LEASE OF 1020 EASTMEADOW CIRCLE PALO ALTO,CALIFORNIA BY ANDBETWEEN CALIFORNIAPACIFIC COMMERCIAL CORPORATION, ACALIFORNIA CORPORATION, LANDLORD AND ANACORPHARMACEUTICALS, INC. A DELAWARECORPORATION, TENANT

do not impair the structural integrity of the Building; and (iv) do not adversely affect the proper functioning of the building systems or other utilities, systems and services of the Building. Notwithstanding the forgoing, in no event shall Tenant decrease the proportion of the Premises which constitute laboratories. As used in this paragraph 7.1, the term “utility installation” means power panels, wiring, conduits, air conditioning and plumbing. If the estimated cost of the improvements exceeds $500,000, Landlord may require Tenant to provide Landlord, at Tenant’s expense, a lien and completion bond in an amount equal to the estimated cost of such alterations, or other reasonable assurance to insure Landlord against any liability for mechanic’s and materialmen’s liens and to insure completion of the work. Should Tenant make any alterations which require Landlord’s prior written consent without obtaining such prior written consent, Tenant shall upon demand by Landlord promptly remove the same and restore the Premises to its original condition before such alterations, all at Tenant’s expense.

7.2.          Plans and Permits. Any alterations which Tenant shall desire to make in or about the Premises and which require the prior written consent of Landlord shall be presented to Landlord in written form, with proposed detailed plans and specifications therefor prepared at Tenant’s sole expense. Landlord shall give its written approval or disapproval thereof within ten (10) days after receipt by Landlord, which approval or disapproval shall be reasonable. Any consent by Landlord thereto shall be deemed conditioned upon Tenant’s acquisition of all permits required to make such alteration from all appropriate governmental agencies, the furnishing of copies thereof to Landlord prior to commencement of the work, and the compliance by Tenant with all conditions of said permits in a prompt and expeditious manner, all at Tenant’s sole expense. Upon completion of any such alteration which requires Landlord’s consent and/or a permit, Tenant, at Tenant’s sole cost, shall promptly deliver to Landlord “as-built” plans and specifications therefor.

7.3.          Construction Work Done by Tenant. All construction work required or permitted to be done by Tenant shall be performed by a licensed contractor and subcontractors (with respect to work to the Building HVAC, electrical and plumbing systems) approved by Landlord, which approval shall not be unreasonably withheld, delayed or conditioned in a reasonably prompt, diligent, and good and workmanlike manner and shall conform in quality and design with the Premises existing as of the date of delivery of possession to Tenant. All such construction work shall be performed in compliance with all applicable statutes, ordinances, regulations, codes and orders of governmental authorities and insurers of the Premises. Tenant or its agents shall secure all licenses and permits necessary therefor and final approval thereof upon completion. Work, once

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started, shall be diligently pursued through to completion in a good and workmanlike manner, in accordance with the plans and specifications approved by Landlord and in compliance with all Applicable Laws and insurance requirements. In connection with alterations requiring Landlord’s consent hereunder, no material changes shall be made to such plans and specifications as approved without the prior approval of Landlord, which approval shall not be unreasonably withheld, delayed or conditioned. Throughout the performance of such alterations, Tenant, at its expense, shall carry, or cause to be carried by Tenant’s contractor and its subcontractors, in addition to the insurance described in paragraph 12, Workers’ Compensation insurance in statutory limits and such other insurance as Landlord may reasonably require, with insurers reasonably satisfactory to Landlord. Tenant shall furnish Landlord with satisfactory evidence that such insurance is in effect at or before the commencement of the alterations and, upon request, at reasonable intervals thereafter until completion of the alterations.

7.4.          Title to Alterations. Unless Landlord requires the removal thereof as set forth in paragraphs 7.1 or 7.5, any alterations which may be made on or to the Premises, shall be and remain the property of Tenant during the term of this Lease, and thereafter shall become the property of Landlord at the expiration or sooner termination of the term of this Lease. Without limiting the generality of the foregoing, all heating, lighting, electrical (including all wiring, conduits, main and subpanels), air conditioning, partitioning, drapery, and carpet installations made by Tenant, regardless of how affixed to the Premises, together with all other alterations that have become an integral part of the Premises, shall be and become the property of Landlord at the expiration or sooner termination of the term of this Lease, and shall not be deemed trade fixtures, and shall remain upon and be surrendered with the Premises at the expiration or sooner termination of this Lease. Notwithstanding the provisions of this paragraph 7.4, Tenant’s furnishings, furniture partitions and panels, trade fixtures, machinery and equipment, laboratory benches and laboratory equipment (but excluding fume hoods installed as part of the initial tenant improvements in acccordance with the Work Letter,  which fume hoods shall remain on the Premises), other than that which is affixed to the Premises so that it cannot be removed without material damage to the Premises, shall remain the property of Tenant and may be removed by Tenant, provided Tenant at Tenant’s expense immediately after removal repairs any damage to the Premises caused thereby and, with respect to any fume hoods removed, removes any accessory ducting, wiring or other improvements or alterations related thereto which Landlord requests that Tenant remove.

7.5.          Removal of Alterations. Other than the initial tenant improvements made in acccordance with the Work

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Letter, Tenant shall remove any alterations that Tenant has made to the Premises and restore the Premises as hereinafter provided unless Landlord notifies Tenant otherwise prior to the expiration of the term of the Lease. If Landlord does not give such notice, Tenant shall, at its sole expense, prior to expiration of the lease term or within thirty (30) days after any sooner termination thereof, remove such alterations, repair any damage occasioned thereby, and restore the Premises to the condition existing as of the date such alteration was made or, in the event of the removal of existing improvements without the installation of any new improvements, as of the date such removal was undertaken. The obligations of Tenant set forth in this paragraph shall survive the termination of this Lease. The terms of this paragraph 7 shall apply to the initial tenant improvements constructed by or on behalf of Tenant.

8.             Mechanics’ Liens. Tenant shall pay when due all claims for labor or materials furnished to or for Tenant at or for use in the Premises, which claims are or may be secured by any mechanic’s or materialman’s lien against the Premises or any interest therein. Tenant shall give Landlord notice of the date of commencement of any work in the Premises not less than ten (10) days prior thereto, and Landlord shall have the right to post notices of non-responsibility or similar notices in or on the Premises in connection therewith. Tenant shall have the right to contest any such liens filed in good faith, provided that if any such liens are filed and not removed or bonded over within fifteen (15) days after notice from Landlord, Landlord may, without waiving its rights and remedies based on such breach by Tenant and without releasing Tenant from any obligations, cause such liens to be released by any means it deems proper, including payment in satisfaction of the claim giving rise to such lien. Tenant shall pay to Landlord upon demand any sum paid by Landlord to remove such liens together with Landlord’s costs and attorneys’ fees and interest at the rate of ten percent (10%) per annum from the date of payment.

9.             Utilities; Janitorial and Security Services. Tenant shall pay when due directly to the charging authority all charges for water, gas, electricity, telephone, janitorial service, refuse pickup, and all other utilities and services supplied or furnished to the Premises during the term of this Lease, together with any taxes thereon. In the event of an interruption in or failure or inability to provide any services or utilities to the Premises or Building for any reason (a “Service Failure”), such Service Failure shall not, regardless of its duration, impose upon Landlord any liability whatsoever (except to the extent an interruption is caused by the Landlord’s gross negligence or willful misconduct and continues for ten consecutive days after Landlord receives notice from Tenant of such interruption), constitute an eviction of Tenant,

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constructive or otherwise, entitle Tenant to an abatement of rent or to terminate this Lease or otherwise release Tenant from any of Tenant’s obligations under this Lease. In no event shall Landlord be liable to Tenant for interruption of Tenant’s business due to failure or interruption of any such utilities or services, unless such interruption (i)is caused by the gross negligence or willful misconduct of Landlord,(ii) continues for a period of three (3) days after written notice by Tenant, (iii) Tenant has maintained its generator in good condition and has resorted to it to remedy any problem, and(iv) causes any damages to Tenant because of such circumstance are not covered by Tenant’s insurance. Subject to the foregoing, Tenant hereby waives any benefits of any applicable existing or future law, including the provisions of California Civil Code Section 1932(1), permitting the termination of this Lease due to such interruption, failure or inability. Tenant shall be responsible for the janitorial service for the entire Building, and shall maintain the Premises in clean condition. Landlord shall not be responsible for providing security guards or other security protection for all or any portion of the Premises, and Tenant may at its own expense provide or obtain such security services as Tenant may desire to ensure the safety of the Premises.

