committee will meet from time to time to review applications for benefits submitted
to it. The Administrative Committee has discretionary authority to grant or deny benefits under
this Plan. Benefits under the Plan will be paid only if the Administrative Committee decides in
its discretion that the claimant is entitled o them. The procedures for claims denials and seeking
review of a denial or partial denial of a claim for benefits are described in this Article.

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     5.2 Claims Procedures.

          (a) Notification to Claimant of Decision. Notice of decision on any claim for
benefits shall be furnished to the claimant within 60 days after receipt of the claim by the
Administrative Committee. In special cases, the Administrative Committee may notify the claimant
that it requires an additional 90 days to consider a claim. If an extension of time beyond the
initial 60-day period for processing the claim is required, written notice of the extension shall
be provided to the claimant before the initial 60-day period expires. The extension notice shall
indicate the special circumstances requiring an extension of time and the date by which the
Administrative Committee expects to render a final decision.

          (b) Content of Notice. Every claimant who is denied a claim for benefits in whole or
in part shall receive a written notice setting forth in a manner calculated to be understood by the
claimant:

	 	(1)	 	the specific reason or reasons for the denial;
	 
	 	(2)	 	reference to the specific Plan provisions on
which the denial is based;
	 
	 	(3)	 	a description of any additional material or
information necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary; and
	 
	 	(4)	 	appropriate information as to the steps to be
taken if the participant or beneficiary wishes to submit his or her
claim for review including the time limits set forth in subsections (d)
and (e) and a statement of the claimant’s right to bring a civil action
under Section 502(a) of ERISA following a denial of the claim upon
review.

          (c) Review Procedure. A claimant whose claim has been denied in whole or in part or
his or her duly authorized representative may:

	 	(1)	 	request a review of the denied claim upon
written application to the Administrative Committee setting forth:

	 	(A)	 	all of the grounds upon which his
or her request for review is based and any facts in support of
his or her request, and
	 
	 	(B)	 	any issues or comments which the
applicant deems pertinent to his or her application; and

	 	(2)	 	review or receive copies, upon request and free
of charge, any documents, records or other information “relevant”
(within the 

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	 	 	 	meaning of Department of Labor Regulation Section
2560.503-1(m)(8)) to the claimant’s claim.

          (d) Time for Seeking Review. A claimant may seek review of a denied claim within 65
days after receipt by the claimant of written notification of the denial or partial denial of the
claim. Under extraordinary circumstances, the Plan may extend this time period.

          (e) Decision on Review.

     (1) The Administrative Committee shall take into account all comments, documents,
records and other information submitted by the claimant relating to the claim, without
regard to whether such information was submitted or considered in the initial review of the
claim. A decision by the Administrative Committee shall be made promptly, and shall not
ordinarily be made later than 60 days after the Administrative Committee’s receipt of a
request for review. In special cases, the Administrative Committee may notify the claimant
that it requires an additional 60 days to consider a claim. If an extension of time beyond
the initial 60-day period for processing the claim is required, written notice of the
extension shall be provided to the claimant before the initial 60-day period expires. The
extension notice shall indicate the special circumstances requiring an extension of time and
the date by which the Administrative Committee expects to render a final decision.

     (2) The decision on review shall be in writing and
shall include:

	 	(A)	 	specific reasons for the
decision, written in a manner calculated to be understood by the
claimant;
	 
	 	(B)	 	references to the specific
provisions of the Plan or other documents governing the Plan on
which the decision is based;
	 
	 	(C)	 	a statement that the claimant is
entitled to receive, upon request and free of charge, reasonable
access to, and copies of, all documents, records or other
information relevant to the claimant’s claim; and
	 
	 	(D)	 	a statement of the claimant’s
right to bring a civil action under Section 502(a) of ERISA
following a wholly or partially denied claim for benefits.

     (3) The decision of the Administrative Committee on any application for benefits shall
be final and conclusive upon all persons.

     5.3 Hearings. In appropriate cases, the Administrative Committee may provide for a
hearing to be conducted with respect to the review of any claim. In such event, the

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Administrative
Committee shall give notice of such hearing to the claimant affected, as well as the procedures for
the hearing, such as the length of the hearing, whether witnesses may be presented, whether
cross-examination will be allowed and any other matters which the Administrative Committee
considers pertinent.

     5.4 Exhaustion Requirement.

          (a) A claimant must exhaust the claims procedures described in Section 5.2 before he may bring
a legal action in court against any of the Plan Parties.

          (b) This Section 5.4 applies if a claimant does not receive payment of the benefits he
believes he is entitled to under the Plan or has any other grievance with respect to his benefits
under the Plan.

          (c) “Plan Parties” means the Plan, the Committee, Northrop Grumman Corporation and any
affiliated company and their respective boards of directors, any trustee, the Administrative
Committee, and the employees or agents of these entities.

     5.5 Time Limitations.

          (a) A claimant may not file a claim in accordance with Section 5.2 later than one year from
the time the claim arises under (d).

          (b) A claimant may not bring a legal action against the Plan Parties in court after the latest
of:

	 	(1)	 	one year from the time the claim arises (within
the meaning of (d));

	 	(2)	 	one year after the date this provision took
effect; and

	 	(3)	 	if a claim is made in accordance with Section
5.2 within the time periods described in Section 5.5(b)(1) or Section
5.5(b)(2), 90 days from the final disposition of the claim by the
Administrative Committee.

          (c) If the statute of limitations period for filing suit on a claim expires prior to the time
limit in (b), this Section is not intended to permit suit to be filed after the end of the statute
of limitations period. In other words, suit must be filed by the earlier of the end of the statute
of limitations period or the time limit in (b).

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          (d) When a Claim Arises.

          (1) A claim arises no later than the earliest of the following:

	 	(A)	 	for any claimant, the
Administrative Committee’s initial denial of the claimant’s
claim for benefits;
	 
	 	(B)	 	for any claimant, the
commencement of the claimant’s benefits; or
	 
	 	(C)	 	the later of:

	 	(i)	 	in the case of a
Participant’s (or former Participant’s) claim, his
termination of employment; or
	 
	 	(ii)	 	in the case of
any claimant, 90 days after the first statement of
pension benefits is furnished to him.

          (2) To the extent the claim of a beneficiary or alternate payee is based on the amount
of benefits a Participant had earned, the claim arises at the same time for the beneficiary
or alternate payee as it would for the Participant. This does not apply to the extent the
claim relates only to the beneficiary’s or alternate payee’s rights.

               Example 1: A beneficiary claims that his survivor benefit should be larger because the
Participant’s benefit should have been larger. In this case, the beneficiary’s claim arises
no later than a claim by the Participant would have arisen.

               Example 2: A beneficiary claims that she should get the Participant’s survivor benefit
rather than some other person. This claim arises only by reference to the beneficiary
herself and so is not subject to the same time limits as a claim by the Participant.

          (3) This subsection only sets the latest date a claim will be deemed to arise. A claim
may arise earlier, at the time a claim arises for statute of limitations purposes.

     5.6 Disclosure of Claim Procedures. All Plan participants will be given a description
of the claims procedures, within a reasonable time after joining the Plan.

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ARTICLE VI

AMENDMENT AND TERMINATION

     6.1 Amendment or Termination. The Company reserves the right to amend or terminate
the Plan when, in the sole discretion of the Company, such amendment or termination is advisable.

     6.2 Effect of Amendment or Termination. No amendment or termination of the Plan shall
adversely affect the rights of a Participant to his accrued benefit under the Plan as of the date
of such amendment or termination. Upon termination of the Plan, distribution of Plan benefits
shall be made to Participants and beneficiaries in the manner and at the time described in Article
III, unless the Company determines in its sole discretion that all such amounts shall be
distributed upon termination in accordance with the requirements under Code section 409A. Upon
termination of the Plan, no further benefit accruals shall occur.

ARTICLE VII

GENERAL PROVISIONS

     7.1 Rights Unsecured. The right of a Participant or his beneficiary to receive a
distribution hereunder shall be an unsecured (but legally enforceable) claim against the general
assets of the Company, and neither the Participant nor his beneficiary shall have any rights in or
against any specific assets of the Company. Thus, the Plan at all times shall be considered
entirely unfunded for ERISA and tax purposes. Any funds set aside by the Company for the purpose
of meeting its obligations under the Plan, including any amounts held by a trustee, shall continue
for all purposes to be part of the general assets of the Company and shall be available to its
general creditors in the event of the Company’s bankruptcy or insolvency. The Company’s obligation
under this Plan shall be that of an unfunded and unsecured promise to pay money in the future.

     7.2 Benefits Not Treated as Compensation. Benefits payable under the Plan shall not
be considered compensation for any purposes under any benefit plan sponsored by the Company or its
Affiliates, including qualified and nonqualified retirement plans.

     7.3 No Guarantee of Benefits. Nothing contained in the Plan shall constitute a
guarantee by the Company or any other person or entity that the assets of the Company will be
sufficient to pay any benefits hereunder.

     7.4 No Enlargement of Rights. No Participant or beneficiary shall have any right to
receive a distribution under the Plan except in accordance with the terms of the Plan.
Establishment of the Plan shall not be construed to give any Participant the right to continue to
be employed by or provide services to the Company.

     7.5 Spendthrift Provision. No interest of any person in, or right to receive a
distribution under, the Plan shall be subject in any manner to sale, transfer, assignment, pledge,
attachment, garnishment, or other alienation or encumbrance of any kind; nor may such interest

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or right to receive a distribution be taken, either voluntarily or involuntarily for the
satisfaction of the debts of, or other obligations or claims against, such person.

     Notwithstanding the foregoing, all or a portion of a Participant’s benefit under the Plan may
be paid to another person as specified in a domestic relations order that the Committee determines
meets certain requirements (a “Domestic Relations Order”). For this purpose, a Domestic Relations
Order means a judgment, decree, or order (including the approval of a settlement agreement) which
is:

	 	(1)	 	issued pursuant to a State’s domestic relations law;

	 	(2)	 	relates to the provision of child support, alimony payments or
marital property rights to a spouse, former spouse, child or other dependent of
the Participant;

	 	(3)	 	creates or recognizes the right of a spouse, former spouse,
child or other dependent of the Participant to receive all or a portion of the
Participant’s benefits under the Plan; and

	 	(4)	 	meets such other requirements established by the Committee.

     The Committee shall determine whether any document received by it is a Domestic Relations
Order. In making this determination, the Committee may consider the rules applicable to “domestic
relations orders” under Code section 414(p) and ERISA section 206(d), and such other rules and
procedures as it deems relevant.

     7.6 Applicable Law. To the extent not preempted by federal law, the Plan shall be
governed by the laws of the State of California.

     7.7 Incapacity of Recipient. If any person entitled to a distribution under the Plan
is deemed by the Committee to be incapable of personally receiving and giving a valid receipt for
such payment, then, unless and until a claim for such payment shall have been made by a duly
appointed guardian or other legal representative of such person, the Committee may provide for such
payment or any part thereof to be made to any other person or institution then contributing toward
or providing for the care and maintenance of such person. Any such payment shall be a payment for
the account of such person and a complete discharge of any liability of the Company and the Plan
with respect to the payment.

     7.8 Taxes. The Company or other payor may withhold from a benefit payment under the
Plan or a Participant’s wages, or the Company may reduce a Participant’s accrued benefit under the
Plan, in order to meet any federal, state, or local tax withholding obligations with respect to
Plan benefits. The Company or other payor shall report Plan payments and other Plan-related
information to the appropriate governmental agencies as required under applicable laws.

     7.9 Corporate Successors. The Plan and the obligations of the Company under the
Plan shall become the responsibility of any successor to the Company by reason of a transfer
or

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sale of substantially all of the assets of the Company or by the merger or consolidation of the
Company into or with any other corporation or other entity.

     7.10 Unclaimed Benefits. Each Participant shall keep the Committee informed of his
current address and the current address of his designated beneficiary. The Committee shall not be
obligated to search for the whereabouts of any person if the location of a person is not made known
to the Committee.

     7.11 Severability. In the event any provision of the Plan shall be held invalid or
illegal for any reason, any illegality or invalidity shall not affect the remaining parts of the
Plan, but the Plan shall be construed and enforced as if the illegal or invalid provision had never
been inserted.

     7.12 Words and Headings. Words in the masculine gender shall include the feminine and
the singular shall include the plural, and vice versa, unless qualified by the context. Any
headings used herein are included for ease of reference only, and are not to be construed so as to
alter the terms hereof.

* * *

     IN WITNESS WHEREOF, this Plan is hereby executed by a duly authorized officer on this
13th day of July, 2007.

	 	 	 	 	 
	 	NORTHROP GRUMMAN CORPORATION

 	 
	 	By:  	/s/   Debora L. Catsavas for
 	 
	 	 	Ian Ziskin 	 
	 	 	Corporate Vice President, Chief Human Resources and Administrative Officer 	 
	 

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Exhibit 10.1

SUBLEASE

     This Sublease (this “Sublease”), dated July 11, 2007 (the “Execution Date”), is
entered into by and between Aradigm Corporation, a California corporation (“Sublandlord”),
and Mendel Biotechnology, Inc., a California corporation (“Subtenant”).

1. Basic Provisions.

     1.1 Sublease Premises:

          1.1.1 As of the Commencement Date, the “Sublease Premises” under this Sublease shall consist
of approximately 39,369 square feet of exclusive use space and a 6,704 square foot portion of
Shared Space (as defined in Section 1.1.6 herein) for a total of 46,073 square feet in the location
shown on the attached Exhibit A in that certain building commonly known as 3929 Point Eden Way,
Hayward, California (“Building”) and subject to the approval and consent of Master Landlord shall
also consist of the space containing approximately 6250 square feet located in the parking lot on
which Subtenant will build and occupy a greenhouse and related facilities with the construction to
be at the sole cost and expenses of Subtenant in accordance with the terms of the amendment to the
Master Lease and the Master Consent, and Subtenant will not be required to pay additional rent for
such space or to have the space considered in the calculation of Subtenant’s Share. The Sublease
Premises are a portion of those certain premises (“Master Premises”) containing approximately
72,467 square feet which are demised pursuant to the Master Lease to Sublandlord. That portion of
the Master Premises not subleased to Subtenant hereunder shall be referred to hereinafter as the
“Retained Space.” The square footages set forth herein and in Section 1.1.2 and Section 1.1.3
shall be deemed final and shall not be subject to remeasurement or adjusted for purposes of
calculation of Rent, except for adjustments due to condemnation or casualty.

          1.1.2 As of the Temporary Space Commencement Date, Sublandlord shall vacate the Temporary
Space as shown on Exhibit A which was temporarily retained by Sublandlord, and the Temporary Space
shall be included in the definition of the Sublease Premises under this Sublease. Thereafter, the
Sublease Premises shall consist of approximately 48,149 square feet in the Building.

          1.1.3 The “Temporary Space” shall consist of approximately 1,774 square feet of exclusive use
space in the Building in the location shown on the attached Exhibit B.

          1.1.4 The “Temporary Space Commencement Date” shall be the date Sublandlord provides Subtenant
with not less than ten (10) business days prior written notice that the Temporary Space is
available for Subtenant to move-in. In no event, however, shall the Temporary Space Commencement
Date commence later than March 15, 2008 and Sublandlord covenants and agrees to vacate such space
prior to said date.

          1.1.5 Sublandlord shall deliver to Subtenant vacant possession of the Sublease Premises on the
Commencement Date and the Temporary Space on the Temporary Space

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Commencement Date, each in broom-swept condition and free of Sublandlord’s personal property
except for the Furniture and Equipment, and except for the Greenhouse to be constructed by
Subtenant as provided in Exhibit E, with all operating systems fully functional and in good working
condition, including, without limitation, plumbing, electrical, HVAC, elevators and lighting.

          1.1.6 From and after the Commencement Date, Subtenant shall have the non-exclusive right to
use (a) the common areas of the Building, including without limitation the entrances (front and
back); and (b) the lunchroom, the gym, the elevator core, the electrical room of the Master
Premises and the corridors to the foregoing as more fully depicted on Exhibit A (the “Shared
Space”), which the parties stipulate contains 10,545 total square feet with 6,704 square feet
allocated to Subtenant prior to the Temporary Space Commencement Date and 7,006 square feet
allocated to Subtenant following the Temporary Space Commencement Date.

     1.2 Master Landlord: Hayward Point Eden I Limited Partnership, a Delaware limited
partnership, as successor-in-interest to Britannia Point Eden, LLC.

     1.3 Master Lease: Lease dated January 28, 1998, as amended, supplemented or otherwise
modified, entered into by Sublandlord, as tenant, and Master Landlord, as landlord, a copy of which
including all amendments is attached hereto as Exhibit C.

     1.4 Term: This Sublease shall begin on the Commencement Date and end on the Expiration Date,
unless terminated earlier in accordance with the terms and conditions of this Sublease.

     1.5 Commencement Date: The “Commencement Date” shall be the date which is the later of (a)
the date of full execution and delivery of this Sublease; (b) July 18, 2007; or (c) the date that
the Master Landlord gives its written consent to the Sublease which consent shall be substantially
in the form attached hereto as Exhibit F or such other form as shall be reasonably acceptable to
Subtenant (“Master Consent”). Notwithstanding anything to the contrary herein, in the event the
Commencement Date shall not have occurred on or before September 1, 2007, Subtenant shall have the
right immediately to terminate this Sublease by written notice to Sublandlord, after which this
Sublease shall be of no further force or effect and the Security Deposit and the Prepaid Rent shall
be immediately returned to Subtenant.

     1.6 Rent Commencement Date: Two (2) months following the Commencement Date, it being the
intention of the parties that Subtenant shall receive two (2) full months of free Base Rent as a
rent concession for entering into this Sublease.

     1.7 Move-In Period: The period commencing on the Commencement Date and expiring on the Rent
Commencement Date, during which period Sublandlord shall deliver to Subtenant vacant possession of
the Sublease Premises, and Subtenant shall be entitled (i) to prepare the Sublease Premises for
occupancy, and (ii) to move into the Sublease Premises including the right to commence the conduct
of its business. Any such Move-In Period entry into and occupancy of the Sublease Premises by
Subtenant or any person or entity working for or on behalf of Subtenant shall be deemed to be
subject to all of the terms, covenants, conditions and provisions of the Sublease, and excluding
only the covenant to pay Rent.

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     1.8 Expiration Date: The Expiration Date shall be July 8, 2016.

     1.9 Base Rent: $1.50 per square foot of the Sublease Premises per month for the first twelve
(12) months of the Term following the Rent Commencement Date, with three percent (3%) annual
increases effective upon each anniversary of the Rent Commencement Date as follows:

	 	 	 	 	 
	Lease Year	 	Monthly Base Rent Payable by Subtenant
	Rent Commencement Date –March __, 2008*
	 	$	69,109.50	*
	March __ ,2008 – September 18, 2008
	 	$	72,223.50	 
	September 19, 2008 – September 18, 2009
	 	$	74,390.21	 
	September 19, 2009 – September 18, 2010
	 	$	76,621.91	 
	September 19, 2010 – September 18, 2011
	 	$	78,920.57	 
	September 19, 2011 – September 18, 2012
	 	$	81,288.19	 
	September 19, 2012 – September 18, 2013
	 	$	83,726.83	 
	September 19, 2013 – September 18, 2014
	 	$	86,238.64	 
	September 19, 2014 – September 18, 2015
	 	$	88,825.80	 
	September 19, 2015 – July 8, 2016
	 	$	91,940.57	 

 

			
	*	 	Monthly Base Rent shall be increased by the amount of $3,114 per month, prorated on a per
diem basis, from and after the Temporary Space Commencement Date which shall occur as
provided in Section 1.1.4.

