Industrial Build To Suit Lease

THIS FIRST AMENDMENT TO LEASE, dated February 10, 1998, is made by and between CHESTNUT BAY LLC, a California limited liability company ("Landlord") and HEARTPORT, INC., a Delaware corporation ("Tenant") with respect to the following facts:


R E C I T A L S


A. Tenant and Landlord entered into that certain Lease agreement dated September 19, 1997, and entered into that certain Exhibit Document dated October 31, 1997 (collectively the "Lease") for premises to be constructed on real property in the State of California, City of Redwood City, County of San Mateo, commonly known as 800 Chestnut Street.


B. Tenant and Landlord desire to amend and modify the Lease to include in the Base Rent the amortized cost for shell upgrades requested by Tenant in accordance with Section 3(c) of the Lease and Section 5(b) of the Industrial Build to Suit Lease Work Letter attached as Exhibit C to the Lease.


C. Landlord intends to borrow funds from Mercantile-Safe Deposit and Trust Company ("Trustee"), in its capacity as trustee of the AFL-CIO Building Investment Trust ("Trust"), a trust existing under the laws of Maryland, and not in its corporate capacity pursuant to certain agreements (collectively, the "Loan Agreements") of even date herewith between Landlord and Trustee through which Landlord intends to borrow funds from the Trust to refinance the acquisition of the Real Property and the Adjacent Real Property, to finance the acquisition of a portion of the Adjacent Real Property, and to finance the construction of the Project and improvements on the Real Property and the Adjacent Real Property. The Tenant and Landlord desire to amend and modify the Lease to accommodate the requirements of the Trust, including expanding Tenant's protection in the event of casualty, as permitted under Section 44 of the Lease. Pursuant to Landlord's borrowing of funds from the Trust, Landlord shall enter into certain agreements with the Trust including a Deed of Trust, Security Agreement and Fixture Filing with Assignment of Rents of even date herewith to be recorded against the Property and Adjacent Real Property to secure funds to be used in part to construct the Shell Improvements (defined in the Loan Agreements as the "Phase I Loan Indenture") and a Deed of Trust, Security Agreement and Fixture Filing with Assignment of Rents of even date herewith to be recorded against the Property and Adjacent Real Property to secure funds to be used in part to construct Building II and Building III on the Adjacent Real Property (defined in the Loan Agreements as the "Phase II Loan Indenture"). The Phase I Loan Indenture and the Phase II Loan Indenture are collectively defined in the Loan Agreements and are hereinafter collectively referred to as the "Indentures". The date when the lien of the Phase I Loan Indenture is reconveyed with respect to the Adjacent Real Property and the lien of the Phase II Loan Indenture is reconveyed with


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respect to the Real Property is defined in the Loan Agreements as the "Cross Collateralization Release Date" which Loan Agreements definition shall be controlling with respect to the parties.


NOW, THEREFORE, for good and valuable consideration the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:


1. BASIC LEASE INFORMATION.


(a) INITIAL BASE RENTAL AND ADJUSTMENT TO BASE RENT DURING LEASE TERM. The Initial Base Rent Per Month set forth in the Basic Lease Information to the Lease is hereby amended to read in its entirety as follows:


Initial Base Rent Per Month ("Base Rent"): During the initial year of
the Lease Term the Base Rent shall be $1.64 per rentable square foot per
month. On the first Adjustment Date, and on each subsequent Adjustment
Date during the initial term only, the Base Rent shall be adjusted to the
sum of the following amounts: (a) $1.56 per rentable square foot as such
amount shall be adjusted pursuant to Section 3(b); plus (b) $.08 per
rentable square foot, which represents the amortized value of Tenant
requested Shell Upgrade Costs under Section 3(c). Except as provided in
the foregoing sentence no additional adjustment shall be made to the Base
Rent under: Section 3(b); or Section 3(c) except as set forth in Section
40(e) of the Lease with respect to an extension term.


(b) TENANT'S ADDRESS FOR NOTICE. The following language is hereby added to Tenant's Address for Notice as set forth in the Basic Lease Information:


Prior to Tenant's occupancy of the Premises for the conduct of Tenant's
business Tenant's address for notice shall be: Heartport, Inc., 200
Chesapeake, Redwood City, California 94063 Attn: Steve Johnson


(c) SECURITY. The Security provision set forth in the Basic Lease Information to the Lease is hereby amended to read in its entirety as follows:


Security ("Security"): Additional collateral in the form of an
irrevocable letter of credit issued by a bank reasonably acceptable to
Landlord and Landlord's lender and naming Trustee as beneficiary. The
amount of the Security and an agreement for reductions in such amount
upon Tenant's achievement of certain financial milestones, is set forth
in that certain Letter of Credit Agreement ("Letter of Credit Agreement")
executed between Trust, Landlord and Tenant of even date with the First
Amendment to Lease and incorporated into the Lease by this reference.