10.           Indemnity. Tenant shall indemnify, defend, protect and hold Landlord, its officers, directors, employees, agents, lenders and their respective successors and assigns harmless from and against any and all claims, loss of rents, damages, losses, expenses (including, without limitation reasonable attorneys’ fees) or liabilities arising out of, involving, or in connection with the use and/or occupancy of the Premises by Tenant, any act or omission in or about the Premises by Tenant or any of its agents, employees, contractors or invitees, or the Default by Tenant under this Lease. In the event any action or proceeding shall be brought against Landlord by reason of any of the foregoing matters, Tenant upon notice from Landlord shall defend the same at Tenant’s expense by counsel reasonably satisfactory to Landlord. The obligations of Tenant contained in this paragraph shall survive the termination of this Lease. Notwithstanding the foregoing, the indemnity, defense and hold harmless obligations of Tenant shall not apply to any claims, loss of rents, damages, losses, expenses or liabilities to the extent caused by the gross negligence or willful misconduct of Landlord or the breach by Landlord of its obligations under this Lease.

11.           Waiver of Claims. Tenant hereby waives any claims against Landlord, its officers, directors, employees, agents, lenders and their respective successors and assigns for injury to Tenant’s business or any loss of income therefrom or for damage to the goods, wares, merchandise or other property of Tenant, or for injury or death of Tenant’s agents, employees, invitees, or

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any other person in or about the Premises regardless of whether the same results from conditions existing upon the Premises or from other sources or places, except to the extent that such claims result from the gross negligence or willful misconduct of Landlord.

12.           Insurance.

12.1.        Tenant’s Liability Insurance. Tenant shall, at Tenant’s expense, obtain and keep in force during the term of this Lease a policy of commercial general liability insurance insuring against liability arising out of the condition, use, occupancy or maintenance of the Premises. Such policy of insurance shall have a combined single limit for both bodily injury and property damage in an amount not less than Five Million Dollars ($5,000,000) per occurrence. No more often than every three (3) years, Landlord may require Tenant to increase the amount of such coverage if, in Landlord’s reasonable opinion, the amount of such coverage is no longer adequate. The policy shall contain cross-liability or equivalent endorsements. Tenant’s liability insurance policy or policies shall:  (i) include premises and operations liability coverage, products and completed operations liability coverage, broad form property damage coverage including completed operations, blanket contractual liability coverage, and personal and advertising injury coverage; (ii) provide that the insurance company has the duty to defend all insureds under the policy; (iii) provide that defense costs are paid in addition to and do not deplete any of the policy limits; (iv) cover liabilities arising out of or incurred in connection with Tenant’s use or occupancy of the Building and the other portions of the Premises; and (v) extend coverage to cover liability for the actions of Tenant’s representatives and invitees. Each policy of liability insurance required by this paragraph shall:  (i) contain a cross liability endorsement or separation of insureds clause; (ii) provide that any waiver of subrogation rights or release prior to a loss does not void coverage; and(iii) provide that it is primary to and not contributing with, any policy of insurance carried by Landlord covering the same loss. The insurance requirements set forth herein are independent of Tenant’s indemnification and other obligations under this Lease and shall not be construed to restrict, limit or modify such indemnification or other obligations of Tenant under the Lease.

12.2.        Landlord’s Liability Insurance. Landlord shall maintain a policy or policies of commercial general liability insurance insuring Landlord (and such other persons as may be designated by Landlord) against liability for personal injury, bodily injury or death, and damage to property occurring or resulting from an occurrence in, on or about the Premises with a combined single limit in such form and in such amounts and including such coverages as Landlord deems appropriate, but in

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any event no less than that required to be maintained by Tenant. Such policy may be a blanket policy also covering other properties owned by Landlord.

12.3.        Property Insurance.

(a)           Landlord shall obtain and keep in force during the term of this Lease a policy or policies of insurance covering loss or damage to the Premises, but excluding coverage of fixtures, machinery, equipment, alterations and leasehold improvements of Tenant which are not considered part of the real estate for insurance purposes, in the amount of the full replacement value thereof, as the same may exist from time to time, or the amount required by any lender (but in no event more than the commercially reasonable and available insurance value thereof) providing protection against all perils customarily included within the “all risk” or “special form” classification of causes of loss, and, at Landlord’s option, flood, earthquake and additional costs resulting from debris removal and the enforcement of any ordinance or law regulating the reconstruction or replacement of any undamaged sections of the Building required to be demolished or removed by reason of the enforcement of any building, zoning, safety or land use laws as the result of a covered cause of loss. In addition, Landlord shall obtain and keep in force, during the term of this Lease, a policy of rental loss insurance commencing on the date of loss and continuing for a period of at least one (1) year, with proceeds payable to Landlord, which insurance may also cover all Real Property Taxes, insurance premiums, and other sums payable by Tenant to Landlord hereunder for said period. The insurance coverage may include sprinkler leakage insurance if the Building contains fire sprinklers. Tenant shall have no interest in or right to the proceeds of any such insurance carried by Landlord.

(b)           Tenant shall, at Tenant’s sole expense, obtain and keep in force during the term of this Lease, a policy covering causes of loss-special form insuring the fixtures, machinery, equipment, alterations, personal property and leasehold improvements of Tenant which are not considered part of the real estate for insurance purposes for the full replacement value thereof, as the same may increase from time to time due to inflation or otherwise. The proceeds from any of such policies shall be used for the repair or replacement of such items so insured to the extent that the same would become the property of Landlord upon the expiration or sooner termination of this Lease. Tenant may carry such insurance under a blanket policy, provided that such policy provides coverage equivalent to a separate policy. Landlord shall be provided coverage under such insurance to the extent of its insurable interest and, if requested by Landlord, both Landlord and Tenant shall sign all documents reasonably necessary or proper in connection with the settlement of any claim or loss under such insurance. Landlord shall have

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no obligation to carry insurance on any of Tenant’s personal or other property.

12.4.        Payment. Tenant shall pay to Landlord the premiums for the insurance obtained by Landlord pursuant to paragraphs 12.2 and 12.3(a). Landlord may obtain liability insurance and property insurance for the Premises separately, or together with other buildings and improvements under blanket policies of insurance. In the latter case, Tenant shall be liable for only such portion of the premiums for such blanket policies as are allocable to the Premises, as reasonably determined by the insurer or Landlord. If the term of this Lease does not expire concurrently with the expiration of the period covered by such insurance, Tenant’s liability for premiums shall be prorated on an annual basis.

12.5. Insurance Policies. The insurance required to be obtained by Tenant pursuant to paragraphs 12.1 and 12.3(b) shall:  (i) be primary insurance; (ii) name Landlord, Landlord’s property manager and such other parties in interest as Landlord may from time to time reasonably designate to Tenant in writing as an additional insured by endorsement, with such endorsement to be on such form and with such modifications as Landlord may require (with such additional insureds being provided at least the same extent of coverage as is provided to Tenant under such policies and all endorsements effecting such additional insured status being at least as broad as additional insured endorsement form number CG 2010 11 85 promulgated by the Insurance Services Office); (iii) be maintained at Tenant’s sole cost and; (iv) be in a form reasonably satisfactory to Landlord, which form may be a blanket policy; (v) be carried with companies admitted to do business in California, rated by the latest edition of the A.M. Best Insurance Guide as A-VIII or better (or such other rating as may be required by any lender); and (vi) provide that the deductible amount under such insurance shall not exceed $25,000. The policy or policies, or duly executed certificates for them, shall be deposited with Landlord on or prior to the date Tenant takes possession of the Premises. Each policy shall provide for the carrier to provide at least thirty (30) days prior written notice to Landlord of cancellation or non-renewal. At least thirty (30) days prior to the expiration of any required insurance policy, Tenant shall furnish Landlord with proof that a new policy has been issued, continuing in force the insurance covered by the policy which is expiring. In addition, Tenant shall at Landlord’s request provide to Landlord evidence that the insurance required to be carried by Tenant pursuant to this Lease, including any endorsement effecting the additional insured status, is in full force and effect and that the premiums therefor have been paid when due. Tenant shall not do or permit to be done anything which shall invalidate any of the insurance policies referred to in paragraphs 12.1, 12.2, and 12.3.

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12.6.        Waiver of Subrogation. Tenant and Landlord each hereby waives any and all rights of recovery against the other, or against the officers, directors, employees, agents and representatives of the other, for loss of or damage to the property of the waiving party or the property of others under its control regardless of the cause (including negligence of the party benefiting from the waiver), where such loss or damage is insured against under any insurance policy carried by Landlord or Tenant and in force at the time of such loss or damage. Tenant and Landlord shall, upon obtaining the policies of insurance required hereunder, give notice to the insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Lease. Landlord and Tenant shall have their respective insurance companies waive any rights of subrogation that such companies may have against Landlord or Tenant, as the case may be.

12.7.        No Limitation of Liability. Landlord makes no representation that the limits of liability specified to be carried by Tenant or Landlord under the terms of this Lease are adequate to protect any party. If Tenant believes that the insurance coverage required under this Lease is insufficient to adequately protect Tenant, Tenant shall provide, at its own expense, such additional insurance as Tenant deems adequate.