     1.10 Subtenant’s Share: Subtenant’s Share is a fraction, the numerator of which is the square
footage of the Sublease Premises, and the denominator of which is the square footage of the Master
Premises. As of the Commencement Date until the Temporary Space Commencement Date, Subtenant’s
Share shall be 63.58%, and as of the Temporary Space Commencement Date until the Expiration Date,
Subtenant’s Share shall be 66.44%. In the event Sublandlord and Subtenant agree that the Retained
Space shall be expanded through the conversion of a portion of the Shared Space into space
dedicated to Sublandlord’s exclusive use, Sublandlord and Subtenant shall enter into an amendment
hereto setting forth a revised Subtenant’s Share to reflect the increase in the square footage of
the Retained Space.

     1.11 Subtenant’s Use: Any use permitted under the Master Lease or permitted by the Master
Landlord in its written consent to the Sublease.

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	1.12

	 	Subtenant’s Address:
	 	Mendel Biotechnology, Inc.
	 

	 	 	 	21375 Cabot Boulevard
	 

	 	 	 	Hayward, California 94545
	 

	 	 	 	Attn: Chief Financial Officer
	 
	 	 	 	 
	1.13

	 	Sublandlord’s Address:
	 	 3929 Point Eden Way
	 

	 	 	 	Hayward, California
	 

	 	 	 	Attn: Chief Financial Officer
	 
	 	 	 	 
	 

	 	With a copy to:
	 	3929 Point Eden Way
	 

	 	 	 	Hayward, California

Attn: Director of Operations

     1.14 Security Deposit: $75,000 in cash payable upon execution of this Sublease and a Letter
of Credit in the amount of $150,000 which shall be delivered to Sublandlord on or before the
Commencement Date and shall be provided subject to and in accordance with the provisions of Section
5.2 (“Subtenant’s Letter of Credit”).

     1.15 Prepaid Rent. $300,000, payable upon the later of the Commencement Date or the receipt
of Sublandlord’s Letter of Credit, which sum shall be applied to the Rent payable for months 12,
18, 24 and 27 of the Term, and if for any reason Rent shall be abated for one or more of such
months then the Prepaid Rent shall be credited to the next Rent due under the Sublease until it is
fully applied. If the Sublease is terminated before the Prepaid Rent is fully applied, then the
unapplied balance shall be immediately refunded to Subtenant, except that if the termination
results from a default by Subtenant, then Sublandlord shall be entitled to apply the unapplied
balance of the Prepaid Rent in accordance with Section 16.1 of the Master Lease. To secure the
obligation of Sublandlord to refund any unapplied Prepaid Rent to Subtenant in accordance with this
Section 1.15, Sublandlord shall deliver to Subtenant on or before the Commencement Date a Letter of
Credit subject to and in accordance with the provisions of Section 5.3 of this Sublease
(“Sublandlord’s Letter of Credit”).

     1.16 Parking: Subtenant’s Share of any parking available under the Master Lease.

	 	 	 	 	 	 	 
	1.17

	 	Brokers:
	 	For Sublandlord:
	 	Aegis Realty Partners
	 
	 	 	 	 	 	 
	 

	 	 	 	For Subtenant:
	 	CB Richard Ellis, Inc.

     1.18 Definitions: Each of the terms in Section 1 is used in this Sublease as a defined term
and has the meaning given in such Section. Other capitalized words and phrases for which no
definition is given in this Sublease shall have the meanings given them in the Master Lease.
Unless otherwise indicated, all section references are to the sections of this Sublease.

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	2.	 	Demise Of Sublease Premises; Sublandlord’s License to Use Space; License of Furniture and
Equipment; Right Of First Offer.

     2.1 Sublandlord hereby subleases the Sublease Premises to Subtenant, and Subtenant hereby
subleases the Sublease Premises from Sublandlord, subject to the terms and conditions of this
Sublease.

          2.1.1 Subtenant represents and warrants to Sublandlord that: (i) Subtenant is familiar with
the provisions of the Master Lease insofar as it pertains to the Sublease Premises and Subtenant’s
use and occupation thereof under this Sublease; (ii) Subtenant has the right and power to execute
and deliver this Sublease and to perform its obligations hereunder; (iii) the person or persons
executing this Sublease for Subtenant are fully authorized to so act and no other action is
required to bind Subtenant to this Sublease; and (iv) Subtenant is duly organized and in good
standing in its state of formation and is authorized to conduct business in the state where the
Sublease Premises are located.

          2.1.2 Sublandlord represents to Subtenant the best of Sublandlord’s knowledge as of the date
hereof, without inquiry, that (i) Sublandlord is not in breach of any provision of the Master Lease
in any material respect and is not aware of any event having occurred which with the giving of
notice or the passage of time, or both, would constitute a default by Sublandlord under the Master
Lease; (ii) Sublandlord is not aware of any breach by Master Landlord of any provision of the
Master Lease in any material respect and is not aware of any event having occurred which with the
giving of notice or the passage of time, or both, would constitute a default by Master Landlord
under the Master Lease, (iii) no notice has been given or threatened to be given to Sublandlord
with respect to violation of any federal, state, or local ordinance, statute, law, or regulation or
with regard to the Building or the Sublease Premises; and (iv) Sublandlord has not mortgaged,
hypothecated, pledged or granted any lien against its interests in the Sublease Premises or the
Furniture and Equipment.

          2.1.3 Sublandlord represents and warrants to Subtenant that: (i) a true, correct and
complete copy of the Master Lease is attached hereto as Exhibit C; (ii) Sublandlord has the right
and power to execute and deliver this Sublease and to perform its obligations hereunder; (iii) the
person or persons executing this Sublease for Sublandlord are fully authorized to so act and no
other action is required to bind Sublandlord to this Sublease; and (iv) Sublandlord is duly
organized and in good standing in its state of formation and is authorized to conduct business in
the state where the Sublease Premises are located.

     2.2 In consideration of the payment of Base Rent hereunder, Sublandlord grants to Subtenant
(i) an exclusive license to use Sublandlord’s furniture, cubicles, audio/visual and other equipment
located within the Sublease Premises, a list of which is attached hereto as Exhibit D (the
“Furniture and Equipment”). Provided no Default has occurred and is continuing, Subtenant’s
Furniture and Equipment License shall be irrevocable during the term of this Sublease; and (ii) a
non-exclusive license to use the furniture, appliances and other equipment located in the Shared
Space. Sublandlord and Subtenant will establish mutually agreeable written rules and policies
directing the use of the Shared Space and the personal property located therein. Upon the
Commencement Date, Subtenant and Sublandlord shall inspect the Furniture and Equipment and shall
agree upon a report of the condition of the same for future reference.

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Subtenant shall maintain the Furniture and Equipment throughout the Term in materially the
same condition as delivered by Sublandlord to Subtenant except for normal wear and tear. In the
event of any damage to the Furniture and Equipment, Subtenant shall provide written notice to
Sublandlord of such damage and Subtenant shall make any and all repairs that are necessary at
Subtenant’s sole cost and expense. If Subtenant fails to make any repairs to the Furniture and
Equipment within fifteen (15) days after written notice from Sublandlord (although notice shall not
be required if there is an emergency), Sublandlord may, but shall not be obligated to, make the
repairs, and Subtenant shall pay the reasonable cost of the repairs to Sublandlord within fifteen
(15) days after receipt of invoice therefor, together with an administrative charge in an amount
equal to ten percent (10%) of the cost of the repairs. Subtenant shall have the right to replace
any Furniture and Equipment with furniture or equipment of equivalent value. At all times during
the Term, Subtenant shall insure the Furniture and Equipment for its full replacement value.
Sublandlord makes no representation or warranty as to the Furniture and Equipment, other than to
its ownership of the same, and hereby expressly DISCLAIMS ANY WARRANTIES AS TO MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.

     Effective as of the Expiration Date, Subtenant shall acquire from Sublandlord and Sublandlord
shall transfer to Subtenant via a Quitclaim Bill of Sale all of Sublandlord’s right, title and
interest in and to the Furniture and Equipment in its then current condition, AS IS and WITH ALL
FAULTS, for a total consideration of One Dollar ($1.00). Following Sublandlord’s execution and
delivery of the Quitclaim to Subtenant, the Furniture and Equipment shall be considered Subtenant’s
personal property, and Subtenant shall remove the Furniture and Equipment from the Sublease
Premises at the termination or expiration of this Sublease in accordance with the terms of this
Sublease.

     2.3 Sublandlord may enter any part of the Sublease Premises during ordinary business hours at
any time upon reasonable prior telephonic notice and during non-business hours after providing at
least 24 hours prior written notice (except in any emergency or suspected emergency, Sublandlord
may enter at any hour without prior notice) (a) to inspect, test, clean, or make repairs to the
Sublease Premises or the Master Premises as Sublandlord believes appropriate, or (b) to show the
Sublease Premises to prospective lenders and purchasers, or (c) to show the Sublease Premises to
prospective subtenants or assignees at any time during the last six (6) months of the term or when
Subtenant is in Default beyond the applicable notice and cure periods hereunder, and, if the
Sublease Premises are vacated, to prepare them for reoccupancy. Sublandlord shall take reasonable
measures not to unreasonably interfere with Subtenant’s operations in connection with such entries
and except in the case where the Sublease Premises are vacated, shall reimburse Subtenant for any
damage caused to the Sublease Premises and Subtenant’s personal property by any such entry by
Sublandlord.

     2.4 Subtenant shall have the right to use the Parking Spaces described in Section 1.15 on an
unreserved basis during the Sublease Term. Any parking shall be subject to the requirements of the
Master Landlord and the terms and conditions of the Master Lease.

     2.5 If at any time during the term of this Sublease, Sublandlord should decide to vacate the
Retained Space, provided Subtenant is not in Default hereunder, Sublandlord shall

6

 

give notice to Subtenant of its intention to vacate (“Notice of Intention to Vacate”)
identifying the portion of the Retained Space that will be vacated (the “Offered Space”) and
setting forth the rental rate at which Sublandlord is willing to sublease the Offered Space to
Subtenant, which rate shall be the greater of (i) 95% of Sublandlord’s reasonable determination of
the fair rental value of the Offered Space, or (ii) 100% of the rent then in effect under the
Master Lease for the Offered Space. Subtenant shall have ten (10) business days following the date
of the Notice of Intention to Vacate to notify Sublandlord that it wishes to sublease the Offered
Space for the remainder of the Term of this Sublease and on the same terms as set forth in this
Sublease, except that the Base Rent and Subtenant’s Share for the Offered Space shall be as
specified in the Notice of Intention to Vacate. If Subtenant does not give such notice within such
time, or fails to execute an amendment to this Sublease evidencing such election within ten (10)
days after receiving it, Sublandlord may sublease the Offered Space to any third party. In all
cases, any right of Subtenant to lease the Offered Space under this Section 2.5 shall be subject
and subordinate to any rights of existing tenants or occupants of the Building or Project to lease
the Offered Space, if such existing rights were granted prior to the Execution Date of this
Sublease.

3. Sublease Term; Termination Option.

     3.1 The Sublease Term shall commence on the Commencement Date and end on the Expiration Date,
unless sooner terminated in accordance with the terms of this Sublease. The Sublease may be
terminated prior to the Expiration Date if the Master Lease is terminated, but subject to the right
of Subtenant to continue in occupancy as a direct tenant of Master Landlord in accordance with the
terms of the Master Consent. Subtenant shall have no option to extend the Sublease Term.

     3.2 If for any reason beyond the reasonable control of Sublandlord, Sublandlord is delayed in
delivery of the Sublease Premises to Subtenant, Sublandlord shall not be liable therefor, nor shall
such failure affect the validity of this Sublease or the obligations of Subtenant hereunder, or
extend the Expiration Date, but in such case the Commencement Date will not occur and Subtenant
shall not be obligated to pay Rent until possession of the Sublease Premises are tendered to
Subtenant. Notwithstanding the foregoing, if for any reason such possession is not delivered by
September 1, 2007, then Subtenant shall upon notice to Sublandlord have the right to terminate this
Sublease and all funds and deposits made by Subtenant shall be promptly returned to Subtenant.

     3.3 Provided that no Default shall have occurred and be continuing, Subtenant shall have the
right to terminate this Lease effective as of September 1, 2012 (the “Termination Option”) by
giving to Sublandlord written notice of its election to terminate no later than January 1, 2012,
provided that as consideration for Subtenant’s exercise of the Termination Option, Sublandlord
shall be entitled to a termination fee in the amount of $225,000 (the “Termination Fee”), which
shall be payable from the proceeds of Subtenant’s Letter of Credit and the cash Security Deposit.
If Subtenant does not elect to exercise its Termination Option, then Sublandlord shall immediately
surrender Subtenant’s Letter of Credit to Subtenant for cancellation.

     3.4 Sublandlord covenants and agrees to use all commercially reasonable means to keep the
Master Lease in full force and effect. Without the express written consent of

7

 

Subtenant, Sublandlord covenants and agrees not to (a) amend the terms or provisions of the
Master Lease in any way which would adversely affect the rights of Subtenant and (b) not to do or
cause to be done or suffer or permit any act or thing to be done which would cause the Master Lease
or the rights of Sublandlord as tenant thereunder to be cancelled, terminated or forfeited.

4. Rent

     4.1 The rent payable by Subtenant for the Sublease Premises shall consist of the Base Rent
under Section 4.2, the Pass Through Costs under Section 4.3 and the Other Charges under Section
4.4. Base Rent, Pass Through Costs, Other Charges and any other sums payable by Subtenant under
this Sublease are collectively referred to as “Rent.” Subtenant’s covenant to pay Rent shall be
independent of every other covenant in this Sublease. Subtenant shall make all payments due to
Sublandlord pursuant to this Sublease at Sublandlord’s address set forth in Section 1.12 above,
unless otherwise modified in writing by Sublandlord from time to time. Sublandlord shall apply
$75,000 of the Prepaid Rent to Subtenant’s obligation to pay Rent in accordance with Section 1.15
of this Sublease.

     4.2 Beginning on the Rent Commencement Date and continuing thereafter on the first day of each
calendar month during the Sublease Term, Subtenant shall pay to Sublandlord in advance, and without
notice, demand, deduction or offset (except as otherwise expressly provided herein), the monthly
Base Rent. If the Rent Commencement Date is a day other than the first day of a calendar month,
the Base Rent for the month in which the Rent Commencement Date occurs will be prorated, based on
the actual number of days in the month after the Rent Commencement Date. Similarly, Base Rent for
the month in which the Expiration Date occurs shall be prorated, base on the actual number of days
in the month prior to the Expiration Date.

     4.3 Commencing on the Commencement Date, and continuing throughout the Sublease Term,
Subtenant also shall pay an amount equal to Subtenant’s Share of all amounts payable by Sublandlord
under Section 4 (“Taxes”), Section 5 (“Operating Expenses”), and Section 6 (“Utilities”) under the
Master Lease (collectively, “Pass Through Costs”). To the extent Pass Through Costs are payable on
a monthly estimated basis, the Additional Rent with respect thereto shall be paid as and when Base
Rent is due in an amount based on Master Landlord’s or Sublandlord’s estimates; and upon any
reconciliation of estimated and actual Pass Through Costs, the corresponding Pass Through Costs
shall be adjusted between Sublandlord and Subtenant (with appropriate reimbursements or additional
payments) within thirty (30) days after delivery to Subtenant of any reconciliation statement. For
purposes of calculating Pass Through Costs, Sublandlord shall be entitled to rely conclusively on
Master Landlord’s determination of estimated and actual Pass Through Costs and shall be under no
obligation to audit or verify the same except as provided in Section 4.3.1 and Section 4.3.2 of
this Sublease.

          4.3.1 Notwithstanding anything to the contrary contained in this Sublease, Sublandlord, at
Subtenant’s reasonable request, shall exercise its rights under the Master Lease, to audit and
verify the determination of the Pass Through Costs, provided (i) Subtenant shall not issue more
than one such request per calendar year of the Sublease term; (ii) Subtenant’s request shall be
made not more than sixty (60) calendar days following delivery to Subtenant of any reconciliation
statement; (iii) Subtenant shall not be in default at the time it issues such request to
Sublandlord or at the time Sublandlord commences such audit; and (iv) Subtenant shall pay all

8

 

out of pocket costs to third parties actually incurred by Sublandlord, plus a ten percent
(10%) administrative fee. Notwithstanding anything to the contrary contained in this Sublease, to
the extent that taxes and/or assessments are increased as a result of Subtenant’s Alterations (as
defined in Section 10 below) or Sublandlord’s alterations to the Retained Space, Subtenant or
Sublandlord, respectively, shall bear and pay 100% of such increase.

          4.3.2 In the event Master Landlord’s annual statement of Pass Through Costs due by Sublandlord
to Master Landlord under the Master Lease (including any later adjustment as the result of an audit
of such costs) for any period after the Commencement Date discloses that Sublandlord has overpaid
or underpaid Pass Through Costs for such period (and hence, Subtenant has materially overpaid or
underpaid Pass Through Costs under this Sublease), then upon Subtenant’s written request
Sublandlord shall contest, at Subtenant’s expense, the determination of any Pass Through Costs, in
accordance with Sublandlord’s rights under the Master Lease, and such overpayment or underpayment
shall be reconciled between Sublandlord and Subtenant hereunder in the same manner as between
Master Landlord and Sublandlord under the Master Lease. Sublandlord shall deliver to Subtenant, as
received, copies of all statements and estimates with respect to Pass Through Costs received from
Master Landlord.

     4.4 Throughout the Sublease Term, Subtenant also shall pay, within five (5) business days
after written notice, any other fees, charges or other sums payable with respect to the Sublease
Premises (collectively, “Other Charges”) for: (a) excess or after-hours utility consumption within
the Sublease Premises; (b) excess, after-hours or supplemental heating, ventilating or air
conditioning service supplied to the Sublease Premises; (c) services or benefits supplied to the
Sublease Premises at Subtenant’s request (or with Subtenant’s acquiescence) for which Master
Landlord reserves any right to impose a fee or charge separate from the Pass Through Costs; (d) to
reimburse Master Landlord or Sublandlord for taxes on Subtenant’s Furniture and Equipment personal
property, equipment and fixtures located in or about the Sublease Premises during the Sublease
Term; (e) to pay for any damage to the Building resulting from the act or omission of Subtenant or
Subtenant’s agents, employees or invitees, subject to the subrogation provisions of Section 8.2
herein; (f) damages recoverable due to a default under the Master Lease which are the result of any
default or failure of performance by Subtenant under this Sublease; and (g) any other costs or
expenses due from Subtenant to Sublandlord under this Sublease.

          4.4.1 To the extent Subtenant exclusively uses a service or system such as after- hours HVAC,
Subtenant shall pay the entire cost as a part of Other Charges. To the extent Sublandlord
exclusively uses a service or system in the Retained Space such as after-hours HVAC, Sublandlord
shall be responsible for the entire cost of such service or system without contribution by
Subtenant. If both Sublandlord and Subtenant jointly utilize any service or system of the Building
which results in Other Charges under Section 4.4(a) or (b), Subtenant and Sublandlord agree to
equitably apportion such Other Charges between Sublandlord and Subtenant based upon Sublandlord’s
good faith estimate of a fair allocation, which estimate shall be subject to review by Subtenant in
the manner provided in Section 5.4 (b) of the Master Lease.