(d) PERMITTED USE. The following language is hereby added to Permitted Use as set forth in the Basic Lease Information:


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Tenant acknowledges and agrees that under no circumstances shall the
Premises or Common Areas be used for any use which is prohibited under
Section 8.4 of the Purchase and Sale Agreement attached to the Lease as
Exhibit I-1.


2. Section 2 TERM.


(a) Section 2(b)(i) RENTAL COMMENCEMENT DATE. The hand interlineations of the language of subsection 2(b)(i) are hereby removed such that 2(b)(i) is revised to read in its entirety as follows:


(i) One Hundred Twenty (120) days following the Commencement Date, plus
any time following the Commencement Date that Tenant's work on the Tenant
Improvements was interrupted or delayed by a Landlord Delay as defined in
Exhibit C (the "Outside Rental Commencement Date");


(b) Section 2(d) DELAYS. Subsection 2(d) of the Lease is hereby deleted in its entirety and replaced with the following:


(d) Delays. If Shell Substantial Completion has not occurred within
fifteen (15) days following the Estimated Shell Substantial Completion
Date, as it may be extended by any Unavoidable Delays (defined in Exhibit
C) and Tenant Delays, this Lease will not terminate but Tenant shall
receive a Rent credit of one day free rent for each day of delay
commencing on the sixteenth (16th) day following the Estimated Shell
Substantial Completion Date until the earlier to occur of: thirty (45)
days following the Estimated Shell Substantial Completion Date; or the
Shell Substantial Completion Date. If Shell Substantial Completion has
not occurred for forty-five (45) days after the Estimated Shell
Substantial Completion Date, as it may be extended by any Unavoidable
Delays and Tenant Delays, this Lease will not terminate but Tenant shall
receive a Rent credit of two days free rent for each day of delay
following the forty-fifth (45th) day of delay until Shell Substantial
Completion. The Rent credits provided in this Section 2(d) and Tenant's
rights under Section 2(f) shall serve as Tenant's sole and exclusive
remedy for any delay of Shell Substantial Completion. Any free rent
credits will commence on the date Rent would otherwise commence under
Section 3(a) of the Lease.


3. Section 2(f)(i) OUTSIDE SHELL COMPLETION DATE. Subsection 2(f)(i) of the Lease is hereby deleted in its entirety and replaced with the following:


(i) In the event of a Landlord election to terminate this Lease
pursuant to this subsection 2(f), and provided this Lease has not been
assigned (other than as permitted under Section 15(b) of the Lease) and
Tenant is not in default hereunder beyond any applicable cure periods,
Tenant shall have the right (the "Outside Shell Completion Date Tenant
Purchase Option"), for a period of thirty (30) days following Landlord's
termination notice, to elect to purchase the Adjacent Real Property with
all improvements constructed thereon and appurtenances thereto and the
Real Property with all completed Tenant Improvements,


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Common Area Improvements and Shell Improvements together with all
materials, equipment and other assets purchased with proceeds of the
loans secured by the Indentures whether or not incorporated into the
improvements on the Real Property or Adjacent Real Property and any
insurance proceeds or condemnation award due Landlord with respect to any
such property (collectively the "Option Property") at a purchase price
equal to the greater of: ninety percent (90%) of the Option Property's
then Fair Market Purchase Price (defined herein); or the outstanding
amounts due under the loans secured by the Indentures at the closing of
the purchase under the option, including any amounts due as a result of
Tenant's exercise of this option (the "Indentures Price"). Tenant shall
exercise such right by delivering to Landlord during said thirty day
period Tenant's proposed purchase contract which shall include reasonable
and customary terms for the acquisition of similarly situated real
property and improvements (which at a minimum shall provide for close of
escrow no later than forty-five days following the date of execution of
the agreement and shall relieve Landlord of all liability with respect to
the Option Property following close of escrow) (the "Purchase Agreement")
and shall state Tenant's proposed Fair Market Purchase Price
(collectively, "Tenant's Purchase Notice"). As used in this Section,
"Fair Market Purchase Price" shall be deemed to mean the arm's length
purchase price between parties of equal bargaining position for real
property and improvements of a similar type, design, and quality as the
Option Property, in the same or similar-quality geographic area in the
mid Peninsula, Highway 101 corridor market area in which the Premises are
situated under market conditions existing at that time in the mid
Peninsula, Highway 101 corridor market area. In determining the Fair
Market Purchase Price the parties or their appraiser(s) shall consider
cost replacement analysis, income analysis as well as sales of comparable
real property and improvements analysis for light industrial and office
purposes comparable in size, location, and type of building, age,
quality, layout and condition of the Option Property, with comparable
parking rights and landscaping. Sales of comparable property that are
not arms-length negotiated transactions (as with a tenant that owns
equity in a building) shall not be considered in determining the Fair
Market Purchase Price. The Fair Market Purchase Price shall not include
any amount attributable to Tenant's Tenant Improvements, Tenant's
Alterations (defined herein), or other improvements made or paid for by
Tenant (whether by amortization during the initial Lease Term or
otherwise), and the Fair Market Purchase Price shall take into account
whether there is any brokerage commission payable by Landlord upon sale.
It is the intention of the parties that the provisions of this Option
shall be construed so that Tenant does not pay twice for the Tenant
Improvements or Tenant Alterations paid for by Tenant. If the parties
cannot agree on the Fair Market Purchase Price of the Option Property
within thirty (30) days of Tenant's purchase notice, each party, at its
cost and by giving notice to the other party, shall, within ten (10) days
thereafter, appoint a real estate appraiser with at least five (5) years'
full-time commercial appraisal experience in the geographic area in which
the Option Property is located, to appraise and determine the then Fair
Market Purchase Price and the Fair Market Purchase Price shall be
conclusively determined as follows:


4. Section 2(g) OUTSIDE SHELL COMPLETION DATE. The first sentence of Subsection 2(g)


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of the Lease is hereby deleted and replaced with the following:


(g) After the Fair Market Purchase Price is determined, Landlord and
Tenant shall execute a Purchase Agreement with a purchase price of the
greater of: ninety percent (90%) of the Option Property's then Fair
Market Purchase Price as determined by the parties as set forth above; or
the Indentures Price. If the parties cannot agree on reasonable and
customary terms for the remaining provisions of the Purchase Agreement
within one hundred thirty (130) days of Tenant's Purchase Notice despite
diligent good faith efforts at negotiating such contract and the
determination of a Fair Market Purchase Price, each party, at its cost
and by giving notice to the other party, shall, within ten (10) days
thereafter, appoint a licensed real estate broker with at least five (5)
years' full-time commercial lease brokerage experience in the geographic
area in which the Option Property is located, who shall jointly determine
the reasonable and customary terms for remaining provisions of the
Purchase Agreement. If Landlord's appointed broker and Tenant's
appointed broker are unable to agree on the reasonable and customary
terms for remaining provisions of the Purchase Agreement within one
hundred sixty (160) days of Tenant's Purchase Notice, they shall select a
third licensed real estate broker with equivalent experience and the
three brokers shall establish the "reasonable and customary terms for
remaining provisions of the Purchase Agreement" using the same process
required of the appraisers to establish the "Fair Market Purchase Price"
under Sections 2(f)(iii) and (iv) of the Lease.


5. Section 2(h) TENANT'S CONTINUING OPTION RIGHTS. A new Section 2(h) TENANT'S PRE- CROSS COLLATERALIZATION RELEASE DATE OPTION and a new Section 2(i) TENANT'S POST CROSS COLLATERALIZATION RELEASE DATE OPTION are hereby added to the Lease to read in their entirety as follows:


2(h) Tenant's Pre- Cross Collateralization Release Date Option. In the
event that Landlord terminates the Lease pursuant to Section 12 or 13
herein prior to the date that the Cross Collateralization Release Date
and the contemplated reconveyances of the Indentures associated therewith
have occurred, and provided this Lease has not been assigned (other than
as permitted under Section 15(b) of the Lease) and Tenant is not in
default hereunder beyond any applicable cure periods, Tenant shall have
the right, for a period of thirty (30) days following Landlord's
termination notice, to elect to purchase the Option Property at a price
equal to the greater of: ninety percent (90%) of the Option Property Fair
Market Purchase Price determined for the date immediately preceding the
date of damage or destruction less Estimated Reconstruction Costs; or the
Indentures Price (the "Pre- Cross Collateralization Release Date
Option"). For purposes of this provision, "Estimated Reconstruction
Costs" shall be the amount reasonably estimated by Landlord's Contractor
and Tenant's Contractor to restore the completed Shell Improvements,
Tenant Improvements, Common Area Improvements, and any improvements
completed on the Adjacent Real Property, to their condition immediately
prior to the damage or destruction. If Landlord's Contractor and
Tenant's Contractor are unable to agree on the Estimated Reconstruction
Costs within thirty (30) days of Tenant's exercise of its Pre-Cross
Collateral


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Release Date Option Right, they shall select a third licensed contractor
with equivalent experience to Tenant's Contractor and the three
contractors shall establish the Estimated Reconstruction Costs using the
same process required of the appraisers to establish the Fair Mar ...