13.           Damage or Destruction.

13.1.        Partial Damage-Insured. Subject to the provisions of paragraphs 13.2 and 13.3, if the Premises or the Building, as the case may be, are damaged and such damage was caused by an act or casualty covered under an insurance policy required to be maintained pursuant to paragraph 12.3(a), Landlord shall cause such damage to be repaired as soon as reasonably possible and this Lease shall continue in full force and effect.

13.2.        Landlord’s Right to Terminate. Landlord may elect to terminate this Lease following damage by fire or other casualty, effective as of the date of the occurrence of such damage, under the following circumstances: (i) if in Landlord’s reasonable judgment the Building cannot be substantially repaired and restored under Applicable Laws within six (6) months from the date of the casualty; (ii) if adequate insurance proceeds are not for any reason (other than Landlord’s failure to obtain coverages required pursuant to paragraph 12.3(a)), including, without limitation, the casualty not being a casualty for which Landlord is required to maintain insurance pursuant to paragraph 12.3(a) or a decision made by any holder of any encumbrance covering any part of the Premises, not to make available to Landlord from Landlord’s insurance policies (and/or from Landlord’s funds made available for such purpose, in Landlord’s sole and absolute discretion) an amount sufficient to cover all of the cost of the required repairs (excluding the

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deductible under the policy); (iii) if the Building is damaged or destroyed to the extent that, in the reasonable judgment of Landlord, the cost to repair and restore the Building would exceed fifty percent (50%) of the full replacement cost of the Building; (iv) if the fire or other casualty occurs during the last one (1) year of the term of the Lease and the damage to the Building is material; or (v) if the casualty is caused by earthquake and the deductible amount payable under Landlord’s earthquake insurance policy exceeds $100,000.

If any of the circumstances described in subparagraphs (i), (ii), (iii) or (iv) of this paragraph 13.3 occur or arise, Landlord shall give Tenant notice within sixty (60) days after the date of the casualty, specifying whether Landlord elects to terminate this Lease as provided above or Landlord’s estimate of the time required to complete Landlord’s repair obligations if more than nine (9) months from the date of the casualty. In the event Landlord elects to terminate this Lease, this Lease shall be terminated effective as of the date of such casualty pursuant to such notice of termination by Landlord.

13.3.        Tenant’s Right to Terminate. If (i) all or a substantial part of the Building is rendered untenantable or inaccessible by damage from fire or other casualty, then Tenant may elect to terminate this Lease if Landlord’s estimate of the time required to complete Landlord’s repair obligations under this Lease is greater than nine (9) months from the date of the casualty, or (ii) the fire or other casualty occurs during the last one (1) year of the term of the Lease and the damage to the Building is material; in each of such events, Tenant may terminate this Lease by giving Landlord notice of Tenant’s election to terminate within fifteen (15) days after Landlord’s notice to Tenant pursuant to paragraph 13.2, in the case of an event described in clause (i) or within thirty (30) days after an event described in clause (ii). If Tenant elects to terminate this Lease, the Lease shall terminate effective as of the date of such casualty.

13.4.        Abatement of Rent. Notwithstanding anything to the contrary contained in paragraph 3 or elsewhere in this Lease, if the Premises are damaged such that they become unusable or partially unusable by Tenant, the rent payable hereunder for the period commencing on the occurrence of such damage and ending upon completion of such repair or restoration shall be abated in proportion to the extent to which Tenant’s use of the Premises is impaired; provided that nothing herein shall be construed to preclude Landlord from being entitled to collect the full amount of any rental loss insurance proceeds. Except for abatement of rent, if any, Tenant shall have no claim against Landlord for any damage suffered by reason of any such damage, destruction, repair or restoration, except as explicitly provided herein.

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13.5.        Tenant’s Property. Landlord’s obligation to rebuild or restore shall not include restoration of Tenant’s trade fixtures, equipment, merchandise, or any improvements, alterations or additions made by Tenant to the Premises.

13.6.        Notice of Damage. Tenant shall notify Landlord within ten (10) days after the occurrence thereof of any damage to all or any portion of the Premises. In no event shall Landlord have any obligation to repair or restore the Premises pursuant to this paragraph 13 until a reasonable period of time after Landlord has reasonable period of time to collect insurance proceeds arising from such damage (unless such damage is clearly not covered by insurance then in effect covering the Premises), not to exceed one hundred and eighty (180) days.

13.7         Waiver of Statutes. The terms of this Lease shall govern the effect of any damage to or destruction of the Premises with respect to the termination of this Lease. Landlord and Tenant hereby waive the provisions of California Civil Code Sections 1932(2), 1933(4) and any other present or future statute to the extent inconsistent herewith.

14.           Condemnation.

14.1.        Partial Taking. Subject to the provisions of paragraph 14.2, if part of the Premises is taken for any public or quasi-public use, under any statute or right of eminent domain (collectively a “taking”), and a part of the Premises remains which is reasonably suitable for Tenant’s continued occupancy for the uses permitted by this Lease, this Lease shall, as to the part so taken, terminate as of the date the condemnor or purchaser takes possession of the property being taken, and the rent payable hereunder shall be reduced based upon the extent to which the partial taking shall interfere with the business carried on by Tenant on the Premises. Landlord shall, at its own cost and expense, make all necessary repairs or alterations to the Premises in order to make the portion of the Premises not taken a complete architectural unit; provided, however, that Landlord shall not be required to repair or restore any injury or damage to the property of Tenant or to make any repairs or restoration of any alterations, additions, fixtures or improvements installed on the Premises by or at the expense of Tenant.

14.2.        Total Taking. If fifteen percent (15%) or more of the floor area of the Building is taken, or more than twenty five percent (25%) of the land area is taken, or such part thereof is taken so that there does not remain a portion of the Premises suitable for Tenant’s continued occupancy for the uses permitted hereunder, such taking shall be treated as a total

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taking and this Lease shall terminate upon the date possession shall be taken by the condemning authority.

14.3.        Distribution of Award. If a part or all of the Premises is taken, all compensation awarded upon such taking shall belong to and be paid to Landlord, except that Tenant shall receive from the award a sum attributable to Tenant’s improvements or alterations made to the Premises by Tenant at Tenant’s expense which Tenant has the right to remove from the Premises pursuant to the provisions of this Lease; or, if Tenant elects to remove any such improvements or alterations made to the Premises at Tenant’s expense, Tenant shall receive a sum for reasonable removal and relocation costs not to exceed the market value of such improvements or alterations on the date possession of the Premises is taken. Notwithstanding the foregoing, Tenant shall have the right to seek a claim against the taking authority for interruption of or damage to its business and loss of business goodwill and moving expenses.

14.4.        Sale Under Threat of Condemnation. A sale by Landlord to any authority having the power of eminent domain, either under threat of condemnation or while condemnation proceedings are pending, shall be deemed a taking under the power of eminent domain for purposes of this paragraph 14.

14.5.        Waiver of Statutes. The terms of this Lease shall govern the effect of any taking of the Premises. Landlord and Tenant hereby waive the provisions of California Code of Civil Procedure Section 1265.130 and any other present or future statute to the extent inconsistent herewith.

15.           Assignment and Subletting.

15.1.        Landlord’s Consent Required. Tenant shall not assign this Lease, or any interest therein, voluntarily or involuntarily, and shall not sublet the Premises or any part thereof, or any right or privilege appurtenant thereto, or suffer any other person to occupy or use the Premises, or any portion thereof, without the prior written consent of Landlord in each instance pursuant to the terms and conditions set forth below, which consent shall not be unreasonably withheld, delayed or conditioned.

15.2.        Documentation. Prior to any assignment or sublease which Tenant desires to make, Tenant shall provide to Landlord:  (i) the name and address of the proposed assignee or sublessee, (ii) true and complete copies of all documents evidencing Tenant’s prospective agreement to assign or sublease, (iii) such other information as may be reasonably requested by Landlord, and (iv) a document signed by Tenant and the proposed assignee or sublessee specifying to Landlord’s reasonable satisfaction all consideration to be received by Tenant in

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connection with such assignment or sublease in the form of lump sum payments, installments of rent, or otherwise. For purposes of this paragraph 15, the term “consideration” shall include, without limitation, all monies or other consideration of any kind, if such sums are related to Tenant’s interest in this Lease or in the Premises, including but not limited to, bonus money, and payments (in excess of fair market value thereof) for Tenant’s assets, fixtures, equipment or furniture remaining in the Premises.