     4.5 All Rent shall be paid to Sublandlord or to such other person or such other place as
Sublandlord may from time to time designate in writing. If Subtenant fails to pay any Rent on

9

 

or before the fifth (5th) day after such Rent is due, the unpaid amounts shall bear interest
for the benefit of Sublandlord at the lesser of 12% per annum or the maximum rate permitted by law
( “Default Rate”), from the date such Rent is due to the date of payment. In addition to such
interest, Tenant shall pay to Landlord a late charge in an amount equal to ten percent (10%) of any
installment of Rent due Sublandlord if Rent is not paid by the fifth (5th) day after such Rent is
due and more than one default in the payment of Rent has occurred in the preceding twelve (12)
months. Subtenant acknowledges that late payment by Subtenant to Sublandlord of Rent will cause
Sublandlord to incur costs not contemplated by this Sublease. Sublandlord further acknowledges
that it is extremely difficult and impractical to fix the exact amount of such costs sand that the
late charge set forth in this Section 4.5 represents a fair and reasonable estimate thereof.
Sublandlord’s acceptance of any late charge shall not constitute a waiver of Subtenant’s default
with respect to overdue Rent, nor shall such acceptance prevent Sublandlord from exercising any of
its other available rights and remedies. Sublandlord’s acceptance of Rent shall not constitute a
waiver of late charges or interest accrued with respect to such Rent or other payments or any prior
installments thereof, nor of any other defaults by Subtenant, whether monetary or non-monetary in
nature, remaining uncured at the time of such acceptance of Rent or other payments.

     4.6 In the event of any casualty or condemnation affecting the Sublease Premises, Rent payable
by Subtenant shall be proportionately abated, but only as to the portion of the Sublease Premises
damaged or taken and only to the extent that Rent payable by Sublandlord is abated or reduced with
respect to such portion of the Sublease Premises.

5. Security Deposit and Letters of Credit.

     5.1 On the Execution Date, Subtenant shall deposit with Sublandlord the cash Security Deposit
in the amount specified in Section 1.14, as security for the full and faithful performance of every
provision of this Sublease to be performed by Subtenant. In addition, prior to the Commencement
Date, Subtenant shall also provide Sublandlord with Subtenant’s Letter of Credit in accordance with
the requirements of Section 5.2 which shall be applied to the payment of the Termination Fee as
provided in Section 3.3 in the event Subtenant exercises its Termination Option. Sublandlord shall
provide Subtenant with Sublandlord’s Letter of Credit in the amount of $300,000 to secure its
obligations under Section 1.15 to refund to Subtenant any unapplied Prepaid Rent in the event of
the early termination of the Master Lease, which Letter of Credit shall comply with the
requirements of Section 5.3.

          5.1.1 The cash Security Deposit is not an advance Rent deposit, an advance payment of any
other kind, or a measure of Sublandlord’s damage in case of Subtenant’s Default. If Subtenant
defaults with respect to any provision of this Sublease, including but not limited to the
provisions relating to the payment of Rent, Sublandlord, without prejudice to any other right or
remedy it may have, may use, apply or retain all or any part of the Security Deposit for the
payment of any Rent or any other amount which Sublandlord may spend or become obligated to spend by
reason of Subtenant’s default, to repair damages to any part of the Sublease Premises or the
Building, to clean the Sublease Premises or to compensate Sublandlord for any other loss or damage
which Sublandlord may suffer by reason of Subtenant’s default. Following any application of the
Security Deposit, Subtenant shall, within five (5) business days

10

 

following Sublandlord’s demand, restore the Security Deposit to its full original amount, and
Subtenant’s failure to restore the Security Deposit shall be deemed an event of default under this
Lease without further notice or cure period. In the event of bankruptcy or other insolvency
proceedings filed by or against Subtenant, the Security Deposit shall be deemed to be applied first
to the payment of Rent and other charges due Sublandlord for all periods prior to the effective
date of such proceedings. Sublandlord shall not be required to keep the Security Deposit separate
from its general funds, and Subtenant shall not be entitled to interest on the Security Deposit.
If Subtenant shall fully and faithfully perform every provision of this Sublease to be performed by
it, the Security Deposit or any unapplied balance thereof shall be returned to Subtenant within
thirty days following the Expiration Date. Subtenant waives the provisions of California Civil
Code Section 1950.7, and all other provisions of law now in force or that become in force after the
date of execution of this Sublease, that provide that Sublandlord may claim from a security deposit
only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damage
caused by Subtenant, or to clean the Sublease Premises. Sublandlord and Subtenant agree that
Sublandlord may, in addition, claims those sums reasonably necessary to compensate Sublandlord for
any other loss or damage caused by the act or omission of Subtenant or Subtenant’s officers,
agents, employees, independent contractors, or invitees.

     5.2 Subtenant’s Letter of Credit shall be issued by and drawn upon Silicon Valley Bank or
another commercial bank (“Subtenant’s Issuing Bank”) which other commercial bank shall be a member
bank of the New York Clearing House Association and shall have offices for banking purposes in San
Francisco and shall have a net worth of not less than Ten Billion Dollars ($10,000,000,000) and it
shall: (i) have a term of five years (or of at least one (1) year and be subject to annual renewals
as provided in clause viii below; (ii) be substantially in the form attached hereto as Exhibit
“G” or otherwise reasonably acceptable to Sublandlord, and in any event be presentable in San
Francisco, California; (iii) be for the account of Sublandlord; (iv) be in an original amount of at
least One Hundred and Fifty Thousand Dollars ($150,000.00); (v) conform and be subject to the
International Standby Practices 1998 International Chamber of Commerce, Publication No. 590; (vi)
provide that Sublandlord shall be entitled to draw upon Subtenant’s Letter of Credit only for the
payment of the Termination Fee in the event that Subtenant exercises the Termination Option, upon
presentation to Subtenant’s Issuing Bank of a sight draft only; and (viii) if the term is only for
one (1) year, provide that Subtenant’s Letter of Credit shall be deemed automatically renewed,
without amendment, for four (4) consecutive periods of one (1) year each, unless Subtenant’s
Issuing Bank shall send notice (“Non-Renewal Notice”) to Sublandlord by registered mail, return
receipt requested, not less than thirty (30) days next preceding the then expiration date of
Subtenant’s Letter of Credit that Subtenant’s Issuing Bank elects not to renew such Subtenant’s
Letter of Credit, in which case Sublandlord shall have the right (if Subtenant’s Letter of Credit
is not renewed or replaced by a Subtenant’s Letter of Credit that complies with this Section 5.2
by the date which is fifteen (15) days prior to the expiration date of Subtenant’s Letter of
Credit) by sight draft on Subtenant’s Issuing Bank, to receive the monies represented by the then
existing Subtenant’s Letter of Credit, and to hold until such proceeds are disbursed pursuant to
the terms of Section 3.3. Notwithstanding the foregoing, if Subtenant does not exercise the
Termination Option, Sublandlord shall return Subtenant’s Letter of Credit or cash proceeds held by
Sublandlord to Subtenant pursuant to the terms of Section 3.3.

11

 

     5.3 Sublandlord’s Letter of Credit shall be issued by and drawn upon Wells Fargo or another
commercial bank (“Sublandlord’s Issuing Bank”) which other commercial bank shall be a member bank
of the New York Clearing House Association and shall have offices for banking purposes in San
Francisco and shall have a net worth of not less than Ten Billion Dollars ($10,000,000,000) and it
shall: (i) have a term of twenty-eight (28) months (or of at least one (1) year and be subject to
annual renewals as provided in clause viii below); (ii) be substantially in the form attached
hereto as Exhibit “H” or otherwise reasonably acceptable to Subtenant, and in any event be
presentable in San Francisco, California; (iii) be for the account of Subtenant; (iv) be in an
original amount of at least Three Hundred Thousand Dollars ($300,000.00) and automatically reduced
to the extent the Prepaid Rent has been applied to the Rent payable by Subtenant in months 12, 18,
24 and 27 of the Term; (v) conform and be subject to the International Standby Practices 1998
International Chamber of Commerce, Publication No. 590; (vi) provide that Subtenant shall be
entitled to draw upon Sublandlord’s Letter of Credit only for the payment of the amount of the
unapplied Prepaid Rent following the termination of the Sublease, upon presentation to
Sublandlord’s Issuing Bank of a sight draft only; and (viii) if the term of Sublandlord’s Letter of
Credit is only for one (1) year, provide that Sublandlord’s Letter of Credit shall be deemed
automatically renewed, without amendment, for two (2) consecutive periods of one (1) year each,
unless Sublandlord’s Issuing Bank shall send notice (the “Non-Renewal Notice”) to
Sublandlord by registered mail, return receipt requested, not less than thirty (30) days next
preceding the then expiration date of Sublandlord’s Letter of Credit that Sublandlord’s Issuing
Bank elects not to renew such Sublandlord’s Letter of Credit, in which case Sublandlord shall have
the right (if Sublandlord’s Letter of Credit is not renewed or replaced by a substitute
Sublandlord’s Letter of Credit in the amount of the then outstanding Prepaid Rent that complies
with this Section 5.3 by the date which is fifteen (15) days prior to the expiration date of
Sublandlord’s Letter of Credit) by sight draft on Sublandlord’s Issuing Bank, to receive the monies
represented by the then existing Sublandlord’s Letter of Credit, and to hold until such proceeds
are disbursed pursuant to the terms of Section 1.15. At the time the Prepaid Rent is fully
applied, Subtenant shall immediately surrender Sublandlord’s Letter of Credit to Sublandlord for
cancellation. If Subtenant shall draw upon Sublandlord’s Letter of Credit, it shall only be
entitled to retain the proceeds necessary to reimburse Subtenant for the amount of any unapplied
Prepaid Rent, and Subtenant shall immediately refund the balance to Sublandlord.

6. Possession and Use.

     6.1 Except as otherwise provided in Section 1.1.5 herein, Sublandlord subleases the Sublease
Premises to Subtenant, and Subtenant accepts the Sublease Premises and the Furniture and Equipment,
strictly in their present “as-is” and “with all faults” condition. Sublandlord has no obligation
to prepare, modify or alter the Sublease Premises. Subtenant acknowledges that it has had full
opportunity to inspect the condition of the Sublease Premises and Building and all laws, rules,
regulations, and restrictions statutes, codes, regulations, ordinances, and restrictions of any
municipal or governmental entity whether in effect now or later (“Laws”) relating to its use and
condition. Subtenant is not relying on any statement, representation or warranty made by or for
Sublandlord with respect to the Sublease Premises or such Laws. Subtenant, by acceptance of
possession of the Sublease Premises, conclusively acknowledges the Sublease

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Premises to be in good order and repair and in a tenantable condition and acceptable for its
intended use.

     6.2 The Sublease Premises shall be used and occupied solely for Subtenant’s Use as specified
in Section 1.10. Subtenant’s use shall comply with the relevant provisions of the Master Lease and
all applicable Laws. Subtenant shall not use or suffer or permit the Sublease Premises to be used
for any other purpose.

7. Services, Maintenance And Repair Obligations.

     7.1 After obtaining Master Landlord’s prior written consent thereto, Subtenant shall install
electrical meters acceptable to Sublandlord to measure electricity consumption in the Sublease
Premises, at Subtenant’s sole cost and expense. To the extent that utility consumption costs,
including without limitation, electric and other charges incurred in connection with lighting, and
providing electrical power and heating, ventilating and air conditioning service to the Sublease
Premises are separately metered and billed directly to Subtenant, Subtenant shall be responsible
for paying all such costs before delinquency. To the extent such utilities are not separately
metered to the Sublease Premises and billed directly to Master Landlord or Sublandlord, Subtenant
shall pay Subtenant’s Share of such costs as Additional Rent or Other Charges in accordance with
Section 4. Sublandlord shall include in Other Charges any such after-hours HVAC charge imposed by
Landlord with respect to the Sublease Premises. Subtenant acknowledges that, if the Master Lease
so provides, the Master Landlord may change such after-hours charges at any time, and that any such
changes will be reflected in Other Charges. Sublandlord grants to Subtenant the right, so long as
Subtenant is not in Default, to receive all of the services and benefits with respect to the
Sublease Premises which are to be provided by Master Landlord under the Master Lease. Sublandlord
shall have no duty to perform any obligations of Master Landlord which are, by their nature, the
obligation of an owner or manager of real property. By way of illustration and not limitation,
Sublandlord shall not be required to provide any services (including janitorial, utilities,
heating, ventilation and air conditioning service, security, or use of common areas or parking
facilities) or to perform any maintenance or repairs which Master Landlord is or may be required to
provide or perform under the Master Lease. Sublandlord shall have no responsibility for or be
liable to Subtenant for any default, failure or delay on the part of Master Landlord in the
performance or observance by Master Landlord of any of its obligations under the Master Lease, nor
shall such default by Master Landlord affect this Sublease or waive or defer the performance of any
of Subtenant’s obligations under this Sublease, including without limitation the obligation to pay
Rent; and Subtenant hereby expressly waives the provisions of any statute, ordinance or judicial
decision, now or hereafter in effect, which would give Subtenant the right to make repairs at the
expense of Sublandlord or Master Landlord, or to claim any actual or constructive eviction by
virtue of any interruption in access, services or utilities to, or any failure to make repairs in
or to, the Sublease Premises or the Building, including without limitation any rights under
California Civil Code Sections 1932(1) and 1931(2), 1933(4), 1941 or 1942. Notwithstanding the
foregoing, the parties do contemplate that Master Landlord will, in fact, perform its obligations
under the Master Lease and in the event of any default or failure of such performance by Master
Landlord, Sublandlord agrees that it will, upon notice from Subtenant, make demand upon Master
Landlord to perform its obligations under the Master Lease and use commercially reasonable efforts
(at

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Subtenant’s expense) to cause Master Landlord to perform its obligations. Sublandlord,
however, shall have no obligation to sue the Master Landlord on Subtenant’s behalf or to terminate
the Master Lease as a result of any such default or failure by Master Landlord.

     7.2 Subtenant shall contract for its own waste removal and shall pay the provider directly.
Subtenant shall maintain the Sublease Premises in a clean and orderly manner and condition, to the
extent that Sublandlord is required to maintain the Sublease Premises under the Master Lease.

     7.3 Without limiting Subtenant’s obligations as incorporated from the Master Lease, Subtenant
shall comply with all Laws and of all insurance bodies and their fire prevention engineers at any
time in force, applicable to the use, condition, occupancy or modification of the Sublease
Premises, including without limitation, all Laws promulgated or applicable as a result of the
Americans with Disabilities Act. Without limiting the generality of the foregoing, Subtenant shall
be responsible for all modifications (including structural modifications) to the Sublease Premises
or Building triggered or required as a result of Subtenant’s particular use or modification of the
Sublease Premises. All provisions of the Master Lease relating to the Tenant’s or Sublandlord’s
use of or liability arising from Hazardous Materials (as defined in the Master Lease) are hereby
incorporated herein, with the term “Subtenant” substituted for Tenant, except that Sublandlord is
not assuming any responsibility or liability with respect to any Hazardous Materials brought onto
the Premises by others or any liabilities of Master Landlord under the Master Lease or any
liabilities of Sublandlord with regard to the Building or the Master Premises or with regard to
matters pertaining to the Sublease Premises prior to the Commencement Date. Subtenant shall not be
responsible for paying any costs or expenses as Rent or otherwise for the investigation or
remediation of Hazardous Materials affecting the Sublease Premises or the underlying land unless
such contamination is attributable to the use or occupancy of the Sublease Premises by Subtenant
or the activities of Subtenant, its employees, contractors or invitees.

     7.4 Sublandlord will not be responsible for any lost or stolen property, equipment, money or
jewelry from the Sublease Premises or the Building.

8. Subtenant’s Insurance and Indemnity.

     8.1 Throughout the Sublease Term, Subtenant shall procure and maintain, at its own cost and
expense, such workers’ compensation, business interruption and commercial general liability
insurance and any other coverages as are required to be carried by Tenant under the Master Lease,
and such property insurance as is required to be carried by Tenant under the Master Lease to the
extent such property insurance pertains to the Sublease Premises, all naming Sublandlord (and any
of its designees), as well as Master Landlord, as additional insureds and loss payees in the manner
required in the Master Lease. If the Master Lease requires the Tenant to insure leasehold
improvements or alterations, then Subtenant shall insure such leasehold improvements which are
located in the Sublease Premises, as well as alterations in the Sublease Premises made by
Subtenant. Subtenant shall furnish to Sublandlord a certificate of Subtenant’s insurance required
under this Section 8.1 on or before the Commencement Date. Subtenant’s general liability policies
shall provide cross-liability coverage for Subtenant and Sublandlord (and any of its designees) to
provide severability of interests, and the coverage afforded to

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Sublandlord must be as broad as that afforded to Subtenant. Within five (5) business days
after any renewal or promptly upon any other request by Sublandlord, Subtenant shall furnish
Sublandlord with copies of policies, or evidence of insurance, evidencing maintenance and renewal
of the required coverage on such form as is reasonably acceptable to Sublandlord, and a copy of the
endorsement to Subtenant’s liability policy showing the additional insureds. In the event
Subtenant does not maintain said insurance, Sublandlord may, in its sole discretion and without
waiving any other remedies hereunder, procure said insurance and Subtenant shall pay to Sublandlord
as Rent the cost of said insurance, plus a ten percent (10%) administrative fee..

     8.2 Each party hereby waives claims against the other for damage to property owned by the
waiving party where such damage is covered under any policy of property insurance maintained, so
long as such waiver does not invalidate or adversely affect the waiving party’s property insurance;
and each party shall obtain from its insurance carrier a waiver of its right of subrogation.
Subtenant agrees to obtain, for the benefit of Master Landlord and Sublandlord, such waivers of
subrogation rights from its insurer as are required of Sublandlord, as Tenant, under the Master
Lease. Subtenant hereby waives claims against Master Landlord and Sublandlord for death, injury,
loss or damage of every kind and nature, if and to the extent that Sublandlord, as Tenant, waives
or releases such claims against Master Landlord under the Master Lease.

     8.3 To the fullest extent permitted by law, Subtenant waives all claims against Sublandlord
for economic damages, damage to any property or injury or death of any person in, on or about the
Sublease Premises arising at any time or from any cause other than to the extent caused by the
gross negligence or willful misconduct of Sublandlord. Subtenant agrees to protect, defend,
indemnify and hold Sublandlord harmless from all claims, losses, damages, liabilities and expenses
which Sublandlord may incur, or for which Sublandlord may be liable to Master Landlord, arising
from (a) the use, modification or occupancy of the Sublease Premises or the Furniture and Equipment
during the Sublease Term; (b) the use, modification or occupancy of, any of the licensed areas by
Subtenant, its employees, agents, contractors, invitees or licensees; (c) the acts or omissions of
Subtenant, its employees, agents or contractors; and (d) any acts or events occurring in or about
the Sublease Premises during the Sublease Term, which are the subject matter of any indemnity or
hold harmless of Sublandlord, as Tenant, to Master Landlord under the Master Lease. Subtenant’s
obligations to protect, defend, indemnify and hold harmless Sublandlord under this Section 8.3 are
in no way conditioned upon either (i) Subtenant’s acts or omissions being a cause of any underlying
claim, demand, action, loss or damage, or (ii) Sublandlord being free of negligence or wrongful
conduct in connection therewith; provided, however, that Subtenant shall not be required to
indemnify or hold Sublandlord harmless to the extent it is established that Sublandlord’s gross
negligence or willful misconduct is the cause of any claim, demand, action, liability, expenses,
loss or damage.