15.3.        Terms and Conditions. As a condition to Landlord’s granting its consent to any assignment or sublease, Landlord may require that (i) Tenant pay to Landlord, as and when received by Tenant, one-half of the amount of any excess of such consideration to be received by Tenant in connection with said assignment or subletting over and above the base rent required to be paid by Tenant for the same month in which the consideration is received (calculated on a per square foot basis if less than all of the Premises is assigned or sublet); provided that Tenant shall first be entitled to retain an amount of such excess consideration equal to Tenant’s reasonable direct costs of the real estate brokerage commissions and attorney’s fees incurred by Tenant in connection with such assignment or subletting and the cost of tenant improvements and alterations made for the assignee or sublessee and paid for by Tenant amortized on a straight line basis over the remaining term of the Lease (or the term of the sublease in the case of a sublease); and (ii) Tenant and the proposed assignee or sublessee demonstrate to Landlord’s reasonable satisfaction that the assignee or sublessee proposes to use the Premises for substantially the same use or a use which is otherwise satisfactory to Landlord. Each assignment or sublease agreement to which Landlord has consented shall be an instrument in writing in form reasonably satisfactory to Landlord, and shall be executed by both Tenant and the assignee or sublessee, as the case may be. Each such assignment or sublease agreement shall recite as follows (collectively, the “Required Provisions”): (i) if a sublease, that it is and shall be subject and subordinate to the provisions of this Lease, (ii) the assignee or sublessee accepts such assignment or sublease and agrees to perform all of the obligations of Tenant hereunder or those applicable to the subleased Premises in the case of a sublease of a portion of the Premises, (iii) the termination of this Lease shall, at Landlord’s sole election, constitute a termination of every such assignment or sublease, (iv) if a sublease, in the event of a Default by Tenant, at Landlord’s sole election, the sublessee shall attorn to Landlord (in which event Landlord shall undertake the obligations of Tenant under such sublease arising after the exercise of such option; provided, however, that Landlord shall not be liable for any prepaid rents or security deposit paid by such sublessee to Tenant or for any prior defaults or breaches by Tenant), (v) if a sublease, any matter requiring the consent of the Tenant under the sublease

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shall also require the consent of Landlord; and (vi) the terms of this paragraph 15 shall apply to any further assignment or subletting of all of any part of the Premises by any future assignee or sublessee. In the event Landlord shall consent to an assignment or sublease, Tenant shall nonetheless remain liable for all obligations and liabilities of Tenant under this Lease, including, but not limited to, the payment of rent. The consent by Landlord to any assignment or sublease shall not constitute a waiver of the provisions of this paragraph 15, including the requirement of Landlord’s prior written consent, with respect to any subsequent assignment or sublease. Tenant agrees to reimburse Landlord upon demand for reasonable attorneys’ fees incurred by Landlord in connection with the negotiation, review, and documentation of any such requested assignment or subleasing, not to exceed $5,000.

15.4.        Corporate Transactions Constituting Assignment.

(a)           Any dissolution, merger, reorganization, transfer (either all at once or any time in the aggregate) of fifty percent (50%) or more of the capital stock, partnership interests or membership interests of Tenant (if Tenant is a corporation, partnership or limited liability company, respectively), or sale (either all at once or in a series of related sales) of all or substantially all of Tenant’s assets located in, on, or about the Premises, shall be deemed an assignment. Notwithstanding the foregoing. if Tenant is deemed to be a Reporting Company under the Securities and Exchange Act of 1934, the sale of more than fifty (50%) per cent of Tenant’s capital stock to a single entity or to related entities in a single transaction or series of related transactions shall be deemed to be an assignment.

(b)           Notwithstanding the foregoing, Tenant may, without Landlord’s prior written consent, without any participation by Landlord in assignment and subletting proceeds, and without giving Landlord any recapture rights, sublet the premises or assign this Lease to:  (i) an entity controlling, controlled by or under common control with Tenant; (ii) a transferee which is the resulting entity of a merger, consolidation or non-bankruptcy reorganization with Tenant; or (iii) a purchaser of all or substantially all of Tenant’s stock or assets. Tenant’s foregoing rights to assign or sublease this Lease without Landlord’s prior written consent shall be subject to the following conditions: (A) Tenant shall not be in uncured Default hereunder; (B) the assignment or sublease agreement shall contain the Required Provisions; (C) other than the requirement that Tenant obtain Landlord’s consent and share with Landlord a portion of the assignment or sublease proceeds and Landlord’s recapture right, all of the provisions of this paragraph 15 shall apply with respect thereto (including, without limitation, that Tenant shall remain liable for all obligations and liabilities of

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Tenant under this Lease); (D) Tenant shall provide at least thirty (30) days prior written notice to Landlord of any such assignment or subletting and promptly supply Landlord with any documents or information reasonably requested by Landlord regarding such assignment or subletting or such assignee or sublessee (provided, however, that in the event that Tenant can not legally deliver such 30 days notice, Tenant shall deliver such notice at the earliest time that it can legally do so; and (E) the entity to which the Lease is assigned or subleased has a net worth as of the date of such assignment or sublease equal to at least the greater of the net worth of Tenant as of the date of this Lease or as of the date immediately preceding such assignment or sublease. Tenant and the proposed assignee or sublessee shall provide such documentation as may be requested by Landlord to demonstrate to Landlord’s reasonable satisfaction that the condition set forth in (E) above has been satisfied. For the purposes of this Lease, the sale of Tenant’s capital stock through any public offering shall not be deemed an assignment, subletting, or other transfer of the Lease or the premises.

15.5         Recapture. In addition to Landlord’s right of approval of any proposed assignment or sublease and without limiting the other provisions of this paragraph 15, Landlord shall have the option, in the event of any proposed Major Transfer to terminate the Lease. The term “Major Transfer” as used in this Lease means an assignment or sublease which: (i) when combined with all other assignments or subleases (other than those subject to paragraph 15.4), means that more than one half of the rentable square feet in the Building would be assigned or sublet; and (ii) either the proposed assignment or sublease (including all options to extend) together with any prior assignment or sublease (including all options to extend) as of the date of the proposed assignment or sublease has a term of more than the lesser of (x) three (3) years ; (y) one half of the remaining term of the Lease as of the date of the commencement of such assignment or sublease; or (z) if the date of the commencement of such assignment or sublease is during the last three (3) years of the term of the Lease, one (1) year. If Tenant desires to determine prior to identifying a particular transaction whether Landlord intends to exercise its recapture right, Tenant shall give Landlord written notice of Tenant’s intent to enter into a Major Transfer as of the date specified in such notice (the “Major Transfer Date”), which date shall be not less than six (6) months and not more than (9) months from the date of Landlord’s receipt of such notice. Tenant shall not be required to have a particular assignment or sublease identified before giving such notice; provided, however, that Tenant shall again comply with the provisions of this paragraph 15.5 with respect a Major Transfer in the event that: (i) Tenant does not enter into a Major Transfer by the Major Transfer Date; or (ii) any assignment or sublease which is not a Major Transfer when executed later becomes one by means of any extension, expansion

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or otherwise (in which case Tenant shall immediately give Landlord written notice of such occurrence). Landlord shall exercise its option to terminate, if at all, by giving Tenant written notice thereof within thirty (30) days following Landlord’s receipt of Tenant’s written notice. In the event that Landlord exercises its option to terminate, the Lease shall terminate as of the Major Transfer Date or, in the event that the Major Transfer occurs as a result of any assignment or sublease which is not a Major Transfer when executed later becoming one by means of any extension, expansion or otherwise, as of the date which is six (6) months after the date of the Major Transfer. Without in any manner limiting the rights of Landlord, following any such termination by Landlord, Landlord may lease all or a portion of the Premises to any prospective assignee or subtenant proposed by Tenant, without liability to the Tenant. Landlord’s failure to exercise such termination right as herein provided shall not be construed as a waiver of Landlord’s right with respect to any other assignment or sublease constituting a Major Transaction or as Landlord’s consent to any proposed assignment or subletting and Tenant shall comply with the terms of this paragraph 15 with respect thereto.

15.6.        Landlord’s Remedies. Any assignment or sublease without Landlord’s prior written consent (if required pursuant to this paragraph 15) shall at Landlord’s election be void, and shall constitute a default. If Tenant shall purport to assign this Lease, or sublease all or any portion of the Premises, or permit any person or persons other than Tenant to occupy the Premises without Landlord’s prior written consent, Landlord may collect rent from the person or persons then or thereafter occupying the Premises and apply the net amount collected to the rent reserved herein, but no such collection shall be deemed a waiver of Landlord’s rights and remedies under this paragraph 15, or the acceptance of any such purported assignee, sublessee or occupant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained.

15.7.        Encumbrances, Licenses and Concession Agreements. Except as permitted herein, Tenant shall not encumber its interest under this Lease or any rights of Tenant hereunder, or enter into any license or concession agreement respecting all or any portion of the Premises, without Landlord’s prior written consent which consent shall not unreasonably be withheld or delayed subject to the terms and conditions referred to in paragraph 15.2 above, and Tenant’s granting of any such encumbrance, license, or concession agreement shall constitute an assignment for purposes of this paragraph 15.

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16.           Default by Tenant.

16.1.        Event of Default. The occurrence of any one or more of the following events (an “Event of Default”) shall constitute a default and breach of this Lease by Tenant:

(a)           The failure by Tenant to make any payment of rent or any other payment required to be made by Tenant hereunder, as and when due, and such failure shall not have been cured within five (5) days after Tenant receives written notice thereof from Landlord;

(b)           Tenant’s failure to perform any other term, covenant or condition contained in this Lease and such failure shall have continued for thirty (30) days after written notice of such failure is given to Tenant; provided that, where such failure cannot reasonably be cured within said thirty (30) day period, Tenant shall not be in default if Tenant commences such cure within said thirty (30) day period and thereafter diligently continues to pursue all reasonable efforts to complete said cure until completion thereof. Said written notice shall constitute those required under California Code of Civil Procedure, Section 1161, et seq.;

(c)           Tenant abandons the Premises for more than thirty (30) days or violates the restrictions on assignment or subletting in paragraph 15;

(d)           Tenant ceases doing business as a going concern; makes an assignment for the benefit of creditors; is adjudicated an insolvent, files a petition (or files an answer admitting the material allegations of a petition) seeking relief under any state or federal bankruptcy or other statute, law or regulation affecting creditors’ rights; all or substantially all of Tenant’s assets are subject to judicial seizure or attachment and are not released within 60 days, or Tenant consents to or acquiesces in the appointment of a trustee, receiver or liquidator for Tenant or for all or any substantial part of Tenant’s assets.

(e)           Tenant fails, within sixty (60) days after the commencement of any proceedings against Tenant seeking relief under any state or federal bankruptcy or other statute, law or regulation affecting creditors’ rights, to have such proceedings dismissed, or Tenant fails, within thirty (30) days after an appointment, without Tenant’s consent or acquiescence, of any trustee, receiver or liquidator for Tenant or for all or any substantial part of Tenant’s assets, to have such appointment vacated.

16.2.        Remedies. Upon any Event of Default, Landlord shall have the following remedies in addition to all other rights and remedies provided by law or equity:

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(a)           The rights and remedies provided by California Civil Code Section 1951.4 (Landlord may continue the lease in effect after Tenant’s breach and abandonment and recover rent as it becomes due, if Tenant has right to sublet or assign, subject only to reasonable limitations). Acts of maintenance or preservation, efforts to relet the premises, or the appointment of a receiver upon Landlord’s initiative to protect its interest under this Lease shall not constitute a termination of Tenant’s right to possession;; or

(b)           Landlord may terminate the Tenant’s right to possession by giving Tenant thirty (30) days written notice of termination. Thirty (30) days after the giving of the notice, this Lease and all of Tenant’s rights in the Premises shall terminate. Any termination under this paragraph shall not release Tenant from the payment of any sum then due Landlord or from any claim for damages or rent previously accrued or then accruing against Tenant.

Tenant hereby waives its right under California Code of Civil Procedure Section 1179. In the event this Lease is terminated pursuant to this paragraph 16.2(b), Landlord may recover from Tenant:

(i)            the worth at the time of award of the unpaid rent which had been earned at the time of termination; plus

(ii)           the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss for the same period that Tenant proves could have been reasonably avoided; plus

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

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

The “worth at the time of award” of the amounts referred to in subparagraphs (i) and (ii) of this paragraph 16.2(b) shall be computed by allowing interest at the greater of ten percent (10%) per annum or the Bank of America reference rate as of the date thereof plus two percent (2%) per

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annum. The “worth at the time of the award” of the amount referred to in subparagraph (iii) of this paragraph 16.2(b) shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award plus one percent (1%). The term “time of award” as used in subparagraphs (i), (ii) and (iii) shall mean the date of entry of a judgment or award against Tenant in an action or proceeding arising out of Tenant’s breach of this Lease. The term “rent” as used in this paragraph shall include all sums required to be paid by Tenant to Landlord pursuant to the terms of this Lease.

(c)           Upon any termination of Tenant’s possession of the Premises or the abandonment of the Premises by Tenant, Landlord may remove all Tenant’s property from the Premises, and such property may be stored by Landlord in a public warehouse or elsewhere at the sole cost and for the account of Tenant. If Landlord does not elect to store any or all of Tenant’s property left in the Premises, Landlord may consider such property to be abandoned by Tenant, and Landlord may thereupon dispose of such property in any manner deemed appropriate by Landlord. Any proceeds realized by Landlord on the disposal of any such property shall be applied first to offset all expenses of storage and sale, then credited against Tenant’s outstanding obligations to Landlord under this Lease, and any balance remaining after satisfaction of all obligations of Tenant under this Lease shall be delivered to Tenant.

(d)           This Lease may be terminated by a judgment specifically providing for termination, or by Landlord’s delivery to Tenant of written notice specifically terminating this Lease in accordance with applicable law. In no event shall any one or more of the following actions by Landlord alone, in the absence of a written election by Landlord to terminate this Lease, constitute a termination of this Lease or a waiver of Landlord’s right to recover damages under this paragraph 16:

(i)            appointment of a receiver in order to protect Landlord’s interest hereunder;

(ii)           consent to any subletting of the Premises or assignment of this Lease by Tenant, whether pursuant to provisions hereof concerning subletting and assignment or otherwise; or

(iii)          any other action by Landlord or Landlord’s agents intended to mitigate the adverse effects of any breach of this Lease by Tenant, including without limitation any action taken to maintain and preserve the Premises or any action taken to relet the Premises or any portion thereof for the account of Tenant and in the name of Tenant.

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16.3.        Landlord’s Right to Perform Tenant’s Obligations. If Tenant shall at any time fail to make any payment or perform any other act required to be made or performed by Tenant under this Lease, then after the cure period provided herein and after reasonable notice to Tenant, Landlord may, but shall not be obligated to, make such payment or perform such other act to the extent Landlord may deem desirable, and may, in connection therewith, pay any and all expenses incidental thereto and employ counsel. No such action by Landlord shall be deemed a waiver by Landlord of any rights or remedies Landlord may have as a result of such failure by Tenant, or a release of Tenant from performance of such obligation. All sums so paid by Landlord, including without limitation all penalties, interest and costs in connection therewith, shall be due and payable by Tenant to Landlord on the day immediately following notice to Tenant of any such payment by Landlord. Landlord shall have the same rights and remedies for the nonpayment of any such sums as Landlord may be entitled to in the case of default by Tenant in the payment of rent.

16.4.        Interest on Past Due Obligations. Any amount due to Landlord hereunder and not paid within the cure period provided herein shall bear interest at the lesser annual rate of (i) ten percent (10%); or (ii) the highest rate then allowed by law, from the date due until paid in full. Payment of such interest shall not excuse or cure any default by Tenant under this Lease.

16.5.        Additional Rent. All sums payable by Tenant to Landlord or to third parties under this Lease shall be payable as additional sums of rent. For purposes of any unlawful detainer action by Landlord against Tenant pursuant to California Code of Civil Procedure Sections 1161-1174, or any similar or successor statutes, Landlord shall be entitled to recover as rent not only such sums specified in paragraph 3 as may then be overdue, but also all such additional sums of rent as may then be overdue.

16.6         Notice Requirements. When this Lease requires service of a notice, that notice shall replace rather than supplement any equivalent or similar statutory notice, including any notices required by Code of Civil Procedure Section 1161 or any similar or successor statute. When a statute requires service of a notice in a particular manner, service of that notice (or a similar notice required by this Lease) in the manner required by paragraph 22 shall replace and satisfy statutory service-of-notice procedures, including those required by Code of Civil Procedure Section 1162 or any similar or successor statute

16.7.        Remedies Not Exclusive. No remedy or election hereunder shall be deemed exclusive but shall, wherever

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possible, be cumulative with all other remedies herein provided or permitted at law or in equity.

17.           Default by Landlord.

17.1.        Cure Period. Landlord shall not be deemed to be in default in the performance of any obligation required to be performed by it hereunder unless and until it has failed to perform such obligation within the period of time specifically provided herein, or if no period of time has been provided, then within thirty (30) days after receipt of written notice by Tenant to Landlord specifying wherein Landlord has failed to perform such obligation; provided, however, that if the nature of Landlord’s obligation is such that more than thirty (30) days are reasonably required for its performance, then Landlord shall not be deemed to be in default if it shall commence such performance within such thirty (30) day period and thereafter diligently prosecute the same to completion.

17.2.        Mortgagee Protection. If any deed of trust or mortgage encumbers the Premises, in the event of any default on the part of Landlord, Tenant will give notice by registered or certified mail to any beneficiary of a deed of trust or mortgagee of a mortgage encumbering the Premises whose address shall have been furnished to Tenant and before Tenant shall have any right to terminate this Lease Tenant shall grant such beneficiary or mortgagee a reasonable period within which to cure the default, including a reasonable period to obtain possession of the Premises by private power of sale if such action is necessary to effect a cure. The provisions of this Lease may require approval by a financial institution making a loan secured by the Premises. If any such institution should require as a condition to such financing any modification of the provisions of this Lease, Tenant will approve and execute such modifications provided no such modification shall relate to the rent payable hereunder, the length of the term or materially alter the rights or obligations of Landlord or Tenant.