     8.4 To the fullest extent permitted by law, Sublandlord and Subtenant waive all claims against
each other for economic damages, damage to any property or injury or death of any person in, on or
about the Retained Space or Shared Space arising at any time or from any cause except to the extent
caused by the gross negligence or willful misconduct of the other party.

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9. Assignment or Subletting.

     9.1 Except with the prior written consent of Sublandlord (and the Master Landlord if required
by the Master Lease) and except as permitted otherwise by this Section 9, Subtenant shall not
voluntarily, involuntarily or by operation of law (a) assign, convey or mortgage this Sublease or
any interest under it; (b) allow any transfer thereof or any lien upon Subtenant’s interest by
operation of law; (c) further sublet the Sublease Premises or any part thereof; or (d) permit the
occupancy of the Sublease Premises or any part thereof by anyone other than Subtenant
(collectively, a “Transfer”). Subtenant shall provide Sublandlord with not less than thirty (30)
days prior notice of a proposed Transfer. With any request for consent to a Transfer, Subtenant
will submit a copy of the proposed Transfer document to Sublandlord and notify Sublandlord of the
proposed effective date of the Transfer, the name of the proposed transferee (accompanied by
evidence of the nature, character, ownership, business, and financial condition of the transferee
and its business), all terms and conditions (including rental and other consideration) of or
relating to the Transfer and a general description of any proposed alterations. Sublandlord shall
grant or deny its consent to the proposed Transfer within thirty (30) days following submission of
Subtenant’s request accompanied by the information required herein. Consent by Sublandlord to any
Transfer shall not be a waiver of Sublandlord’s rights as to any subsequent Transfer. Any approved
Transfer shall be expressly subject to the terms and conditions of the Master Lease. Upon Default
while a Transfer is in effect, Sublandlord may collect directly from the transferee all sums
becoming due to Subtenant under the Transfer and apply this amount against any sums due Sublandlord
by Subtenant, and Subtenant hereby authorizes and directs any transferee to make payments directly
to Sublandlord upon notice from Sublandlord. No direct collection by Sublandlord from any
transferee shall constitute a novation or release of Subtenant, a consent to the Transfer or a
waiver of the covenant prohibiting Transfers. Sublandlord, as Subtenant’s agent, may endorse any
check, draft or other instrument payable to Subtenant for sums due under a Transfer, and apply the
proceeds in accordance with this Sublease; this agency is coupled with an interest and is
irrevocable. In the event that Subtenant shall request Sublandlord’s consent to a Transfer,
Subtenant shall pay Sublandlord’s reasonable processing costs and attorneys’ fees and costs
incurred in reviewing such request, together with the fees and costs of Master Landlord in
accordance with the terms of the Master Lease.

     9.2 If the consideration Subtenant receives for any Transfer (including key money and bonus
money and any payment in excess of fair market value for services or assets provided or transferred
in connection with the Transfer) exceeds the rent payable under this Sublease for the same period
and portion of the Sublease Premises, then the excess shall be immediately due and payable by
Subtenant to Sublandlord as Additional Rent under this Sublease. Subtenant shall allow Sublandlord
to review and audit Subtenant’s book and records for the purpose of verifying Subtenant’s
calculation of excess rent payable to Sublandlord.

     9.3 Notwithstanding anything to the contrary herein, Subtenant shall have the same rights as
Sublandlord to make a “Permitted Transfer” (as defined in the Master Lease) without obtaining
Sublandlord’s consent (but Subtenant shall provide Sublandlord with prior or concurrent written
notice thereof). If Sublandlord consents to any assignment of this Sublease or further subletting
of the Sublease Premises, Sublandlord shall use reasonable efforts to obtain

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the consent of Master Landlord if required by the Master Lease. All costs of obtaining Master
Landlord’s consent shall be borne by Subtenant.

     9.4 No permitted assignment shall be effective and no permitted sublease shall commence unless
and until any Default by Subtenant hereunder has been cured. No permitted assignment or subletting
shall relieve Subtenant from Subtenant’s obligations and agreements under this Sublease, and
Subtenant shall continue to be liable as a principal and not as a guarantor or surety, to the same
extent as though no assignment or subletting had been made. Subtenant hereby waives the provisions
of Section 1995.310 of the California Civil Code, or any similar or successor Laws, now or
hereinafter in effect, and all other remedies, including, without limitation, any right at law or
equity to terminate this Sublease, on its own behalf and, to the extent permitted under all
applicable Laws, on behalf of the proposed transferee. Any attempted Transfer in violation of this
Section is voidable by Sublandlord.

10. Alterations.

     10.1 Subtenant shall not make any alterations in or additions to the Sublease Premises
(“Alterations”) if to do so would constitute a default under the Master Lease (without regard to
any requirement of notice or cure period). If Subtenant’s proposed Alterations would not
constitute a default under the Master Lease, Sublandlord’s consent thereto shall nonetheless be
required, but Sublandlord’s consent to such Alterations shall not be unreasonably withheld,
conditioned or delayed, and if Sublandlord consents thereto, Sublandlord shall use reasonable
efforts to obtain the consent of Master Landlord if such consent is required under the Master
Lease. If Alterations by Subtenant are permitted or consented to, Subtenant shall comply with all
of the covenants of Sublandlord, as Tenant, contained in the Master Lease pertaining to the
installation and removal of such Alterations. At the expiration or earlier termination of this
Sublease, Subtenant shall remove all Alterations and restore the Sublease Premises to its condition
as of the date of this Sublease, reasonable wear and tear excepted, unless the Master Landlord and
Sublandlord shall expressly agree in writing, in their sole and absolute discretion, that such
removal and restoration shall not be required (provided that Sublandlord shall not require removal
of Alterations unless such removal is required by Master Landlord). In addition, Subtenant shall
indemnify, defend and hold harmless Sublandlord against claim, liability, loss, cost, damage, liens
and expense imposed on Sublandlord arising out of the installation and removal of Alterations by
Subtenant. Notwithstanding the foregoing, Subtenant shall be permitted to construct or perform an
Alteration following not less than ten (10) business days notice to Sublandlord, but without
Landlord’s prior approval, provided such Alteration (i) does not constitute a default under the
Master Lease; (ii) is merely cosmetic in nature (i.e. re-painting and re-carpeting); (iii) does not
affect the exterior of the Building, (iv) does not affect the structure of the Building or the
systems and equipment of the Shared Space, the Retained Space or the Building; (iv) does not
interfere with Building services or the use of the Building by other tenants or occupants; and (v)
does not cost more than $5,000.

     10.2 If Subtenant performs any Alterations, Subtenant shall be obligated to insure all such
Alterations during the Term for the full replacement cost value.

     10.3 Any increase in taxes and assessments imposed as a result of Subtenant’s Alterations
shall be borne and paid for solely by Subtenant.

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11. Casualty or Eminent Domain.

In the event of a fire or other casualty which destroys or substantially damages the Building or
the Sublease Premises, or of a taking of all or substantially all of the Building or the Sublease
Premises under the power of condemnation, Sublandlord may exercise any right it may have under the
Master Lease to terminate the Master Lease without first obtaining the consent or approval of
Subtenant. Subtenant shall likewise have the independent right to decide whether or not to
terminate the Sublease in accordance with the termination provisions contained in Section 13.1 of
the Master Lease which provisions are incorporated herein by Section 16.2 of the Sublease However,
if Subtenant exercises such termination right with respect to the Sublease , the Master Lease is
not terminated and Sublandlord or Master Landlord restores the Sublease Premises, then Subtenant
shall pay to Sublandlord an amount equal to the lesser of: (i) the Termination Fee, and (ii) the
remaining Base Rent which would otherwise be payable by Subtenant pursuant to the Sublease. If the
Sublease is not terminated, then Subtenant shall have the obligation to restore and replace the
Furniture and Equipment, its personal property and all fixtures, alterations and improvements to
the Sublease Premises paid for by Subtenant as provided in Section 13.5 of the Master Lease which
is incorporated herein pursuant to Section 16.2 of this Sublease. Sublandlord shall not be liable
to Subtenant for any failure by the Master Landlord to timely or adequately restore the Building or
the Sublease Premises in accordance with its obligations under Section 13.1, but Sublandlord shall
reasonably cooperate with Subtenant to secure such performance.

     11.1 If a material portion of the Sublease Premises is damaged or destroyed by fire or other
casualty such that Sublandlord elects to terminate the Master Lease pursuant to Section 13.1
thereof, Sublandlord shall provide notice to Subtenant concurrent with Sublandlord’s notice to
Subtenant, and the Sublease shall terminate on the date provided in Sublandlord’s notice for
termination of the Master Lease, but subject to any right of Subtenant to a direct lease pursuant
to the terms of the Master Consent. Subtenant shall have no right to terminate the Sublease in
connection with any casualty or condemnation except to the extent that the Master Lease also is
terminated as to the Sublease Premises.

12. Surrender.

     12.1 On the Expiration Date, or upon the earlier termination of the Sublease or of Subtenant’s
right to possession of the Sublease Premises, unless Subtenant is obtaining a direct lease with
Sublandlord pursuant to the Master Consent, Subtenant will at once surrender and deliver up the
Sublease Premises, together with all improvements thereon (subject to Subtenant’s removal and
restoration obligations regarding Alterations set forth in Section 11 above), to Sublandlord in as
good condition and repair as when delivered to Subtenant, reasonable wear and tear and casualty
excepted. Conditions existing because of Subtenant’s failure to perform maintenance, repairs or
replacements as required of Subtenant under this Sublease shall not be deemed “reasonable wear and
tear.” Subtenant shall surrender to Sublandlord all keys to the Sublease Premises and make known
to Sublandlord the combination of all combination locks which Subtenant is permitted to leave on
the Sublease Premises.

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     12.2 All Alterations in or upon the Sublease Premises made by Subtenant and not removed or
required to be removed hereunder shall become a part of and shall remain upon the Sublease Premises
upon such termination without compensation, allowance or credit to Subtenant. At Sublandlord’s
written request Subtenant shall restore the Sublease Premises to their condition prior to the
making of such Alterations and repair any damage occasioned by such removal or restoration. If
Subtenant is permitted or required to remove any Alteration or a portion thereof, and Subtenant
does not complete such removal in accordance with this Section, Sublandlord may remove the same
(and repair any damage occasioned thereby), and dispose thereof, or at its election, warehouse the
same. Subtenant shall pay the costs of such removal, repair and warehousing on demand, plus an
administrative fee equal to ten percent (10%) of such costs, on demand.

     12.3 As between Sublandlord and Subtenant, Subtenant shall not be required to remove any
Alterations performed by Sublandlord prior to the Commencement Date (“Sublandlord Alterations”) or
to restore the Sublease Premises to their condition as of the date of this Sublease. If
Sublandlord is required under the Master Lease to remove any Sublandlord Alterations performed
prior to the Commencement Date, Subtenant shall permit Sublandlord to enter the Sublease Premises
for a reasonable period of time prior to the expiration date of the Master Lease for the purpose of
removing Sublandlord Alterations and restoring the Sublease Premises as required by the Master
Lease.

     12.4 On the Expiration Date, or upon the earlier termination of the Sublease or of Subtenant’s
right to possession of the Sublease Premises, unless Subtenant is obtaining a direct lease with
Sublandlord pursuant to the Master Consent, Subtenant shall remove Subtenant’s articles of personal
property incident to Subtenant’s business which are not affixed to the Sublease Premises (“Trade
Fixtures”); provided, however that Subtenant shall repair any injury or damage to the Sublease
Premises which may result from such removal, and shall restore the Sublease Premises to the same
condition as prior to the installation thereof. If Subtenant does not remove Subtenant’s Trade
Fixtures from the Sublease Premises on or before the Expiration Date or the earlier termination of
Subtenant’s right to possession, Sublandlord may, at its option, remove the same (and repair any
damage occasioned thereby and restore the Sublease Premises as aforesaid) and dispose thereof or
warehouse the same, and Subtenant shall pay the cost of such removal, repair, restoration or
warehousing, plus an administrative fee equal to ten percent (10%) of such costs, to Sublandlord
on demand, or Sublandlord may treat said Trade Fixtures as having been conveyed to Sublandlord with
this Sublease acting as a Bill of Sale therefor, without further payment or credit by Sublandlord
to Subtenant.

13. Holding Over.

     13.1 Subtenant has no right to occupy the Sublease Premises or any portion thereof after the
Expiration Date or after the termination of this Sublease or of Subtenant’s right to possession
hereunder, unless Subtenant is obtaining a direct lease pursuant to the Master Consent. In the
event Subtenant or any party claiming by, through or under Subtenant holds over, Sublandlord may
exercise any and all remedies available to it at law or in equity to recover possession of the
Sublease Premises, and to recover damages, including without limitation, damages payable by
Sublandlord to Master Landlord by reason of such holdover.

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     13.2 Without limiting Sublandlord’s rights under Section 13.1, for each and every month or
partial month that Subtenant or any party claiming by, through or under Subtenant remains in
occupancy of all or any portion of the Sublease Premises after the Expiration Date or after the
earlier termination of this Sublease or of Subtenant’s right to possession, unless Subtenant is
obtaining a direct lease with Sublandlord pursuant to the Master Consent, Subtenant shall pay, as
minimum damages and not as a penalty, monthly rental at a rate equal to double the rate of Rent
payable by Sublandlord under the Master Lease immediately prior to the Expiration Date or the
earlier termination of this Sublease or of Subtenant’s right to possession. The acceptance by
Sublandlord of any lesser sum shall be construed as payment on account and not in satisfaction of
damages for such holding over.

14. Encumbering Title.

     14.1 Subtenant shall not do any act which in any way encumbers the title of Master Landlord in
and to the Building nor shall the interest or estate of Master Landlord or Sublandlord be in any
way subject to any claim by way of lien or encumbrance, whether by operation of law or by virtue of
any express or implied contract by Subtenant, or by reason of any other act or omission of
Subtenant. Any claim to, or lien upon, the Sublease Premises or the Building arising from any act
or omission of Subtenant shall accrue only against the estate of Subtenant and shall be subject and
subordinate to the paramount title and rights of Master Landlord and Sublandlord.

     14.2 Without limiting the generality of Section 14.1, Subtenant shall not permit the Sublease
Premises or the Building to become subject to any mechanics’, laborers’ or materialmen’s lien on
account of labor or material furnished to Subtenant or claimed to have been furnished to Subtenant
in connection with work of any character performed or claimed to have been performed on the
Sublease Premises by, or at the direction or sufferance of, Subtenant. Sublandlord may cause such
liens to be released by any means it deems proper, including payment, at Subtenant’s expense and
without affecting Sublandlord’s rights.

15. Subtenant’s Default.

          15.1 Any one or more of following events shall be considered a “Default” by Subtenant, as such
terms are used in this Sublease:

          15.1.1 Subtenant shall be adjudged an involuntary bankrupt, or a decree or order approving, as
properly filed, a petition or answer filed against Subtenant asking reorganization of Subtenant
under the Federal bankruptcy laws as now or hereafter amended, or under the laws of any state,
shall be entered, and any such decree or judgment or order shall not have been vacated or stayed or
set aside within thirty (30) days from the date of the entry or granting thereof; or

          15.1.2 Subtenant shall file, or admit the jurisdiction of the court and the material
allegations contained in, any petition in bankruptcy, or any petition pursuant or purporting to be
pursuant to the Federal Bankruptcy laws now or hereafter amended, or Subtenant shall institute any
proceedings for relief of Subtenant under any bankruptcy or insolvency laws or any laws relating to
the relief of debtors, readjustment of indebtedness, re-organization, arrangements, composition or
extension; or

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          15.1.3 Subtenant shall make any assignment for the benefit of creditors or shall apply for or
consent to the appointment of a receiver for Subtenant or any of the property of Subtenant; or

          15.1.4 Subtenant shall admit in writing its inability to pay its debts as they become due; or

          15.1.5 The Sublease Premises are levied on by any revenue officer or similar officer; or

          15.1.6 A decree or order appointing a receiver of the property of Subtenant shall be made and
such decree or order shall not have been vacated, stayed or set aside within thirty (30) days from
the date of entry or granting thereof; or

          15.1.7 Subtenant shall abandon (as defined in California Civil Code Section 1951.3) the
Sublease Premises during the Sublease Term; or

          15.1.8 Subtenant fails to make any payment of Rent required to be made by Subtenant as and
when the same is due and such failure continues for more than three (3) days after written notice
from Sublandlord of such failure, provided, however, that any such notice shall be in lieu of, and
not in addition to, any notice required under California Code of Civil Procedure Section 1161 et
seq., as amended from time to time; or

          15.1.9 The failure by Tenant to pay any installment of Base Rent or the failure by Tenant to
make any other payment required to be made by Tenant under this Lease, within five (5) days after
such payment becomes due, provided, however, that the first occurrence of such a delinquency in any
twelve (12) consecutive month period shall constitute an Event of Default only if Tenant fails to
cure such delinquency within three (3) days following written notice from Landlord as and when due.

          15.1.10 Subtenant fails to secure insurance or to provide proper evidence of insurance as set
forth in Section 8 of this Sublease or fails to keep the Sublease Premises or the Building free of
lien claims as set forth in Section 14 of this Sublease and either such failure continues for more
than three (3) days after written notice thereof to Subtenant, provided, however, that Subtenant
may contest any claim of lien pursuant to the same procedure in Section 7.4 afforded Sublandlord as
Tenant under the Master Lease, and further provided, that any such notice shall be in lieu of, and
not in addition to, any notice required under California Code of Civil Procedure Section 1161 et
seq., as amended from time to time; or

          15.1.11 Subtenant, by its act or omission, causes an event or condition under the Master Lease
which either is a default thereunder and Sublandlord has given Subtenant prompt notice of such
default, but Subtenant fails to promptly take the action necessary to cure such default within the
grace period provided therein; or

          15.1.12 Subtenant fails to fulfill, keep, observe or perform any of the other covenants and
obligations herein contained to be fulfilled, kept, observed and performed by Subtenant, and such
failure continues for more than fifteen (15) days after notice thereof in

21

 

writing to Subtenant, provided that if such default cannot be cured within fifteen (15) days,
it shall be sufficient if Subtenant commences within the fifteen (15) days and thereafter
diligently pursues the cure to completion.

     15.2 Upon the occurrence of any one or more Defaults, Sublandlord may exercise any remedy
against, and recover such amounts from, Subtenant as Master Landlord may exercise or be entitled to
for default by Tenant under the Master Lease, which provisions of the Master Lease are hereby
incorporated herein by reference. Without limiting the generality of the foregoing, Sublandlord
may exercise the damage remedies available under California Civil Code Sections 1951.2 and 1951.4
or any similar or successor statute which provides that a lessor may continue a lease in effect and
recover damages as they become due.

16. Provisions Regarding Master Lease.

     16.1 This Sublease and all rights of the parties hereunder are subject and subordinate to the
Master Lease. The parties hereby acknowledge, each to the other, that it is not practical in this
Sublease to enumerate all of the rights and obligations of the various parties under the Master
Lease and specifically to allocate those rights and obligations in this Sublease. Accordingly, in
order to afford to Subtenant the benefits of this Sublease and of those provisions of the Master
Lease which by their nature are intended to benefit the party in possession of the Sublease
Premises, and in order to protect Sublandlord against a Default by Subtenant which might cause a
default by Sublandlord under the Master Lease, Sublandlord and Subtenant covenant and agree as set
forth in this Article 16.