18.           Advertisements and Signs. Tenant shall not place or permit to be placed any sign, display, advertisement, or decoration (“sign”) on the exterior of the Building, or elsewhere on the Premises, without all necessary approvals from the City of Palo Alto and the prior written consent of Landlord, which consent shall not be unreasonably withheld, as to the color, size, style, character, content, and location of each such sign. The cost of Tenant’s sign(s) and their installation, maintenance and removal (including any necessary repairs to the Building or any other part of the Premises caused by such removal) shall be Tenant’s sole cost and expense. Upon termination of this Lease, Tenant shall remove any sign which it has placed on the Premises or the Building, and shall repair any damage caused by the installation or removal of such sign.

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19.           Entry by Landlord. Landlord and its agents shall be entitled to enter into and upon the Premises at all reasonable times upon reasonable notice (except in the case of an emergency, in which event no notice shall be required), for purposes of (i)exercising its rights under this Lease; (ii) posting notices of non-responsibility for alterations, additions, or repairs, (iii) during the final year of the lease term for the purpose of placing upon the Premises any ordinary “for sale” signs, and during the one hundred eight (180) day period prior to the expiration of this Lease, to place upon the Premises any usual or ordinary “for lease” signs and exhibit the Premises to prospective tenants at reasonable hours; (iv)determining whether the Premises are in good condition; (v) performing any maintenance or repair of the Building or Premises that Landlord has the right or obligation to perform; (vi) determining whether Tenant is complying with its obligations under this Lease (including, without limitation, its obligations under paragraph 5); or(vii) doing any other act or thing necessary for the safety or preservation of the Building or the Premises, all without any abatement of rent and without liability to Tenant for any injury or inconvenience to or interference with Tenant’s business, quiet enjoyment of the Premises, or any other loss occasioned thereby, except for Landlord’s gross negligence or willful misconduct. Landlord’s rights of entry as set forth in this paragraph shall be subject to the reasonable security regulations of Tenant and good laboratory practices as determined by Tenant, and to the requirement that Landlord shall at all times act in a manner designed to minimize interference with Tenant’s business activities on the Premises.

20.           Subordination and Attornment.

20.1.        Subordination. This Lease shall be subject and subordinate to any mortgage, deed of trust, ground lease or other instrument of security now of record or which is recorded after the date of this Lease affecting the land and Building, or land or Building, of which the Premises form a part, and such subordination is hereby made effective without any further act of Tenant; provided that such subordination shall not be effective with respect to any mortgage, deed of trust, ground lease or other instrument or security recorded after the date of this Lease unless Landlord first obtains from the lender or ground lessor a written agreement that provides in essence that as long as Tenant performs its obligations under this Lease within any applicable notice and cure periods, no foreclosure of, deed given in lieu of foreclosure, or sale under the encumbrance, and no steps or procedures taken under the encumbrance, shall affect Tenant’s rights or increase Tenant’s obligations under this Lease. Tenant shall execute and deliver to Landlord any written agreement and any other documents reasonably required by the lender or ground lessor to accomplish the purposes of this

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paragraph, within ten (10) days after delivery thereof to Tenant; provided that, in any case where Tenant is entitled to the above-described nondisturbance agreement, either prior to or concurrently with the request Tenant is provided the required nondisturbance agreement by the lender or ground lessor. Anything in this paragraph 20.1 to the contrary notwithstanding, if a lender so elects in writing, this Lease shall be deemed superior to the lien held by the lender, regardless of the date of recordation of the lien, and Tenant will execute an agreement confirming the lender’s election on request. Landlord represents that there is no loan currently outstanding which is secured by the Premises.

20.2.        Attornment. Subject to the foregoing paragraph 20.1, Tenant shall attorn to any third party purchasing or otherwise acquiring the Premises at any sale or other proceeding, or pursuant to the exercise of any rights, powers or remedies under any mortgages or deeds of trust or ground leases now or hereafter encumbering all or any part of the Premises, as if such third party had been named as Landlord under this Lease.

21.           Estoppel Certificates and Financial Statements.

21.1.        Estoppel Certificates. Tenant shall, within ten (10) days following request by Landlord, execute and deliver any documents, including estoppel certificates, in any reasonable form presented by Landlord:  (i) certifying that this Lease has not been modified or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect, (ii) stating the date to which the rent and other charges are paid in advance, if at all, (iii) acknowledging that there are not, to Tenant’s knowledge, any uncured defaults on the part of either party hereunder, or if there are uncured defaults, stating the nature of such uncured defaults, (iv) evidencing the status, to Tenant’s knowledge, of this Lease (with respect the subordination thereof or any other matter) as may be required either by a lender making a loan to be secured by a deed of trust or mortgage encumbering the Premises or a purchaser of the Premises from Landlord; and (v) stating any other information as Landlord may reasonably request. Any person or entity purchasing, acquiring an interest in or extending financing with respect to the Premises shall be entitled to rely upon any such certificate. If Tenant fails to deliver such certificate within five (5) days after Landlord’s second written request therefor, Tenant shall be liable to Landlord for any damages incurred by Landlord, including any profits or other benefits from any sale or financing of the Premises or any interest therein which are lost or made unavailable as a result, directly or indirectly, of Tenant’s failure or refusal to timely execute or deliver such estoppel certificate.

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21.2.        Financial Statements Within ten (10) days after written request therefor, which request shall not be made more frequently than twice per year, Tenant shall deliver to Landlord a copy of Tenant’s most current financial statements (including at least a year end balance sheet and a statement of operations) of Tenant (and of each guarantor, if any, of Tenant’s obligations under this Lease) and for each of the three most recently completed years (if available), prepared in accordance with generally accepted accounting principles (and, if such is Tenant’s normal practice, audited by an independent certified public accountant), all then available subsequent quarterly statements, and such other financial information as may reasonably be requested by Landlord or required by any lender. This requirement shall not apply in any period during which Tenant is a “reporting company” as defined in the Securities and Exchange Act of 1934.

22.           Notices. Any notice, approval, request, demand or consent (collectively “notice”) required or desired to be given under this Lease shall be in writing and shall be delivered (i) by United States mail, registered or certified, postage prepaid, (ii) by a recognized courier service with proof of delivery and addressed to the party to be served at the last address given by that party to the other party under the provisions of this paragraph, or (iii) by receipted facsimile to the number indicated below, with a hard copy delivered in accordance with clauses (i) or (ii). At the date of execution of this Lease, the addresses of Landlord and Tenant are as set forth below:

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Any notice delivered by mail pursuant to this paragraph shall be deemed to have been delivered three (3) business days after the posted date of mailing.

23.           Waiver. The waiver by either party of any breach of any term, covenant, or condition herein contained shall not be deemed to be a waiver of such term, covenant or condition or any subsequent breach of the same or any other term, covenant or condition herein contained. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rental so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of acceptance of such rent. No term, covenant or condition shall be deemed to have been waived by either party unless such waiver is in writing and signed by the party making such waiver.

24.           No Accord and Satisfaction. No payment by Tenant, or receipt by Landlord, or an amount which is less than the full amount of rent and all other sums payable by Tenant hereunder at such time shall be deemed to be other than on account of (a) the earliest of such other sums due and payable, and thereafter (b) the earliest Base Rent due and payable hereunder. No endorsement or statement on any check or any letter accompanying any payment of rent or such other sums shall be deemed an accord and satisfaction. Landlord may accept any such check or payment without prejudice to Landlord’s right to receive payment of the balance of such rent and/or other sums or to Landlord’s right to pursue any remedies to which Landlord may be entitled to recover such balance.

25.           Attorneys’ Fees. If any action or proceeding at law or in equity, or an arbitration proceeding (collectively an “action”) shall be brought to recover any rent under this Lease, or for or on account of any breach of or to enforce or interpret any of the terms, covenants or conditions of this Lease, or for the recovery of possession of the Premises, the prevailing party

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shall be entitled to recover from the other party as a part of such action, or in a separate action brought for that purpose, its reasonable attorneys’ fees and costs and expenses incurred in connection with the prosecution or defense of such action (including any appeal and enforcement of any judgment or award), whether or not the dispute is litigated or prosecuted to final judgment. “Prevailing party” within the meaning of this paragraph shall include, without limitation, a party who brings an action against the other after the other is in breach or default, if such action is dismissed upon the other’s payment of the sums allegedly due for performance of the covenants allegedly breached, or if the party commencing such action obtains substantially the relief sought by it in such action, whether or not such action proceeds to a final judgment or determination.

26.           Surrender. Tenant shall, upon expiration or sooner termination of this Lease, surrender the Premises to Landlord in the same condition as existed on the Commencement Date (reasonable wear and tear, losses due to casualty and condemnation and Landlord’s repair obligations excepted) with all holes in walls repaired,  all HVAC equipment in good operating order and in good repair (reasonable wear and tear, losses due to casualty and condemnation and Landlord’s repair obligations excepted), and the Premises in broom clean condition, all to the reasonable satisfaction of Landlord. In addition, prior to the expiration or earlier termination of this Lease Tenant shall:  (a) upon Landlord’s request, remove all telephone and other cabling installed in the Building by Tenant; (b) remove from the Premises all Tenant’s personal property and trade fixtures, and all property not so removed shall be deemed abandoned by Tenant; and (c) remove all alterations that Landlord has elected to require Tenant to remove ; and Tenant shall repair any damage and perform any restoration work caused by removal of any of the foregoing items. If such removal is not completed within the time periods required herein, Landlord shall have the right (but no obligation) to remove the same and Tenant shall be liable to Landlord for costs of removal of any abandoned trade fixtures or equipment of Tenant, or of any alterations Tenant fails to remove if required by this Lease, together with the cost of returning the Premises to the condition required by this Lease, and the transportation and storage costs of such items. All keys to the Premises or any part thereof shall be surrendered to Landlord upon expiration or sooner termination of the lease term.

Normal wear and tear, for purposes of this provision, shall be construed to mean wear and tear caused to the Premises by the natural aging process that occurs in spite of application of good standards for maintenance, repair and janitorial practices. It is not intended, nor shall it be construed, to include items of neglected or deferred maintenance which should have been attended to by Tenant in accordance with the requirements of this Lease.

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27.           Holding Over. Unless Tenant exercises in a timely manner its option to extend the term, this Lease shall terminate without further notice at the expiration of the initial lease term. Any holding over after the expiration shall be at one hundred seventy five percent (175%) of the monthly Base Rent for the last month of the lease term for the first month and thereafter be at two hundred percent (200%) of the monthly Base Rent for the last month of the lease term, unless otherwise agreed in writing by Landlord, and shall otherwise be on the terms and conditions herein specified insofar as applicable, unless otherwise mutually agreed in writing by the parties. Tenant shall indemnify, defend and hold Landlord harmless from and against all claims, demands, actions, liabilities, damages, losses, costs and expenses, including reasonable attorneys’ fees, arising or resulting directly or indirectly from Tenant’s failure to timely surrender the Premises, including, without limitation, (i) any rent payable by or any loss, cost, or damages paid by Landlord to any subsequent tenant of the Premises, and (ii) Landlord’s damages as a result of a tenant terminating, a subsequent lease of the Premises by reason of such failure to timely surrender the Premises. Any holding over by Tenant after expiration shall not constitute a renewal or extension of the lease term or give Tenant any rights in or to the Premises unless otherwise expressly provided in this Lease.

28.           Transfer of Premises by Landlord. The term “Landlord” as used in this Lease, so far as the covenants or obligations on the part of Landlord are concerned, shall be limited to mean and include only the owner at the time in question of the fee title to the Premises. In the event of any transfer of such fee title, the Landlord herein named (and in case of any subsequent transfer or conveyance, the then grantor) shall after the date of such transfer or conveyance by automatically freed and relieved of all liability with respect to performance of any covenants or obligations on the part of Landlord contained in this Lease thereafter to be performed. The covenants and obligations contained in this Lease on the part of Landlord shall, subject to the foregoing, be binding upon each Landlord hereunder only during his or its respective period of ownership except for any prior uncured defaults unless Tenant failed to specify the default in an estoppel certificate requested for the benefit of such successor.

29.           General Provisions.

29.1.        Entire Agreement. This instrument including the Exhibits attached hereto contains all of the agreements and conditions made between the parties hereto and may not be modified orally or in any manner other than by an agreement in writing signed by all of the parties hereto or their respective

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successors in interest. Any executed copy of this Lease shall be deemed an original for all purposes.

29.2.        Time. Time is of the essence with respect to the performance of each and every provision of this Lease in which time of performance is a factor. All references to days contained in this Lease shall be deemed to mean calendar days unless otherwise specifically stated.

29.3.        Captions. The captions and headings of the numbered paragraphs of this Lease are inserted solely for the convenience of the parties hereto, and are not a part of this Lease and shall have no effect upon the construction or interpretation of any part hereof.

29.4.        California Law; Construction. This Lease shall be construed and interpreted in accordance with the laws of the State of California. The language in all parts of this Lease shall in all cases be construed as a whole according to its fair meaning and not strictly for or against either Landlord or Tenant, and without regard to which party prepared this Lease.

29.5.        Gender; Singular and Plural. When required by the context of this Lease, the neuter includes the masculine, the feminine, a partnership, a corporation or a joint venture, and the singular shall include the plural.

29.6.        Partial Invalidity. If any provision of this Lease is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions hereof shall nonetheless continue in full force and effect and shall in no way be affected, impaired, or invalidated thereby.

29.7.        No Warranties. Any agreements, warranties or representations not expressly contained herein shall not bind either Landlord or Tenant, and Landlord and Tenant expressly waive all claims for damages by reason of any statement, representation, warranty, promise or agreement, if any, not expressly contained in this Lease.

29.8         Tenant Representations and Warranties. Tenant hereby represents and warrants the following to Landlord:

(i)            Authority. Tenant has all requisite power and authority to execute and deliver, and to perform all of its obligations under, this Lease.

(ii)           Due Execution. This Lease and all agreements, instruments and documents herein provided to be executed or to be caused to be executed by Tenant are duly authorized, executed and delivered by Tenant.

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(iii)          Consents; No Conflict. Tenant has obtained all consents and permissions related to the transactions herein contemplated and required under any covenant, agreement, encumbrance, or applicable law. Neither this Lease nor any agreement, document or instrument executed or to be executed in connection with the same, nor anything provided in or contemplated by this Lease or any such other agreement, document or instrument, does now or shall hereafter breach, invalidate, cancel, make inoperative or interfere with, or result in the acceleration or maturity of, any agreement, document, instrument, right or interest, to which Tenant is a party.

29.9.        Successors and Assigns. The covenants and conditions herein contained, subject to the provisions as to assignment, shall apply to and bind the heirs, executors, administrators, assigns, and any other person or entity succeeding lawfully, and pursuant to the provisions of this Lease, to the rights or obligations of either of the parties hereto.

29.10.      Amendments. This Lease may be amended by written agreement of amendment executed by both parties, but not otherwise.

29.11.      Memorandum of Lease. Neither party may record this Lease or a short form memorandum hereof without the prior written consent of the other party.

29.12.      Merger. The voluntary or other surrender of this Lease, or a mutual cancellation thereof, shall not work an automatic merger, but shall, at the sole option of Landlord, either terminate all or any existing subleases or subtenancies, or operate as an assignment to Landlord of any or all of such subleases or subtenancies.

29.13.      Real Estate Brokers. Except as provided in this paragraph 29.13, each party represents that it has not had any dealings with any real estate broker, finder or other person with respect to this Lease, and each party shall hold harmless the other party from all damages, expenses, and liabilities resulting from any claims that may be asserted against the other party by any broker, finder or other person with whom the other party has dealt. Landlord and Tenant each has engaged Cornish & Carey Commercial in connection with this transaction and Landlord shall be obligated to pay any and all commissions or fees which may be due said broker in connection with this transaction pursuant to its agreement with said broker. The parties acknowledge that Cornish & Carey Commercial has disclosed that certain of its agents have ownership interests in Landlord.

29.14.      Limitation on Liability. If Tenant obtains a money judgment against Landlord resulting from any default or

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other claim arising under this Lease, such judgment shall be satisfied only out of Landlord’s interest in the Premises or out of the rents, profits, income or insurance proceeds received by Landlord with respect to its right, title and interest in the Premises. No other real, personal or mixed property of Landlord shall be subject to levy to satisfy any such judgment and Landlord shall have no personal liability under this Lease.

29.15.      Quiet Enjoyment. Landlord agrees to and shall in the commencement of this Lease place Tenant in quiet possession of the Premises and shall secure it in the quiet possession thereof against all persons lawfully claiming the same during the lease term.

29.16.      Third Party Beneficiaries. Except as otherwise expressly provided in this Lease, Landlord and Tenant do not intend by any provision of this Lease to confer any right, remedy or benefit upon any third party, and no third party shall be entitled to enforce or otherwise shall acquire any right, remedy or benefit by reason of any provision of this Lease.

29.17.      Interpretation. Each party acknowledges and agrees that this Lease: (i) has been reviewed by it and its counsel; (ii) is the product of negotiations between the parties, and (iii) shall not be deemed prepared or drafted by any one party. In the event of any dispute between the parties concerning this Lease, the parties agree that any ambiguity in the language of the Lease is to not to be resolved against Landlord or Tenant, but shall be given a reasonable interpretation in accordance with the plain meaning of the terms of this Lease and the intent of the parties as manifested hereby.

29.18.      Joint and Several Liability. If more than one person or entity is identified as Tenant hereunder, the obligations of each and all of them under this Lease shall be joint and several.

29.19.      Counterparts. This Lease may be executed in multiple counterparts, each of which shall constitute an original and all of which together shall constitute one

agreement.