     16.2 Except as expressly modified herein or otherwise excluded herein, and for purposes of
incorporation thereof into this Sublease, the following provisions of the Master Lease are hereby
expressly incorporated into this Sublease with the term “Sublandlord” substituted for Landlord, the
term “Subtenant” substituted for Tenant, the term “Sublease” substituted for Lease, and the term
“Sublease Premises” substituted for “Premises”: 8.2, 9.1, 9.2, 9.3, 9.4, 9.5, 9.6, 10.1, 10.2,
10.3, 10.4, 10.5, 12.1, 12.2, 15.3, 15.4 and 17.11 and paragraph 1 of the Third Amendment, and
further provided that all references to the “Property” in Sections 9.6(a), 9.6(d)(i) and 9.6(d)(ii)
are specifically excluded from incorporation into this Sublease.

     16.3 Except as otherwise expressly provided in this Sublease, Subtenant shall perform all
affirmative covenants and shall refrain from performing any act which is prohibited by the negative
covenants of the Master Lease, where the obligation to perform or refrain from performing is by its
nature imposed upon the party in possession of the Sublease Premises. If practicable, Subtenant
shall perform affirmative covenants which are also covenants of Sublandlord under the Master Lease
at least five (5) days prior to the date when Sublandlord’s performance is required under the
Master Lease. Sublandlord shall have the right to enter the Sublease Premises to cure any default
by Subtenant under this Section.

     16.4 It is expressly agreed that: (i) if the Master Lease should terminate prior to the
Expiration Date, Sublandlord shall have no liability to Subtenant, unless Sublandlord shall have
failed to comply with its obligations under Section 3.4 of this Sublease; and (ii) to the extent
the Master Lease grants Sublandlord the right to terminate the Master Lease because the Premises
are substantially destroyed by fire or other casualty or substantially taken by condemnation, then

22

 

Sublandlord shall be entitled to exercise, or not exercise, such right in its reasonable
discretion and without liability to Subtenant.

     16.5 Any non-liability, release, indemnity or hold harmless provision in the Master Lease for
the benefit of Master Landlord shall be deemed to apply under this Sublease and inure to the
benefit of both Sublandlord and Master Landlord.

     16.6 If Subtenant desires to take any action which requires the consent of Master Landlord
under the terms of the Master Lease, then, except as otherwise provided herein: (a) Sublandlord,
independently, shall have the same rights of approval or disapproval as Master Landlord has under
the Master Lease; (b) Subtenant shall not take any such action until it obtains the consent of both
Sublandlord and Master Landlord; and (c) Subtenant shall request that Sublandlord obtain Master
Landlord’s consent on Subtenant’s behalf and Sublandlord shall use commercially reasonable efforts
to obtain such consent. Subtenant shall pay all costs reasonably incurred by Sublandlord in
seeking or procuring Master Landlord’s consent or third party consents. Any approval or consent
required of Sublandlord conclusively shall be deemed reasonably withheld if approval or consent
also is required of the Master Landlord, and Master Landlord fails to give Master Landlord’s
approval or consent.

     16.7 Subtenant shall protect, defend, indemnify and hold harmless Sublandlord from any and all
liability, damages, liabilities, claims, proceedings, actions, demands and costs (including
reasonable attorneys’ fees) resulting, directly or indirectly, from Subtenant’s Default under this
Sublease.

     16.8 As between Sublandlord and Subtenant, in the event of a conflict between the provisions
of the Master Lease and the provisions of this Sublease, the provisions of this Sublease shall
control.

17. Master Consent.

     17.1 This Sublease and the obligations of the parties hereunder are expressly conditioned upon
the execution by Master Landlord and Sublandlord of the Master Consent which shall be substantially
in the form attached hereto as Exhibit F or such other reasonable form as shall be acceptable to
the parties thereto. Subtenant shall promptly deliver to Sublandlord any information reasonably
requested by Master Landlord with respect to the nature and operation of Subtenant’s business
and/or the financial condition of Subtenant, provided, however, Sublandlord shall treat such
information in the same manner and subject to the same confidentiality obligations as the Master
Landlord is required to treat Sublandlord’s information under the Master Lease.

     17.2 Sublandlord and Subtenant hereby agree, for the benefit of Master Landlord, that this
Sublease and Master Landlord’s consent hereto shall not (a) create privity of contract between
Master Landlord and Subtenant; (b) be deemed to have amended the Master Lease in any regard (unless
Master Landlord shall have expressly agreed writing to such amendment); or (c) be construed as a
waiver of Master Landlord’s right to consent to any assignment of the Master Lease by Sublandlord
or any further subletting of the Sublease Premises, or as a waiver

23

 

of Master Landlord’s right to consent to any assignment by Subtenant of this Sublease or any
subletting of the Sublease Premises or any part thereof.

     17.3 Sublandlord shall (i) to the extent requested by Subtenant, (a) promptly submit to Master
Landlord all requests from Subtenant for Master Landlord’s consent, and (b) promptly submit to
Master Landlord any extra copy or copies of plans, specifications and other items submitted by
Subtenant for consent and approval, and (ii) promptly submit to Subtenant, all responses or
inquiries from Master Landlord with respect to the foregoing.

18. Notices.

     18.1 All notices which may or are required to be given by either party to the other shall be
in writing and shall be deemed given when received or refused if personally delivered, or if sent
by United States registered or certified mail, postage prepaid, return receipt requested, or if
sent by a nationally recognized overnight commercial courier service providing receipted delivery,
in any such case (a) if to Subtenant, addressed to Subtenant at the address specified in Section
1.11 or at such other place as Subtenant may from time to time designate by notice in writing to
Sublandlord or (b) if for Sublandlord, addressed to Sublandlord at the address specified in Section
1.12 or at such other place as Sublandlord may from time to time designate by notice in writing to
Subtenant. Each party agrees promptly to deliver to the other party a copy of any notice, demand,
request, consent or approval received from Master Landlord.

     18.2 Any notice delivered by Sublandlord in connection with, or as a precondition to, a
Default by Subtenant shall be in lieu of and not in addition to any notice to pay rent or notice to
perform covenant required under law.

19. Miscellaneous.

     19.1 Each party warrants to the other that it has had no dealings with any broker or agent in
connection with this Sublease, except those Brokers specified in Section 1.16 above. Each party
covenants to protect, defend, indemnify and hold harmless the other party from and against any and
all costs (including reasonable attorneys’ fees), expense or liability for any compensation,
commission and charges claimed by any broker or other agent, other than the Brokers, with respect
to this Sublease or the negotiation thereof on behalf of such indemnifying party.

     19.2 Sublandlord shall not be responsible for providing any security to the Sublease Premises.

     19.3 In the event that any action is brought by either party to enforce the terms of this
Sublease, the prevailing party shall be entitled to reasonable attorneys’ fees and costs.

     19.4 This Sublease is the entire agreement between the parties regarding its subject matter
and supersedes any prior oral or written agreements among them regarding the subject matter
contained herein.

24

 

     19.5 No waiver of any provision of this Sublease or consent to any action shall constitute a
waiver of any other provision of this Sublease or consent to any other action. No waiver or
consent shall constitute a continuing waiver or consent, or commit a party to provide a future
waiver, unless such provision is expressly set forth in writing. Any waiver given by a party shall
be void if the party requesting such waiver has not provided a full and complete disclosure of all
material facts relevant to the waiver requested.

     19.6 The terms of this Sublease have been negotiated by the parties hereto and the language
used in this Sublease shall be deemed to be the language chosen by the parties hereto to express
their mutual intent. The parties acknowledge and agree that each party and its counsel have
reviewed and revised this Sublease and that no rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall be employed in the interpretation
of this Sublease.

     19.7 This Sublease is subject to amendment only by a writing that makes reference to this
Sublease and is signed by all parties hereto.

     19.8 This Sublease may be executed in counterparts, each of which shall constitute an
original, but all of which together shall constitute one and the same instrument.

25

 

     In Witness Whereof, Sublandlord and Subtenant have executed this Sublease on the
dates set forth below, intending to be bound hereby.

	 	 	 	 	 	 	 	 	 
	SUBLANDLORD:	 	SUBTENANT:	 	 
	 
	 	 	 	 	 	 	 	 
	Aradigm Corporation,	 	Mendel Biotechnology, Inc.	 	 
	a California corporation	 	a California corporation	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Igor Gonda
	 	By:
	 	/s/ Neal Gutterson	 	 
	 

	 	 
	 	 	 	 	 	 
	Name: Igor Gonda	 	Name: Neal Gutterson	 	 
	Its: President and CEO	 	Its: President and CEO	 	 
	 
	Date: July 11, 2007	 	Date: July 11, 2007	 	 

EXHIBITS

Exhibit A – Designation of Sublease Premises

Exhibit B – Designation of Temporary Space

Exhibit C – Master Lease

Exhibit D – Furniture and Equipment

Exhibit E – Greenhouse Work Letter

Exhibit F – Consent by Master Landlord to Sublease

Exhibit G – Subtenant’s Letter of Credit

Exhibit H – Sublandlord’s Letter of Credit

26

 

Exhibit A

Designation of Sublease Premises

[Graphic omitted.]

1

 

Exhibit B

Designation of Temporary Space

[Graphic omitted.]

1

 

Exhibit C

Master Lease

[Previously filed.]

1

 

Exhibit D

FURNITURE AND EQUIPMENT

     Pursuant to Section 2.2 of this Sublease, Subtenant shall have an exclusive license to use the
following furniture, cubicles, audio/visual and other equipment of Sublandlord located within the
Sublease Premises:

	 	 	 
	Number	 	Description
	32

	 	Cubicle Panels-each fabric-covered panel measuring 48” x 67,” configured for optional
electrical outlets
	 
	 	 
	 

	 	Cubicle Panels-each fabric-covered panel measuring 36” x 67,” configured for optional
electrical outlets
	 
	 	 
	18

	 	Cubicle Panels-each fabric-covered pane measuring 24” x 67,” configured for optional
electrical outlets
	 
	 	 
	35

	 	Corner Work Surfaces – Each corner work surface package assembly measuring 48” x 24”
	 
	 	 
	21

	 	Straight work surfaces (48”) — Straight work surfaces with Formica tops, each measuring 48” x
24”
	 
	 	 
	2

	 	Straight work surfaces (36”) — Straight work surfaces with Formica tops, each measuring 36” x
24”
	 
	 	 
	21

	 	Straight work surfaces (24”) — Straight work surfaces with Formica tops, each measuring 24” x
24”
	 
	 	 
	2

	 	Straight work surfaces (12”) — Straight work surfaces with Formica tops, each measuring 12” x
24”
	 
	 	 
	3

	 	Regular Bullets (60”) — Straight work surfaces with Formica top and rounded corners, each
measuring 60” x 24”
	 
	 	 
	1

	 	Small Bullet
	 
	 	 
	22

	 	Overhead Bins (48”) – Each bin consists of shelf and door. Shelf is a flat base and two side
panels designed to affix to cubicle panel. Door is a fabric covering for top of shelf with
sliding/locking door.
	 
	 	 
	 

	 	Overhead Bins (36”) – Each bin consists of shelf and door. Shelf is a flat base and two
side panels designed to affix to cubicle panel. Door is a fabric covering for top of
shelf with sliding/locking door.
	 
	 	 
	11

	 	Overhead Bins (24”) — Each bin consists of shelf and door. Shelf is a flat base and two side
panels designed to affix to cubicle panel. Door is a fabric covering for top of shelf with
sliding/locking door.

1

 

	 	 	 
	Number	 	Description
	1

	 	Overhead Shelf (48”) — Same as overhead bin, omitting door
	 
	 	 
	 

	 	Overhead Shelf (36”) — Same as overhead bin, omitting door
	 
	 	 
	5

	 	Overhead Shelves (24”) — Same as overhead bin, omitting door
	 
	 	 
	19

	 	Push Pin Boards (48”) — Each corkboard covered in fabric, measuring 48” x 15.5.” designed to
affix to cubicle panel
	 
	 	 
	1

	 	Push Pin Boards (36”) – Each corkboard covered in fabric, measuring — 36” x 15.5,” designed
to affix to cubicle panel
	 
	 	 
	17

	 	Push Pin Boards (24”) — Each corkboard covered in fabric measuring,- 24” x 15.5,” designed to
affix to cubicle panel
	 
	 	 
	9

	 	2 Drawer Pedestal File Cabinets — Black file cabinets w/2 file drawers — 30” high
	 
	 	 
	22

	 	3 Drawer Pedestal File Cabinets — Black file cabinets w/2 pencil drawers & 1 file drawer —
30” high
	 
	 	 
	8

	 	Under Surface Drawers — Storage drawers that slide into tracks affixed under the work
surface, each measuring — 20.5” x 15.25”
	 
	 	 
	16

	 	Keyboard Trays — Slide-out trays affixed to the under side of the work surfaces, designed to
accommodate a computer keyboard and mouse.
	 
	 	 
	22

	 	Desk Chairs — Black chairs on wheels designed for use with desks and cubicle configurations
	 
	 	 
	8

	 	Visitor’s Chair — Extra chair without wheels for use in offices
	 
	 	 
	100%

	 	Laboratory existing casework (permanent lab benches, cabinets and sinks) and built-in fume
hoods
	 
	 	 
	100%

	 	Glass wash room existing sinks, cabinets, DI water system, dishwashers and related built-in
equipment
	 
	 	 
	100%

	 	Board Room and Meeting Room furniture and fixtures
	 
	 	 
	100%

	 	Cold room existing fixtures
	 
	 	 
	1

	 	Room 156 existing sink

          Subtenant shall have a non-exclusive license to use the existing furniture and equipment in
the Shared Space pursuant to Section 2.2 of this Sublease. Sublandlord agrees that the furniture,
equipment, floor coverings and wall coverings existing in the Sublease Premises on the Commencement
Date shall remain in place during the Sublease Term, subject to any maintenance and repair
obligations of Sublandlord pursuant to Article 7 of this Sublease.

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EXHIBIT E

GREENHOUSE WORK LETTER

     A. This Greenhouse Work Letter, dated July 11, 2007, is entered into by and between
Aradigm Corporation, a California corporation (“Sublandlord”), and Mendel
Biotechnology, Inc., a California corporation (“Subtenant”). On or about the date hereof,
Sublandlord and Subtenant entered into that certain Sublease (the “Sublease”) for certain premises
(the “Sublease Premises”) consisting of the entirety of the building commonly known as 3929 Point
Eden Way in the Britannia Point Eden Business Park, Hayward, California (“Building”). This Work
Letter sets forth the agreement of Sublandlord and Subtenant with respect to the greenhouse
improvements to be constructed by Subtenant in the Sublease Premises. All defined terms used
herein shall have the meaning set forth in the Master Lease and the Sublease, unless otherwise
defined in this Work Letter.

     1. Construction of Greenhouse.

          1.1 Subtenant desires to construct in the parking area lying northerly of the Premises, a
greenhouse facility having a footprint of approximately 125 feet by 50 feet (the “Greenhouse”), as
depicted in Exhibit A attached to the Sublease. Subtenant shall, through its general
contractor (“Contractor”), construct the Greenhouse within the Sublease Premises, substantially in
accordance with the plans and specifications to be approved by Sublandlord and Subtenant pursuant
to paragraphs 2 and 3 below. The quantities, character and manner of installation of the
Greenhouse components shall be subject to the limitations imposed by any applicable governmental
regulations relating to conservation of energy and by applicable Laws. In addition, Subtenant
agrees that the Greenhouse shall not require Sublandlord to perform work which would (i) require
changes to structural components of the Building or the exterior design of the Building; (ii)
require any material modification to the Building’s mechanical or electrical systems; or (iii) be
incompatible with the Building plans filed with the City of Hayward. The construction of the
Greenhouse hereunder may be referred to as the Greenhouse Work.

     2. Space Planning.

          2.1 Subtenant shall engage an architect reasonably acceptable to Sublandlord (“Architect”) to
prepare for the approval of Sublandlord and the Master Landlord “Space Planning Documents” showing
the Greenhouse. Subtenant agrees that such space planning documents are or, after revisions
requested by Sublandlord or Master Landlord shall be, sufficient to enable Sublandlord’s architect
and engineers to evaluate the Working Drawings (as defined below).

          2.2 All planning and interior design services relating to any furniture and equipment, such as
selection of colors, finishes, fixtures, furnishings or floor coverings, will be included in the
cost of the Greenhouse, shall be subject to prior written approval of Sublandlord, and shall be
timely delivered so as not to impede the design and construction of the Greenhouse.

3

 

          2.3 Upon execution of the he Sublease and this Work Letter by Subtenant and receipt by
Sublandlord of the Space Planning Documents, Subtenant shall be authorized to cause its architect
and engineers to prepare the Working Drawings.

          2.4 Subtenant acknowledges that it shall be solely responsible for the actions and omissions
of its Architect(s) and engineers it engages and for any loss, liability, claim, cost, damage or
expense suffered by Sublandlord or any other entity or person as a result of the acts or omissions
of its Architects or for delays caused by its Architect(s) and engineers. The approval of
Sublandlord and the Master Landlord of any of Subtenant’s Architects or engineers and of any
documents prepared by any of them shall not be for the benefit of Subtenant or any third party, and
Sublandlord shall have no duty to Subtenant or to any third parties for the actions or omissions of
Subtenant’s Architects or engineers. Subtenant shall indemnify and hold harmless Sublandlord
against any and all losses, costs, damages, claims and liabilities arising from the actions or
omissions of Subtenant’s Architects and engineers.

     3. APPROVAL OF WORKING DRAWINGS.

          3.1 Sublandlord and Subtenant acknowledge that Subtenant shall retain an Architect and
engineers to prepare all architectural and engineering plans and specifications required for the
construction of the Greenhouse in conformance with the base building and tenant improvement
standard specifications of the Master Landlord (the “Working Drawings”), if any, and to prepare
drawings and specifications for changes, if any, requested or required.

          3.2 Subtenant shall submit the completed Working Drawings to Sublandlord for the approval of
Sublandlord and the Master Landlord. Sublandlord will provide written approval of the Working
Drawings within five (5) business days after such submission. If Sublandlord disapproves any part
of the submission, the disapproval shall include written instructions adequate for Subtenant’s
Architect and engineers to revise the Working Drawings. Such revisions shall be resubmitted to
Sublandlord for the approval of Sublandlord and the Master Landlord within ten (10) business days
following Sublandlord’s disapproval.

          3.3 If Subtenant fails to submit the Working Drawings or the required Working Drawings within
the applicable periods set forth in subparagraph 3.2 above, then Subtenant shall be responsible for
any resulting delay, and the cost of such delay.

          3.4 Upon the approval of Sublandlord and the Master Landlord of the Working Drawings,
Subtenant shall be authorized to cause the Contractor to proceed with the construction of the
Greenhouse in accordance with the Working Drawings.

     4. Construction.

          4.1 Subtenant shall obtain all building and other permits necessary in connection with the
Greenhouse prior to the commencement of the Greenhouse Work.

          4.2 Prior to commencing construction, Subtenant shall deliver to Sublandlord the following:

2

 

               4.2.1 The address of Subtenant’s general contractor, and the names of the primary
subcontractors Subtenant’s contractor intends to engage for the construction of the Sublease
Premises;

               4.2.2 The actual commencement date of construction and the estimated date of completion of the
work, including fixturization;

               4.2.3 Evidence of insurance as called for herein below; and

               4.2.4 An executed copy of the applicable building permit for the Greenhouse Work.

          4.3 Subtenant, in its discretion, may competitively bid the Greenhouse Work. Subtenant’s
contractors and subcontractors shall be acceptable to and approved in writing by Sublandlord, which
approval shall not be unreasonably withheld or delayed, and shall, at Sublandlord’s option, be
subject to administrative supervision by Sublandlord. Sublandlord reserves the right to specify
engineers and subcontractors for mechanical, life safety, electrical and plumbing work. Subtenant
shall furnish to Sublandlord a copy of the executed contract between Subtenant and Subtenant’s
general contractor covering all of Subtenant’s obligations under this Work Letter. Subtenant shall
use commercially reasonable efforts to cause the Greenhouse Work to be performed in as efficient a
manner as is commercially reasonable. Subtenant shall reimburse Sublandlord on demand for the cost
of repairing any damage to the Building or Common Area caused by Subtenant or its contractors
during performance of the Greenhouse. Subtenant’s Contractors shall conduct their work and employ
labor in such manner as to maintain harmonious labor relations.

          4.4 Any changes in the Greenhouse from the final drawings approved by Sublandlord shall be
subject to Sublandlord’s prior written approval, which shall not be unreasonably withheld. Any
deviation in construction from the design specifications and criteria set forth herein or from
Subtenant’s plans and specifications as approved by Sublandlord shall constitute a default for
which Sublandlord may, within ten (10) days after giving written notice to Subtenant, elect to
exercise the remedies available in the event of default under the provisions of this Sublease,
unless such default is cured within such ten (10) day period, or, if the cure reasonably requires
more than ten (10) days, unless such default is cured as soon as reasonably practicable but in no
event later than thirty (30) days after Sublandlord’s notice to Subtenant. Only new materials
shall be used in the construction of the Greenhouse, except with the written consent of
Sublandlord.

          4.5 Trash removal will be done continually at Subtenant’s sole cost and expense. No trash, or
other debris, or other waste may be deposited at any time outside of the staging area for the
Greenhouse location. If so, Sublandlord may remove it at Subtenant’s expense, which expense shall
equal the cost of removal plus ten percent (10%) of such costs as administrative fee.

          4.6 Storage of Subtenant’s contractors’ construction materials, tools and equipment shall be
confined within the staging area, and in no event shall any materials or debris be stored outside
of the Sublease Premises.

3

 

          4.7 Sublandlord shall have the right to post in a conspicuous location on the Sublease
Premises, as well as record with the County of Alameda, a Notice of Nonresponsibility.

          4.8 Without limiting the generality of the foregoing, any work to be performed outside of
Greenhouse location shall be coordinated with Sublandlord and Master Sublandlord, and shall be
subject to reasonable scheduling requirements of Sublandlord.

          4.9 Subtenant, its contractors and subcontractors may use all or any portion of the parking
spaces allotted to Subtenant hereunder during construction of the Greenhouse Work, without charge
but subject to the terms of this Sublease.

     5. Inspection. Master Landlord, Sublandlord, and its agents, Architects and contractors,
shall have the right, but not the obligation, to inspect the Greenhouse Work at any reasonable time
during the construction thereof provided such rights are exercised in a manner intended not to
impede the performance of the Greenhouse Work. If Sublandlord discovers faulty construction or any
deviation from Subtenant’s Working Drawings approved by Sublandlord, then Subtenant, at its cost
and expense, shall cause its contractors or subcontractors to make corrections promptly; provided,
however, that neither the privilege herein granted to Sublandlord to make such inspections, nor the
making of such inspection by Sublandlord to require conformance by Subtenant to the terms and
conditions of this Work Letter, shall constitute a representation or warranty by Sublandlord that
the Greenhouse Work have been constructed in accordance with applicable law or any other standard.

     6. Substantial Completion. Subtenant shall cause the Greenhouse to be “substantially
completed” within 365 days following commencement of the Greenhouse Work, subject to delays caused
by strikes, lockouts, boycotts or other labor problems, casualties, discontinuance of any utility
or other service required for performance of the Greenhouse, unavailability or shortages of
materials or other problems in obtaining materials necessary for performance of the Greenhouse or
any other matter beyond the control of Subtenant (or beyond the control of Subtenant’s contractors
or subcontractors performing the Greenhouse), Subtenant’s inability, despite good faith reasonable
efforts, to obtain building or other permits required by governmental agencies to construct the
Greenhouse. The Greenhouse shall be deemed to be “substantially completed” for all purposes under
this Work Letter and the Sublease if and when Subtenant’s Architect issues a written certificate to
Subtenant and Sublandlord, certifying that the Greenhouse has been substantially completed in
substantial compliance with the Working Drawings other than any details of construction, mechanical
adjustment or any other similar matter the noncompletion of which would not materially interfere
with Sublandlord’s ability to carry on its business at the Sublease Premises and the cost of which
items is less than $1,000.00 in the aggregate to correct or complete (“Punchlist Items”), or when
Sublandlord first takes occupancy of the Sublease Premises, whichever first occurs.

     7. Payment of Costs of Subtenant Improvement. Unless specified otherwise herein, Subtenant
shall bear and pay the cost of the Greenhouse (which cost shall include, without limitation, the
costs of construction, cabling, permits and permit expediting, and all Architectural and
engineering services obtained by Sublandlord in connection with the Greenhouse, and the
Contractor’s fees) Sublandlord shall charge a construction management fee, supervision fee or plan
review fee in connection with the Greenhouse Work in the amount of

4

 

three percent (3%) of the cost of the Greenhouse Work.

8. Completion of Greenhouse.

          8.1 Upon the completion of the Greenhouse, Subtenant shall:

               8.1.1 Submit to Sublandlord a detailed breakdown of Subtenant’s final and total construction
costs, together with receipted evidence showing payment thereof, satisfactory to Sublandlord;

               8.1.2 Submit to Sublandlord all evidence from governmental authorities showing authorization
for physical occupancy of the Greenhouse;

               8.1.3 Submit to Sublandlord two (2) complete sets of as-built plans (one (1) of which shall be
reproducible) and specifications describing all portions of the Greenhouse Work; and

               8.1.4 Deliver to Sublandlord an assignment transferring to Sublandlord on a non-exclusive
basis any and all rights Subtenant may have against Subtenant’s Architects and contractors relating
to the Greenhouse, without in any way obligating Sublandlord to pursue or prosecute such rights.

9. Insurance Required of Subtenant and Subtenant’s Contractors.

          9.1 Workers’ Compensation and Liability Insurance. Subtenant’s General Contractor and
all subcontractors shall carry, at a minimum, the following coverages, with the following limits of
liability:

               9.1.1 Workers’ Compensation. Workers’ Compensation, as required by state law, plus
Employer’s Liability Insurance, with a limit of not less than One Million Dollars ($1,000,000), and
any other insurance required by any employee benefit statute or other similar statute.

               9.1.2 Liability. Commercial General Liability Insurance (including Contractor’s
Protective Liability) with a minimum combined single limit of liability of not less than Two
Million Dollars ($2,000,000.00) provided that the insurance limits applicable to subcontractors
shall be One Million Dollars ($1,000,000.00). Such insurance shall provide for explosion, collapse
and underground coverage. All such insurance shall provide coverage against any and all claims for
bodily injury, including death resulting therefrom, and damage to or destruction of property of any
kind whatsoever and to whomsoever belonging and arising from such contractor’s operations, whether
such operations are performed by Subtenant’s General Contractor, subcontractors or any of their
subcontractors, or by anyone directly or indirectly employed by any of them.

          9.2 Subtenant’s Liability Insurance. At all times during the performance of the
Greenhouse Work, Subtenant shall obtain and maintain the liability insurance required to be
maintained pursuant to the Master Lease and the Sublease. If required in order to provide such

5

 

coverage, such policy shall be endorsed to insure against any loss or damage arising out of
the performance of the Greenhouse Work.

               9.2.1 Subtenant’s Builder’s Risk Insurance. Subtenant shall obtain an “All Physical
Loss” Builder’s Risk Insurance policy covering Greenhouse Work. The policy shall name Master
Landlord, Sublandlord and Subtenant as named insureds. The amount of insurance to be provided
shall be one hundred percent (100%) of the replacement cost of the Greenhouse Work.

               9.2.2 Additional Insureds. Except as otherwise required by the express terms of this
Agreement, all such insurance policies required under this Work Letter shall include Master
Landlord, Sublandlord, Master Landlord’s lenders and Sublandlord’s agents as additional insureds,
except Workers’ Compensation Insurance, which shall contain an endorsement waiving all rights of
subrogation against Sublandlord and its agents. All of Subtenant’s insurance in which Sublandlord
is required to be an additional insured shall provide that such insurance coverage shall not be
canceled except upon thirty (30) days’ prior written notice to Sublandlord. Subtenant shall notify
Sublandlord of any reduction of its insurance coverage at least thirty(30) days prior to the
effective date of such reduction. Subtenant shall provide Sublandlord with certificates of
insurance prior to the commencement of the Greenhouse Work. Such certificates shall indicate that
such insurance complies with the requirements of this Section 6, including the requirement
that such insurance coverage shall not be reduced or canceled except upon thirty (30) days’ prior
written notice to Sublandlord.

          9.3 Bonds; Liens. Subtenant’s Contractor shall furnish bonds for one hundred percent
(100%) of the cost of the Greenhouse Work, covering the faithful performance of its contract and
the payment of all obligations thereunder. Upon completion of the Greenhouse Work, Subtenant shall
deliver to Sublandlord unconditional lien waivers from Subtenant’s General Contractor and all
subcontractors and suppliers. Subtenant shall keep the Premises free and clear of all claims and
liens and shall indemnify, defend and protect Sublandlord against, and hold Sublandlord harmless
from, any and all such claims and liens including, but not be limited to, attorneys’ fees and
costs.

     10. Sublease Provisions. The terms and provisions of the Sublease, insofar as they
are applicable to this Work Letter, are hereby incorporated herein by reference. All amounts
payable by Subtenant to Sublandlord hereunder shall be deemed to be Additional Rent under the
Sublease and, upon any default in the payment of same, Sublandlord shall have all of the rights and
remedies provided for in the Sublease.

     11. Miscellaneous.

          11.1 This Work Letter shall be governed by the laws of the State of California.

          11.2 This Work Letter may not be amended except by a written instrument signed by the party or
parties to be bound thereby.

          11.3 Any person signing this Work Letter on behalf of Subtenant warrants and represents he/she
has authority to sign and deliver this Work Letter and bind Subtenant.

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          11.4 Notices under this Work Letter shall be given in the same manner as under the Sublease.

          11.5 The headings set forth herein are for convenience only.

          11.6 This Work Letter sets forth the entire agreement of Subtenant and Sublandlord regarding
the Greenhouse Work.

     12. Exculpation of Sublandlord and Master Landlord. Notwithstanding anything to the
contrary contained in this Work Letter, it is expressly understood and agreed by and between the
parties hereto that:

          12.1 The recourse of Subtenant or its successors or assigns against Sublandlord with respect
to the alleged breach by or on the part of Sublandlord of any representation, warranty, covenant,
undertaking or agreement contained in this Work Letter (collectively, “Sublandlord’s Work Letter
Undertakings”) shall extend only to Sublandlord’s interest in the Sublease Premises and not to any
other assets of Sublandlord or its officers, directors or shareholders; and

          12.2 No personal liability or personal responsibility of any sort with respect to any of
Sublandlord’s Work Letter Undertakings or any alleged breach thereof is assumed by, or shall at any
time be asserted or enforceable against, Sublandlord, the Master Landlord, or against any of their
respective directors, officers, shareholders, employees, agents, constituent partners,
beneficiaries, trustees or representatives.

     In Witness Whereof, Sublandlord and Subtenant have executed this Work Letter as of
the respective dates set forth below.

	 	 	 	 	 	 	 	 	 
	SUBLANDLORD:	 	SUBTENANT:	 	 
	 
	 	 	 	 	 	 	 	 
	Aradigm Corporation,	 	Mendel Biotechnology, Inc.	 	 
	a California corporation	 	a California corporation	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	 	 	Name:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	Its:

	 	 	 	Its:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Date:

	 	 	 	Date:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 

7

 

EXHIBIT F

CONSENT BY MASTER LANDLORD TO SUBLEASE

8

 

CONSENT OF MASTER LANDLORD

     HAYWARD POINT EDEN I LIMITED PARTNERSHIP, a Delaware limited partnership (“Master
Landlord”), as landlord (as successor in interest to Britannia Point Eden, LLC) under the Lease
dated as of January 28, 1998, as amended by a First Amendment to Lease dated as of December 16,
1998, a Second Amendment to Lease dated as of December 31, 2003 and a Third Amendment to Lease
dated and executed substantially concurrently with this Consent (as so amended, the “Master
Lease”) with ARADIGM CORPORATION, a California corporation (“Tenant”) as tenant,
covering premises which consist of the building commonly known as 3929 Point Eden Way, Hayward,
California (the “Building”) and a proposed greenhouse facility to be constructed pursuant
to the above-referenced Third Amendment (which greenhouse facility, when constructed, shall be
construed for purposes of this Consent as being part of both the Building and the Sublease
Premises, as such terms are used in this Consent, unless otherwise expressly provided in any
specific provision of this Consent), hereby consents to the Sublease dated July 11, 2007 (the
“Sublease”) between Tenant (“Sublandlord”) as sublandlord and MENDEL BIOTECHNOLOGY,
INC., a California corporation (“Subtenant”) as subtenant, covering the proposed greenhouse
facility described above and a portion of the Building as more particularly described in the
Sublease (collectively, the “Sublease Premises”), and to all of the terms and conditions
contained therein (except as otherwise expressly noted herein), subject to the following:

     1. Nothing contained in the Sublease (including, but not limited to, the incorporation into
the Sublease, pursuant to Sections 7.3, 11, 15.2 and 16.2 of the Sublease, of certain provisions of
the Master Lease and the replacement of certain defined terms in some of those incorporated
provisions) shall be construed to amend the Master Lease, nor to limit or impair in any way Master
Landlord’s rights and remedies thereunder, nor to impose any obligations or liabilities on Master
Landlord, nor to create any direct contractual or other relationship between Master Landlord and
Subtenant, any direct obligation or liability of Master Landlord to Subtenant or any direct right
or remedy of Subtenant against Master Landlord, in each instance, except to the extent (if any)
expressly set forth in this Consent. Without limiting the generality of the foregoing, (a) this
Consent shall not constitute an approval or acceptance of any term or provision of the Sublease
that conflicts with or is inconsistent with any provision of the Master Lease, except to the extent
(if any) expressly set forth in this Consent; (b) neither the Sublease nor this Consent shall
release or discharge Sublandlord from any liability, whether past, present or future, under the
Master Lease or alter the primary liability of Sublandlord to pay the rent and perform and comply
with all of the obligations of Sublandlord as Tenant to be performed under the Master Lease; (c)
neither the Sublease nor this Consent shall be construed as a waiver of Master Landlord’s right
under the Master Lease (to the extent provided therein) to consent to any further subletting either
by Sublandlord or by Subtenant; (d) Section 7.1 of the Sublease shall not be construed as creating
any direct obligation or liability of Master Landlord to Subtenant or any direct right or remedy of
Subtenant against Master Landlord, or as a consent or acquiescence by Master Landlord to any such
direct obligation, liability, right or remedy; and (e) the provisions of Section 2.2 of the
Sublease regarding Furniture and Equipment (as defined therein) shall, as between Master Landlord
and the other parties to this Consent, be subject and subordinate to the provisions of Article 7 of
the Master Lease relating to the allocation of ownership of alterations, additions, improvements,
trade fixtures and equipment, and nothing in this Consent shall be

9

 

construed to amend or limit any of the provisions of such Article 7 except to the extent (if
any) expressly set forth in this Consent.

     2. To the extent Master Landlord’s consent or approval is required under the Master Lease or
otherwise, Master Landlord is not hereby consenting to or approving, or waiving its right of
consent or approval with respect to, any of the following:

          (a) any alterations or repairs to be undertaken by either Sublandlord or Subtenant in or about
the Sublease Premises pursuant to or in connection with the Sublease (any required approval of any
such alterations or repairs, including (but not limited to) the Greenhouse work contemplated in the
Sublease and in the above-referenced Third Amendment to the Master Lease, will be considered only
upon receipt of a formal request accompanied by detailed working drawings, a detailed work
specification and such other information as Master Landlord may reasonably request under the terms
of the Master Lease); provided, however, that (i) Master Landlord and Tenant acknowledge
that they have received and approved in concept the preliminary plans for construction of the
Greenhouse in an area of the parking lot as provided in the Third Amendment, and (ii) Tenant
expressly agrees (A) to deliver promptly to Master Landlord copies of all notices, requests,
consents, approvals, plans, specifications and permits received by Tenant or issued by Tenant in
connection with the above-referenced Greenhouse work, and (B) to obtain from Subtenant or its
architect or contractor and deliver to Master Landlord, promptly following completion of such
Greenhouse work, a set of as-built drawings for the Greenhouse;

          (b) any use of hazardous, radioactive or toxic materials in or about the Sublease Premises,
except in compliance with all applicable provisions of the Master Lease and except with Master
Landlord’s express written consent (in response to a specific request) to the extent required under
the Master Lease; provided, however, that Master Landlord and Tenant hereby (i) approve in
concept the use of an area of the Subleased Premises for the storage and use of radioactive
materials in accordance with standard procedures for a research laboratory engaged in genetic
research, and (ii) approve specifically the storage and use of 35S Methionine (approx. 0.0003 gal.,
316 microcuries) and 32P deoxycytosinetriphosphate (approx. 0.00000125 gal.) as heretofore
described by Subtenant to Master Landlord and Tenant, subject in the case of each of the preceding
clauses (i) and (ii) to compliance with all other applicable provisions of the Master Lease and all
applicable laws; or

          (c) any signage on or about the Building that may be requested by or on behalf of Subtenant
(in which regard, any required approval of any signage requested by or on behalf of Subtenant,
including but not limited to any replacement of existing signage, will be considered only upon
receipt of a formal request accompanied by appropriately detailed drawings and specifications and
such other information as Master Landlord may reasonably request under the terms of the Master
Lease).

     3. Assignment of Rents.

          (a) As provided in Section 11.2 of the Master Lease, Tenant irrevocably assigns and transfers
to Master Landlord all of Tenant’s interest in all rent and other sums owing and to be owed by
Subtenant under the Sublease, subject to the terms of this Paragraph 3. If an

10

 

event of default by Tenant, continuing beyond the expiration of any applicable notice and cure
periods, occurs pursuant to the terms of Section 14.1 of the Master Lease (hereinafter, an
“Event of Default”), then for so long as the Master Lease remains in effect, Master
Landlord shall be entitled to receive and collect (or to continue to receive and collect, as the
case may be) directly from Subtenant all rent and other sums owing and to be owed by Subtenant
under the Sublease, as further set forth in Paragraph 3(b), below.

          (b) Tenant hereby irrevocably authorizes and directs Subtenant, upon receipt of written notice
from Master Landlord (which may be delivered by Master Landlord only if an Event of Default has
occurred under the Master Lease) and at the direction of Master Landlord, to pay directly to or as
directed by Master Landlord any or all Rent and/or other sums owing or to become owing under the
Sublease, and Tenant hereby agrees that Subtenant shall have the right to rely upon any such
written notice from Master Landlord, and that Subtenant shall pay any such Rent and/or other sums
directly to Master Landlord without any obligation or right of inquiry and notwithstanding any
notice from or claim of Tenant to the contrary. Until such time as Master Landlord shall deliver
written notice to Subtenant in accordance with the foregoing sentence, Master Landlord agrees that
Tenant may receive, collect and enjoy the Rent accruing under the Sublease. Tenant shall not have
any right or claim against Subtenant for any such Rent or other sums so paid by Subtenant to Master
Landlord pursuant to the first sentence of this Paragraph 3(b). Notwithstanding the foregoing,
following collection by Master Landlord of any Rent or other sums from Subtenant pursuant to this
Paragraph 3(b), Master Landlord shall credit the amount thereof against any sums or other
consideration already due and payable by Tenant to Master Landlord pursuant to the Master Lease,
and Master Landlord shall credit any remaining balance of such amount against Tenant’s rental
obligations next coming due under the Master Lease. Notwithstanding anything to the contrary
contained herein, in no event shall Master Landlord be liable to Tenant in any manner whatsoever or
under any circumstances whatsoever for any failure by Master Landlord to collect any Rent or any
other sums from Subtenant under the Sublease.

     4. All use of parking spaces by Subtenant pursuant to the Sublease shall be on a nonexclusive
basis and shall be subject to all parking-related provisions in the Master Lease, and Master
Landlord is not hereby consenting to any designation or reservation of specific parking spaces on
the subject property for use by Subtenant.

     5. Master Landlord shall not incur or be subject to any liability for any brokerage
commissions in connection with the Sublease.

     6. The terms and provision of this Consent shall be construed in accordance with and governed
by the laws of the State of California. This Consent shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and assigns. Each of the
undersigned parties agrees to execute and deliver such documents and take such other actions as may
be reasonably requested by any of the other parties in order to implement the provisions of this
Consent.

     7. In the event any litigation, arbitration or other similar proceeding arising under or in
connection with this Consent is brought by any party hereto, the prevailing party in such

11

 

proceeding shall be entitled to recover its costs and reasonable attorneys’ fees incurred in
connection with such proceeding.

     8. This Consent may be executed in any number of counterparts, and by different parties on
different counterparts, but all such counterparts taken together shall constitute a single
instrument.

     9. Subtenant is prepared to enter into the Sublease and construct the Greenhouse improvements
as contemplated by the Third Amendment to the Master Lease only if Master Landlord agrees that in
the event of a Master Lease Termination (as hereinafter defined), Master Landlord will enter into a
direct lease with Subtenant as hereinafter provided, should Subtenant desire to remain in the
Premises and timely elect to enter into such a direct lease. In consideration of Subtenant’s
willingness to execute the Sublease and construct the Greenhouse, the parties to this Consent
accordingly agree to the following (provided, however, that all of the provisions of this
Paragraph 9 are subject to any restrictions or limitations imposed under applicable laws,
including, but not limited to, under (i) any applicable bankruptcy, insolvency or other similar
laws and (ii) any orders, judgments, decrees or plans entered or approved in any applicable
proceedings under any such bankruptcy, insolvency or other similar laws):

          (a) Master Landlord shall furnish Subtenant with a copy of all notices of default which Master
Landlord shall from time to time give to or receive from Tenant under the Master Lease. The
aforesaid copies shall be provided at the address set forth in the Sublease or at such other
address as may be designated from time to time by written notice from Subtenant to Master Landlord
at 555 Twelfth Street, Suite 1650, Oakland, CA 94607, with a copy to 444 North Michigan Avenue,
Suite 3230, Chicago, IL 60611, or at such other address(es) as may be designated from time to time
by written notice from Master Landlord to Subtenant.

          (b) “Master Lease Termination” means a termination or cancellation of the Master Lease
under any of the following circumstances: (i) termination by Master Landlord following an Event of
Default by Tenant under the Master Lease; (ii) termination resulting from or in connection with
foreclosure proceedings brought by the holder of any mortgage or trust deed to which the Master
Lease or the real property covered by the Master Lease is subject; (iii) rejection of the Master
Lease in a bankruptcy, insolvency or similar proceeding; (iv) termination of Tenant’s leasehold
estate by an unlawful detainer proceeding, dispossession proceeding or other similar proceeding
initiated by Master Landlord or any other party entitled to seek such relief under applicable law;
or (v) any voluntary termination of the Master Lease by mutual agreement of Master Landlord and
Tenant. Master Lease Termination shall not include (x) a termination by Master Landlord or
Tenant pursuant to casualty or condemnation provisions set forth in the Master Lease or (y) an
assignment or transfer of Tenant’s interest under the Master Lease to a third party not affiliated
with Master Landlord in or pursuant to a bankruptcy, insolvency or similar proceeding, with or
without termination or rejection of the Sublease.

          (c) Upon the occurrence of a Master Lease Termination, Master Landlord shall promptly notify
Subtenant in writing (the “Option Notice”) of (i) the occurrence and effective date of the
Master Lease Termination and (ii) whether Master Landlord elects to require removal of the
Greenhouse (as contemplated in Paragraph 1(b) of the Third Amendment to the Master Lease) following
such Master Lease Termination (unless Tenant enters into a New Direct

12

 

Lease as defined below). Substantially concurrently with the Option Notice, Master Landlord
shall tender a new direct lease to Subtenant for the entire Premises subject to the Master Lease,
at the rents and upon all of the terms and conditions and subject to the rights as set forth in the
Master Lease and for the balance of the scheduled term of the Master Lease (the “New Direct
Lease”). Subtenant shall have twenty (20) days after receipt of the Option Notice and of the
New Direct Lease (such twenty (20) day period being referred to herein as the “Option
Period”) in which to accept the tendered New Direct Lease by executing two (2) counterparts of
the New Direct Lease and returning them to Master Landlord. Upon such execution of the New Direct
Lease by Subtenant, Subtenant shall be responsible for paying rent and performing as tenant all of
the obligations of tenant arising under the New Direct Lease from and after its effective date, and
shall have all of the rights of tenant to the use and enjoyment of the entire Premises covered by
the New Direct Lease in accordance with the terms and provisions of the New Direct Lease. Nothing
contained herein (including, but not limited to, the execution of a New Direct Lease) shall be
construed or applied to waive or release any claims which Master Landlord may have against Tenant
or any obligations or liabilities which Tenant may have to Master Landlord under the Master Lease
with respect to periods prior to the Master Lease Termination or in connection with or as a result
of the Master Lease Termination, except to the extent (if any) that the execution of the New Direct
Lease may operate as a mitigation under applicable legal principles. If Subtenant fails to execute
a New Direct Lease prior to expiration of the Option Period, then Subtenant shall be deemed to have
declined to enter into a New Direct Lease and shall vacate the Sublease Premises and the remainder
of the Building (if applicable) and surrender possession thereof to Master Landlord no later than
one hundred twenty (120) days after expiration of the Option Period, subject to the provisions of
subparagraph (d)(iv)(A) below.

          (d) During the period from the occurrence of a Master Lease Termination until the earlier to
occur of (x) the effective date of a New Direct Lease or (y) the expiration of the Option Period,
Master Landlord agrees that Subtenant shall be permitted to continue to occupy and use the Sublease
Premises upon payment of the rental and compliance with all of the terms and conditions set forth
in the Sublease, and Subtenant agrees that it shall pay such rent and comply with all such terms
and conditions in accordance with the terms of the Sublease. If Subtenant fails to enter into a
New Direct Lease by the end of the Option Period, then:

               (i) For the first thirty (30) days after end of the Option Period, Subtenant shall be
permitted to continue to occupy and use the Sublease Premises upon payment of the rental and
compliance with all of the terms and conditions set forth in the Sublease, except that during such
period Subtenant shall be required to pay all charges for utilities and services supplied to the
entire Building (in accordance with the provisions of Article 6 of the Master Lease as in effect
prior to the Master Lease Termination) and to pay Operating Expenses allocable to the entire
Building (in accordance with the provisions of Article 5 of the Master Lease as in effect prior to
the Master Lease Termination), and Subtenant agrees that it shall pay such rent and other amounts
and comply with such terms and conditions in accordance with the provisions of this subparagraph
(i);

               (ii) For the next ninety (90) days after the end of the Option Period, to the extent Subtenant
remains in occupancy of any portion of the Building (subject to the provisions of subparagraph
(d)(iv)(A) below), Subtenant shall be deemed to be occupying and

13

 

using (and shall be permitted to occupy and use, to the extent Subtenant so desires) the
entire Building upon and subject to all of the terms and conditions of Articles 3 through 15 and
Article 17 of the Master Lease as in effect prior to the Master Lease Termination, for which
purpose all of such provisions of the Master Lease are incorporated herein by this reference as if
fully set forth herein, including (but not limited to) provisions relating to minimum monthly
rental, Operating Expenses, utilities and services, taxes, maintenance and repairs, insurance and
indemnity, and hazardous materials (except that Subtenant shall have no liability or responsibility
for any hazardous materials conditions to the extent caused by Tenant or its employees, agents or
invitees during Tenant’s prior occupancy of the Building, or caused by other parties, and not
caused or contributed to by Subtenant or its employees, agents or invitees), as if Subtenant were
occupying the entire Building pursuant to such incorporated provisions of the Master Lease; and

               (iii) Beginning one hundred twenty-one (121) days after expiration of the Option Period, to
the extent Subtenant remains in occupancy of any portion of the Building (subject to the provisions
of subparagraph (d)(iv)(A) below), Subtenant shall be deemed to be occupying, using and holding
over in the entire Building as a tenant at will, subject to all of the terms and conditions of
Section 2.6 of the Master Lease as in effect prior to the Master Lease Termination (for which
purpose the provisions of such Section 2.6 are incorporated herein by this reference as if fully
set forth herein) and to all other applicable provisions of the Master Lease as incorporated herein
by reference pursuant to subparagraph (ii) above, including (but not limited to) the obligation to
pay to Master Landlord, as holdover rental for the entire Building during such tenancy at will,
minimum monthly rent for the entire Building at the holdover rate (125% of the otherwise applicable
rate) provided in such Section 2.6 of the Master Lease as incorporated herein pursuant to this
subparagraph (iii).

               (iv) If Master Landlord notifies Subtenant in the Option Notice of Master Landlord’s election
to require removal of the Greenhouse (as contemplated in the first sentence of Paragraph 9(c)
above) following the Master Lease Termination and Subtenant does not execute a New Direct Lease
within the Option Period, then Subtenant shall cause the Greenhouse to be dismantled and removed
from the parking lot and shall cause the parking lot area where the Greenhouse was located to be
restored to substantially the same condition as existed prior to construction of the Greenhouse
(collectively, “Greenhouse Removal and Parking Lot Restoration”), all in accordance with
the provisions of this subparagraph (iv), no later than the earlier to occur of (x) one hundred
eighty (180) days after expiration of the Option Period or (y) sixty (60) days after the date
Subtenant has otherwise vacated and surrendered possession of the Sublease Premises and the balance
of the Building (if applicable) to Master Landlord. For purposes of this subparagraph (iv), all
Master Lease provisions referred to in this subparagraph (iv) are deemed to be incorporated herein
by this reference as if fully set forth herein, but only with respect to the Greenhouse Removal and
Parking Lot Restoration to be performed pursuant to this subparagraph (iv), and the term “Tenant”
as used in such incorporated provisions shall be construed as referring instead to Subtenant. The
terms and conditions applicable to the Greenhouse Removal and Parking Lot Restoration shall be as
follows:

               (A) So long as Subtenant is not conducting any ordinary business activities in or with
respect to the Greenhouse, Subtenant’s possession and

14

 

control of the Greenhouse solely for purposes of performing the Greenhouse Removal and
Parking Lot Restoration and activities directly related thereto shall not constitute
occupancy or use of the Greenhouse, Building and/or Sublease Premises for purposes of
subparagraphs (d)(i), (ii) and/or (iii) above.

               (B) The Greenhouse Removal and Parking Lot Restoration shall be performed at
Subtenant’s sole cost and expense. Subtenant shall be responsible for performing the
Greenhouse Removal and Parking Lot Restoration in accordance with all applicable laws,
codes, regulations and requirements; for obtaining all permits, licenses and other
governmental approvals necessary for the Greenhouse Removal and Parking Lot Restoration; for
arranging for the capping or removal, to the reasonable satisfaction of Master Landlord and
the applicable utility provider, of any utility lines installed for the purpose of providing
utility service to the Greenhouse; and in the case of the portion of the work relating to
restoration of the parking lot improvements, for performing such improvements in accordance
with plans and specifications approved by Master Landlord (which approval shall not be
unreasonably withheld, and which plans and specifications shall not be held to any higher
standard of design, quality or materials than that of being substantially consistent with
the design, quality and materials of the remainder of the parking lot in which such
improvements are reconstructed). Subtenant shall keep the Greenhouse and the property on
which the Greenhouse is located free from liens arising out of or in connection with the
Greenhouse Removal and Parking Lot Restoration in accordance with the provisions of Section
7.4 of the Master Lease.

               (C) Until completion of the Greenhouse Removal and Parking Lot Restoration, Subtenant
shall (i) continue to maintain liability insurance complying with the requirements of
Article 10 of the Master Lease, and (ii) pay all applicable charges and costs for any
utilities delivered to the Greenhouse or otherwise consumed by Subtenant or its employees,
agents or contractors in the course of or in connection with the Greenhouse Removal and
Parking Lot Restoration. To the extent provided in, and in accordance with, Section 10.6(a)
of the Master Lease, Subtenant shall indemnify, defend and hold Master Landlord and related
parties (as identified in such Section 10.6(a)) harmless from any and all liabilities,
actions, claims, demands, costs (including, without limitation, reasonable attorneys’ fees),
damages and expenses of any kind which arise out of or in connection with the performance of
the Greenhouse Removal and Parking Lot Restoration by Subtenant or its employees, agents or
contractors.

               (D) If Subtenant fails to complete the Greenhouse Removal and Parking Lot Restoration
within the required time set forth above, Master Landlord shall have the right (but shall
not be required), by written notice to Subtenant, to take over and complete the Greenhouse
Removal and Parking Lot Restoration, in which event all costs and expenses actually incurred
by Master Landlord in completing the Greenhouse Removal and Parking Lot Restoration shall be
due and payable by Subtenant to Master Landlord no later than twenty (20) days after Master
Landlord delivers to Subtenant written demand for such payment, accompanied by invoices or
other supporting documentation reasonably establishing the amounts for which such payment is
demanded. Any amounts not paid by Subtenant to Master Landlord within such 20-day

15

 

period shall be subject to interest and late charges in accordance with Section 3.2 of
the Master Lease.

          (e) Without the written consent of Subtenant, Master Landlord and Tenant hereby agree not to
amend the Master Lease in any way which would adversely affect the rights or interest of Subtenant
in the event it were to become a direct tenant under a New Direct Lease as provided above.

     10. Upon the occurrence of any Event of Default which remains uncured after any applicable
notice and cure period under the Master Lease, Master Landlord agrees to notify Subtenant in
writing of the uncured Event of Default and of the payment or action necessary to cure the Event of
Default (a “Subtenant Cure Notice”). Upon receipt of such a Subtenant Cure Notice,
Subtenant shall have the right (but not the obligation) (a) to tender within five (5) days any
monetary payment that is the subject of such Event of Default and (b) to perform within fifteen
(15) days any non-monetary obligation that is the subject of such Event of Default (or, if the
non-monetary default is curable in nature but is not reasonably curable within fifteen (15) days,
to commence cure of such non-monetary default within fifteen (15) days and thereafter to pursue
such cure diligently to completion), and Master Landlord agrees to accept any such tender of
payment or performance by Subtenant made on behalf of Tenant as a cure of the applicable default,
provided it is completed within the applicable time period set forth above in this sentence and is
otherwise sufficient to cure the subject default under the Master Lease, and agrees to refrain from
exercising any right or remedy involving termination of the Master Lease pursuant to the applicable
Event of Default during the cure period available to Subtenant under the Subtenant Cure Notice.
Notwithstanding any such tender of payment or performance by Subtenant and acceptance thereof by
Master Landlord, Tenant shall retain the right to contest in good faith the monetary amount or
non-monetary performance demanded by Master Landlord in accordance with the provisions of the
Master Lease (a “Contest”). Subject to any such Contest (if applicable), Tenant hereby
consents to such tender of payment or performance by Subtenant. Upon the resolution between Master
Landlord and Tenant of any such Contest, to the extent that Subtenant has expended sums for a
monetary payment or incurred reasonable out-of-pocket expenses in connection with performance which
is in excess of Subtenant’s obligations under the Sublease, then Subtenant shall be entitled (as
against Tenant) to credit such excess amounts reasonably incurred against the rents next payable to
Tenant under the Sublease. Notwithstanding any of the foregoing provisions of this Paragraph 10,
if Master Landlord properly delivers Subtenant Cure Notices with respect to two (2) separate Events
of Default within any period of twelve (12) calendar months, then for a period of twelve (12)
calendar months following the second such Subtenant Cure Notice, Master Landlord shall be relieved
of any obligation to provide a Subtenant Cure Notice or to recognize or accept a tendered cure by
Subtenant with respect to any further Event of Default occurring during such subsequent 12-month
period, and shall instead be entitled to pursue all legal rights and remedies under the Master
Lease and under applicable law with respect to such further Event of Default without any
requirement of compliance with the provisions of this Paragraph 10.

     11. This Consent is conditional upon, and shall become effective only upon, Master Landlord’s
receipt of (a) a copy of the Sublease fully signed by Sublandlord and Subtenant, with all exhibits,
in form and substance satisfactory to Master Landlord (for which purpose Master

16

 

Landlord acknowledges that it has approved the form and substance of the executed
Sublease and Greenhouse Work Letter heretofore delivered to Master Landlord, but has not received
copies of Exhibits A, B, C, D, F, G or H to the Sublease, and Master Landlord agrees that it will
not unreasonably withhold its approval of any such Exhibits upon receipt thereof) and (b) a copy of
this Consent signed by Sublandlord and Subtenant.

     IN WITNESS WHEREOF, Master Landlord has executed this Consent as of the date set forth below
(subject to the conditions set forth in this Consent), and Sublandlord and Subtenant have executed
this Consent to evidence their acceptance of and agreement to the conditions set forth in this
Consent.

	 	 	 	 	 	 	 
	Master Landlord:	 	 
	 
	 	 	 	 	 	 
	HAYWARD POINT EDEN I LIMITED PARTNERSHIP, a
Delaware limited partnership	 	 
	 
	 	 	 	 	 	 
	By:	 	Slough Point Eden Incorporated, a Delaware

corporation, General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Jonathan M. Bergschneider	 	 
	 

	 	 	 	Senior Vice President	 	 

Date: July 18, 2007

	 	 	 	 	 	 	 	 	 
	Subtenant:	 	Sublandlord:	 	 
	 
	 	 	 	 	 	 	 	 
	MENDEL BIOTECHNOLOGY, INC., a California
corporation	 	ARADIGM CORPORATION, a
California corporation	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	 	 	Name:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	Title:

	 	 	 	Title:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Date: July 18, 2007	 	Date: July 18, 2007	 	 

17

 

EXHIBIT G

SUBTENANT’S LETTER OF CREDIT

18

 

BENEFICIARY:

ARADIGM CORPORATION

3929 POINT EDEN WAY

HAYWARD, CA 94545

ATTN: CHIEF FINANCIAL OFFICER

AS “SUBLANDLORD”

APPLICANT:

MENDEL BIOTECHNOLOGY, INC.

21375 CABOT BOULEVARD

HAYWARD, CALIFORNIA 94545

ATTN: CHIEF FINANCIAL OFFICER

SUBTENANT”

          AMOUNT: US$150,000.00 (ONE HUNDRED FIFTY THOUSAND AND
NO/100 US DOLLARS)

EXPIRATION DATE: JULY 18, 2008

          LOCATION: SANTA CLARA, CALIFORNIA

LADIES AND GENTLEMEN:

WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVBSF004751 IN YOUR FAVOR. THIS
LETTER OF CREDIT IS AVAILABLE BY SIGHT PAYMENT WITH OURSELVES ONLY AGAINST PRESENTATION AT THE
BANK’S OFFICE (AS DEFINED BELOW) OF THE FOLLOWING DOCUMENTS:

	 	1.	 	THE ORIGINAL OF THIS LETTER OF CREDIT AND ALL AMENDMENT (S), IF ANY.
	 
	 	2.	 	YOUR SIGHT DRAFT, IN WHOLE OR IN PART DRAWN ON US IN THE FORM ATTACHED HERETO AS
EXHIBIT “A”.
	 
	 	3.	 	A DATED STATEMENT PURPORTEDLY SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE
BENEFICIARY, FOLLOWED BY HIS/HER PRINTED NAME AND DESIGNATED TITLE, STATING ANY OF THE
FOLLOWING WITH INSTRUCTIONS IN BRACKETS THEREIN COMPLIED WITH:

     (A.) “MENDEL BIOTECHNOLOGY, INC. AS SUBTENANT UNDER THAT CERTAIN
SUBLEASE AGREEMENT DATED AS OF JULY 11, 2007 BY AND BETWEEN
SUBTENANT, AND BENEFICIARY, AS SUBLANDLORD HAS EXERCISED ITS

19

 

TERMINATION OPTION AS PROVIDED THEREIN AND THE TERMINATION FEE IS
NOW DUE AND PAYABLE TO SUBLANDORD”

OR

     (B.) “BENEFICIARY HAS RECEIVED A NOTICE FROM SILICON VALLEY BANK THAT
ITS IRREVOCABLE LETTER OF CREDIT NUMBER SVBSF004751 WILL NOT BE
EXTENDED AND APPLICANT HAS FAILED TO PROVIDE A REPLACEMENT LETTER
OF CREDIT SATISFACTORY TO BENEFICIARY WITHIN THIRTY (30) DAYS PRIOR TO THE CURRENT
EXPIRATION DATE.”

THE SUBLEASE MENTIONED ABOVE IS FOR IDENTIFICATION PURPOSES ONLY AND IS NOT INTENDED THAT SAID
SUBLEASE BE INCORPORATED HEREIN OR FORM PART OF THIS LETTER OF CREDIT.

PARTIAL AND MULTIPLE DRAWINGS ARE ALLOWED.

     THIS LETTER OF CREDIT MUST ACCOMPANY ANY DRAWINGS HEREUNDER FOR ENDORSEMENT OF THE DRAWING
AMOUNT AND WILL BE RETURNED TO BENEFICIARY UNLESS IT IS FULLY UTILIZED.

     THIS LETTER OF CREDIT SHALL BE DEEMED AUTOMATICALLY EXTENDED WITHOUT AN AMENDMENT FOR THREE
(3) ADDITIONAL CONSECUTIVE PERIODS OF ONE YEAR EACH

     AND A FOURTH CONSECUTIVE PERIOD EXPIRING JANUARY 3, 2012 WHICH SHALL BE THE FINAL EXPIRATION
DATE OF THIS LETTER OF CREDIT, BEGINNING ON THE PRESENT EXPIRATION DATE HEREOF JULY 18, 2008 UNLESS
AT LEAST SIXTY (60) DAYS PRIOR TO THE THEN CURRENT EXPIRATION DATE WE NOTIFY YOU BY REGISTERED
MAIL/OVERNIGHT COURIER SERVICE AT THE ABOVE ADDRESS (OR SUCH OTHER ADDRESS AS BENEFICIARY MAY FROM
TIME TO TIME DESIGNATE IN A NOTICE DELIVERED TO SILICON VALLEY BANK AT THE BANK’S OFFICE) THAT THIS
LETTER OF CREDIT WILL NOT BE EXTENDED BEYOND THE THEN-CURRENT EXPIRATION DATE.

     THE DATE THIS LETTER OF CREDIT EXPIRES IN ACCORDANCE WITH THE ABOVE PROVISION IS THE “FINAL
EXPIRATION DATE”. UPON THE OCCURRENCE OF THE FINAL EXPIRATION DATE THIS LETTER OF CREDIT SHALL
FULLY AND FINALLY EXPIRE AND NO PRESENTATIONS MADE UNDER THIS LETTER OF CREDIT AFTER SUCH DATE WILL
BE HONORED.

20

 

THIS LETTER OF CREDIT IS TRANSFERABLE BY THE ISSUING BANK ONE OR MORE TIMES BUT IN EACH INSTANCE TO
A SINGLE BENEFICIARY AND ONLY IN ITS ENTIRETY UP TO THE THEN AVAILABLE AMOUNT IN FAVOR OF ANY
NOMINATED TRANSFEREE ASSUMING SUCH TRANSFER TO SUCH TRANSFEREE WOULD BE IN COMPLIANCE WITH THEN
APPLICABLE LAW AND REGULATIONS, INCLUDING BUT NOT LIMITED TO THE REGULATIONS OF THE U.S. DEPARTMENT
OF TREASURY AND U.S. DEPARTMENT OF COMMERCE. AT THE TIME OF TRANSFER, THE ORIGINAL LETTER OF CREDIT
AND ORIGINAL AMENDMENT(S), IF ANY, MUST BE SURRENDERED TO US TOGETHER WITH OUR LETTER OF TRANSFER
DOCUMENTATION (IN THE FORM OF EXHIBIT “B” ATTACHED HERETO) AND OUR TRANSFER FEE OF 1/4 OF 1% OF THE
TRANSFER AMOUNT (MINIMUM $250.00). ANY TRANSFER OF THIS LETTER OF CREDIT MAY NOT CHANGE THE PLACE
OF EXPIRATION OF THE LETTER OF CREDIT FROM OUR ABOVE-SPECIFIED OFFICE. EACH TRANSFER SHALL BE
EVIDENCED BY OUR ENDORSEMENT ON THE REVERSE OF THE ORIGINAL LETTER OF CREDIT AND WE SHALL FORWARD
THE ORIGINAL LETTER OF CREDIT TO THE TRANSFEREE.

DRAFT(S) AND DOCUMENTS MUST INDICATE THE NUMBER AND DATE OF THIS LETTER OF CREDIT.

     DOCUMENTS MUST BE DELIVERED TO US DURING REGULAR BUSINESS HOURS ON A BUSINESS DAY OR FORWARDED
TO US BY OVERNIGHT DELIVERY SERVICE TO: SILICON VALLEY BANK, 3003 TASMAN DRIVE, 2ND
FLOOR, MAIL SORT HF210, SANTA CLARA, CALIFORNIA 95054, ATTENTION: INTERNATIONAL DIVISION – STANDBY
LETTER OF CREDIT NEGOTIATION DEPARTMENT (THE “BANK’S OFFICE).

     WE HEREBY ENGAGE WITH YOU THAT DRAFT(S) DRAWN AND/OR DOCUMENTS PRESENTED UNDER AND IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT SHALL BE DULY HONORED UPON
PRESENTATION TO SILICON VALLEY BANK, IF PRESENTED ON OR BEFORE THE EXPIRATION DATE OF THIS LETTER
OF CREDIT.

     IF ANY INSTRUCTIONS ACCOMPANYING A DRAWING UNDER THIS LETTER OF CREDIT REQUEST THAT PAYMENT IS TO
BE MADE BY TRANSFER TO YOUR ACCOUNT WITH ANOTHER BANK, WE WILL ONLY EFFECT SUCH PAYMENT BY FED WIRE
TO A U.S. REGULATED BANK, AND WE AND/OR SUCH OTHER BANK MAY RELY ON AN ACCOUNT NUMBER SPECIFIED IN
SUCH INSTRUCTIONS EVEN IF THE NUMBER IDENTIFIES A PERSON OR ENTITY DIFFERENT FROM THE INTENDED
PAYEE.

21

 

     THIS LETTER OF CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICE 1998 (“ISP98”),
INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 590.

	 	 	 	 	 
	SILICON VALLEY BANK,
	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	AUTHORIZED SIGNATURE

	 	AUTHORIZED SIGNATURE
	 	 

22

 

EXHIBIT “A”

SIGHT DRAFT/BILL OF EXCHANGE

			
	 	 	 
	     DATE:                     
	 	REF. NO.                     

     AT SIGHT OF THIS BILL OF EXCHANGE

     PAY TO THE ORDER OF                                          US$                    
U.S. DOLLARS                                                             

     “DRAWN UNDER SILICON VALLEY BANK, SANTA CLARA, CALIFORNIA, IRREVOCABLE STANDBY LETTER OF CREDIT
NUMBER NO. SVBSF                      DATED                      ___, 20___”

	 	 	 
	TO: SILICON VALLEY BANK
	 	 
	 
	 	 
	 	 	 
	     3003 TASMAN DRIVE

	 	[INSERT NAME OF BENEFICIARY]
	     SANTA CLARA, CA 95054
	 	 
	 
	 	 
	 

	 	 
	 

	 	Authorized Signature

GUIDELINES TO PREPARE THE SIGHT DRAFT OR BILL OF EXCHANGE:

	1.	 	DATE INSERT ISSUANCE DATE OF DRAFT OR BILL OF EXCHANGE.
	 
	2.	 	REF. NO. INSERT YOUR REFERENCE NUMBER IF ANY.
	 
	3.	 	PAY TO THE ORDER OF: INSERT NAME OF BENEFICIARY
	 
	4.	 	US$ INSERT AMOUNT OF DRAWING IN NUMERALS/FIGURES.
	 
	5.	 	U.S. DOLLARS INSERT AMOUNT OF DRAWING IN WORDS.
	 
	6.	 	LETTER OF CREDIT NUMBER INSERT THE LAST DIGITS OF OUR STANDBY L/C NUMBER THAT
PERTAINS TO THE DRAWING.
	 
	7.	 	DATED INSERT THE ISSUANCE DATE OF OUR STANDBY L/C.
	 
	 	 	NOTE: BENEFICIARY SHOULD ENDORSE THE BACK OF THE SIGHT DRAFT OR BILL OF EXCHANGE AS YOU WOULD A
CHECK.

IF YOU NEED FURTHER ASSISTANCE IN COMPLETING THIS SIGHT DRAFT OR BILL OF EXCHANGE, PLEASE CALL OUR
L/C PAYMENT SECTION AND ASK FOR: EFRAIN TUVILLA AT (408) 654-6349 OR ALICE DALUZ AT (408) 654-7120.

23

 

EXHIBIT “B”

DATE:

	 	 	 	 	 	 	 
	TO:

	 	SILICON VALLEY BANK 

3003 TASMAN DRIVE 

SANTA CLARA, CA 95054

ATTN: INTERNATIONAL DIVISION. 

STANDBY LETTERS OF CREDIT
	 	RE:
	 	IRREVOCABLE STANDBY LETTER OF CREDIT 

NO.        ISSUED BY 

SILICON VALLEY BANK, SANTA CLARA 

L/C AMOUNT:

GENTLEMEN:

FOR VALUE RECEIVED, THE UNDERSIGNED BENEFICIARY HEREBY IRREVOCABLY TRANSFERS TO:

(NAME OF TRANSFEREE)

(ADDRESS)

ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY TO DRAW UNDER THE ABOVE LETTER OF CREDIT UP TO ITS
AVAILABLE AMOUNT AS SHOWN ABOVE AS OF THE DATE OF THIS TRANSFER.

BY THIS TRANSFER, ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY IN SUCH LETTER OF CREDIT ARE
TRANSFERRED TO THE TRANSFEREE. TRANSFEREE SHALL HAVE THE SOLE RIGHTS AS BENEFICIARY THEREOF,
INCLUDING SOLE RIGHTS RELATING TO ANY AMENDMENTS, WHETHER INCREASES OR EXTENSIONS OR OTHER
AMENDMENTS, AND WHETHER NOW EXISTING OR HEREAFTER MADE. ALL AMENDMENTS ARE TO BE ADVISED DIRECT TO
THE TRANSFEREE WITHOUT NECESSITY OF ANY CONSENT OF OR NOTICE TO THE UNDERSIGNED BENEFICIARY.

THE ORIGINAL OF SUCH LETTER OF CREDIT IS RETURNED HEREWITH, AND WE ASK YOU TO ENDORSE THE TRANSFER
ON THE REVERSE THEREOF, AND FORWARD IT DIRECTLY TO THE TRANSFEREE WITH YOUR CUSTOMARY NOTICE OF
TRANSFER.

	 	 	 
	SINCERELY,
	 
	 

	(BENEFICIARY’S NAME)
	 
	 

	(SIGNATURE OF BENEFICIARY)
	 
	 

	(NAME AND TITLE)

SIGNATURE AUTHENTICATED

The name(s), title(s), and signature(s) conform to that/those on file with us for the company and
the signature(s) is/are authorized to execute this instrument.

We further confirm that the company has been identified applying the appropriate due diligence and
enhanced due diligence as required by BSA and all its subsequent amendments.

 

(Name of Bank)

 

(Address of Bank)

 

(City, State, ZIP Code)

 

(Authorized Name and Title)

 

(Authorized Signature)

 

(Telephone number)

24

 

EXHIBIT G

SUBLANDLORD’S LETTER OF CREDIT

TRADE SERVICES DIVISION, NORTHERN CALIFORNIA

ONE FRONT STREET, 21ST FLOOR

SAN FRANCISCO, CALIFORNIA 94111

Contact Phone: 1(800) 798-2815 (Option 1)

Email : sftrade@wellsfargo.com

IRREVOCABLE LETTER OF CREDIT

			
	 	 	 
	Mendel Biotechnology, Inc.
	 	Letter of Credit No. NZS601368
	21375 Cabot Boulevard
	 	Date: July 23, 2007
	Hayward, CA 94545	 	 
	Attention: Mr. Murray L.M. Phimester	 	 

Ladies and Gentlemen:

     At the request and for the account of Aradigm Corporation, 3929 Point Eden Way, Hayward, CA
94545 we hereby establish our Irrevocable Letter of Credit in your favor in the amount of Three
Hundred Thousand United States Dollars (US$300,000.00) available with us at our above office by
payment of your draft(s) drawn on us at sight accompanied by your signed and dated statement worded
as follows with the instructions in brackets therein complied with:

“The undersigned, an authorized representative of Mendel Biotechnology, Inc. hereby
certifies that the amount drawn under Wells Fargo Bank, N.A. Letter of Credit No.
NZS601368 is due to Beneficiary in connection with and pursuant to that certain
sub-lease dated 18 July 2007 between Mendel Biotechnology, Inc. as subtenant and
Aradigm Corporation as sublandlord.”

     Notwithstanding any other provision of this Letter of Credit, this Letter of Credit expires at
our above office on August 18, 2008, but shall be automatically extended, without written
amendment, first to August 18, 2009 and then to, but not beyond November 18, 2009 (the “Final
Expiration Date”) unless we have sent written notice to you at your address above by registered
mail or express courier that we elect not to extend the expiration date of this Letter of Credit
beyond the date specified in such notice, which date will be August 18, 2008 or August 18,, 2009
and be at least thirty (30) calendar days after the date we send you such notice. Upon our sending
you such notice of the non-extension of the expiration date of this Letter of Credit, you may also
draw under this Letter of Credit by presentation to us at our above address, on or before the
expiration date specified in such notice, of your draft drawn on us at sight

25

 

accompanied by your signed and dated statement worded as follows with the instructions in brackets
therein complied with:

“The undersigned, an authorized representative of Mendel Biotechnology, Inc.
(“Beneficiary”) hereby certifies that Beneficiary has received written notification
from Wells Fargo Bank, N.A. that Letter of Credit No. NZS601368 (the “Credit”) will
not be extended past its current expiration date. The undersigned further certifies
that as of the date of this statement, Beneficiary has not received a letter of
credit or other instrument acceptable to the Beneficiary as a replacement to the
Credit. ”

     Partial and multiple drawings are permitted under this Letter of Credit.

     Each draft must be marked “Drawn under Wells Fargo Bank, N.A. Letter of Credit No. NZS601368.”

     Each draft must also be accompanied by the original of this Letter of Credit for our
endorsement on this Letter of Credit of our payment of such draft.

     If any instructions accompanying a drawing under this Letter of Credit request that payment is
to be made by transfer to an account with us or at another bank, we and/or such other bank may rely
on an account number specified in such instructions even if the number identifies a person or
entity different from the intended payee.

     As used below, (a) the terms “Conforming Draft” and “Conforming Drafts” mean, as the context
shall require, a draft or drafts presented to us under and in compliance with the terms of this
Letter of Credit, and (b) the term “Business Day” means a day on which we are open at our above
address in San Francisco, California to conduct our letter of credit business, and (c) the term
“Maximum Drawable Amount” means, for any one time period set forth below under the column titled
“Presentation Periods” (each such time period a “Presentation Period”), the maximum aggregate
amount of all Conforming Drafts that may be presented to us during such Presentation Period. Your
failure to present a Conforming Draft to us during any Presentation Period shall not preclude your
right to present a Conforming Draft(s) to us under this Letter of Credit during any or each
subsequent Presentation Period. Notwithstanding any provision to the contrary in the UCP (as
defined below),

if August 18, 2008 or any other date specified below under the column titled “Presentation Periods”
is not a Business Day then such date shall be automatically extended to the next succeeding date
which is a Business Day.

     The Maximum Drawable Amount for the first Presentation Period is the amount set forth below
under the column titled “Maximum Beginning Amounts” directly opposite

26

 

the first Presentation Period, and the Maximum Drawable Amount for each subsequent Presentation
Period is the lesser of:

     (1) the amount set forth below under the column titled “Maximum Beginning Amounts” directly
opposite that Presentation Period, and

     (2) the remainder of (a) the Maximum Drawable Amount for the immediately preceding
Presentation Period minus (b) the sum of the amount of all Conforming Drafts, if any, presented to
us during the immediately preceding Presentation Period.

	 	 	 
	PRESENTATION PERIODS	 	MAXIMUM BEGINNING AMOUNTS
	On or before August 18, 2008
	 	US $300,000.00
	 	 	 
	After August 18, 2008 and on or before
 February 18, 2009
	 	US $225,000.00
	 	 	 
	After February 18, 2009 and on or before
 August 18, 2009
	 	US $150,000.00
	 	 	 
	After August 18, 2009 and on or before
 November 18, 2009
	 	US $75,000.00

     Except as otherwise provided in this Letter of Credit, this Letter of Credit is subject to the
Uniform Customs and Practice For Documentary Credits (2007 Revision), International Chamber of
Commerce Publication No. 600 (the “UCP”), and engages us in accordance therewith.

	 	 	 	 	 	 	 
	 	 	               Very truly yours

WELLS FARGO BANK, N.A.	 	 
	 
	 	 	 	 	 	 
	 

	 	BY:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	(AUTHORIZED SIGNATURE)	 	 

27

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