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the dates specified below immediately adjacent to their respective signatures. Delivery of this Lease to Landlord, duly executed by Tenant, constitutes an offer by Tenant to lease the Premises as herein set forth, and under no circumstances shall such delivery be deemed to create an option or reservation to lease the Premises for the benefit of Tenant. This Lease

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shall only become effective and binding upon execution of this Lease by Landlord and delivery of a signed copy to Tenant.

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EXHIBITS

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PROPERTY DESCRIPTION 1020 EAST MEADOW CIRCLE

PALO ALTO, CALIFORNIA

Parcel Three, Parcel Map Recorded

April 22, 1974, Map Book 338 Page 4

Santa Clara County Records

EXHIBIT “A”

EXHIBIT “B”

WORK LETTER AGREEMENT

This Work Letter Agreement (The “Agreement”) supplements the Lease dated October 5, 2007, executed concurrently herewith by and between CALIFORNIA PACIFIC COMMERCIAL CORPORATION (“Landlord”) and ANACOR PHARMACEUTICALS, INC. (“Tenant”).

1.             General.

(a)           The purpose of this Agreement is to set forth how the Tenant Improvements (as defined in Section 4 below) in the Premises are to be constructed, who will undertake the construction of the Tenant Improvements, who will pay for the construction of the Tenant Improvements, and the procedure for preparation and Landlord’s approval of the Final Plans (as defined in Section 2 below).

(b)           Except as defined in this Agreement to the contrary, all terms used in this Agreement shall have the same meaning given them in the Lease. When work, services, consents or approvals are to be provided by or on behalf of Landlord, the term “Landlord” shall include Landlord’s agents, contractors, employees and affiliates.

(c)           The provisions of the Lease (including, without limitation, the provisions of paragraph 7), except to the extent inconsistent or inapplicable to this Agreement, are incorporated into this Agreement.

(d)           The Tenant Improvements shall be constructed pursuant to this Agreement by Tenant. Landlord shall provide the Tenant Improvement Allowance (as defined in Section 5(a) below.

(e)           Tenant shall make all Tenant Improvements to the Premises. All work done by or for Tenant on the Premises shall be in conformity with all applicable Laws. The term “Laws” as used in this Lease shall mean all laws, statutes, codes, rules or regulations applicable to the Building. Tenant shall obtain at its expense all necessary permits for construction of the Tenant Improvements.

2.             Preparation of Plans. Tenant shall arrange for the preparation of the plans and specifications for its proposed Tenant Improvements in accordance with this paragraph 2 by a licensed architect approved by Landlord, in the reasonable exercise of its discretion.

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(a)           Preparation and Approval of Preliminary Plans.

(i)            Tenant shall have prepared preliminary plans showing all of its proposed Tenant Improvements to the Premises (the “Preliminary Plans”).

(ii)           Tenant shall submit to Landlord the Preliminary Plans for Landlord’s review and approval. Within ten (10) days after Landlord receives the Preliminary Plans, Landlord shall either approve or disapprove the Preliminary Plans; provided, however, that Landlord’s approval shall not be unreasonably withheld, conditioned or delayed. In the event that Landlord disapproves the Preliminary Plans, Landlord shall return the Preliminary Plans to Tenant together with the reasons for Landlord’s disapproval (each, a “Design Problem”). Tenant shall make the changes necessary in order to correct the Design Problems and shall return the Preliminary Plans to Landlord which Landlord shall approve or disapprove within five (5) days after Landlord receives the revised Preliminary Plans. This procedure shall be repeated until the Preliminary Plans are finally approved by Landlord and written approval has been delivered to and received by Tenant.

(b)           Preparation and Approval of Working Drawings.

(i)            After the Preliminary Plans are approved by Landlord, Tenant shall submit to Landlord drawings (“Working Drawings”) which shall be compatible with the design, construction and equipment of the Building, be capable of logical measurement and construction, contain all such information as may be required for the construction of the Tenant Improvements and the permits for such Tenant Improvements and contain all plumbing locations, air conditioning system and duct work, special air conditioning requirements, reflected ceiling plans,  and special security systems, if applicable.

(ii)           Landlord shall approve the Working Drawings within ten (10) days after receipt of same or designate by notice given within such time period to Tenant the specific changes reasonably required to be made to the Working Drawings and shall return the Working Drawings to Tenant. Tenant shall make the changes necessary and shall return the Working Drawings to Landlord, which Landlord shall approve or disapprove within five (5) days after Landlord receives the revised Working Drawings. This procedure shall be repeated until all of the Working Drawings are finally approved by Landlord and written approval has been delivered to and received by Tenant. The Working Drawing so approved are referred to as the “Final Plans”.

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(iii)          Tenant shall verify, in the field, the dimensions and conditions as shown on the relevant portions of any Building plans provided by Landlord to Tenant. Tenant shall be solely responsible for the same and Landlord shall have no responsibility in connection therewith.

(c)           No Liability for Approval. Landlord’s review and approval of the Preliminary Plans, Working Drawings, the Final Plans(collectively, the “Construction Drawings”) or other documents shall be for its sole purpose and not constitute any representation or warranty by or on behalf of Landlord as to the adequacy, efficiency, suitability, fitness or desirability of any space layout or improvements or otherwise constitute assumption by Landlord of any responsibility for the accuracy or sufficiency thereof, or to be interpreted as a statement of compliance with code requirements. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its architect, engineers and consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord’s architect, engineers, and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings.

3.             Contractor. Tenant shall select a contractor (“Contractor”) subject to the approval of Landlord, which approval shall not be unreasonably withheld, delayed or conditioned. Tenant may have Landlord approve three (3) or more contractors prior to any competitive bidding. Work involving sprinkler, plumbing, mechanical, electrical power, lighting or fire safety systems of the Building shall be performed only by subcontractors approved by Landlord, which approval shall not be unreasonably withheld, delayed or conditioned.

4.             Tenant Improvements. The term “Tenant Improvements” shall mean all improvements shown in the Final Plans. The Tenant Improvements shall be constructed in accordance with the Final Plans. No material changes shall be made to the Final Plans without the prior approval of Landlord in accordance with paragraph 6 below and obtaining all requisite governmental approvals for such changes. All Tenant’s materials, work, installations and decorations of any nature brought upon or installed in the Premises before or after the Commencement Date shall be at Tenant’s risk, and neither Landlord nor any party acting on Landlord’s behalf shall be responsible for any damage thereto or loss or destruction thereof except to the extent arising from the gross negligence or willful misconduct of Landlord or any party acting on Landlord’s behalf, except as otherwise provided in the Lease. Except as provided in paragraph 5 below, all cost of construction shall be borne by Tenant. Upon completion of the Tenant Improvements, Tenant shall deliver to Landlord “as-built” plans and specifications therefor.

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5.             Tenant Improvement Allowance.

(a)         Amount. Landlord will pay to Tenant an amount equal to Three Hundred Sixty Nine Thousand Six Hundred Dollars ($369,600) (“Tenant Improvement Allowance”) as reimbursement for the costs of the construction of the Tenant Improvements, including any amount paid for design, space planning, consultants, construction drawings, laboratory construction (including the cost of purchase and installation of fume hoods), IT/wiring costs, cosmetic upgrades, office renovation and related plumbing, HVAC and electrical upgrades. No portion of the Tenant Improvement Allowance may be used for furnishings, trade fixtures, or other items or equipment (such as laboratory benches) that are that are removable by Tenant upon the expiration of the term of the Lease.

(b)           Disbursement. The Tenant Improvement Allowance shall be paid to Tenant upon substantial completion of the Tenant Improvements. As a condition precedent to the payment of the Tenant Improvement Allowance, Tenant shall have (i)substantially completed the Tenant Improvements and delivered to Landlord (A) a certification from Tenant’s architect that the Tenant Improvements have been completed substantially in accordance with the Final Plans and (B) a copy of the occupancy permit issued by the City of Palo Alto; (ii)provided Landlord with copies of paid invoices for the entire cost of the Tenant Improvements; (iii) provided Landlord with appropriate unconditional mechanic’s lien releases with respect to all of the work performed in the construction of the Tenant Improvements; and (iv) have provided evidence reasonably satisfactory to Landlord that the statutory time period for filing liens has expired and that no mechanics or other liens have been filed in connection with the construction of the Tenant Improvements.

6.             Change Orders. In the event that Tenant requests any changes to the Final Plans, Landlord shall not unreasonably withhold, delay or condition its consent to any such changes.

7.             No Fee to Landlord. Landlord shall receive no fee for supervision, administration, profit, overhead or general conditions in connection with the Tenant Improvements.

8.             Bonding. Landlord shall have the right to require the Contractor to obtain a payment and performance bond in form reasonably acceptable to Landlord in the event that the Contractor is not on the approved list attached hereto as Exhibit A.

IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date first written above.

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Exhibit “D”

Reportable Uses

Approved “Reportable Uses” are those for which the following permits are required: