Exhibit 10.30

SORRENTO GATEWAY
LEASE
This Lease (the "Lease"), dated as of the date set forth in Section 1 of the
Summary of Basic Lease Information (the "Summary"), below, is made by and
between HCP LIFE SCIENCE ESTATES, INC., a Delaware corporation ("Landlord"), and
SORRENTO THERAPEUTICS, INC., a Delaware corporation ("Tenant").
SUMMARY OF BASIC LEASE INFORMATION

TERMS OF LEASE
DESCRIPTION
1. Date:
November 13, 2018
2. Premises
(Article 1).
 
2.1 Building:
That certain two (2)-story building located at 4939 Directors Place, San Diego,
California 92121.

2.2 Premises:
All of the approximately 61,207 rentable square feet of space located in the
Building (and including Tenant's Share of that certain 2,454 rentable square
feet of space located in the ancillary amenities building within the Project and
Tenant shall have the right to access and use such amenities to the same extent
as the other tenants of the Project), as further set forth in Exhibit A to the
Lease.

3. Lease Term
(Article 2).
 
3.1 Length of Term:

Ten (10) years and seven (7) months.
3.2 Lease Commencement
Date:

April 1, 2019.
3.3 Lease Expiration Date:
October 31, 2029.

4. Base Rent (Article 3):
 
Lease Months
Annual
Base Rent
Monthly
Installment
of Base Rent*
Approximate
Monthly Base
Rent per Rentable
Square Foot
1-12**
$2,607,418.20
$217,284.85
$3.55
13-24
$2,685,640.80
$223,803.40
$3.66
25-36
$2,766,210.00
$230,517.50
$3.77
37-48
$2,849,196.24
$237,433.02
$3.88
49-60
$2,934,672.12
$244,556.01
$4.00
61-72
$3,022,712.28
$251,892.69
$4.12
73-84
$3,113,393.64
$259,449.47
$4.24
85-96
$3,206,795.52
$267,232.96
$4.37
97-108
$3,302,999.40
$275,249.95
$4.50
109-120
$3,402,089.40
$283,507.45
$4.63

 
 
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

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121-
Lease Expiration Date
$3,504,152.04
$292,012.67
$4.77
*The calculation of the Monthly Installment of Base Rent reflects an annual
increase of 3%, rounded to the nearest cent, after every twelve (12) Lease Month
period.
**Tenant's obligation to pay the Monthly Installment of Base Rent otherwise
attributable to the Premises shall be subject to the terms and conditions of
Section 3.2 of this Lease.
5. Tenant Improvement Allowance (Exhibit B):
An amount equal to $6,120,700.00 (i.e., an amount equal to $100.00 per rentable
square feet in the Premises); provided, however, the foregoing amount may be
increased by up to an additional $25.00 per rentable square foot of the Premises
in accordance with the terms and conditions of Sections 2.1.2,
2.1.3 and 2.1.4 of the Tenant Work Letter.
6. Tenant's Share
(Article 4):

One hundred percent (100%).
7. Permitted Use
(Article 5):
The Premises shall be used only for general office, research and development,
manufacturing and/or laboratory uses, including, but not limited to,
administrative offices and other lawful uses reasonably related to or incidental
to such specified uses, all (i) consistent with first class life sciences
projects in San Diego, California ("First Class Life Sciences Projects"), and
(ii) in compliance with, and subject to, applicable laws and the terms of this
Lease.
8. Letter of Credit
(Article 21):
$353,209.67
9. Parking
(Article 28):
Provided Tenant is the tenant under the "4955 DP Lease," as that term is defined
in Section 1.1.2 of the Lease, and the 4955 DP Lease remains in full force and
effect, then Tenant shall have the exclusive use of all parking areas within the
Project.
10. Address of Tenant
(Section 29.18):
 
Sorrento Therapeutics, Inc.
4955 Directors Place
San Diego, California 92121
Attention: Jiong Shao, CFO
11. Address of Landlord
(Section 29.18):
 
See Section 29.18 of the Lease.
12. Broker(s)
(Section 29.24):

 Representing Tenant: Avison Young
and

 
Representing Landlord: CBRE

 
2
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

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1.    PREMISES, BUILDING, PROJECT, AND COMMON AREAS
1.1    Premises, Building, Project and Common Areas.
1.1.1    The Premises. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the premises set forth in Section 2.2 of the Summary (the
"Premises"). The outline of the Premises is set forth in Exhibit A attached
hereto. The outline of the "Building" and the "Project," as those terms are
defined in Section 1.1.2 below, are further depicted on the Site Plan attached
hereto as Exhibit A-1. The parties hereto agree that the lease of the Premises
is upon and subject to the terms, covenants and conditions herein set forth, and
Tenant covenants as a material part of the consideration for this Lease to keep
and perform each and all of such terms, covenants and conditions by it to be
kept and performed and that this Lease is made upon the condition of such
performance. The parties hereto hereby acknowledge that the purpose of Exhibit A
is to show the approximate location of the Premises only, and such Exhibit is
not meant to constitute an agreement, representation or warranty as to the
construction of the Premises, the precise area thereof or the specific location
of the "Common Areas," as that term is defined in Section 1.1.3, below, or the
elements thereof or of the accessways to the Premises or the "Project," as that
term is defined in Section 1.1.2, below. Except as specifically set forth in
this Lease and in the Tenant Work Letter attached hereto as Exhibit B (the
"Tenant Work Letter"), Landlord shall not be obligated to provide or pay for any
improvement work or services related to the improvement of the Premises. Tenant
also acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty regarding the condition of the Premises, the Building
or the Project or with respect to the suitability of any of the foregoing for
the conduct of Tenant's business, except as specifically set forth in this Lease
and the Tenant Work Letter. Subject to the terms and conditions of this Lease
and the Tenant Work Letter, the taking of possession of the Premises by Tenant
shall conclusively establish that the Premises and the Building were at such
time in good and sanitary order, condition and repair. Subject to "Applicable
Laws," as that term is defined in Article 24 of this Lease, and the other
provisions of this Lease, and except in the event of an emergency, Tenant shall
have access to the Premises twenty-four (24) hours per day, seven (7) days per
week, every day of the year.
1.1.2    The Building and The Project. The Premises constitutes the entire
building set forth in Section 2.1 of the Summary (the "Building"). The Building
is part of an office-building project commonly known as "Sorrento Gateway." The
term "Project," as used in this Lease, shall mean (i) the Building and the
Common Areas, (ii) the land (which is improved with landscaping, parking
facilities and other improvements) upon which the Building and the Common Areas
are located, (iii) the other building located at 4955 Directors Place, San Diego
(the "4955 DP Building"), which 495 DP Building is located adjacent to the
Building and the land upon which such 4955 DP Building is located, and (iv) at
Landlord's discretion, any additional real property, areas, land, buildings or
other improvements added thereto outside of the Project. Landlord and Tenant
hereby acknowledge that the 4955 DP Building is leased in its entirety to Tenant
pursuant to that certain Lease by and between HCP LIFE SCIENCE REIT, INC., a
Maryland corporation, an affiliate of Landlord (the "Affiliate Landlord") and
Tenant, dated September 8, 2016 (the "4955 DP Lease").
1.1.3    Common Areas. Tenant shall have the non-exclusive right to use in
common with other tenants in the Project, and subject to the rules and
regulations referred to in Article 5 of this Lease, those portions of the
Project which are provided, from time to time, for use in common by Landlord,
Tenant and any other tenants of the Project (such areas, together with such
other portions of the Project designated by Landlord, in its discretion, are
collectively referred to herein as the "Common Areas"). The manner in which the
Common Areas are maintained and operated shall be at the sole discretion of
Landlord and the use thereof shall be subject to such rules, regulations and
restrictions as Landlord may make from time to time. Landlord reserves the right
to close temporarily, make alterations or additions to, or change the location
of elements of the Project and the Common Areas. Notwithstanding the foregoing,
Landlord and Tenant acknowledge that there are currently no Common Areas within
the Building as Tenant is the only tenant within the Building as of the date of
this Lease.
1.1.4    Condition of Building Systems. Notwithstanding anything set forth in
Section 1.1.1, above, to the contrary, Landlord shall cause the "Building
Systems," as that term is defined in Section 7, below, which serve the Premises
to be in good working condition and repair upon the Lease Commencement Date. The
foregoing shall

 
 
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

not be deemed to require Landlord to replace any of the Building Systems, as
opposed to repair any Building Systems, unless and to the extent the repair of
such Building Systems, or portion thereof, would not be commercially reasonable
under the circumstances. In addition, Landlord hereby covenants that the
Building Systems serving the Premises (the "Warrantied Item") shall remain in
good working condition for a period of twelve (12) months following the Lease
Commencement Date.  Notwithstanding anything in this Lease to the contrary,
Landlord shall, at Landlord's sole cost and expense (which shall not be deemed
an "Operating Expense," as that term is defined in Article 4), repair or replace
any portion of the Warrantied Item during such twelve (12) month period which is
not in good working condition ("Landlord’s 12 Month Warranty"), provided that
(i) the need to repair or replace was not caused (A) by the misuse, misconduct,
damage, destruction, omissions, and/or negligence of Tenant, its subtenants
and/or assignees, if any, or any company which is acquired, sold or merged with
Tenant (collectively, "Tenant Damage"), or (B) by any modifications, Alterations
or improvements constructed by or on behalf of Tenant, and (ii) Landlord has
reasonably approved Tenant's Building Systems vendors ("Building Systems
Vendors") and corresponding maintenance operating plans ("Maintenance Plans")
and such Building Systems Vendor conducts quarterly inspections in compliance
with the Maintenance Plan. Landlord's 12 Month Warranty shall not extend to the
costs of normal and customary preventive maintenance relating to the Warrantied
Item. To the extent repairs which Landlord is required to make pursuant to this
Section 1.1.4 are necessitated in part by Tenant Damage, then Tenant shall
reimburse Landlord for an equitable proportion of the cost of such repair.  If
it is determined that the Warrantied Item was not in good working condition and
repair as of the Lease Commencement Date, Landlord shall not be liable to Tenant
for any damages, but, subject to Section 19.5.2, below, as Tenant's sole remedy,
Landlord, at no cost to Tenant, shall promptly commence such work or take such
other action as may be necessary to place the same in good working condition and
repair, and shall thereafter diligently pursue the same to completion. The
parties hereto acknowledge and agree that the terms of this Section 1.1.4 does
not affect Landlord’s obligations to repair and maintain the Building, including
without limitation, the "Landlord Repair Obligation", pursuant to the express
terms and conditions of Section 7.4 of this Lease.
1.2    Rentable Square Feet of Premises. The rentable square footage of the
Premises is hereby deemed to be as set forth in Section 2.2 of the Summary, and
shall not be subject to measurement or adjustment during the Lease Term.
1.3    Right of First Offer. If Landlord elects in its sole discretion to
commence construction of a new building in the portion of the Project set forth
on Exhibit A-2. attached hereto (a "Landlord Spec Building"), prior to Landlord
having an agreed upon term sheet or binding lease agreement with a tenant to
lease all or a portion of the Landlord Spec Building, then Landlord hereby
grants to the originally named Tenant herein ("Original Tenant"), and any
assignee of Original Tenant's entire interest in the Lease pursuant to the terms
of Section 14.8, below (a “Permitted Assignee”), a one-time right of first offer
with respect to any space becoming available in the Landlord Spec Building (the
"First Offer Space"). Tenant's right of first offer shall be on the terms and
conditions set forth in this Section 1.3.
1.3.1    Procedure for Offer. If Tenant's first of first offer is applicable
pursuant to the terms of Section 1.3, above, then prior to leasing all or any
portion of the First Offer Space to any third party, Landlord shall notify
Tenant (a "First Offer Notice") when the First Offer Space or any portion
thereof becomes available (or Landlord reasaonbly anticipates that it will
become available) for lease to third parties. A First Offer Notice shall
describe the space so offered to Tenant. The rentable square footage of the
space so offered to Tenant shall be as set forth in the First Offer Notice.
1.3.2    Procedure for Acceptance. If Tenant wishes to exercise its right of
first offer with respect to the space described in a First Offer Notice, then
within ten (10) days of delivery of such First Offer Notice to Tenant (“Offer
Exercise Period”), Tenant shall deliver notice to Landlord of Tenant's intention
to exercise its right of first offer with respect to the entire space described
in such First Offer Notice. If Tenant timely exercises its right of first offer
as set forth herein, Landlord and Tenant shall, within five (5) business days
after Landlord's receipt of Tenant's notice, meet and discuss the lease of the
space described in such First Offer Notice from Landlord to Tenant (the "First
Offer Meeting"). If Landlord and Tenant do not reach agreement as to the
material economic terms of the lease of such space within five (5) business days
after the First Offer Meeting (the "First Offer Negotiation Period"), then
Tenant shall have the right to irrevocably exercise its option to lease the
space described in the First Offer Notice but have the material economic terms
of the lease of such space determined pursuant to the terms of Section 2.2.3 of
this Lease, below, by delivering written notice of such exercise (the
"Irrevocable Exercise Notice") to Landlord prior to

 
4
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

the expiration of the First Offer Negotiation Period. If Landlord and Tenant do
not reach agreement as to the material economic terms of the lease of such space
prior to the expiration of the First Offer Negotiation Period and Tenant fails
to timely deliver an Irrevocable Exercise Notice, then Tenant will not be
required to lease the First Offer Space and Landlord, in its sole and absolute
discretion, shall have the right to terminate negotiations with Tenant and to
lease the space described in the First Offer Notice to anyone whom Landlord
desires on any terms which Landlord desires. Notwithstanding anything to the
contrary contained herein, Tenant must elect to exercise its right of first
offer, if at all, with respect to all of the space offered by Landlord to Tenant
at any particular time, and Tenant may not elect to lease only a portion
thereof. If Tenant does not exercise its right of first offer with respect to
any space described in a First Offer Notice or if Tenant fails to respond to a
First Offer Notice prior to the expiration of the Offer Exercise Period, then
Tenant's right of first offer as set forth in this Section 1.3 shall terminate
as to the space set forth in the First Offer Notice.
1.3.3    First Offer Space Rent. The annual "Rent," as that term is defined in
Section 4.1 of this Lease, payable by Tenant for the First Offer Space (the
"First Offer Rent") shall be equal to the Rent agreed between Landlord and
Tenant, or, if Tenant timely delivers an Irrevocable Exercise Notice, then the
"Fair Rental Value," as that term is defined in Section 2.2.2 of this Lease, for
the First Offer Space, as of the "First Offer Commencement Date," as that term
is defined in Section 1.3.5 of this Lease.
1.3.4    Construction In First Offer Space. Tenant shall accept the First Offer
Space in its then existing "as is" condition. The construction of improvements
in the First Offer Space shall comply with the terms of Article 8 of this Lease.
1.3.5    Amendment to Lease. If Tenant timely exercises Tenant's right to lease
First Offer Space as set forth herein, then, within thirty (30) days thereafter,
Landlord and Tenant shall execute an amendment to this Lease for such First
Offer Space upon the terms and conditions as set forth in the First Offer Notice
therefor and this Section 1.3; provided, however that if the First Offer Rent
has not been determined at the time the parties enter into such lease amendment,
then Tenant shall pay rent for the First Offer Space in accordance with the
terms of Section 2.2.3.8 below. Notwithstanding the foregoing, the failure of
Landlord and Tenant to execute and deliver such First Offer Space amendment
shall not affect an otherwise valid exercise of Tenant’s first offer rights or
the parties’ rights and responsibilities in respect thereof. Tenant shall
commence payment of Rent for such First Offer Space, and the term of such First
Offer Space shall commence, upon the date of delivery of such First Offer Space
to Tenant (the "First Offer Commencement Date") and terminate on the date set
forth in the First Offer Notice therefor.
1.3.6    Termination of Right of First Offer. The rights contained in this
Section 1.3 shall be personal to Original Tenant and any Permitted Assignee, and
may only be exercised by Original Tenant or a Permitted Assignee (and not by any
other assignee, sublessee or "Transferee," as that term is defined in
Section 14.1 of this Lease, of Tenant's interest in this Lease) if Original
Tenant or Permitted Assignee, as applicable, occupies not less than seventy-five
percent (75%) of the Premises. Tenant shall not have the right to lease First
Offer Space, as provided in this Section 1.3, if, as of the date of the
attempted exercise of any right of first offer by Tenant, or as of the scheduled
date of delivery of such First Offer Space to Tenant, Tenant is in default under
this Lease or Tenant has previously been in default under this Lease more than
twice during the immediately preceding twelve (12) month period.

2.        LEASE TERM; OPTION TERM
2.1    Lease Term. The terms and provisions of this Lease shall be effective as
of the date of this Lease. The term of this Lease (the "Lease Term") shall be as
set forth in Section 3.1 of the Summary, shall commence on the date set forth in
Section 3.2 of the Summary (the "Lease Commencement Date"), and shall terminate
on the date set forth in Section 3.3 of the Summary (the "Lease Expiration
Date") unless this Lease is sooner terminated as hereinafter provided. For
purposes of this Lease, the term "Lease Month" shall mean each monthly period
during the Lease Term; provided that the first (1st) Lease Month of the Lease
Term shall commence on the Lease Commencement Date and end on the last day of
the first (1st) full calendar month of the Lease Term, and the last Lease Month
shall end on the Lease Expiration Date; and provided further that, if
applicable, the first (1st) Lease Month of the Option Term shall commence on the
first (1st) day of the Option Term and end on the last day of the first (1st)
full calendar month of the Option Term, and the last Lease Month of the Option
Term shall end on the last day of the Option Term. At any time during the Lease
Term, Landlord may deliver to Tenant a notice in the form as set forth in
Exhibit C, attached hereto,

 
5
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

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as a confirmation only of the information set forth therein, which Tenant shall
execute and return to Landlord within five (5) days of receipt thereof.
2.2    Option Term.
2.2.1    Option Right. Landlord hereby grants the Original Tenant, and any
Permitted Assignee, one (1) option to extend the Lease Term for a period of five
(5) years (the “Option Term”). Such option to extend shall be exercisable only
by written notice delivered by Tenant to Landlord not more than fifteen (15)
months nor less than twelve (12) months prior to the expiration of the initial
Lease Term, stating that Tenant is thereby irrevocably exercising its option to
lease the Premises during the Option Term. Upon the proper exercise of the
option to extend, and provided that, at Landlord’s option, as of the date of
delivery of such notice, Tenant is not in default under this Lease and has not
previously been in default under this Lease more than twice during the preceding
twelve (12) month period, and as of the end of the initial Lease Term, Tenant is
not in default under this Lease, the Lease Term shall be extended for a period
of five (5) years. The rights contained in this Section 2.2 shall be personal to
Original Tenant and any Permitted Assignee (and not any other assignee,
sublessee or “Transferee,” as that term is defined in Section 14.1, below, of
Tenant’s interest in this Lease).
2.2.2    Option Rent. The annual Rent payable by Tenant during the Option Term
(the "Option Rent") shall be equal to (i) the "Fair Rental Value," as that term
is defined below, for the Premises as of the commencement date of the Option
Term for the first year of the Option Term (i.e., November 1, 2029 – October 31,
2030), and (ii) one hundred three percent (103%) of the prior year's Option Rent
for each subsequent year of the Option Term. The "Fair Rental Value," as used in
this Lease, shall be equal to the annual rent per rentable square foot
(including additional rent and considering any "base year" or "expense stop"
applicable thereto), including all escalations, at which tenants (pursuant to
leases consummated within the twelve (12) month period preceding the first day
of the Option Term), are leasing non-sublease, non-encumbered, non-equity space
which is not significantly greater or smaller in size than the subject space,
for a comparable lease term, in an arm's length transaction, which comparable
space is located in the "Comparable Buildings," as that term is defined in this
Section 2.2.2, below (transactions satisfying the foregoing criteria shall be
known as the "Comparable Transactions"), taking into consideration the following
concessions (the "Concessions"): (a) rental abatement concessions, if any, being
granted such tenants in connection with such comparable space; (b) tenant
improvements or allowances provided or to be provided for such comparable space,
and taking into account the value, if any, of the existing improvements in the
subject space, such value to be based upon the age, condition, design, quality
of finishes and layout of the improvements; and (c) other reasonable monetary
concessions being granted such tenants in connection with such comparable space;
provided, however, that in calculating the Fair Rental Value, no consideration
shall be given to any period of rental abatement, if any, granted to tenants in
comparable transactions in connection with the design, permitting and
construction of tenant improvements in such comparable spaces. The Fair Rental
Value shall additionally include a determination as to whether, and if so to
what extent, Tenant must provide Landlord with financial security, such as a
letter of credit or guaranty, for Tenant's Rent obligations in connection with
Tenant's lease of the Premises during the Option Term. Such determination shall
be made by reviewing the extent of financial security then generally being
imposed in Comparable Transactions from tenants of comparable financial
condition and credit history to the then existing financial condition and credit
history of Tenant (with appropriate adjustments to account for differences in
the then-existing financial condition of Tenant and such other tenants). The
Concessions (A) shall be reflected in the effective rental rate (which effective
rental rate shall take into consideration the total dollar value of such
Concessions as amortized on a straight-line basis over the applicable term of
the Comparable Transaction (in which case such Concessions evidenced in the
effective rental rate shall not be granted to Tenant)) payable by Tenant, or
(B) at Landlord’s election, all such Concessions shall be granted to Tenant in
kind. The term “Comparable Buildings” shall mean those first-class laboratory
and R&D buildings located in the Sorrento Mesa Area of San Diego, California
that are comparable in age (based on the date of original construction or the
latest major renovation) location, quality of construction, services and
amenities.
2.2.3    Determination of Option Rent. In the event Tenant timely and
appropriately exercises an option to extend the Lease Term, Landlord shall
notify Tenant of Landlord's determination of the Option Rent on or before the
Lease Expiration Date. If Tenant, on or before the date which is thirty (30)
days following the date upon which Tenant receives Landlord's determination of
the Option Rent, in good faith objects to Landlord's determination of the Option
Rent, then Landlord and Tenant shall attempt to agree upon the Option Rent using
their best good-faith

 
6
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

efforts. If Landlord and Tenant fail to reach agreement within thirty (30) days
following Tenant's objection to the Option Rent (the "Outside Agreement Date"),
or if Tenant timely delivers an Irrevocable Exercise Notice to Landlord pursuant
to the terms of Section 1.3.2, above, then each party shall make a separate
determination of the Option Rent (or First Offer Rent, as the case may be),
within five (5) days, and such determinations shall be submitted to arbitration
in accordance with Sections 2.2.3.1 through 2.2.3.7, below. If Tenant fails to
object to Landlord's determination of the Option Rent within the time period set
forth herein, then Tenant shall be deemed to have accepted Landlord's
determination of Option Rent.
2.2.3.1    Landlord and Tenant shall each appoint one arbitrator who shall be,
at the option of the appointing party, a real estate broker, appraiser or
attorney who shall have been active over the five (5) year period ending on the
date of such appointment in the leasing or appraisal, as the case may be, of
commercial office properties in North San Diego, California. The determination
of the arbitrators shall be limited solely to the issue of whether Landlord's or
Tenant's submitted Option Rent (or First Offer Rent, as the case may be) is the
closest to the actual Option Rent (or First Offer Rent, as the case may be),
taking into account the requirements of Section 2.2.2 of this Lease, as
determined by the arbitrators. Each such arbitrator shall be appointed within
fifteen (15) days after the Outside Agreement Date. Landlord and Tenant may
consult with their selected arbitrators prior to appointment and may select an
arbitrator who is favorable to their respective positions. The arbitrators so
selected by Landlord and Tenant shall be deemed "Advocate Arbitrators."
2.2.3.2    The two (2) Advocate Arbitrators so appointed shall be specifically
required pursuant to an engagement letter within ten (10) days of the date of
the appointment of the last appointed Advocate Arbitrator to agree upon and
appoint a third arbitrator ("Neutral Arbitrator") who shall be qualified under
the same criteria set forth hereinabove for qualification of the two Advocate
Arbitrators, except that neither the Landlord or Tenant or either parties'
Advocate Arbitrator may, directly or indirectly, consult with the Neutral
Arbitrator prior or subsequent to his or her appearance. The Neutral Arbitrator
shall be retained via an engagement letter jointly prepared by Landlord's
counsel and Tenant’s counsel.
2.2.3.3    The three arbitrators shall, within thirty (30) days of the
appointment of the Neutral Arbitrator, reach a decision as to whether the
parties shall use Landlord's or Tenant's submitted Option Rent (or First Offer
Rent, as the case may be), and shall notify Landlord and Tenant thereof.
2.2.3.4    The decision of the majority of the three arbitrators shall be
binding upon Landlord and Tenant.
2.2.3.5    If either Landlord or Tenant fails to appoint an Advocate Arbitrator
within fifteen (15) days after the Outside Agreement Date, then either party may
petition the presiding judge of the Superior Court of San Diego County to
appoint such Advocate Arbitrator subject to the criteria in Section 2.2.3.1 of
this Lease, or if he or she refuses to act, either party may petition any judge
having jurisdiction over the parties to appoint such Advocate Arbitrator.
2.2.3.6    If the two (2) Advocate Arbitrators fail to agree upon and appoint
the Neutral Arbitrator, then either party may petition the presiding judge of
the Superior Court of San Diego County to appoint the Neutral Arbitrator,
subject to criteria in Section 2.2.3.2 of this Lease, or if he or she refuses to
act, either party may petition any judge having jurisdiction over the parties to
appoint such arbitrator.
2.2.3.7    The cost of the arbitration shall be paid by Landlord and Tenant
equally.
2.2.3.8    In the event that the Option Rent (or First Offer Rent, as the case
may be) shall not have been determined pursuant to the terms hereof prior to the
commencement of the Option Term (or the First Offer Commencement Date, as the
case may be), Tenant shall be required to pay the Option Rent (or First Offer
Rent, as the case may be) initially provided by Landlord to Tenant, and upon the
final determination of the Option Rent (or First Offer Rent, as the case may
be), the payments made by Tenant shall be reconciled with the actual amounts of
Option Rent (or First Offer Rent, as the case may be) due, and the appropriate
party shall make any corresponding payment to the other party.

 
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2.3    Beneficial Occupancy. Tenant shall have the right to occupy the Premises
(or certain portions of the Premises) to conduct its business prior to the Lease
Commencement Date, provided that (A) Tenant shall give Landlord at least ten
(10) days' prior notice of any such occupancy of the Premises, (B) a temporary
certificate of occupancy, or its legal equivalent allowing legal occupancy of
the Premises, shall have been issued by the appropriate governmental authorities
for each such portion to be occupied, and (C) all of the terms and conditions of
the Lease shall apply, other than Tenant's obligation to pay "Base Rent" (as
that term is defined in Article 3 below) as though the Lease Commencement Date
had occurred (although the Lease Commencement Date shall not actually occur
until the occurrence of the same pursuant to the terms of the second sentence of
Section 2.1, above) upon such occupancy of a portion of the Premises by Tenant.
If, and only if, Tenant is, in fact, occupying the Premises (and not merely
performing improvements, fixturizing, testing or moving into the Premises), then
Tenant shall be required to pay any direct charges (such as utilities), and
"Tenant's Share" of the annual "Direct Expenses" (as those terms are defined in
Article 4 , below).

3.        BASE RENT    
3.1    In General. Tenant shall pay, without prior notice or demand, to Landlord
or Landlord's agent at the management office of the Project, or, at Landlord's
option, at such other place as Landlord may from time to time designate in
writing, by a check for currency which, at the time of payment, is legal tender
for private or public debts in the United States of America, base rent ("Base
Rent") as set forth in Section 4 of the Summary, payable in equal monthly
installments as set forth in Section 4 of the Summary in advance on or before
the first day of each and every calendar month during the Lease Term, without
any setoff or deduction whatsoever. The Base Rent and the estimated "Tenant's
Share" of "Direct Expenses," as those terms are defined in Article 4, below, for
the first full month of the Lease Term shall be paid at the time of Tenant's
execution of this Lease. If any Rent payment date (including the Lease
Commencement Date) falls on a day of the month other than the first day of such
month or if any payment of Rent is for a period which is shorter than one month,
the Rent for any fractional month shall accrue on a daily basis for the period
from the date such payment is due to the end of such calendar month or to the
end of the Lease Term at a rate per day which is equal to 1/365 of the
applicable annual Rent. All other payments or adjustments required to be made
under the terms of this Lease that require proration on a time basis shall be
prorated on the same basis.
3.2    Abated Base Rent. Notwithstanding any provision to the contrary contained
in Section 3.1 above, provided that Tenant is not in default under this Lease,
Tenant shall be entitled to an abatement (the "Base Rent Abatement") of one
hundred percent (100%) of the Base Rent otherwise due for the Premises during
the second (2nd), third (3rd), fourth (4th), fifth (5th), sixth (6th), seventh
(7th) and eighth (8th) full calendar months of the Lease Term (collectively, the
"Base Rent Abatement Period"), for a total Base Rent Abatement amount equal to
$1,520,993.95 in the aggregate. Tenant acknowledges and agrees that during such
Base Rent Abatement Period, such abatement of Base Rent shall have no effect on
the calculation of any Direct Expenses payable by Tenant pursuant to the terms
of this Lease, which Direct Expenses shall be payable during the Base Rent
Abatement Period without regard to the Base Rent Abatement. The Base Rent
Abatement right set forth in this Section 3.2 has been granted to Tenant as
additional consideration for Tenant’s agreement to enter into this Lease and
comply with the terms and conditions otherwise required under this Lease. If
Tenant shall be in default under this Lease, or if this Lease is terminated for
any reason other than Landlord's breach of this Lease, then the dollar amount of
the unapplied portion of the Base Rent Abatement as of the date of such default
or termination, as the case may be, shall be converted to a credit to be applied
to the Base Rent applicable at the end of the Lease Term and Tenant shall
immediately be obligated to begin paying Base Rent for the Premises in full.

4.        ADDITIONAL RENT
4.1    General Terms.
4.1.1    Direct Expenses; Additional Rent. In addition to paying the Base Rent
specified in Article 3 of this Lease, Tenant shall pay "Tenant's Share" of the
annual "Direct Expenses," as those terms are defined in Sections 4.2.6 and 4.2.2
of this Lease, respectively. Such payments by Tenant, together with any and all
other amounts payable by Tenant to Landlord pursuant to the terms of this Lease,
are hereinafter collectively referred to as the "Additional Rent", and the Base
Rent and the Additional Rent are herein collectively referred to as "Rent." All
amounts due under this Article 4 as Additional Rent shall be payable for the
same periods and in the same manner as the Base

 
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Rent. Without limitation on other obligations of Tenant which survive the
expiration of the Lease Term, the obligations of Tenant to pay the Additional
Rent provided for in this Article 4 shall survive the expiration of the Lease
Term.
4.1.2    Triple Net Lease. Landlord and Tenant acknowledge that, except as
otherwise provided to the contrary in this Lease, it is their intent and
agreement that this Lease be a "TRIPLE NET" lease and that as such, the
provisions contained in this Lease are intended to pass on to Tenant or
reimburse Landlord for the costs and expenses reasonably associated with this
Lease, the Building and the Project, and Tenant's operation therefrom. To the
extent such costs and expenses payable by Tenant cannot be charged directly to,
and paid by, Tenant, such costs and expenses shall be paid by Landlord but
reimbursed by Tenant as Additional Rent.
4.2    Definitions of Key Terms Relating to Additional Rent. As used in this
Article 4, the following terms shall have the meanings hereinafter set forth:
4.2.1    Intentionally Deleted.
4.2.2    "Direct Expenses" shall mean "Operating Expenses" and "Tax Expenses."
4.2.3    "Expense Year" shall mean each calendar year in which any portion of
the Lease Term falls, through and including the calendar year in which the Lease
Term expires, provided that Landlord, upon notice to Tenant, may change the
Expense Year from time to time to any other twelve (12) consecutive month
period, and, in the event of any such change, Tenant's Share of Direct Expenses
shall be equitably adjusted for any Expense Year involved in any such change.
4.2.4    "Operating Expenses" shall mean all expenses, costs and amounts of
every kind and nature which Landlord pays or accrues during any Expense Year
because of or in connection with the ownership, management, maintenance,
security, repair, replacement, restoration or operation of the Project, or any
portion thereof. Without limiting the generality of the foregoing, Operating
Expenses shall specifically include any and all of the following: (i) the cost
of supplying all utilities, the cost of operating, repairing, maintaining, and
renovating the utility, telephone, mechanical, sanitary, storm drainage, and
elevator systems, and the cost of maintenance and service contracts in
connection therewith; (ii) the cost of licenses, certificates, permits and
inspections and the cost of contesting any governmental enactments which may
affect Operating Expenses, and the costs incurred in connection with a
governmentally mandated transportation system management program or similar
program; (iii) the cost of all insurance carried by Landlord in connection with
the Project and Premises as reasonably determined by Landlord; (iv) the cost of
landscaping, relamping, and all supplies, tools, equipment and materials used in
the operation, repair and maintenance of the Project, or any portion thereof;
(v) the cost of parking area operation, repair, restoration, and maintenance;
(vi) fees and other costs, including management and/or incentive fees,
consulting fees, legal fees and accounting fees, of all contractors and
consultants in connection with the management, operation, maintenance and repair
of the Project; (vii) payments under any equipment rental agreements and the
fair rental value of any management office space; (viii) subject to item (f),
below, wages, salaries and other compensation and benefits, including taxes
levied thereon, of all persons engaged in the operation, maintenance and
security of the Project; (ix) costs under any instrument pertaining to the
sharing of costs by the Project; (x) operation, repair, maintenance and
replacement of all systems and equipment and components thereof of the Project;
(xi) the cost of janitorial, alarm, security and other services, replacement of
wall and floor coverings, ceiling tiles and fixtures in common areas,
maintenance and replacement of curbs and walkways, repair to roofs and
re-roofing; (xii) amortization (including interest on the unamortized cost) over
the reasonable useful life of such item as Landlord shall reasonably determine
in accordance with sound real estate management and accounting principles,
consistently applied, of the cost of acquiring or the rental expense of personal
property used in the maintenance, operation and repair of the Project, or any
portion thereof; (xiii) the cost of capital improvements or other costs incurred
in connection with the Project (A) which are intended to effect economies in the
operation or maintenance of the Project, or any portion thereof, or to reduce
current or future Operating Expenses or to enhance the safety or security of the
Project or its occupants, (B) that are required to comply with present or
anticipated conservation programs, (C) which are replacements or modifications
of nonstructural items located in the Common Areas required to keep the Common
Areas in good order or condition, or (D) that are required under any
governmental law or regulation; provided, however, that any capital expenditure
shall be amortized (including interest on the amortized cost) over its
reasonable useful life as Landlord shall reasonably determine in accordance with
sound real estate

 
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management and accounting principles, consistently applied; and (xiv) costs,
fees, charges or assessments imposed by, or resulting from any mandate imposed
on Landlord by, any federal, state or local government for fire and police
protection, trash removal, community services, or other services which do not
constitute "Tax Expenses" as that term is defined in Section 4.2.5, below,
(xv) cost of tenant relation programs reasonably established by Landlord, and
(xvi) payments under any easement, license, operating agreement, declaration,
restrictive covenant, or instrument pertaining to the sharing of costs by the
Building, including, without limitation, any covenants, conditions and
restrictions affecting the property, and reciprocal easement agreements
affecting the property, any parking licenses, and any agreements with transit
agencies affecting the Property (collectively, "Underlying Documents").
Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses
shall not, however, include:
(a)    costs, including legal fees, space planners' fees, advertising and
promotional expenses (except as otherwise set forth above), and brokerage fees
incurred in connection with the original construction or development, or
original or future leasing of the Project, and costs, including permit, license
and inspection costs, incurred with respect to the installation of tenant
improvements made for new tenants initially occupying space in the Project after
the Lease Commencement Date or incurred in renovating or otherwise improving,
decorating, painting or redecorating vacant space for tenants or other occupants
of the Project (excluding, however, such costs relating to any common areas of
the Project or parking facilities);
(b)    except as set forth in items (xii), (xiii), and (xiv) above,
depreciation, interest and principal payments on mortgages and other debt costs,
if any, penalties and interest;
(c)    costs for which the Landlord is reimbursed by any tenant or occupant of
the Project or by insurance by its carrier or any tenant's carrier or by anyone
else, and electric power costs for which any tenant directly contracts with the
local public service company;
(d)    any bad debt loss, rent loss, or reserves for bad debts or rent loss;
(e)    costs associated with the operation of the business of the partnership or
entity which constitutes the Landlord, as the same are distinguished from the
costs of operation of the Project (which shall specifically include, but not be
limited to, accounting costs associated with the operation of the Project).
Costs associated with the operation of the business of the partnership or entity
which constitutes the Landlord include costs of partnership accounting and legal
matters, costs of defending any lawsuits with any mortgagee (except as the
actions of the Tenant may be in issue), costs of selling, syndicating,
financing, mortgaging or hypothecating any of the Landlord's interest in the
Project, and costs incurred in connection with any disputes between Landlord and
its employees, between Landlord and Project management, or between Landlord and
other tenants or occupants;
(f)    the wages and benefits of any employee who does not devote substantially
all of his or her employed time to the Project unless such wages and benefits
are prorated to reflect time spent on operating and managing the Project
vis-a-vis time spent on matters unrelated to operating and managing the Project;
provided, that in no event shall Operating Expenses for purposes of this Lease
include wages and/or benefits attributable to personnel above the level of
Project manager;
(g)    amount paid as ground rental for the Project by the Landlord;
(h)    except for a Project management fee to the extent allowed pursuant to
item (l) below, overhead and profit increment paid to the Landlord or to
subsidiaries or affiliates of the Landlord for services in the Project to the
extent the same exceeds the costs of such services rendered by qualified,
first-class unaffiliated third parties on a competitive basis;
(i)    any compensation paid to clerks, attendants or other persons in
commercial concessions operated by the Landlord, provided that any compensation
paid to any concierge at the Project shall be includable as an Operating
Expense;

 
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(j)    rentals and other related expenses incurred in leasing air conditioning
systems, elevators or other equipment which if purchased the cost of which would
be excluded from Operating Expenses as a capital cost, except equipment not
affixed to the Project which is used in providing engineering, janitorial or
similar services and, further excepting from this exclusion such equipment
rented or leased to remedy or ameliorate an emergency condition in the Project;
(k)    all items and services for which Tenant or any other tenant in the
Project reimburses Landlord or which Landlord provides selectively to one or
more tenants (other than Tenant) without reimbursement;
(l)    any costs expressly excluded from Operating Expenses elsewhere in this
Lease;
(m)    rent for any office space occupied by Project management personnel to the
extent the size or rental rate of such office space exceeds the size or fair
market rental value of office space occupied by management personnel of the
comparable buildings in the vicinity of the Building, with adjustment where
appropriate for the size of the applicable project;
(n)    personal injury or property damage costs arising from the negligence or
willful misconduct of Landlord in connection with this Lease; and
(o)    costs incurred to comply with laws relating to the removal of hazardous
material (as defined under applicable law) which was in existence in the
Building or on the Project prior to the Lease Commencement Date, and was of such
a nature that a federal, State or municipal governmental authority, if it had
then had knowledge of the presence of such hazardous material, in the state, and
under the conditions that it then existed in the Building or on the Project,
would have then required the removal of such hazardous material or other
remedial or containment action with respect thereto; and costs incurred to
remove, remedy, contain, or treat hazardous material, which hazardous material
is brought into the Building or onto the Project after the date hereof by
Landlord or any other tenant of the Project and is of such a nature, at that
time, that a federal, State or municipal governmental authority, if it had then
had knowledge of the presence of such hazardous material, in the state, and
under the conditions, that it then exists in the Building or on the Project,
would have then required the removal of such hazardous material or other
remedial or containment action with respect thereto.
4.2.5    Taxes.
4.2.5.1    "Tax Expenses" shall mean all federal, state, county, or local
governmental or municipal taxes, fees, charges or other impositions of every
kind and nature, whether general, special, ordinary or extraordinary (including,
without limitation, real estate taxes, general and special assessments, transit
taxes, leasehold taxes or taxes based upon the receipt of rent, including gross
receipts or sales taxes applicable to the receipt of rent, unless required to be
paid by Tenant, personal property taxes imposed upon the fixtures, machinery,
equipment, apparatus, systems and equipment, appurtenances, furniture and other
personal property used in connection with the Project, or any portion thereof),
which shall be paid or accrued during any Expense Year (without regard to any
different fiscal year used by such governmental or municipal authority) because
of or in connection with the ownership, leasing and operation of the Project, or
any portion thereof.
4.2.5.2    Tax Expenses shall include, without limitation: (i) Any tax on the
rent, right to rent or other income from the Project, or any portion thereof, or
as against the business of leasing the Project, or any portion thereof; (ii) Any
assessment, tax, fee, levy or charge in addition to, or in substitution,
partially or totally, of any assessment, tax, fee, levy or charge previously
included within the definition of real property tax; (iii) Any assessment, tax,
fee, levy, or charge allocable to or measured by the area of the Premises or the
Rent payable hereunder, including, without limitation, any business or gross
income tax or excise tax with respect to the receipt of such rent, or upon or
with respect to the possession, leasing, operating, management, maintenance,
alteration, repair, use or occupancy by Tenant of the Premises, or any portion
thereof; and (iv) Any assessment, tax, fee, levy or charge, upon this
transaction

 
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or any document to which Tenant is a party, creating or transferring an interest
or an estate in the Premises or the improvements thereon.
4.2.5.3    Any costs and expenses (including, without limitation, reasonable
attorneys' and consultants' fees) incurred in attempting to protest, reduce or
minimize Tax Expenses shall be included in Tax Expenses in the Expense Year such
expenses are incurred. Tax refunds shall be credited against Tax Expenses and
refunded to Tenant regardless of when received, based on the Expense Year to
which the refund is applicable, provided that in no event shall the amount to be
refunded to Tenant for any such Expense Year exceed the total amount paid by
Tenant as Additional Rent under this Article 4 for such Expense Year. If Tax
Expenses for any period during the Lease Term or any extension thereof are
increased after payment thereof for any reason, including, without limitation,
error or reassessment by applicable governmental or municipal authorities,
Tenant shall pay Landlord upon demand Tenant's Share of any such increased Tax
Expenses. Notwithstanding anything to the contrary contained in this
Section 4.2.5, there shall be excluded from Tax Expenses (i) all excess profits
taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and
succession taxes, estate taxes, federal and state income taxes, and other taxes
to the extent applicable to Landlord's net income (as opposed to rents, receipts
or income attributable to operations at the Project), (ii) any items included as
Operating Expenses, and (iii) any items paid by Tenant under Section 4.5 of this
Lease.
4.2.6    "Tenant's Share" shall mean the percentage set forth in Section 6 of
the Summary.
4.3    Allocation of Direct Expenses.    The parties acknowledge that the
Building is part of a multi-building project and that the costs and expenses
incurred in connection with the Project (i.e., the Direct Expenses) should be
shared between the Building and the other buildings in the Project. Accordingly,
as set forth in Section 4.2 above, Direct Expenses (which consist of Operating
Expenses and Tax Expenses) are determined annually for the Project as a whole,
and a portion of the Direct Expenses, which portion shall be determined by
Landlord on an equitable basis, shall be allocated to the Building (as opposed
to other buildings in the Project). Such portion of Direct Expenses allocated to
the Building shall include all Direct Expenses attributable solely to the
Building and an equitable portion of the Direct Expenses attributable to the
Project as a whole, and shall not include Direct Expenses attributable solely to
other buildings in the Project.
4.4    Calculation and Payment of Additional Rent. Tenant shall pay to Landlord,
in the manner set forth in Section 4.4.1, below, and as Additional Rent,
Tenant's Share of Direct Expenses for each Expense Year.
4.4.1    Statement of Actual Direct Expenses and Payment by Tenant. Landlord
shall use commercially reasonable efforts to give to Tenant within one hundred
twenty (120) days following the end of each Expense Year, a statement (the
"Statement") which shall state the Direct Expenses incurred or accrued for such
preceding Expense Year, and which shall indicate the amount of Tenant's Share of
Direct Expenses. Upon receipt of the Statement for each Expense Year commencing
or ending during the Lease Term, Tenant shall pay, with its next installment of
Base Rent due, the full amount of Tenant's Share of Direct Expenses for such
Expense Year, less the amounts, if any, paid during such Expense Year as
"Estimated Direct Expenses," as that term is defined in Section 4.4.2, below,
and if Tenant paid more as Estimated Direct Expenses than the actual Tenant's
Share of Direct Expenses, Tenant shall receive a credit in the amount of
Tenant's overpayment against Rent next due under this Lease. The failure of
Landlord to timely furnish the Statement for any Expense Year shall not
prejudice Landlord or Tenant from enforcing its rights under this Article 4.
Even though the Lease Term has expired and Tenant has vacated the Premises, when
the final determination is made of Tenant's Share of Direct Expenses for the
Expense Year in which this Lease terminates, Tenant shall immediately pay to
Landlord such amount, and if Tenant paid more as Estimated Direct Expenses than
the actual Tenant's Share of Direct Expenses, Landlord shall, within thirty (30)
days, deliver a check payable to Tenant in the amount of the overpayment. The
provisions of this Section 4.4.1 shall survive the expiration or earlier
termination of the Lease Term.
4.4.2    Statement of Estimated Direct Expenses. In addition, Landlord shall use
commercially reasonable efforts to give to Tenant within one hundred twenty
(120) days following the end of each Expense Year a yearly expense estimate
statement (the "Estimate Statement") which shall set forth Landlord's reasonable
estimate (the "Estimate") of what the total amount of Direct Expenses for the
then-current Expense Year shall be and the estimated Tenant's Share of Direct
Expenses (the "Estimated Direct Expenses"). The failure of Landlord to timely

 
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furnish the Estimate Statement for any Expense Year shall not preclude Landlord
from enforcing its rights to collect any Estimated Direct Expenses under this
Article 4, nor shall Landlord be prohibited from revising any Estimate Statement
or Estimated Direct Expenses theretofore delivered to the extent necessary.
Thereafter, Tenant shall pay, with its next installment of Base Rent due, a
fraction of the Estimated Direct Expenses for the then-current Expense Year
(reduced by any amounts paid pursuant to the last sentence of this
Section 4.4.2). Such fraction shall have as its numerator the number of months
which have elapsed in such current Expense Year, including the month of such
payment, and twelve (12) as its denominator. Until a new Estimate Statement is
furnished (which Landlord shall have the right to deliver to Tenant at any
time), Tenant shall pay monthly, with the monthly Base Rent installments, an
amount equal to one-twelfth (1/12) of the total Estimated Direct Expenses set
forth in the previous Estimate Statement delivered by Landlord to Tenant.
4.5    Taxes and Other Charges for Which Tenant Is Directly
Responsible.    Tenant shall be liable for and shall pay ten (10) days before
delinquency, taxes levied against Tenant's equipment, furniture, fixtures and
any other personal property located in or about the Premises. If any such taxes
on Tenant's equipment, furniture, fixtures and any other personal property are
levied against Landlord or Landlord's property or if the assessed value of
Landlord's property is increased by the inclusion therein of a value placed upon
such equipment, furniture, fixtures or any other personal property and if
Landlord pays the taxes based upon such increased assessment, which Landlord
shall have the right to do regardless of the validity thereof but only under
proper protest if requested by Tenant, Tenant shall upon demand repay to
Landlord the taxes so levied against Landlord or the proportion of such taxes
resulting from such increase in the assessment, as the case may be.
4.6    Audit of Direct Expenses. Upon Tenant's written request (an "Audit
Request") given not more than sixty (60) days after Tenant's receipt of a
Statement for a particular Expense Year, and provided that Tenant is not then in
default under this Lease, Landlord shall furnish Tenant with such reasonable
supporting documentation in connection with said Direct Expenses. Landlord shall
provide said information to Tenant within sixty (60) days after Tenant's written
request therefor. Within sixty (60) days after receipt of such information by
Tenant (the "Review Period"), if Tenant disputes the amount of Direct Expenses
set forth in the Statement, an independent certified public accountant (which
accountant (A) is a certified public accountant, (B) is a member of a nationally
recognized accounting firm, (C) is not working on a contingency fee basis, and
(D) is reasonably acceptable to, and approved by Landlord (which approval shall
not be unreasonably withheld or delayed)), designated and paid for by Tenant,
may, after reasonable notice to Landlord and at reasonable times, inspect
Landlord's records with respect to the Statement at Landlord's offices, provided
that Tenant is not then in default under this Lease and Tenant has paid all
amounts required to be paid under the applicable Estimate Statement and
Statement, as the case may be. In connection with such inspection, Tenant and
Tenant's agents must agree in advance to follow Landlord's reasonable rules and
procedures regarding inspections of Landlord's records, and shall execute a
commercially reasonable confidentiality agreement regarding such inspection.
Tenant's failure to dispute the amount of Direct Expenses set forth in any
Statement within the Review Period shall be deemed to be Tenant's approval of
such Statement and Tenant, thereafter, waives the right or ability to dispute
the amounts set forth in such Statement. If after such inspection, Tenant still
disputes such Additional Rent, a determination as to the proper amount shall be
made, at Tenant's expense, by an independent certified public accountant (the
"Accountant") selected by Landlord and subject to Tenant's reasonable approval;
provided that if such determination by the Accountant proves that Direct
Expenses were overstated by more than five percent (5%), then the cost of the
Accountant and the cost of such determination shall be paid for by Landlord with
interest at the "Default Rate," as that term is defined in Article 25, below. If
the parties agree or the Accountant determines that Tenant's payments of Direct
Expenses for such calendar year were in excess of the actual Direct Expenses for
such calendar year, then Landlord shall, at Landlord's option, either (a) credit
such excess to Tenant's next succeeding installment(s) of Estimated Direct
Expenses until such excess has been exhausted, or (b) deliver a check payable to
Tenant in the amount of such excess within thirty (30) days after such agreement
or determination. If the parties agree or the Accountant determines that
Tenant's payments of Direct Expenses for such calendar year were less than the
actual Direct Expenses, then Tenant shall pay the deficiency to Landlord within
thirty (30) days after such agreement or determination. Tenant hereby
acknowledges that Tenant's sole right to inspect Landlord's books and records
and to contest the amount of Direct Expenses payable by Tenant shall be as set
forth in this Section 4.6, and Tenant hereby waives any and all other rights
pursuant to applicable law to inspect such books and records and/or to contest
the amount of Direct Expenses payable by Tenant.

 
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5.        USE OF PREMISES
5.1    Permitted Use. Tenant shall use the Premises solely for the Permitted Use
set forth in Section 7 of the Summary and Tenant shall not use or permit the
Premises or the Project to be used for any other purpose or purposes whatsoever
without the prior written consent of Landlord, which may be withheld in
Landlord's sole discretion.
5.2    Prohibited Uses. Tenant further covenants and agrees that Tenant shall
not use, or suffer or permit any person or persons to use, the Premises or any
part thereof for any use or purpose in violation of the laws of the United
States of America, the State of California, or the ordinances, regulations or
requirements of the local municipal or county governing body or other lawful
authorities having jurisdiction over the Project) including, without limitation,
any such laws, ordinances, regulations or requirements relating to hazardous
materials or substances, as those terms are defined by applicable laws now or
hereafter in effect, or any Underlying Documents. Landlord shall have the right
to impose reasonable and customary rule and regulations (which shall be enforced
by Landlord in a non-discriminatory manner) regarding the use of the Project, as
reasonably deemed necessary by Landlord with respect to the orderly operation of
the Project, and Tenant shall comply with such reasonable rules and regulations.
Tenant shall not do or permit anything to be done in or about the Premises which
will in any way damage the reputation of the Project or obstruct or interfere
with the rights of other tenants or occupants of the Building, or injure or
annoy them or use or allow the Premises to be used for any improper, unlawful or
objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance
in, on or about the Premises. Tenant shall comply with, and Tenant's rights and
obligations under the Lease and Tenant's use of the Premises shall be subject
and subordinate to, all recorded easements, covenants, conditions, and
restrictions now or hereafter affecting the Project; provided, however, no
Underlying Documents or any documents referenced in this sentence recorded or
otherwise enacted by Landlord after the date of this Lease will materially
increase Tenant’s monetary obligations or decrease Tenant’s rights pursuant to
this Lease.
5.3    Hazardous Materials.
5.3.1    Tenant's Obligations.
5.3.1.1    Prohibitions. As a material inducement to Landlord to enter into this
Lease with Tenant, Tenant has fully and accurately completed Landlord’s
Pre-Leasing Environmental Exposure Questionnaire (the “Environmental
Questionnaire”), which is attached as Exhibit F. Tenant agrees that except for
those chemicals or materials, and their respective quantities, specifically
listed on the Environmental Questionnaire, neither Tenant nor Tenant’s
employees, contractors and subcontractors of any tier, entities with a
contractual relationship with Tenant (other than Landlord), or any entity acting
as an agent or sub-agent of Tenant (collectively, "Tenant's Agents") will
produce, use, store or generate any "Hazardous Materials," as that term is
defined below, on, under or about the Premises, nor cause or permit any
Hazardous Material to be brought upon, placed, stored, manufactured, generated,
blended, handled, recycled, used or "Released," as that term is defined below,
on, in, under or about the Premises. If any information provided to Landlord by
Tenant on the Environmental Questionnaire, or otherwise relating to information
concerning Hazardous Materials is false, incomplete, or misleading in any
material respect, the same shall be deemed a default by Tenant under this Lease.
Upon request by Landlord, Tenant shall deliver to Landlord an updated
Environmental Questionnaire at least once a year; provided that, regardless of
whether such request is made by Landlord, Tenant shall deliver to Landlord an
updated Environmental Questionnaire to the extent any information therein needs
to be updated in any material respect, provided that "material" shall mean any
changes in the Hazardous Materials usage including, but not limited to, in terms
of their hazardous character, handling profile, usage and quantity. Landlord’s
prior written consent shall be required to any Hazardous Materials use for the
Premises not described on the initial Environmental Questionnaire, such consent
to be withheld in Landlord’s sole discretion. Tenant shall not install or permit
any underground storage tank on the Premises. For purposes of this Lease,
"Hazardous Materials" means all flammable explosives, petroleum and petroleum
products, waste oil, radon, radioactive materials, toxic pollutants, asbestos,
polychlorinated biphenyls (“PCBs”), medical waste, chemicals known to cause
cancer or reproductive toxicity, pollutants, contaminants, hazardous wastes,
toxic substances or related materials, including without limitation any
chemical, element, compound, mixture, solution, substance, object, waste or any
combination thereof, which is or may be hazardous to human health, safety or to
the environment due to its radioactivity, ignitability, corrosiveness,
reactivity, explosiveness, toxicity, carcinogenicity, infectiousness or other
harmful or potentially harmful properties or effects, or defined as, regulated
as or included in, the definition of “hazardous substances,” “hazardous wastes,”
“hazardous

 
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materials,” or “toxic substances” under any Environmental Laws. The term
“Hazardous Materials” for purposes of this Lease shall also include any mold,
fungus or spores, whether or not the same is defined, listed, or otherwise
classified as a “hazardous material” under any Environmental Laws, if such mold,
fungus or spores may pose a risk to human health or the environment or
negatively impact the value of the Premises. For purposes of this Lease,
"Release" or "Released" or "Releases" shall mean any release, deposit,
discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping,
pouring, emptying, escaping, dumping, disposing, or other movement of Hazardous
Materials into the environment. Landlord represents and warrant to Tenant that,
to Landlord's actual knowledge, without duty of investigation or inquiry, there
is no Hazardous Material on, in, or under the Premises as of the Lease
Commencement Date in violation of Environmental Laws. For purposes of the
foregoing, Landlords "actual knowledge" shall mean the current actual (as
opposed to constructive) knowledge of Michael Dorris ("Landlord's
Representative"). No duty of inquiry or investigation on the part of Landlord or
Landlord's Representative will be required or implied by the making of any
representation or warranty which is so limited to matters within Landlord's
actual knowledge, and in no event shall Landlord's Representative have any
personal liability therefor.
5.3.1.2    Notices to Landlord. Tenant shall notify Landlord in writing as soon
as possible but in no event later than five (5) days after (i) the discovery (or
the date Tenant should have discovered had Tenant acted in a reasonable and
prudent manner) of any actual, alleged or threatened Release of any Hazardous
Material in, on, under, from, about or in the vicinity of the Premises (whether
past or present), regardless of the source or quantity of any such Release, or
(ii) Tenant becomes aware of any regulatory actions, inquiries, inspections,
investigations, directives, or any cleanup, compliance, enforcement or abatement
proceedings (including any threatened or contemplated investigations or
proceedings) relating to or potentially affecting the Premises, or (iii) Tenant
becomes aware of any claims by any person or entity relating to any Hazardous
Materials in, on, under, from, about or in the vicinity of the Premises, whether
relating to damage, contribution, cost recovery, compensation, loss or injury.
Collectively, the matters set forth in clauses (i), (ii) and (iii) above are
hereinafter referred to as “Hazardous Materials Claims”. Tenant shall promptly
forward to Landlord copies of all orders, notices, permits, applications and
other communications and reports in connection with any Hazardous Materials
Claims. Additionally, Tenant shall promptly advise Landlord in writing of
Tenant’s discovery of any occurrence or condition on, in, under or about the
Premises that could subject Tenant or Landlord to any liability, or restrictions
on ownership, occupancy, transferability or use of the Premises under any
"Environmental Laws," as that term is defined below. Tenant shall not enter into
any legal proceeding or other action, settlement, consent decree or other
compromise with respect to any Hazardous Materials Claims without first
notifying Landlord of Tenant’s intention to do so and affording Landlord the
opportunity to join and participate, at Landlord's sole cost and expense, as a
party if Landlord so elects, in such proceedings and in no event shall Tenant
enter into any agreements which are binding on Landlord or the Premises without
Landlord’s prior written consent. Landlord shall have the right to appear at and
participate in, any and all legal or other administrative proceedings concerning
any Hazardous Materials Claim. For purposes of this Lease, “Environmental Laws”
means all applicable present and future laws relating to the protection of human
health, safety, wildlife or the environment, including, without limitation,
(i) all requirements pertaining to reporting, licensing, permitting,
investigation and/or remediation of emissions, discharges, Releases, or
threatened Releases of Hazardous Materials, whether solid, liquid, or gaseous in
nature, into the air, surface water, groundwater, or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of Hazardous Materials; and (ii) all requirements
pertaining to the health and safety of employees or the public. Environmental
Laws include, but are not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 USC § 9601, et seq., the Hazardous
Materials Transportation Authorization Act of 1994, 49 USC § 5101, et seq., the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976, and Hazardous and Solid Waste Amendments of 1984, 42 USC § 6901, et
seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act
of 1977, 33 USC § 1251, et seq., the Clean Air Act of 1966, 42 USC § 7401, et
seq., the Toxic Substances Control Act of 1976, 15 USC § 2601, et seq., the Safe
Drinking Water Act of 1974, 42 USC §§ 300f through 300j, the Occupational Safety
and Health Act of 1970, as amended, 29 USC § 651 et seq., the Oil Pollution Act
of 1990, 33 USC § 2701 et seq., the Emergency Planning and Community
Right-To-Know Act of 1986, 42 USC § 11001 et seq., the National Environmental
Policy Act of 1969, 42 USC § 4321 et seq., the Federal Insecticide, Fungicide
and Rodenticide Act of 1947, 7 USC § 136 et seq., California
Carpenter-Presley-Tanner Hazardous Substance Account Act, California Health &
Safety Code §§ 25300 et seq., Hazardous Materials Release Response Plans and
Inventory Act, California Health & Safety Code, §§ 25500 et seq., Underground
Storage of Hazardous Substances provisions, California Health & Safety Code, §§
25280 et seq., California Hazardous Waste Control Law, California Health &
Safety Code, §§ 25100 et seq., and any

 
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other state or local law counterparts, as amended, as such applicable laws, are
in effect as of the Lease Commencement Date, or thereafter adopted, published,
or promulgated.
5.3.1.3    Releases of Hazardous Materials. If any Release of any Hazardous
Material in, on, under, from or about the Premises shall occur at any time
during the Lease Term and/or if any other Hazardous Material condition exists at
the Premises that requires response actions of any kind (other than Hazardous
Materials brought onto the Premises by Landlord or Landlord's agents or an
Existing Hazardous Materials condition), in addition to notifying Landlord as
specified above, Tenant, at its own sole cost and expense, shall (i) timely
comply with any and all reporting requirements imposed pursuant to any and all
Environmental Laws, (ii) provide a written certification to Landlord indicating
that Tenant has complied with all applicable reporting requirements, (iii) take
any and all necessary investigation, corrective and remedial action in
accordance with any and all applicable Environmental Laws, utilizing an
environmental consultant approved by Landlord, all in accordance with the
provisions and requirements of this Section 5.3, including, without limitation,
Section 5.3.4, and (iv) take any such additional investigative, remedial and
corrective actions as necessary such that the Premises are remediated to the
condition required by applicable Environmental Laws and which allows the
Premises and Project to be used without any use restriction that was not
applicable to the Project as of the date of this Lease.
5.3.1.4    Indemnification.
5.3.1.4.1    In General. Without limiting in any way Tenant’s obligations under
any other provision of this Lease, Tenant shall be solely responsible for and
shall protect, defend, indemnify and hold the Landlord Parties harmless from and
against any and all claims, judgments, losses, damages, costs, expenses,
penalties, enforcement actions, taxes, fines, remedial actions, liabilities
(including, without limitation, actual attorneys’ fees, litigation, arbitration
and administrative proceeding costs, expert and consultant fees and laboratory
costs) including, without limitation, sums paid in settlement of claims, which
arise during or after the Lease Term, whether foreseeable or unforeseeable,
arising out of or attributable to the presence, use, generation, manufacture,
treatment, handling, refining, production, processing, storage, Release or
presence of Hazardous Materials in, on, under or about the Premises by Tenant or
Tenant's Agents. Landlord agrees to indemnify, defend, protect and hold harmless
Tenant from and against any liability, obligation, damage or costs, including
without limitation, attorneys’ fees and costs, resulting directly or indirectly
from any use, presence, removal or disposal of any Hazardous Materials to the
extent such liability, obligation, damage or costs was a result of actions
caused or knowingly permitted by Landlord or a Landlord Party.
5.3.1.4.2    Limitations. Notwithstanding anything in Section 5.3.1.4, above, to
the contrary, Tenant's indemnity of Landlord as set forth in Section 5.3.1.4,
above, shall not be applicable to (a) any claims that directly or indirectly
arise from the activities of Landlord, its contractors or agents on or about the
Premises after the Lease Commencement Date, and (b) claims based upon Hazardous
Materials which may exist in, on or about the Premises as of the date of this
Lease ("Existing Hazardous Materials"), except to the extent that Tenant's
construction activities and/or Tenant's other acts or omissions caused or
exacerbated the subject claim and Tenant had been notified in writing by
Landlord of the particular Existing Hazardous Materials that is the subject of
the claim (a "Tenant Caused Release of Existing Hazardous Materials").
5.3.1.5    Compliance with Environmental Laws. Without limiting the generality
of Tenant’s obligation to comply with applicable laws as otherwise provided in
this Lease, Tenant shall, at its sole cost and expense, comply with all
Environmental Laws applicable to its use of the Premises; provided however that
Tenant shall not be liable for or obligated to remove or remediate any Existing
Hazardous Materials (other than a Tenant Caused Release of Existing Hazardous
Materials) or Hazardous Materials brought onto the Premises by Landlord or
Landlord's agents. Tenant shall obtain and maintain any and all necessary
permits, licenses, certifications and approvals appropriate or required for the
use, handling, storage, and disposal of any Hazardous Materials used, stored,
generated, transported, handled, blended, or recycled by Tenant on the Premises.
Landlord shall have a continuing right, without obligation, to require Tenant to
obtain, and to review and inspect any and all such permits, licenses,
certifications and approvals, together with copies of any and all Hazardous
Materials management plans and programs, any and all Hazardous Materials risk
management and pollution prevention programs, and any and all Hazardous
Materials emergency response and employee training programs respecting Tenant’s
use of Hazardous Materials. Upon request of Landlord, Tenant

 
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shall deliver to Landlord a narrative description explaining the nature and
scope of Tenant’s activities involving Hazardous Materials and showing to
Landlord’s satisfaction compliance with all Environmental Laws and the terms of
this Lease.
5.3.2    Assurance of Performance.
5.3.2.1    Environmental Assessments In General. Landlord may, but shall not be
required to, engage from time to time such contractors as Landlord determines to
be appropriate to perform environmental assessments of a scope reasonably
determined by Landlord (an "Environmental Assessment") to ensure Tenant’s
compliance with the requirements of this Lease with respect to Hazardous
Materials. Such Environmental Assessments shall be performed by a competent and
experienced environmental engineer.
5.3.2.2    Costs of Environmental Assessments. All costs and expenses incurred
by Landlord in connection with any such Environmental Assessment initially shall
be paid by Landlord; provided that if any such Environmental Assessment shows
that Tenant has failed to comply with the provisions of this Section 5.3, then
all of the costs and expenses of such Environmental Assessment shall be
reimbursed by Tenant as Additional Rent within ten (10) days after receipt of
written demand therefor.
5.3.3    Tenant’s Obligations upon Surrender. At the expiration or earlier
termination of the Lease Term, Tenant, at Tenant’s sole cost and expense, shall:
(i) cause an Environmental Assessment of the Premises to be conducted in
accordance with Section 15.3; (ii) to the extent required by Environmental Laws,
cause all Hazardous Materials to be removed from the Premises and disposed of in
accordance with all Environmental Laws and as necessary to allow the Premises to
be used for any purpose; and (iii) cause to be removed all containers installed
or used by Tenant or Tenant’s Agents to store any Hazardous Materials on the
Premises, and cause to be repaired any damage to the Premises caused by such
removal.
5.3.4    Clean-up.
5.3.4.1    Environmental Reports; Clean-Up. If any written report containing
results of any Environmental Assessment (an “Environmental Report”) shall
indicate (i) the presence of any Hazardous Materials as to which either Tenant
or Landlord has a removal or remediation obligation under this Section 5.3, and
(ii) that as a result of same, the investigation, characterization, monitoring,
assessment, repair, closure, remediation, removal, or other clean-up (the
“Clean-up”) of any Hazardous Materials is required, Tenant shall immediately
prepare and submit to Landlord within thirty (30) days after receipt of the
Environmental Report a comprehensive plan, subject to Landlord’s reasonable
written approval, specifying the actions to be taken by Tenant to perform the
Clean-up so that the Premises are restored to the conditions required by this
Lease. Upon Landlord’s approval of the Clean-up plan which shall not be
unreasonably withheld, delayed or conditioned, Tenant shall, if the Clean-up is
necessitated by Tenant’s (or a Tenant Party's) act or omission, at Tenant’s sole
cost and expense, without limitation on any rights and remedies of Landlord
under this Lease, immediately implement such plan with a consultant reasonably
acceptable to Landlord and proceed to Clean-Up Hazardous Materials in accordance
with all applicable laws and as required by such plan and this Lease. If the
Clean-up is necessitated by Landlord’s act or omission or in connection with
Existing Hazardous Materials, the Clean-up shall be completed by Landlord at
Landlord’s sole cost and expense. If, within thirty (30) days after receiving a
copy of such Environmental Report, Tenant fails either (a) to complete such
Clean-up, or (b) with respect to any Clean-up that cannot be completed within
such thirty-day period, fails to proceed with diligence to prepare the Clean-up
plan and complete the Clean-up as promptly as practicable, then Landlord shall
have the right, but not the obligation, and without waiving any other rights
under this Lease, to carry out any Clean-up recommended by the Environmental
Report or required by any governmental authority having jurisdiction over the
Premises, and recover all of the costs and expenses thereof from Tenant as
Additional Rent, payable within ten (10) days after receipt of written demand
therefor. If an Environmental Report indicates that Clean-up of any Existing
Hazardous Materials (other than a Tenant Caused Release of Existing Hazardous
Materials) which is required by Environmental Laws, then Landlord, at its sole
cost and expense, shall notify Tenant of, and thereafter implement, Landlord's
Clean-up plan, which Clean-up plan, including the scope and timing thereof,
shall cause the Premises to be restored substantially in the condition existing
prior to commencing Landlord's Clean-up plan.

 
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5.3.4.2    Rent Abatement. Tenant shall continue to pay all Rent due or accruing
under this Lease during any Clean-up of Hazardous Materials as to which Tenant
has a removal or remediation obligation under this Section 5.3, and shall not be
entitled to any reduction, offset or deferral of any Base Rent or Additional
Rent due or accruing under this Lease during any such Clean-up. During the
Clean-up of Existing Hazardous Materials as to which Landlord has a removal or
remediation obligation under this Section 5.3, Landlord may temporarily close
all or a portion of the Premises to facilitate the Clean-up, and the provisions
regarding Rent abatement set forth in Section 19.5.2 shall apply thereto except
that Tenant shall not be required to provide notice to Landlord and the
applicable abatement shall commence on the first day that all or a portion of
the Premises are closed.
5.3.4.3    Surrender of Premises. Tenant shall complete any Clean-up prior to
surrender of the Premises upon the expiration or earlier termination of this
Lease. Tenant shall obtain and deliver to Landlord a letter or other written
determination from the overseeing governmental authority confirming that the
Clean-up has been completed in accordance with all requirements of such
governmental authority and that no further response action of any kind is
required for the unrestricted use of the Premises (“Closure Letter”). Upon the
expiration or earlier termination of this Lease, Tenant shall also be obligated
to close all permits obtained in connection with Hazardous Materials in
accordance with applicable laws.
5.3.4.4    Failure to Timely Clean-Up. Should any Clean-up for which Tenant is
responsible not be completed, or should Tenant not receive the Closure Letter
and any governmental approvals required under Environmental Laws in conjunction
with such Clean-up prior to the expiration or earlier termination of this Lease,
then Tenant shall be liable to Landlord as a holdover tenant (as more
particularly provided in Article 16) until Tenant has fully complied with its
obligations under this Section 5.3.
5.3.5    Confidentiality. Unless compelled to do so by applicable law, Tenant
agrees that Tenant shall not disclose, discuss, disseminate or copy any
information, data, findings, communications, conclusions and reports regarding
the environmental condition of the Premises to any Person (other than Tenant’s
consultants, attorneys, property managers and employees that have a need to know
such information), including any governmental authority, without the prior
written consent of Landlord. In the event Tenant reasonably believes that
disclosure is compelled by applicable law, it shall provide Landlord five
(5) days’ advance notice of disclosure of confidential information so that
Landlord may, at its own cost, attempt to obtain a protective order. Tenant may
additionally release such information to bona fide prospective purchasers or
lenders, subject to any such parties’ written agreement to be bound by the terms
of this Section 5.3.
5.3.6    Copies of Environmental Reports. Within thirty (30) days of receipt
thereof, Tenant shall provide Landlord with a copy of any and all environmental
assessments, audits, studies and reports regarding Tenant’s activities with
respect to the Premises, or ground water beneath the Land, or the environmental
condition or Clean-up thereof. Tenant shall be obligated to provide Landlord
with a copy of such materials without regard to whether such materials are
generated by Tenant or prepared for Tenant, or how Tenant comes into possession
of such materials.
5.3.7    Intentionally Omitted.
5.3.8    Signs, Response Plans, Etc. Tenant shall be responsible for posting on
the Premises any signs required under applicable Environmental Laws. Tenant
shall also complete and file any business response plans or inventories required
by any applicable laws. Tenant shall concurrently file a copy of any such
business response plan or inventory with Landlord.
5.3.9    Survival. Each covenant, agreement, representation, warranty and
indemnification made by each of Tenant and Landlord set forth in this Section
5.3 shall survive the expiration or earlier termination of this Lease and shall
remain effective until all of Tenant’s obligations under this Section 5.3 have
been completely performed and satisfied.
5.4    Fitness Center. Landlord and Tenant hereby acknowledge that Landlord
currently operates a fitness center (the "Fitness Center") in Project, and, for
so long as Landlord continues to operate the Fitness Center, the use of the
Fitness Center shall be limited to (i) Tenant and Tenant's employees, and (ii)
the tenants and their employees of

 
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the 4955 DP Building and, if constructed, the Landlord Spec Building. Landlord
reserves the right to control the manner in which the Fitness Center is
maintained and operated (including the requirement, if applicable, that Tenant's
employees using the Fitness Center execute Landlord's standard waiver form), and
to make alterations or additions to, to relocate or to entirely eliminate the
Fitness Center. In the event that Tenant requests Landlord to provide any extra
services in connection with Tenant's use of the Fitness Center Tenant shall pay
Landlord's standard charge for such service(s) requested by Tenant. Tenant shall
comply with such reasonable rules and regulations relating to the Fitness Center
as Landlord may from time to time promulgate. Tenant’s use of the Fitness Center
shall be without direct charge or cost to Tenant; provided, however, Tenant
acknowledges and agrees that Landlord shall have the right to include in
Operating Expenses costs incurred in connection with the operation and
maintenance of the Fitness Center.

6.        SERVICES AND UTILITIES
6.1    In General. Tenant will be responsible, at its sole cost and expense, for
the furnishing of all services and utilities to the Premises (provided that
Landlord and Tenant shall reasonably cooperate in good faith to cause any such
utility provider to provide such utility to the point of entry into the
Building; provided further that if any such utility provider is not responsible
to make any repairs required to provide such utility to the point of entry into
the Building, then Landlord shall use commercially reasonable efforts to repair
(or cause to be repaired) such utility in order to provide the same to the point
of entry into the Building), including, but not limited to heating, ventilation
and air‑conditioning, electricity, water, telephone, janitorial and interior
Building security services.
6.1.1    All utilities (including without limitation, electricity, gas, sewer
and water) to the Building are separately metered at the Premises and shall be
paid directly by Tenant to the applicable utility provider.
6.1.2    Landlord shall not provide janitorial services for the Premises. Tenant
shall be solely responsible for performing all janitorial services and other
cleaning of the Premises, all in compliance with applicable laws. The janitorial
and cleaning of the Premises shall be adequate to maintain the Premises in a
manner consistent with First Class Life Sciences Projects.
Tenant shall cooperate fully with Landlord at all times and abide by all
regulations and requirements that Landlord may reasonably prescribe for the
proper functioning and protection of the HVAC, electrical, mechanical and
plumbing systems. Provided that Landlord agrees to provide and maintain and keep
in continuous service utility connections to the Project, including electricity,
water and sewage connections, Landlord shall have no obligation to provide any
services or utilities to the Building, including, but not limited to heating,
ventilation and air‑conditioning, electricity, water, telephone, janitorial and
interior Building security services.
6.2    Interruption of Use. Tenant agrees that Landlord shall not be liable for
damages, by abatement of Rent or otherwise, for failure to furnish or delay in
furnishing any service (including telephone and telecommunication services), or
for any diminution in the quality or quantity thereof, when such failure or
delay or diminution is occasioned, in whole or in part, by breakage, repairs,
replacements, or improvements, by any strike, lockout or other labor trouble, by
inability to secure electricity, gas, water, or other fuel at the Building or
Project after reasonable effort to do so, by any riot or other dangerous
condition, emergency, accident or casualty whatsoever, by act or default of
Tenant or other parties, or by any other cause; and such failures or delays or
diminution shall never be deemed to constitute an eviction or disturbance of
Tenant's use and possession of the Premises or relieve Tenant from paying Rent
or performing any of its obligations under this Lease. Furthermore, Landlord
shall not be liable under any circumstances for a loss of, or injury to,
property or for injury to, or interference with, Tenant's business, including,
without limitation, loss of profits, however occurring, through or in connection
with or incidental to a failure to furnish any of the services or utilities as
set forth in this Article 6.
6.3    Energy Performance Disclosure Information. Tenant hereby acknowledges
that Landlord may be required to disclose certain information concerning the
energy performance of the Building pursuant to California Public Resources Code
Section 25402.10 and the regulations adopted pursuant thereto (collectively the
“Energy Disclosure Requirements”). Tenant hereby acknowledges prior receipt of
the Data Verification Checklist, as defined in the Energy Disclosure
Requirements (the “Energy Disclosure Information”), and agrees that Landlord has
timely complied in full with Landlord’s obligations under the Energy Disclosure
Requirements. Tenant acknowledges and

 
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agrees that (i) Landlord makes no representation or warranty regarding the
energy performance of the Building or the accuracy or completeness of the Energy
Disclosure Information, (ii) the Energy Disclosure Information is for the
current occupancy and use of the Building and that the energy performance of the
Building may vary depending on future occupancy and/or use of the Building, and
(iii) Landlord shall have no liability to Tenant for any errors or omissions in
the Energy Disclosure Information. If and to the extent not prohibited by
applicable laws, Tenant hereby waives any right Tenant may have to receive the
Energy Disclosure Information, including, without limitation, any right Tenant
may have to terminate this Lease as a result of Landlord’s failure to disclose
such information. Further, Tenant hereby releases Landlord from any and all
losses, costs, damages, expenses and/or liabilities relating to, arising out of
and/or resulting from the Energy Disclosure Requirements, including, without
limitation, any liabilities arising as a result of Landlord’s failure to
disclose the Energy Disclosure Information to Tenant prior to the execution of
this Lease. Tenant’s acknowledgment of the AS-IS condition of the Premises
pursuant to the terms of this Lease shall be deemed to include the energy
performance of the Building. Tenant further acknowledges that pursuant to the
Energy Disclosure Requirements, Landlord may be required in the future to
disclose information concerning Tenant’s energy usage to certain third parties,
including, without limitation, prospective purchasers, lenders and tenants of
the Building (the “Tenant Energy Use Disclosure”). Tenant hereby (A) consents to
all such Tenant Energy Use Disclosures, and (B) acknowledges that Landlord shall
not be required to notify Tenant of any Tenant Energy Use Disclosure. Further,
Tenant hereby releases Landlord from any and all losses, costs, damages,
expenses and liabilities relating to, arising out of and/or resulting from any
Tenant Energy Use Disclosure. The terms of this Section 6.3 shall survive the
expiration or earlier termination of this Lease.
6.4    Tenant Maintained Security. Tenant hereby acknowledges that Landlord
shall have no obligation to provide, or otherwise pay for, any guard service or
other security measures for the benefit of the Premises or the Project. Tenant
hereby assumes all responsibility for the protection of Tenant and its agents,
employees, contractors, invitees and guests, and the property thereof, from acts
of third parties, including keeping doors locked and other means of entry to the
Premises closed. In accordance with, initially, the terms and conditions of the
Tenant Work Letter attached hereto as Exhibit B, or thereafter the terms and
conditions of Article 8 of this Lease, Tenant shall be allowed, at Tenant's sole
cost and expense, to install its own integrated security systems for the
Premises.

7.        REPAIRS    
7.1    Tenant Repair Obligations. Subject to Landlord's obligations under
Section 1.1.4, above, Tenant shall, throughout the Term, at its sole cost and
expense, maintain, repair, replace and improve as required, the non-structural
portion of the interior of the Premises and Building and every part thereof in a
good standard of maintenance, repair and replacement as required, and in good
and sanitary condition, all in accordance with the standards of First Class Life
Sciences Projects, except for "Landlord Repair Obligations," as that term is
defined in Section 7.4, below, whether or not such maintenance, repair,
replacement or improvement is required in order to comply with applicable Laws
("Tenant's Repair Obligations"), including, without limitation, the following:
(1) glass, windows, window frames, window casements (including the repairing,
resealing, cleaning and replacing of both interior and exterior windows) and
skylights; (2) interior and exterior doors, door frames and door closers; (3)
interior lighting (including, without limitation, light bulbs and ballasts); (4)
the plumbing, sewer, drainage, electrical, fire protection, elevator, escalator,
life safety and security systems and equipment, existing heating, ventilation
and air-conditioning systems, and all other mechanical, electrical and
communications systems and equipment (collectively, the "Building Systems"),
including without limitation (i) any specialty or supplemental Building Systems
installed by or for Tenant and (ii) all electrical facilities and equipment,
including lighting fixtures, lamps, fans and any exhaust equipment and systems,
electrical motors and all other appliances and equipment of every kind and
nature located in, upon or about the Premises; (5) all communications systems
serving the Premises; (6) all of Tenant's security systems in or about or
serving the Premises; (7) Tenant's signage; (8) interior demising walls and
partitions (including painting and wall coverings), equipment, floors, and any
roll-up doors, ramps and dock equipment; and (9) the non-structural portions of
the roof of the Building. Tenant’s Repair Obligations also includes the routine
maintenance of the load bearing and exterior walls of the Building, including,
without limitation, any painting, sealing, patching and waterproofing of such
walls. Tenant shall additionally be responsible, at Tenant’s sole cost and
expense, to furnish all expendables, including light bulbs, paper goods and
soaps, used in the Premises, and, to the extent that Landlord notifies Tenant in
writing of its intention to no longer arrange for such monitoring, cause the
fire alarm systems serving the Premises to be monitored by a monitoring or
protective services firm approved by Landlord in writing.

 
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7.2    Service Contracts. All Building Systems, including HVAC, elevators, main
electrical, plumbing and fire/life-safety systems, shall be maintained, repaired
and replaced by Tenant (i) in a commercially reasonable condition consistent
with prevalent industry practices, (ii) in accordance with any applicable
manufacturer specifications relating to any particular component of such
Building Systems, (iii) in accordance with applicable Laws. Tenant shall
contract with a qualified, experienced professional third party service
companies (a "Service Contract"). Tenant shall regularly, in accordance with
commercially reasonable standards, generate and maintain preventive maintenance
records relating to each Building’s mechanical and main electrical systems,
including life safety, elevators and the central plant (“Preventative
Maintenance Records”). In addition, upon Landlord’s request, Tenant shall
deliver a copy of all current Service Contracts to Landlord and/or a copy of the
Preventative Maintenance Records.
7.3    Landlord's Right to Perform Tenant's Repair Obligations. Tenant shall
notify Landlord in writing at least ten (10) days prior to performing any
material Tenant's Repair Obligations, including without limitation, any Tenant's
Repair Obligation which affect the Building Systems or which is reasonably
anticipated to cost more than $100,000.00, which notice will provide the
reasonably anticipated schedule for completion of such repair. Upon receipt of
such notice from Tenant, Landlord shall have the right to either (i) perform
such material Tenant's Repair Obligation materially on the same schedule set by
Tenant for such repair by delivering notice of such election to Tenant within
ten (10) days following receipt of Tenant's notice, and Tenant shall pay
Landlord the cost thereof (including Landlord's reasonable supervision fee)
within thirty (30) days after receipt of an invoice therefor, or (ii) require
Tenant to perform such Tenant's Repair Obligation at Tenant's sole cost and
expense. If Tenant fails to perform any Tenant's Repair Obligation within a
reasonable time period, as reasonably determined by Landlord, then Landlord may,
but need not, following delivery of notice to Tenant of such election, make such
Tenant Repair Obligation, and Tenant shall pay Landlord the cost thereof,
(including Landlord's reasonable supervision fee) within thirty (30) days after
receipt of an invoice therefor.
7.4    Landlord Repair Obligations. Landlord shall maintain, repair, replace and
improve as required, the exterior walls, foundation and roof of the Building,
the structural portions of the floors of the Building, except to the extent that
such repairs are required due to the negligence or willful misconduct of Tenant
(the "Landlord Repair Obligation"); provided, however, that if such repairs are
due to the negligence or willful misconduct of Tenant, Landlord shall
nevertheless make such repairs at Tenant's expense, or, if covered by Landlord's
insurance, Tenant shall only be obligated to pay any deductible in connection
therewith.

8.        ADDITIONS AND ALTERATIONS
8.1    Landlord's Consent to Alterations. Tenant may not make any improvements,
alterations, additions or changes to the Premises or any mechanical, plumbing or
HVAC facilities or systems pertaining to the Premises (collectively, the
"Alterations") without first procuring the prior written consent of Landlord to
such Alterations, which consent shall be requested by Tenant not less than
thirty (30) days prior to the commencement thereof, and which consent shall not
be unreasonably withheld by Landlord, provided it shall be deemed reasonable for
Landlord to withhold its consent to any Alteration which adversely affects the
structural portions or the systems or equipment of the Building or is visible
from the exterior of the Building. Notwithstanding the foregoing, Tenant shall
be permitted to make Alterations following ten (10) business days' notice to
Landlord, but without Landlord's prior consent, to the extent that such
Alterations (i) do not affect the building systems or equipment, (ii) are not
visible from the exterior of the Building, and (iii) cost less than $50,000.00
for a particular job of work. The construction of the initial improvements to
the Premises shall be governed by the terms of the Tenant Work Letter and not
the terms of this Article 8.
8.2    Manner of Construction. Landlord may impose, as a condition of its
consent to any and all Alterations or repairs of the Premises or about the
Premises, such requirements as Landlord in its reasonable discretion may deem
desirable, including, but not limited to, the requirement that in accordance
with the terms of Section 8.5, below, Tenant shall, at Tenant's expense, remove
such Alterations upon the expiration or any early termination of the Lease Term.
Tenant shall construct such Alterations and perform such repairs in a good and
workmanlike manner, in conformance with any and all applicable federal, state,
county or municipal laws, rules and regulations and pursuant to a valid building
permit, issued by the city in which the Building is located (or other applicable
governmental authority). Tenant shall not use (and upon notice from Landlord
shall cease using) contractors, services, workmen, labor, materials or equipment
that, in Landlord's reasonable judgment, would disturb labor harmony with the
workforce or trades

 
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engaged in performing other work, labor or services in or about the Building or
the Common Areas. Upon completion of any Alterations (or repairs), Tenant shall
deliver to Landlord final lien waivers from all contractors, subcontractors and
materialmen who performed such work. In addition to Tenant's obligations under
Article 9 of this Lease, upon completion of any Alterations, Tenant agrees to
cause a Notice of Completion to be recorded in the office of the Recorder of the
County of San Diego in accordance with Section 8182 of the Civil Code of the
State of California or any successor statute, and Tenant shall deliver to the
Project construction manager a reproducible copy of the "as built" drawings of
the Alterations as well as all permits, approvals and other documents issued by
any governmental agency in connection with the Alterations.
8.3    Payment for Improvements. If Tenant orders any work directly from
Landlord, Tenant shall pay to Landlord an amount equal to five percent (5%) of
the cost of such work to compensate Landlord for all overhead, general
conditions, fees and other costs and expenses arising from Landlord's
involvement with such work. If Tenant does not order any work directly from
Landlord, Tenant shall reimburse Landlord for Landlord's reasonable, actual,
out-of-pocket costs and expenses actually incurred in connection with Landlord's
review of such work.
8.4    Construction Insurance. In addition to the requirements of Article 10 of
this Lease, in the event that Tenant makes any Alterations, prior to the
commencement of such Alterations, Tenant shall provide Landlord with evidence
that Tenant carries "Builder's All Risk" insurance in an amount approved by
Landlord covering the construction of such Alterations, and such other insurance
as Landlord may reasonably require, it being understood and agreed that all of
such Alterations shall be insured by Tenant pursuant to Article 10 of this Lease
immediately upon completion thereof. In addition, Tenant's contractors and
subcontractors shall be required to carry (i) Commercial General Liability
Insurance in an amount approved by Landlord, with Landlord, and, at Landlord's
option, Landlord's property manager and project manager, as additional insureds
in an amount approved by Landlord, and otherwise in accordance with the
requirements of Article 10 of this Lease, and (ii) workers compensation
insurance with a waiver of subrogation in favor of Landlord . Landlord may, in
its reasonable judgment taking into consideration the anticipated cost of such
Alteration and Tenant's then financial wherewithal, require Tenant to obtain a
lien and completion bond or some alternate form of security satisfactory to
Landlord in an amount sufficient to ensure the lien-free completion of such
Alterations and naming Landlord as a co-obligee. For purposes of determining the
cost of an Alteration, work done in phases or stages shall be considered part of
the same Alteration, and any Alteration shall be deemed to include all trades
and materials involved in accomplishing a particular result.
8.5    Landlord's Property. All Alterations, improvements, fixtures, equipment
and/or appurtenances which may be installed or placed in or about the Premises,
from time to time, shall be at the sole cost of Tenant and shall be and become
the property of Landlord and remain in place at the Premises following the
expiration or earlier termination of this Lease. Notwithstanding the foregoing,
Landlord may, by written notice to Tenant prior to the end of the Lease Term, or
given following any earlier termination of this Lease, require Tenant, at
Tenant's expense, to remove any Alterations and/or improvements and/or systems
and equipment within the Premises and to repair any damage to the Premises and
Building caused by such removal; provided; however, that notwithstanding the
foregoing, upon request by Tenant at the time of Tenant's request for Landlord's
consent to any Alteration or improvement, Landlord shall notify Tenant whether
the applicable Alteration or improvement will be required to be removed pursuant
to the terms of this Section 8.5 and whether Tenant will be required to restore
any portion of the Premises affected by such removal, and Tenant shall have no
removal or restoration obligations for Alterations or improvements identified in
such notice as not requiring removal by Landlord. If Tenant fails to complete
any required removal and/or to repair any damage caused by the removal of any
Alterations and/or improvements and/or systems and equipment in the Premises and
return the affected portion of the Premises to a condition required by Landlord
(subject to the immediately preceding sentence), Landlord may do so and may
charge the cost thereof to Tenant. Tenant hereby protects, defends, indemnifies
and holds Landlord harmless from any liability, cost, obligation, expense or
claim of lien in any manner relating to the installation, placement, removal or
financing of any such Alterations, improvements, fixtures and/or equipment in,
on or about the Premises, which obligations of Tenant shall survive the
expiration or earlier termination of this Lease.

 
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9.        COVENANT AGAINST LIENS    Tenant shall keep the Project and Premises
free from any liens or encumbrances arising out of the work performed, materials
furnished or obligations incurred by or on behalf of Tenant, and shall protect,
defend, indemnify and hold Landlord harmless from and against any claims,
liabilities, judgments or costs (including, without limitation, reasonable
attorneys' fees and costs) arising out of same or in connection therewith.
Tenant shall give Landlord notice at least twenty (20) days prior to the
commencement of any such work on the Premises (or such additional time as may be
necessary under applicable laws) to afford Landlord the opportunity of posting
and recording appropriate notices of non-responsibility (to the extent
applicable pursuant to then applicable laws). Tenant shall remove any such lien
or encumbrance by bond or otherwise within ten (10) business days after notice
by Landlord, and if Tenant shall fail to do so, Landlord may pay the amount
necessary to remove such lien or encumbrance, without being responsible for
investigating the validity thereof.

10.        INSURANCE
10.1    Indemnification and Waiver. Subject to the waiver of subrogation
provisions set forth in Section 10.5, and except to the extent arising from the
gross negligence or willful misconduct of Landlord or the "Landlord Parties," as
that term is defined below, or Landlord's breach of this Lease, Tenant hereby
assumes all risk of damage to property or injury to persons in, upon or about
the Premises from any cause whatsoever and agrees that Landlord, its partners,
subpartners and their respective officers, agents, servants, employees, lenders,
any property manager and independent contractors (collectively, "Landlord
Parties") shall not be liable for, and are hereby released from any
responsibility for, any damage either to person or property or resulting from
the loss of use thereof, which damage is sustained by Tenant or by other persons
claiming through Tenant. Except to the extent arising from the gross negligence
or willful misconduct of Landlord or the Landlord Parties or Landlord's breach
of this Lease, Tenant shall indemnify, defend, protect, and hold harmless the
Landlord Parties from any and all claims, loss, cost, damage, injury, expense
and liability (including without limitation court costs and reasonable
attorneys' fees) incurred in connection with or arising from any cause in, on or
about the Premises, any acts, omissions or negligence of Tenant or of any person
claiming by, through or under Tenant, or of the contractors, agents, servants,
employees, invitees, guests or licensees of Tenant or any such person, in, on or
about the Project or any breach of the terms of this Lease, either prior to,
during, or after the expiration of the Lease Term. Landlord shall indemnify,
defend, protect, and hold Tenant harmless from any and all loss, cost, damage,
expense and liability (including without limitation reasonable attorneys' fees)
to the extent arising from the gross negligence or willful misconduct of
Landlord or any Landlord Parties in, on or about the Project, except to the
extent caused by the negligence or willful misconduct of the Tenant Parties.
Notwithstanding anything to the contrary set forth in this Lease, either party's
agreement to indemnify the other party as set forth in this Section 10.1 shall
be ineffective to the extent the matters for which such party agreed to
indemnify the other party are covered by insurance required to be carried by the
non-indemnifying party pursuant to this Lease. Further, Tenant's agreement to
indemnify Landlord and Landlord's agreement to indemnify Tenant pursuant to this
Section 10.1 are not intended to and shall not relieve any insurance carrier of
its obligations under policies required to be carried pursuant to the provisions
of this Lease, to the extent such policies cover, or if carried, would have
covered the matters, subject to the parties' respective indemnification
obligations; nor shall they supersede any inconsistent agreement of the parties
set forth in any other provision of this Lease. Should Landlord be named as a
defendant in any suit brought against Tenant in connection with or arising out
of Tenant's occupancy of the Premises, Tenant shall pay to Landlord its
reasonable costs and expenses incurred in such suit, including without
limitation, its actual professional fees such as reasonable appraisers',
accountants' and attorneys' fees. The provisions of this Section 10.1 shall
survive the expiration or sooner termination of this Lease with respect to any
claims or liability arising in connection with any event occurring prior to such
expiration or termination.
10.2    Tenant's Compliance With Landlord's Property Insurance. Landlord shall
insure the Building during the Lease Term against loss or damage under a
building property and general liability insurance policy. Such coverage shall be
in such amounts, from such companies, and on such other terms and conditions, as
Landlord may from time to time reasonably determine. Additionally, at the option
of Landlord, such insurance coverage may include the risks of earthquakes and/or
flood damage and additional hazards, a rental loss endorsement and one or more
loss payee endorsements in favor of the holders of any mortgages or deeds of
trust encumbering the interest of Landlord in the Building or the ground or
underlying lessors of the Building, or any portion thereof. Tenant shall, at
Tenant's expense, comply with all insurance company requirements pertaining to
the use of the Premises. If Tenant's conduct or use of the Premises causes any
increase in the premium for such insurance policies then Tenant shall reimburse

 
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Landlord for any such increase. Tenant, at Tenant's expense, shall comply with
all rules, orders, regulations or requirements of the American Insurance
Association (formerly the National Board of Fire Underwriters) and with any
similar body.
10.3    Tenant's Insurance. Tenant shall maintain the following coverages in the
following amounts.
10.3.1    Commercial General Liability Insurance on an occurrence form covering
the insured against claims of bodily injury, personal injury and property damage
(including loss of use thereof) arising out of Tenant's operations, and
contractual liabilities including a contractual coverage, and including products
and completed operations coverage, for limits of liability on a per location
basis of not less than:
Bodily Injury and
Property Damage Liability
$2,000,000 each occurrence
$2,000,000 annual aggregate
Personal Injury Liability
$2,000,000 each occurrence
$2,000,000 annual aggregate

10.3.2    Property Insurance covering (i) all office furniture, business and
trade fixtures, office equipment, free-standing cabinet work, movable
partitions, merchandise and all other items of Tenant's property on the Premises
installed by, for, or at the expense of Tenant, (ii) the "Tenant Improvements,"
as that term is defined in the Tenant Work Letter, and any other improvements
which exist in the Premises as of the Lease Commencement Date (excluding the
"Base Building," as that term is defined below) (the "Original Improvements"),
and (iii) all other improvements, alterations and additions to the Premises.
Such insurance shall be written on an "all risks" of physical loss or damage
basis, for the full replacement cost value (subject to reasonable deductible
amounts) new without deduction for depreciation of the covered items and in
amounts that meet any co-insurance clauses of the policies of insurance and
shall include coverage for damage or other loss caused by fire or other peril
including, but not limited to, vandalism and malicious mischief, theft,
sprinkler leakage, bursting or stoppage of pipes, and explosion. As used in this
Lease, the "Base Building" shall include the structural portions of the
Building, and the elevators, exit stairwells and the systems and equipment
located in the internal core of the Building.
10.3.3    Business Income Interruption for one (1) year plus Extra Expense
insurance in such amounts as will reimburse Tenant for actual direct or indirect
loss of earnings attributable to the risks outlined in Section 10.3.2 above, up
to the Tenant’s blanket coverage limit for business interruption insurance of
$8,395,000.
10.3.4    Worker's Compensation and Employer's Liability or other similar
insurance pursuant to all applicable state and local statutes and regulations.
The policy shall include a waiver of subrogation in favor of Landlord, its
employees, Lenders and any property manager or partners.
10.4    Form of Policies. The minimum limits of policies of insurance required
of Tenant under this Lease shall in no event limit the liability of Tenant under
this Lease. Such insurance shall (i) name Landlord, its subsidiaries and
affiliates, its property manager (if any) and any other party the Landlord so
specifies, as an additional insured, including Landlord's managing agent (but
only with regard to commercial liability and general property insurance), if
any; (ii) be issued by an insurance company having a rating of not less than
A:IX in Best's Insurance Guide or which is otherwise acceptable to Landlord and
licensed to do business in the State of California; (iv) be primary insurance as
to all claims thereunder and provide that any insurance carried by Landlord is
excess and is non-contributing with any insurance required of Tenant; (v) be in
form and content reasonably acceptable to Landlord; and (vi) provide that said
insurance shall not be canceled or coverage changed unless thirty (30) days'
prior written notice shall have been given to Landlord and any mortgagee of
Landlord (unless such cancellation is the result of non-payment of premiums).
Tenant shall deliver said policy or policies or certificates thereof to Landlord
on or before the Lease Commencement Date and at least ten (10) days before the
expiration dates thereof. In the event Tenant shall fail to procure such
insurance, or to deliver such policies or certificate, Landlord may, at its
option, procure such policies for the account of Tenant, and the cost thereof
shall be paid to Landlord within five (5) days after delivery to Tenant of bills
therefor.

 
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10.5    Subrogation. Landlord and Tenant hereby agree to look solely to, and
seek recovery only from, their respective insurance carriers in the event of a
property or business interruption loss to the extent that such coverage is
agreed to be provided hereunder. The parties each hereby waive all rights and
claims against each other for such losses, and waive all rights of subrogation
of their respective insurers, provided such waiver of subrogation shall not
affect the right to the insured to recover thereunder. The parties agree that
their respective insurance policies do now, or shall, contain the waiver of
subrogation.
10.6    Additional Insurance Obligations. Tenant shall carry and maintain during
the entire Lease Term, at Tenant's sole cost and expense, increased amounts of
the insurance required to be carried by Tenant pursuant to this Article 10 and
such other reasonable types of insurance coverage and in such reasonable amounts
covering the Premises and Tenant's operations therein, as may be reasonably
requested by Landlord or Landlord's lender, but in no event in excess of the
amounts and types of insurance then being required by landlords of buildings
comparable to and in the vicinity of the Building.

11.        DAMAGE AND DESTRUCTION
11.1    Repair of Damage to Premises by Landlord. Tenant shall promptly notify
Landlord of any damage to the Premises resulting from fire or any other
casualty. If the Premises or any Common Areas serving or providing access to the
Premises shall be damaged by fire or other casualty, Landlord shall promptly and
diligently, subject to reasonable delays for insurance adjustment or other
matters beyond Landlord's reasonable control, and subject to all other terms of
this Article 11, restore the Base Building and such Common Areas. Such
restoration shall be to substantially the same condition of the Base Building
and the Common Areas prior to the casualty, except for modifications required by
zoning and building codes and other laws or by the holder of a mortgage on the
Building or Project or any other modifications to the Common Areas deemed
desirable by Landlord, which are consistent with the character of the Project,
provided that access to the Premises shall not be materially impaired. Upon the
occurrence of any damage to the Premises, upon notice (the "Landlord Repair
Notice") to Tenant from Landlord, Tenant shall assign to Landlord (or to any
party designated by Landlord) all insurance proceeds payable to Tenant under
Tenant's insurance required under Section 10.3 of this Lease, and Landlord shall
repair any injury or damage to the Tenant Improvements and the Original
Improvements installed in the Premises and shall return such Tenant Improvements
and Original Improvements to their original condition; provided that if the cost
of such repair by Landlord exceeds the amount of insurance proceeds received by
Landlord from Tenant's insurance carrier, as assigned by Tenant, the excess cost
of such repairs shall be paid by Tenant to Landlord in accordance with a
reasonable progress payment schedule, or, in the event Tenant is not the
Original Tenant, then prior to Landlord's commencement of repair of the damage.
In the event that Landlord does not deliver the Landlord Repair Notice within
sixty (60) days following the date the casualty becomes known to Landlord,
Tenant shall, at its sole cost and expense, repair any injury or damage to the
Tenant Improvements and the Original Improvements installed in the Premises and
shall return such Tenant Improvements and Original Improvements to their
original condition. Whether or not Landlord delivers a Landlord Repair Notice,
prior to the commencement of construction, Tenant shall submit to Landlord, for
Landlord's review and approval, all plans, specifications and working drawings
relating thereto, and Landlord shall select the contractors to perform such
improvement work. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or its visitors, or injury to Tenant's business resulting in
any way from such damage or the repair thereof; provided however, that if such
fire or other casualty shall have damaged the Premises or Common Areas necessary
to Tenant's occupancy, and the Premises are not occupied by Tenant as a result
thereof, then during the time and to the extent the Premises are unfit for
occupancy, the Rent shall be abated in proportion to the ratio that the amount
of rentable square feet of the Premises which is unfit for occupancy for the
purposes permitted under this Lease bears to the total rentable square feet of
the Premises. In the event that Landlord shall not deliver the Landlord Repair
Notice, Tenant's right to rent abatement pursuant to the preceding sentence
shall terminate as of the date which is reasonably determined by Landlord to be
the date Tenant should have completed repairs to the Premises assuming Tenant
used reasonable due diligence in connection therewith.
11.2    Landlord's Option to Repair. Notwithstanding the terms of Section 11.1
of this Lease, Landlord may elect not to rebuild and/or restore the Premises,
Building and/or Project, and instead terminate this Lease, by notifying Tenant
in writing of such termination within forty-five (45) days after the date of
discovery of the damage, such notice to include a termination date giving Tenant
sixty (60) days to vacate the Premises, but Landlord may so

 
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elect only if the Building or Project shall be damaged by fire or other casualty
or cause, whether or not the Premises are affected, and one or more of the
following conditions is present: (i) in Landlord's reasonable judgment, repairs
cannot reasonably be completed within one hundred eighty (180) days after the
date of discovery of the damage (when such repairs are made without the payment
of overtime or other premiums); (ii) the holder of any mortgage on the Building
or Project or ground lessor with respect to the Building or Project shall
require that the insurance proceeds or any portion thereof be used to retire the
mortgage debt, or shall terminate the ground lease, as the case may be; (iii)
the damage is not fully covered by Landlord's insurance policies, after the
payment by Landlord of any deductible under the applicable insurance policy in
an amount up to Five Hundred Thousand and 00/100 Dollars ($500,000.00); (iv)
Landlord decides to rebuild the Building or Common Areas so that they will be
substantially different structurally or architecturally; (v) the damage occurs
during the last twelve (12) months of the Lease Term; or (vi) any owner of any
other portion of the Project, other than Landlord, does not intend to repair the
damage to such portion of the Project; provided, however, that if Landlord does
not elect to terminate this Lease pursuant to Landlord's termination right as
provided above, and the repairs cannot, in the reasonable opinion of Landlord,
be completed within one hundred eighty (180) days after being commenced, Tenant
may elect, no earlier than sixty (60) days after the date of the damage and not
later than ninety (90) days after the date of such damage, to terminate this
Lease by written notice to Landlord effective as of the date specified in the
notice, which date shall not be less than thirty (30) days nor more than sixty
(60) days after the date such notice is given by Tenant. Notwithstanding the
provisions of this Section 11.2, Tenant shall have the right to terminate this
Lease under this Section 11.2 only if each of the following conditions is
satisfied: (a) the damage to the Project by fire or other casualty was not
caused by the gross negligence or intentional act of Tenant or its partners or
subpartners and their respective officers, agents, servants, employees, and
independent contractors; (b) as a result of the damage, Tenant cannot reasonably
conduct business from the Premises; and () as a result of the damage to the
Project, Tenant does not occupy or use the Premises at all.
11.3    Waiver of Statutory Provisions. The provisions of this Lease, including
this Article 11, constitute an express agreement between Landlord and Tenant
with respect to any and all damage to, or destruction of, all or any part of the
Premises, the Building or the Project, and any statute or regulation of the
State of California, including, without limitation, Sections 1932(2) and 1933(4)
of the California Civil Code, with respect to any rights or obligations
concerning damage or destruction in the absence of an express agreement between
the parties, and any other statute or regulation, now or hereafter in effect,
shall have no application to this Lease or any damage or destruction to all or
any part of the Premises, the Building or the Project.

12.        NONWAIVER    No provision of this Lease shall be deemed waived by
either party hereto unless expressly waived in a writing signed thereby. The
waiver by either party hereto of any breach of any term, covenant or condition
herein contained shall not be deemed to be a waiver of any subsequent breach of
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 Rent so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such Rent. No acceptance of a lesser amount than the Rent herein
stipulated shall be deemed a waiver of Landlord's right to receive the full
amount due, nor shall any endorsement or statement on any check or payment or
any letter accompanying such check or payment be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the full amount due. No receipt of monies by
Landlord from Tenant after the termination of this Lease shall in any way alter
the length of the Lease Term or of Tenant's right of possession hereunder, or
after the giving of any notice shall reinstate, continue or extend the Lease
Term or affect any notice given Tenant prior to the receipt of such monies, it
being agreed that after the service of notice or the commencement of a suit, or
after final judgment for possession of the Premises, Landlord may receive and
collect any Rent due, and the payment of said Rent shall not waive or affect
said notice, suit or judgment.

13.        CONDEMNATION    If the whole or any part of the Premises, Building or
Project shall be taken by power of eminent domain or condemned by any competent
authority for any public or quasi-public use or purpose, or if any adjacent
property or street shall be so taken or condemned, or reconfigured or vacated by
such authority in such manner as to require the use, reconstruction or
remodeling of any part of the Premises, Building or Project, or if Landlord
shall grant a deed or other instrument in lieu of such taking by eminent domain
or condemnation, Landlord shall have the option to terminate this Lease
effective as of the date possession is required to be surrendered to the
authority. Tenant shall not because of such taking assert any claim against
Landlord or the authority for any compensation

 
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because of such taking and Landlord shall be entitled to the entire award or
payment in connection therewith, except that Tenant shall have the right to file
any separate claim available to Tenant for any taking of Tenant's personal
property and fixtures belonging to Tenant and removable by Tenant upon
expiration of the Lease Term pursuant to the terms of this Lease, and for moving
expenses, so long as such claims do not materially diminish the award available
to Landlord, its ground lessor with respect to the Building or Project or its
mortgagee, and such claim is payable separately to Tenant. All Rent shall be
apportioned as of the date of such termination. If any part of the Premises
shall be taken, and this Lease shall not be so terminated, the Rent shall be
proportionately abated. Tenant hereby waives any and all rights it might
otherwise have pursuant to Section 1265.130 of The California Code of Civil
Procedure. Notwithstanding anything to the contrary contained in this Article
13, in the event of a temporary taking of all or any portion of the Premises for
a period of one hundred and eighty (180) days or less, then this Lease shall not
terminate but the Base Rent and the Additional Rent shall be abated for the
period of such taking in proportion to the ratio that the amount of rentable
square feet of the Premises taken bears to the total rentable square feet of the
Premises. Landlord shall be entitled to receive the entire award made in
connection with any such temporary taking.

14.        ASSIGNMENT AND SUBLETTING
14.1    Transfers. Tenant shall not, without the prior written consent of
Landlord, which will not be unreasonably withheld, assign, mortgage, pledge,
hypothecate, encumber, or permit any lien to attach to, or otherwise transfer,
this Lease or any interest hereunder, permit any assignment, or other transfer
of this Lease or any interest hereunder by operation of law, sublet the Premises
or any part thereof, or enter into any license or concession agreements or
otherwise permit the occupancy or use of the Premises or any part thereof by any
persons other than Tenant and its employees and contractors (all of the
foregoing are hereinafter sometimes referred to collectively as "Transfers" and
any person to whom any Transfer is made or sought to be made is hereinafter
sometimes referred to as a "Transferee"). If Tenant desires Landlord's consent
to any Transfer, Tenant shall notify Landlord in writing, which notice (the
"Transfer Notice") shall include (i) the proposed effective date of the
Transfer, which shall not be less than thirty (30) days nor more than one
hundred eighty (180) days after the date of delivery of the Transfer Notice,
(ii) a description of the portion of the Premises to be transferred (the
"Subject Space"), (iii) all of the terms of the proposed Transfer and the
consideration therefor, including calculation of the "Transfer Premium", as that
term is defined in Section 14.3 below, in connection with such Transfer, the
name and address of the proposed Transferee, and a copy of all existing executed
and/or proposed documentation pertaining to the proposed Transfer, and (iv)
current financial statements of the proposed Transferee certified by an officer,
partner or owner thereof, business credit and personal references and history of
the proposed Transferee and any other information reasonably required by
Landlord which will enable Landlord to determine the financial responsibility,
character, and reputation of the proposed Transferee, nature of such
Transferee's business and proposed use of the Subject Space. Any Transfer made
without Landlord's prior written consent shall, at Landlord's option, be null,
void and of no effect, and shall, at Landlord's option, constitute a default by
Tenant under this Lease. Whether or not Landlord consents to any proposed
Transfer, Tenant shall pay Landlord's reasonable review and processing fees, as
well as any reasonable professional fees (including, without limitation,
attorneys', accountants', architects', engineers' and consultants' fees)
incurred by Landlord, not to exceed Two Thousand and 00/100 Dollars ($2,000.00)
for a Transfer in the ordinary course of business, within thirty (30) days after
written request by Landlord.
14.2    Landlord's Consent. Landlord shall not unreasonably withhold, condition
or delay its consent to any proposed Transfer of the Subject Space to the
Transferee on the terms specified in the Transfer Notice. Without limitation as
to other reasonable grounds for withholding consent, the parties hereby agree
that it shall be reasonable under this Lease and under any applicable law for
Landlord to withhold consent to any proposed Transfer where one or more of the
following apply:
14.2.1    The Transferee is of a character or reputation or engaged in a
business which is not consistent with the quality of the Building or the
Project;
14.2.2    The Transferee is either a governmental agency or instrumentality
thereof;
14.2.3    (A) If the Transferee is an assignee, the Transferee, (i) if such
Transferee is a public company, has a market capitalization less than Tenant's
market capitalization as of the date of this Lease (which the parties hereby
agree is $525,000,000.00) ("Tenant's Market Capitalization"), and (ii) if such
Transferee is not a public company,

 
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has a tangible net worth (not including goodwill as an asset) computed in
accordance with generally accepted accounting principles which is less than the
equivalent to Tenant's Market Capitalization, and (B) if the Transferee is a
sublessee, the Transferee is not a party of reasonable financial worth and/or
financial stability in light of the responsibilities to be undertaken in
connection with the Transfer on the date consent is requested; or
14.2.4    The proposed Transfer would cause a violation of another lease for
space in the Project, or would give an occupant of the Project a right to cancel
its lease.
If Landlord consents to any Transfer pursuant to the terms of this Section 14.2
(and does not exercise any recapture rights Landlord may have under Section 14.4
of this Lease), Tenant may within six (6) months after Landlord's consent, but
not later than the expiration of said six-month period, enter into such Transfer
of the Premises or portion thereof, upon substantially the same terms and
conditions as are set forth in the Transfer Notice furnished by Tenant to
Landlord pursuant to Section 14.1 of this Lease, provided that if there are any
changes in the terms and conditions from those specified in the Transfer Notice
such that Landlord would initially have been entitled to refuse its consent to
such Transfer under this Section 14.2, Tenant shall again submit the Transfer to
Landlord for its approval and other action under this Article 14 (including
Landlord's right of recapture, if any, under Section 14.4 of this Lease).
Notwithstanding anything to the contrary in this Lease, if Tenant or any
proposed Transferee claims that Landlord has unreasonably withheld or delayed
its consent under Section 14.2 or otherwise has breached or acted unreasonably
under this Article 14, their sole remedies shall be a suit for contract damages
(other than damages for injury to, or interference with, Tenant's business
including, without limitation, loss of profits, however occurring) or
declaratory judgment and an injunction for the relief sought, and Tenant hereby
waives all other remedies, including, without limitation, any right at law or
equity to terminate this Lease, on its own behalf and, to the extent permitted
under all applicable laws, on behalf of the proposed Transferee.
14.3    Transfer Premium. If Landlord consents to a Transfer, as a condition
thereto which the parties hereby agree is reasonable, Tenant shall pay to
Landlord fifty percent (50%) of any "Transfer Premium," as that term is defined
in this Section 14.3, received by Tenant from such Transferee. "Transfer
Premium" shall mean all rent, additional rent or other consideration payable by
such Transferee in connection with the Transfer in excess of the Rent and
Additional Rent payable by Tenant under this Lease during the term of the
Transfer on a per rentable square foot basis if less than all of the Premises is
transferred, and after deduction of (i) any costs of improvements made to the
Subject Space in connection with such Transfer, (ii) brokerage commissions and
reasonable marketing costs paid in connection with such Transfer, (iii) rent
abatement granted to the Transferee, and (iii) reasonable legal fees incurred in
connection with such Transfer. "Transfer Premium" shall also include, but not be
limited to, key money and bonus money paid by Transferee to Tenant in connection
with such Transfer, and any payment in excess of fair market value for services
rendered by Tenant to Transferee or for assets, fixtures, inventory, equipment,
or furniture transferred by Tenant to Transferee in connection with such
Transfer, where the payment in excess of fair market value was made for the
purpose of circumventing the obligation of Tenant to pay Landlord any amount due
as a Transfer Premium for rental payments related to the Premises . For clarity,
the Transfer Premium shall exclude any consideration payable by Transferee
(and/or payable to Tenant) generally related to the Transfer itself (e.g. merger
consideration, consideration for sale of assets, stock transfer, investments,
financings, etc.) and unrelated to the Transferee’s use of the Premises. The
determination of the amount of Landlord's applicable share of the Transfer
Premium shall be made on a monthly basis as rent or other consideration is
received by Tenant under the Transfer.
14.4    Landlord's Option as to Subject Space. Notwithstanding anything to the
contrary contained in this Article 14, in the event Tenant contemplates a
Transfer which, together with all prior Transfers then remaining in effect,
would cause fifty percent (50%) or more of the Premises to be Transferred for
more than fifty percent (50%) of the then remaining Lease Term (taking into
account any extension of the Lease Term which has irrevocably exercised by
Tenant), Tenant shall give Landlord notice (the "Intention to Transfer Notice")
of such contemplated Transfer (whether or not the contemplated Transferee or the
terms of such contemplated Transfer have been determined). The Intention to
Transfer Notice shall specify the portion of and amount of rentable square feet
of the Premises which Tenant intends to Transfer (the "Contemplated Transfer
Space"), the contemplated date of commencement of the Contemplated Transfer (the
"Contemplated Effective Date"), and the contemplated length of the term of such
contemplated Transfer, and shall specify that such Intention to Transfer Notice
is delivered to Landlord pursuant to this Section 14.4 in order to allow
Landlord to elect to recapture the Contemplated Transfer Space. Thereafter,
Landlord

 
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shall have the option, by giving written notice to Tenant within thirty (30)
days after receipt of any Intention to Transfer Notice, to recapture the
Contemplated Transfer Space. Such recapture shall cancel and terminate this
Lease with respect to such Contemplated Transfer Space as of the Contemplated
Effective Date. In the event of a recapture by Landlord, if this Lease shall be
canceled with respect to less than the entire Premises, the Rent reserved herein
shall be prorated on the basis of the number of rentable square feet retained by
Tenant in proportion to the number of rentable square feet contained in the
Premises, and this Lease as so amended shall continue thereafter in full force
and effect, and upon request of either party, the parties shall execute written
confirmation of the same. If Landlord declines, or fails to elect in a timely
manner, to recapture such Contemplated Transfer Space under this Section 14.4,
then, subject to the other terms of this Article 14, for a period of nine (9)
months (the "Nine Month Period") commencing on the last day of such thirty (30)
day period, Landlord shall not have any right to recapture the Contemplated
Transfer Space with respect to any Transfer made during the Nine Month Period,
provided that any such Transfer is substantially on the terms set forth in the
Intention to Transfer Notice, and provided further that any such Transfer shall
be subject to the remaining terms of this Article 14. If such a Transfer is not
so consummated within the Nine Month Period (or if a Transfer is so consummated,
then upon the expiration of the term of any Transfer of such Contemplated
Transfer Space consummated within such Nine Month Period), Tenant shall again be
required to submit a new Intention to Transfer Notice to Landlord with respect
any contemplated Transfer, as provided above in this Section 14.4.
14.5    Effect of Transfer. If Landlord consents to a Transfer, (i) the terms
and conditions of this Lease shall in no way be deemed to have been waived or
modified, (ii) such consent shall not be deemed consent to any further Transfer
by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord,
promptly after execution, an original executed copy of all documentation
pertaining to the Transfer in form reasonably acceptable to Landlord, (iv)
Tenant shall furnish upon Landlord's request a complete statement, certified by
an independent certified public accountant, or Tenant's chief financial officer,
setting forth in detail the computation of any Transfer Premium Tenant has
derived and shall derive from such Transfer, and (v) no Transfer relating to
this Lease or agreement entered into with respect thereto, whether with or
without Landlord's consent, shall relieve Tenant or any guarantor of the Lease
from any liability under this Lease, including, without limitation, in
connection with the Subject Space. Landlord or its authorized representatives
shall have the right at all reasonable times to audit the books, records and
papers of Tenant relating to any Transfer, and shall have the right to make
copies thereof. If the Transfer Premium respecting any Transfer shall be found
understated, Tenant shall, within thirty (30) days after demand, pay the
deficiency, and if understated by more than five percent (5%), Tenant shall pay
Landlord's costs of such audit.
14.6    Additional Transfers. For purposes of this Lease, the term "Transfer"
shall also include (i) if Tenant is a partnership, the withdrawal or change,
voluntary, involuntary or by operation of law, of fifty percent (50%) or more of
the partners, or transfer of fifty percent (50%) or more of partnership
interests, within a twelve (12)-month period, or the dissolution of the
partnership without immediate reconstitution thereof, and (ii) if Tenant is a
closely held corporation (i.e., whose stock is not publicly held and not traded
through an exchange or over the counter), (A) the dissolution, merger,
consolidation or other reorganization of Tenant or (B) the sale or other
transfer of an aggregate of fifty percent (50%) or more of the voting shares of
Tenant (other than to immediate family members by reason of gift or death),
within a twelve (12)-month period, or (C) the sale, mortgage, hypothecation or
pledge of an aggregate of fifty percent (50%) or more of the value of the
unencumbered assets of Tenant within a twelve (12)-month period.
14.7    Occurrence of Default. Any Transfer hereunder shall be subordinate and
subject to the provisions of this Lease, and if this Lease shall be terminated
during the term of any Transfer, Landlord shall have the right to: (i) treat
such Transfer as cancelled and repossess the Subject Space by any lawful means,
or (ii) require that such Transferee attorn to and recognize Landlord as its
landlord under any such Transfer. If Tenant shall be in default under this
Lease, Landlord is hereby irrevocably authorized, as Tenant's agent and
attorney-in-fact, to direct any Transferee to make all payments under or in
connection with the Transfer directly to Landlord (which Landlord shall apply
towards Tenant's obligations under this Lease) until such default is cured. Such
Transferee shall rely on any representation by Landlord that Tenant is in
default hereunder, without any need for confirmation thereof by Tenant. Upon any
assignment, the assignee shall assume in writing all obligations and covenants
of Tenant thereafter to be performed or observed under this Lease. No collection
or acceptance of rent by Landlord from any Transferee shall be deemed a waiver
of any provision of this Article 14 or the approval of any Transferee or a
release of Tenant from any obligation under this Lease, whether theretofore or
thereafter accruing. In no event shall Landlord's enforcement of any provision
of this Lease against any Transferee be deemed a waiver of Landlord's right to
enforce any term of this Lease against Tenant

 
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or any other person. If Tenant's obligations hereunder have been guaranteed,
Landlord's consent to any Transfer shall not be effective unless the guarantor
also consents to such Transfer.
14.8    Non-Transfers. Notwithstanding anything to the contrary contained in
this Article 14, an assignment or subletting of all or a portion of the Premises
to an affiliate of Tenant (an entity which is controlled by, controls, or is
under common control with, Tenant), shall not be deemed a Transfer under this
Article 14, provided that Tenant notifies Landlord of any such assignment or
sublease and promptly supplies Landlord with any documents or information
requested by Landlord regarding such assignment or sublease or such affiliate,
and further provided that such assignment or sublease is not a subterfuge by
Tenant to avoid its obligations under this Lease. "Control," as used in this
Section 14.8, shall mean the ownership, directly or indirectly, of at least
fifty-one percent (51%) of the voting securities of, or possession of the right
to vote, in the ordinary direction of its affairs, of at least fifty-one percent
(51%) of the voting interest in, any person or entity. No such permitted
assignment or subletting shall serve to release Tenant from any of its
obligations under this Lease.
14.9    Pre-Approved Subtenant. Subject to Landlord's approval of the applicable
sublease documentation, which approval shall not unreasonably withheld,
conditioned or delayed, Landlord hereby consents to Tenant's sublease of all or
a portion of the Premises to Scilex Pharmaceuticals Inc, a Delaware corporation.

15.        SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES
15.1    Surrender of Premises. No act or thing done by Landlord or any agent or
employee of Landlord during the Lease Term shall be deemed to constitute an
acceptance by Landlord of a surrender of the Premises unless such intent is
specifically acknowledged in writing by Landlord. The delivery of keys to the
Premises to Landlord or any agent or employee of Landlord shall not constitute a
surrender of the Premises or effect a termination of this Lease, whether or not
the keys are thereafter retained by Landlord, and notwithstanding such delivery
Tenant shall be entitled to the return of such keys at any reasonable time upon
request until this Lease shall have been properly terminated. The voluntary or
other surrender of this Lease by Tenant, whether accepted by Landlord or not, or
a mutual termination hereof, shall not work a merger, and at the option of
Landlord shall operate as an assignment to Landlord of all subleases or
subtenancies affecting the Premises or terminate any or all such sublessees or
subtenancies.
15.2    Removal of Tenant Property by Tenant. Upon the expiration of the Lease
Term, or upon any earlier termination of this Lease, Tenant shall, subject to
the provisions of this Article 15, quit and surrender possession of the Premises
to Landlord in as good order and condition as when Tenant took possession and as
thereafter improved by Landlord and/or Tenant, reasonable wear and tear and
repairs which are specifically made the responsibility of Landlord hereunder
excepted. Upon such expiration or termination, Tenant shall, without expense to
Landlord, remove or cause to be removed from the Premises all debris and
rubbish, and such items of furniture, equipment, free-standing cabinet work,
movable partitions and other articles of personal property owned by Tenant or
installed or placed by Tenant at its expense in the Premises, and such similar
articles of any other persons claiming under Tenant, as Landlord may, in its
sole discretion, require to be removed, and Tenant shall repair at its own
expense all damage to the Premises and Building resulting from such removal.
15.3    Environmental Assessment. In connection with its surrender of the
Premises, Tenant shall submit to Landlord, at least one hundred twenty (120)
days prior to the expiration date of this Lease (or in the event of an earlier
termination of this Lease, as soon as reasonably possible following such
termination), an Environmental Assessment of the Premises by a competent and
experienced environmental engineer or engineering firm reasonably satisfactory
to Landlord (pursuant to a contract approved by Landlord and providing that
Landlord can rely on the

 
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Environmental Assessment), which (i) evidences that the Premises are in a clean
and safe condition and free and clear of any Hazardous Materials brought onto
the Project by Tenant or a Tenant Party; and (ii) includes a review of the
Premises by an environmental consultant for asbestos, mold, fungus, spores, and
other moisture conditions, on-site chemical use, and lead-based paint. If such
Environmental Assessment reveals that remediation or Clean-up is required under
any Environmental Laws, Tenant shall submit a remediation plan prepared by a
recognized environmental consultant and shall be responsible for all costs of
remediation and Clean-up, as more particularly provided in Section 5.3, above.
15.4    Condition of the Building and Premises Upon Surrender. In addition to
the above requirements of this Article 15, upon the expiration of the Lease
Term, or upon any earlier termination of this Lease, Tenant shall, surrender the
Premises and Building such that the same are in compliance with all Applicable
Laws (provided that Tenant will not be required to perform legal compliance
upgrades which are subject to so called “grandfathering” provisions or which
would not be triggered absent pulling a permit for construction) and with Tenant
having complied with all of Tenant’s obligations under this Lease, including
those relating to improvement, repair, maintenance, compliance with law, testing
and other related obligations of Tenant set forth in Article 7 of this Lease. In
the event that the Building and Premises shall be surrendered in a condition
which does not comply with the terms of this Section 15.4, because Tenant failed
to comply with its obligations set forth in Lease, then following thirty
(30) days notice to Tenant, during which thirty (30) day period Tenant shall
have the right to cure such noncompliance, Landlord shall be entitled to expend
all reasonable costs in order to cause the same to comply with the required
condition upon surrender and Tenant shall immediately reimburse Landlord for all
such costs upon notice and Tenant shall be deemed during the period that Tenant
or Landlord, as the case may be, perform obligations relating to the Surrender
Improvements to be in holdover under Article 16 of this Lease.

16.        HOLDING OVER    If Tenant holds over after the expiration of the
Lease Term or earlier termination thereof, with the express or implied consent
of Landlord, such tenancy shall be from month-to-month only, and shall not
constitute a renewal hereof or an extension for any further term. If Tenant
holds over after the expiration of the Lease Term of earlier termination
thereof, without the express or implied consent of Landlord, such tenancy shall
be deemed to be a tenancy by sufferance only, and shall not constitute a renewal
hereof or an extension for any further term. In either case, Rent shall be
payable at a monthly rate equal to one hundred fifty percent (150%) of the Rent
applicable during the last rental period of the Lease Term under this Lease.
Such month-to-month tenancy or tenancy by sufferance, as the case may be, shall
be subject to every other applicable term, covenant and agreement contained
herein. Nothing contained in this Article 16 shall be construed as consent by
Landlord to any holding over by Tenant, and Landlord expressly reserves the
right to require Tenant to surrender possession of the Premises to Landlord as
provided in this Lease upon the expiration or other termination of this Lease.
The provisions of this Article 16 shall not be deemed to limit or constitute a
waiver of any other rights or remedies of Landlord provided herein or at law. If
Tenant fails to surrender the Premises within thirty (30) days following the
termination or expiration of this Lease, in addition to any other liabilities to
Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold
Landlord harmless from all loss, costs (including reasonable attorneys' fees)
and liability resulting from such failure, including, without limiting the
generality of the foregoing, any claims made by any succeeding tenant founded
upon such failure to surrender and any lost profits to Landlord resulting
therefrom.

17.        ESTOPPEL CERTIFICATES    Within ten (10) business days following a
request in writing by Landlord ("Initial Estoppel Request Period"), Tenant shall
execute, acknowledge and deliver to Landlord an estoppel certificate, which, as
submitted by Landlord, shall be substantially in the form of Exhibit D, attached
hereto (or such other form as may be required by any prospective mortgagee or
purchaser of the Project, or any portion thereof), indicating therein any
exceptions thereto that may exist at that time, and shall also contain any other
information reasonably requested by Landlord or Landlord's mortgagee or
prospective mortgagee. Any such certificate may be relied upon by any
prospective mortgagee or purchaser of all or any portion of the Project. Tenant
shall execute and deliver whatever other instruments may be reasonably required
for such purposes. At any time during the Lease Term, Landlord may require
Tenant to provide Landlord with a current financial statement and financial
statements of the two (2) years prior to the current financial statement year.
Such statements shall be prepared in accordance with generally accepted
accounting principles and, if such is the normal practice of Tenant, shall be
audited by an independent certified public accountant. If Tenant fails to
deliver such estoppel certificate prior to the expiration of the Initial
Estoppel Request Period, then Landlord shall provide written notice of the same
to Tenant pursuant to Section 19.1.4

 
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or Section 19.1.2, as applicable, below, and Tenant shall thereafter deliver
such certificate to Landlord within the time period for cure set forth in such
applicable Section. Failure of Tenant to timely execute, acknowledge and deliver
such estoppel certificate or other instruments shall constitute an acceptance of
the Premises and an acknowledgment by Tenant that statements included in the
estoppel certificate are true and correct, without exception. Notwithstanding
the foregoing, in the event that (i) stock in the entity which constitutes
Tenant under this Lease (as opposed to an entity that "controls" Tenant or is
otherwise an "affiliate" of Tenant, as those terms are defined in Section 14.8
of this Lease) is publicly traded on a national stock exchange, and (ii) Tenant
has its own, separate and distinct 10K and 10Q filing requirements (as opposed
joint or cumulative filings with an entity that controls Tenant or with entities
which are otherwise Affiliates of Tenant), then Tenant's obligation to provide
Landlord with a copy of its most recent current financial statement shall be
deemed satisfied.

18.        SUBORDINATION    This Lease shall be subject and subordinate to all
present and future ground or underlying leases of the Building or Project and to
the lien of any mortgage, trust deed or other encumbrances now or hereafter in
force against the Building or Project or any part thereof, if any, and to all
renewals, extensions, modifications, consolidations and replacements thereof,
and to all advances made or hereafter to be made upon the security of such
mortgages or trust deeds, unless the holders of such mortgages, trust deeds or
other encumbrances, or the lessors under such ground lease or underlying leases,
require in writing that this Lease be superior thereto (collectively, the
“Superior Holders”); provided, however, that in consideration of and a condition
precedent to Tenant’s agreement to subordinate this Lease to any future
mortgage, trust deed or other encumbrances, shall be the receipt by Tenant of a
commercially reasonable subordination non-disturbance and attornment agreement
from such Superior Holder, which requires such Superior Holder to accept this
lease, and not to disturb tenant’s possession, so long as an event of default
has not occurred and be continuing (a “SNDAA”) executed by Landlord and the
appropriate Superior Holder. Tenant covenants and agrees in the event any
proceedings are brought for the foreclosure of any such mortgage or deed in lieu
thereof (or if any ground lease is terminated), to attorn, without any
deductions or set-offs whatsoever, to the lienholder or purchaser or any
successors thereto upon any such foreclosure sale or deed in lieu thereof (or to
the ground lessor), if so requested to do so by such purchaser or lienholder or
ground lessor, and to recognize such purchaser or lienholder or ground lessor as
the lessor under this Lease, provided such lienholder or purchaser or ground
lessor shall agree to accept this Lease and not disturb Tenant's occupancy, so
long as Tenant timely pays the rent and observes and performs the terms,
covenants and conditions of this Lease to be observed and performed by Tenant.
Landlord's interest herein may be assigned as security at any time to any
lienholder. Tenant shall, within ten (10) days of request by Landlord, execute
such further commercially reasonable instruments or assurances as Landlord may
reasonably deem necessary to evidence or confirm the subordination or
superiority of this Lease to any such mortgages, trust deeds, ground leases or
underlying leases. Tenant waives the provisions of any current or future
statute, rule or law which may give or purport to give Tenant any right or
election to terminate or otherwise adversely affect this Lease and the
obligations of the Tenant hereunder in the event of any foreclosure proceeding
or sale.

19.        DEFAULTS; REMEDIES
19.1    Events of Default. The occurrence of any of the following shall
constitute a default of this Lease by Tenant:

 
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19.1.1    Any failure by Tenant to pay any Rent or any other charge required to
be paid under this Lease, or any part thereof, when due unless such failure is
cured within five (5) business days after written notice of such failure; or
19.1.2    Except where a specific time period is otherwise set forth for
Tenant's performance in this Lease, in which event the failure to perform by
Tenant within such time period shall be a default by Tenant under this
Section 19.1.2, any failure by Tenant to observe or perform any other provision,
covenant or condition of this Lease to be observed or performed by Tenant where
such failure continues for thirty (30) days after written notice thereof from
Landlord to Tenant; provided that if the nature of such default is such that the
same cannot reasonably be cured within a thirty (30) day period, Tenant shall
not be deemed to be in default if it diligently commences such cure within such
period and thereafter diligently proceeds to rectify and cure such default; or
19.1.3    Abandonment or vacation of all or a substantial portion of the
Premises by Tenant; or
19.1.4    The failure by Tenant to observe or perform according to the
provisions of Articles 5, 14, 17 or 18 of this Lease where such failure
continues for more than five (5) business days after notice from Landlord
(which, as it applies to Article 17, only if Landlord is required to provide the
estoppel certificate in order to consummate any sale, financing or third party
transaction, and otherwise Section 19.1.2 shall apply).
19.1.5    The notice periods provided herein are in lieu of, and not in addition
to, any notice periods provided by law.
19.2    Remedies Upon Default. Upon the occurrence of any event of default by
Tenant, Landlord shall have, in addition to any other remedies available to
Landlord at law or in equity (all of which remedies shall be distinct, separate
and cumulative), the option to pursue any one or more of the following remedies,
each and all of which shall be cumulative and nonexclusive, without any notice
or demand whatsoever.
19.2.1    Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying the Premises or any part
thereof, without being liable for prosecution or any claim or damages therefor;
and Landlord may recover from Tenant the following:
(i)    The worth at the time of award of the unpaid rent which has been earned
at the time of such 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 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 Lease Term after the time of award exceeds the amount of
such rental loss that Tenant proves could have been reasonably avoided; plus
(iv)    Any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom; and
(v)    At Landlord's election, such other amounts in addition to or in lieu of
the foregoing as may be permitted from time to time by applicable law.
The term "rent" as used in this Section 19.2 shall be deemed to be and to mean
all sums of every nature required to be paid by Tenant pursuant to the terms of
this Lease, whether to Landlord or to others. As used in Sections 19.2.1(i) and
(ii), above, the "worth at the time of award" shall be computed by allowing
interest at the rate set forth

 
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in Article 25 of this Lease, but in no case greater than the maximum amount of
such interest permitted by law. As used in Section 19.2.1(iii) above, the "worth
at the time of award" shall be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent (1%).
19.2.2    Landlord shall have the remedy described in California Civil Code
Section 1951.4 (lessor may continue lease in effect after lessee's breach and
abandonment and recover rent as it becomes due, if lessee has the right to
sublet or assign, subject only to reasonable limitations). Accordingly, if
Landlord does not elect to terminate this Lease on account of any default by
Tenant, Landlord may, from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease, including the right to recover
all rent as it becomes due.
19.2.3    Landlord shall at all times have the rights and remedies (which shall
be cumulative with each other and cumulative and in addition to those rights and
remedies available under Sections 19.2.1 and 19.2.2, above, or any law or other
provision of this Lease), without prior demand or notice except as required by
applicable law, to seek any declaratory, injunctive or other equitable relief,
and specifically enforce this Lease, or restrain or enjoin a violation or breach
of any provision hereof.
19.3    Subleases of Tenant. Whether or not Landlord elects to terminate this
Lease on account of any default by Tenant, as set forth in this Article 19,
Landlord shall have the right to terminate any and all subleases, licenses,
concessions or other consensual arrangements for possession entered into by
Tenant and affecting the Premises or may, in Landlord's sole discretion, succeed
to Tenant's interest in such subleases, licenses, concessions or arrangements.
In the event of Landlord's election to succeed to Tenant's interest in any such
subleases, licenses, concessions or arrangements, Tenant shall, as of the date
of notice by Landlord of such election, have no further right to or interest in
the rent or other consideration receivable thereunder.
19.4    Efforts to Relet. No re-entry or repossession, repairs, maintenance,
changes, alterations and additions, reletting, appointment of a receiver to
protect Landlord's interests hereunder, or any other action or omission by
Landlord shall be construed as an election by Landlord to terminate this Lease
or Tenant's right to possession, or to accept a surrender of the Premises, nor
shall same operate to release Tenant in whole or in part from any of Tenant's
obligations hereunder, unless express written notice of such intention is sent
by Landlord to Tenant. Tenant hereby irrevocably waives any right otherwise
available under any law to redeem or reinstate this Lease.
19.5    Landlord Default.
19.5.1    General. Notwithstanding anything to the contrary set forth in this
Lease, Landlord shall not be in default in the performance of any obligation
required to be performed by Landlord pursuant to this Lease unless Landlord
fails to perform such obligation within thirty (30) days after the receipt of
notice from Tenant specifying in detail Landlord's failure to perform; provided,
however, if the nature of Landlord's obligation is such that more than thirty
(30) days are required for its performance, then Landlord shall not be in
default under this Lease if it shall commence such performance within such
thirty (30) day period and thereafter diligently pursue the same to completion.
Upon any such default by Landlord under this Lease, Tenant may, except as
otherwise specifically provided in this Lease to the contrary, exercise any of
its rights provided at law or in equity.
19.5.2    Abatement of Rent. In the event that Tenant is prevented from using,
and does not use, the Premises or any portion thereof, as a result of (i) any
repair, maintenance or alteration performed by Landlord, or which Landlord
failed to perform, after the Lease Commencement Date and required by this Lease,
which substantially interferes with Tenant's use of the Premises, or (ii) any
failure to provide services, utilities or access to the Premises as required by
this Lease, each as a direct result of Landlord's negligence or willful
misconduct (and except to the extent such failure is caused in whole or in part
by the action or inaction of Tenant) (either such set of circumstances as set
forth in items (i) or (ii), above, to be known as an "Abatement Event"), then
Tenant shall give Landlord notice of such Abatement Event, and if such Abatement
Event continues for ten (10) consecutive business days after Landlord's receipt
of any such notice (the "Eligibility Period") and Landlord does not diligently
commence and pursue to completion the remedy of such Abatement Event, then the
Base Rent, Tenant's Share of Direct Expenses, and Tenant's obligation, if any,
to pay for parking (to the extent not utilized by Tenant) shall be abated or
reduced, as the case may be, after expiration of the Eligibility Period for such
time that Tenant continues to be so prevented from using, and does not use

 
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for the normal conduct of Tenant's business, the Premises or a portion thereof,
in the proportion that the rentable area of the portion of the Premises that
Tenant is prevented from using, and does not use, bears to the total rentable
area of the Premises; provided, however, in the event that Tenant is prevented
from using, and does not use, a portion of the Premises for a period of time in
excess of the Eligibility Period and the remaining portion of the Premises is
not sufficient to allow Tenant to effectively conduct its business therein, and
if Tenant does not effectively conduct its business from such remaining portion,
then for such time after expiration of the Eligibility Period during which
Tenant is so prevented from effectively conducting its business therein, the
Base Rent and Tenant's Share of Direct Expenses for the entire Premises and
Tenant's obligation to pay for parking shall be abated for such time as Tenant
continues to be so prevented from using, and does not use, the Premises. If,
however, Tenant reoccupies any portion of the Premises during such period, the
Rent allocable to such reoccupied portion, based on the proportion that the
rentable area of such reoccupied portion of the Premises bears to the total
rentable area of the Premises, shall be payable by Tenant from the date Tenant
reoccupies such portion of the Premises. To the extent an Abatement Event is
caused by an event covered by Articles 5, 11 or 13 of this Lease, then Tenant's
right to abate rent shall be governed by the terms of such Article 5, 11 or 13,
as applicable, and the Eligibility Period shall not be applicable thereto. Such
right to abate Base Rent and Tenant's Share of Direct Expenses shall be Tenant's
sole and exclusive remedy for rent abatement at law or in equity for an
Abatement Event. Except as expressly provided in this Lease, nothing contained
herein shall be interpreted to mean that Tenant is excused from paying Rent due
hereunder.

20.        COVENANT OF QUIET ENJOYMENT    Landlord covenants that Tenant, on
paying the Rent, charges for services and other payments herein reserved and on
keeping, observing and performing all the other terms, covenants, conditions,
provisions and agreements herein contained on the part of Tenant to be kept,
observed and performed, shall, during the Lease Term, peaceably and quietly
have, hold and enjoy the Premises subject to the terms, covenants, conditions,
provisions and agreements hereof without interference by any persons lawfully
claiming by or through Landlord. The foregoing covenant is in lieu of any other
covenant express or implied.

21.        LETTER OF CREDIT    
21.1    Delivery of Letter of Credit. Tenant shall deliver to Landlord
concurrent with Tenant's execution of this Lease, as protection for the full and
faithful performance by Tenant of all of its obligations under this Lease and
for all losses and damages Landlord may suffer (or which Landlord reasonably
estimates that it may suffer) as a result of any breach or default by Tenant
under this Lease, an unconditional, clean, irrevocable negotiable standby letter
of credit (the “L-C”) in the amount set forth in Section 8 of the Summary (the
“L-C Amount”), in the form attached hereto as Exhibit G, payable in the City of
San Diego, California, running in favor of Landlord, drawn on a bank (the
“Bank”) reasonably approved by Landlord and which Bank at a minimum must have a
rating from Standard and Poors Corporation of A- or better (or any equivalent
rating thereto from any successor or substitute rating service selected by
Landlord) and a letter of credit issuer rating from Moody’s Investor Service of
A3 or better (or any equivalent rating thereto from any successor rating agency
thereto) (the “Credit Rating Threshold”), and otherwise conforming in all
respects to the requirements of this Article 21, including, without limitation,
all of the requirements of Section 21.2 below, all as set forth more
particularly hereinbelow. Tenant shall pay all expenses, points and/or fees
incurred by Tenant in obtaining and maintaining the L-C. In the event of an
assignment by Tenant of its interest in the Lease (and irrespective of whether
Landlord's consent is required for such assignment), the acceptance of any
replacement or substitute letter of credit by Landlord from the assignee shall
be subject to Landlord's prior written approval, in Landlord's reasonable
discretion, and the attorney's fees incurred by Landlord in connection with such
determination shall be payable by Tenant to Landlord within ten (10) days of
billing.
21.2    In General. The L-C shall be “callable” at sight, permit partial draws
and multiple presentations and drawings, and be otherwise subject to the Uniform
Customs and Practices for Documentary Credits (1993-Rev), International Chamber
of Commerce Publication #500, or the International Standby Practices-ISP 98,
International Chamber of Commerce Publication #590. Tenant further covenants and
warrants as follows:
21.2.1    Landlord Right to Transfer. The L-C shall provide that Landlord, its
successors and assigns, may, at any time and without notice to Tenant and
without first obtaining Tenant's consent thereto, transfer (one or more times)
all or any portion of its interest in and to the L-C to another party, person or
entity, regardless of whether or not such transfer is separate from or as a part
of the assignment by Landlord of its rights and interests in

 
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and to this Lease. In the event of a transfer of Landlord's interest in the
Building, Landlord shall transfer the L-C, in whole or in part, to the
transferee and thereupon Landlord shall, without any further agreement between
the parties, be released by Tenant from all liability therefor, and it is agreed
that the provisions hereof shall apply to every transfer or assignment of the
whole or any portion of said L-C to a new landlord. In connection with any such
transfer of the L-C by Landlord, Tenant shall, at Tenant's sole cost and
expense, execute and submit to the Bank such applications, documents and
instruments as may be necessary to effectuate such transfer, and Tenant shall be
responsible for paying the Bank's transfer and processing fees in connection
therewith.
21.2.2    No Assignment by Tenant. Tenant shall neither assign nor encumber the
L-C or any part thereof. Neither Landlord nor its successors or assigns will be
bound by any assignment, encumbrance, attempted assignment or attempted
encumbrance by Tenant in violation of this Section.
21.2.3    Replenishment. If, as a result of any drawing by Landlord on the L-C
pursuant to its rights set forth in Section 21.3 below, the amount of the L-C
shall be less than the L-C Amount, Tenant shall, within five (5) days
thereafter, provide Landlord with (i) an amendment to the L-C restoring such L-C
to the L-C Amount or (ii) additional L-Cs in an amount equal to the deficiency,
which additional L-Cs shall comply with all of the provisions of this Article
21, and if Tenant fails to comply with the foregoing, notwithstanding anything
to the contrary contained in Section 19.1 above, the same shall constitute an
incurable default by Tenant under this Lease (without the need for any
additional notice and/or cure period).
21.2.4    Renewal; Replacement. If the L-C expires earlier than the date (the
“LC Expiration Date”) that is one hundred twenty (120) days after the expiration
of the Lease Term, Tenant shall deliver a new L-C or certificate of renewal or
extension to Landlord at least sixty (60) days prior to the expiration of the
L-C then held by Landlord, without any action whatsoever on the part of
Landlord, which new L-C shall be irrevocable and automatically renewable through
the LC Expiration Date upon the same terms as the expiring L-C or such other
terms as may be acceptable to Landlord in its sole discretion. In furtherance of
the foregoing, Landlord and Tenant agree that the L-C shall contain a so-called
“evergreen provision,” whereby the L-C will automatically be renewed unless at
least sixty (60) days’ prior written notice of non-renewal is provided by the
issuer to Landlord; provided, however, that the final expiration date identified
in the L-C, beyond which the L-C shall not automatically renew, shall not be
earlier than the LC Expiration Date.
21.2.5    Bank’s Financial Condition. If, at any time during the Lease Term, the
Bank’s long term credit rating is reduced below the Credit Rating Threshold, or
if the financial condition of the Bank changes in any other materially adverse
way (either, a “Bank Credit Threat”), then Landlord shall have the right to
require that Tenant obtain from a different issuer a substitute L-C that
complies in all respects with the requirements of this Article 21, and Tenant’s
failure to obtain such substitute L-C within ten (10) days following Landlord’s
written demand therefor (with no other notice or cure or grace period being
applicable thereto, notwithstanding anything in this Lease to the contrary)
shall entitle Landlord, or Landlord’s then managing agent, to immediately draw
upon the then existing L- C in whole or in part, without notice to Tenant, as
more specifically described in Section 21.3 below. Tenant shall be responsible
for the payment of any and all costs incurred with the review of any replacement
L-C (including without limitation Landlord’s reasonable attorneys’ fees), which
replacement is required pursuant to this Section or is otherwise requested by
Tenant.
21.3    Application of Letter of Credit. Tenant hereby acknowledges and agrees
that Landlord is entering into this Lease in material reliance upon the ability
of Landlord to draw upon the L-C as protection for the full and faithful
performance by Tenant of all of its obligations under this Lease and for all
losses and damages Landlord may suffer (or which Landlord reasonably estimates
that it may suffer) as a result of any breach or default by Tenant under this
Lease. Landlord, or its then managing agent, shall have the right to draw down
an amount up to the face amount of the L-C (provided that if the amount to be
drawn by Landlord is greater than the amount of all losses and damages Landlord
may suffer (or which Landlord reasonably estimates that it may suffer) as a
result of such breach or default by Tenant, then the amount drawn by Landlord
must be reasonable under the then circumstances) if any of the following shall
have occurred or be applicable: (A) such amount is due to Landlord under the
terms and conditions of this Lease, or (B) Tenant has filed a voluntary petition
under the U. S. Bankruptcy Code or any state bankruptcy code (collectively,
"Bankruptcy Code"), or (C) an involuntary petition has been filed against Tenant
under the Bankruptcy Code, or

 
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(D) the Bank has notified Landlord that the L-C will not be renewed or extended
through the LC Expiration Date, or (E) a Bank Credit Threat or Receivership (as
such term is defined in Section 21.6.1 below) has occurred and Tenant has failed
to comply with the requirements of either Section 21.2.5 above or 21.6 below, as
applicable. If Tenant shall breach any provision of this Lease or otherwise be
in default hereunder or if any of the foregoing events identified in Sections
21.3(B) through (E) shall have occurred, Landlord may, but without obligation to
do so, and without notice to Tenant, draw upon the L-C, in part or in whole, and
the proceeds may be applied by Landlord (i) to cure any breach or default of
Tenant and/or to compensate Landlord for any and all damages of any kind or
nature sustained or which Landlord reasonably estimates that it will sustain
resulting from Tenant's breach or default, (ii) against any Rent payable by
Tenant under this Lease that is not paid when due and/or (iii) to pay for all
losses and damages that Landlord has suffered or that Landlord reasonably
estimates that it will suffer as a result of any breach or default by Tenant
under this Lease. The use, application or retention of the L-C, or any portion
thereof, by Landlord shall not prevent Landlord from exercising any other right
or remedy provided by this Lease or by any applicable law, it being intended
that Landlord shall not first be required to proceed against the L-C, and shall
not operate as a limitation on any recovery to which Landlord may otherwise be
entitled. Tenant agrees not to interfere in any way with payment to Landlord of
the proceeds of the L-C, either prior to or following a "draw" by Landlord of
any portion of the L-C, regardless of whether any dispute exists between Tenant
and Landlord as to Landlord's right to draw upon the L-C. No condition or term
of this Lease shall be deemed to render the L-C conditional to justify the
issuer of the L-C in failing to honor a drawing upon such L-C in a timely
manner. Tenant agrees and acknowledges that (a) the L-C constitutes a separate
and independent contract between Landlord and the Bank, (b) Tenant is not a
third party beneficiary of such contract, (c) Tenant has no property interest
whatsoever in the L-C or the proceeds thereof, and (d) in the event Tenant
becomes a debtor under any chapter of the Bankruptcy Code, neither Tenant, any
trustee, nor Tenant's bankruptcy estate shall have any right to restrict or
limit Landlord's claim and/or rights to the L-C and/or the proceeds thereof by
application of Section 502(b)(6) of the U. S. Bankruptcy Code or otherwise.
21.4    Letter of Credit not a Security Deposit. Landlord and Tenant acknowledge
and agree that in no event or circumstance shall the L-C or any renewal thereof
or any proceeds thereof be (i) deemed to be or treated as a "security deposit"
within the meaning of California Civil Code Section 1950.7, (ii) subject to the
terms of such Section 1950.7, or (iii) intended to serve as a "security deposit"
within the meaning of such Section 1950.7. The parties hereto (A) recite that
the L-C is not intended to serve as a security deposit and such Section 1950.7
and any and all other laws, rules and regulations applicable to security
deposits in the commercial context ("Security Deposit Laws") shall have no
applicability or relevancy thereto and (B) waive any and all rights, duties and
obligations either party may now or, in the future, will have relating to or
arising from the Security Deposit Laws.
21.5    Proceeds of Draw. In the event Landlord draws down on the L-C pursuant
to Section 21.3(D) or (E) above, the proceeds of the L-C may be held by Landlord
and applied by Landlord against any Rent payable by Tenant under this Lease that
is not paid when due and/or to pay for all losses and damages that Landlord has
suffered or that Landlord reasonably estimates that it will suffer as a result
of any breach or default by Tenant under this Lease. Any unused proceeds shall
constitute the property of Landlord and need not be segregated from Landlord's
other assets. Tenant hereby (i) agrees that (A) Tenant has no property interest
whatsoever in the proceeds from any such draw, and (B) such proceeds shall not
be deemed to be or treated as a "security deposit" under the Security Deposit
Law, and (ii) waives all rights, duties and obligations either party may now or,
in the future, will have relating to or arising from the Security Deposit Laws.
Landlord agrees that the amount of any proceeds of the L-C received by Landlord,
and not (a) applied against any Rent payable by Tenant under this Lease that was
not paid when due or (b) used to pay for any losses and/or damages suffered by
Landlord (or reasonably estimated by Landlord that it will suffer) as a result
of any breach or default by Tenant under this Lease (the “Unused L-C Proceeds”),
shall be paid by Landlord to Tenant (x) upon receipt by Landlord of a
replacement L-C in the full L-C Amount, which replacement L-C shall comply in
all respects with the requirements of this Article 21, or (y) within thirty (30)
days after the LC Expiration Date; provided, however, that if prior to the LC
Expiration Date a voluntary petition is filed by Tenant, or an involuntary
petition is filed against Tenant by any of Tenant's creditors, under the
Bankruptcy Code, then Landlord shall not be obligated to make such payment in
the amount of the Unused L-C Proceeds until either all preference issues
relating to payments under this Lease have been resolved in such bankruptcy or
reorganization case or such bankruptcy or reorganization case has been
dismissed.
21.6    Bank Placed Into Receivership.

 
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21.6.1    Bank Placed Into Receivership. In the event the Bank is placed into
receivership or conservatorship (any such event, a “Receivership”) by the
Federal Deposit Insurance Corporation or any successor or similar entity (the
“FDIC”), then, effective as of the date such Receivership occurs, the L-C shall
be deemed to not meet the requirements of this Article 21, and, within ten (10)
days following Landlord's notice to Tenant of such Receivership (the "LC
Replacement Notice"), Tenant shall replace the L-C with a substitute L-C from a
different issuer reasonably acceptable to Landlord and that complies in all
respects with the requirements of this Article 21. If Tenant fails to replace
such L-C with a substitute L-C from a different issuer pursuant to the terms and
conditions of this Section 21.6.1, then, notwithstanding anything in this Lease
to the contrary, Landlord shall have the right, at Landlord's option, to either
(i) declare Tenant in default of this Lease for which there shall be no notice
or grace or cure periods being applicable thereto other than the aforesaid ten
(10) day period), in which event, Landlord shall have the right to pursue any
and all remedies available to it under this Lease and at law, including, without
limitation, treating any Receivership as a Bank Credit Threat and exercising
Landlord’s remedies under Section 21.2.5 above, to the extent possible pursuant
to then existing FDIC policy; or (ii) elect to increase the Base Rent due and
owing under the terms of this Lease pursuant to the terms and conditions of
Section 21.6.2, below. Tenant shall be responsible for the payment of any and
all costs incurred with the review of any replacement L- C (including without
limitation Landlord’s reasonable attorneys’ fees), which replacement is required
pursuant to this Section or is otherwise requested by Tenant.
21.6.2    FAILURE TO REPLACE L-C; LIQUIDATED DAMAGES. IN THE EVENT THAT TENANT
FAILS TO REPLACE THE L-C PURSUANT TO, AND WITHIN THE TIME PERIODS SET FORTH IN,
SECTION 21.6.1 OF THIS LEASE, ABOVE, THEN TENANT'S MONTHLY INSTALLMENT OF BASE
RENT SHALL BE INCREASED TO ONE HUNDRED TEN PERCENT (110%) OF ITS THEN EXISTING
LEVEL DURING THE PERIOD COMMENCING ON THE DATE THAT OCCURS TEN (10) DAYS
FOLLOWING THE DATE TENANT RECEIVES THE LC REPLACEMENT NOTICE AND ENDING ON THE
EARLIER TO OCCUR OF (I) THE DATE SUCH REPLACEMENT L-C IS DELIVERED TO LANDLORD
PURSUANT TO THE TERMS OF SECTION 21.6.1, OR (II) THE DATE WHICH IS NINETY (90)
DAYS AFTER THE DATE OF SUCH LC REPLACEMENT NOTICE. IN THE EVENT THAT TENANT
FAILS, DURING SUCH NINETY (90) DAY PERIOD FOLLOWING THE DATE OF THE LC
REPLACEMENT NOTICE, TO CAUSE THE REPLACEMENT L-C TO BE DELIVERED TO LANDLORD
PURSUANT TO THE TERMS OF SECTION 21.6.1, THEN TENANT'S MONTHLY INSTALLMENT OF
BASE RENT SHALL BE INCREASED TO ONE HUNDRED TWENTY-FIVE PERCENT (125%) OF ITS
THEN EXISTING LEVEL DURING THE PERIOD COMMENCING ON THE DATE WHICH IS NINETY
(90) DAYS AFTER THE DATE OF SUCH LC REPLACEMENT NOTICE AND ENDING ON THE DATE
SUCH REPLACEMENT L-C IS DELIVERED TO LANDLORD PURSUANT TO THE TERMS OF
SECTION 21.6.1, PROVIDED, HOWEVER, THAT THE TOTAL AGGREGATE AMOUNT OF BASE RENT
PAID BY TENANT IN EXCESS OF THE AMOUNT OF BASE RENT THAT TENANT WOULD HAVE PAID
HAD SUCH L-C REPLACEMENT FAILURE NEVER OCCURRED SHALL IN NO EVENT EXCEED THE L-C
AMOUNT. THE PARTIES AGREE THAT IT WOULD BE IMPRACTICABLE AND EXTREMELY DIFFICULT
TO ASCERTAIN THE ACTUAL DAMAGES SUFFERED BY LANDLORD AS A RESULT OF TENANT'S
FAILURE TO TIMELY REPLACE THE L-C FOLLOWING THE LC REPLACEMENT NOTICE AS
REQUIRED IN SECTION 21.6.1, AND THAT UNDER THE CIRCUMSTANCES EXISTING AS OF THE
DATE OF THIS LEASE, THE LIQUIDATED DAMAGES PROVIDED FOR IN THIS SECTION 21.6.2
REPRESENT A REASONABLE ESTIMATE OF THE DAMAGES WHICH LANDLORD WILL INCUR AS A
RESULT OF SUCH FAILURE, PROVIDED, HOWEVER, THAT THIS PROVISION SHALL NOT WAIVE
OR AFFECT LANDLORD'S RIGHTS AND TENANT'S INDEMNITY OBLIGATIONS UNDER OTHER
SECTIONS OF THIS LEASE. THE PARTIES ACKNOWLEDGE THAT THE PAYMENT OF SUCH
LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING
OF CALIFORNIA CIVIL CODE SECTION 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE
LIQUIDATED DAMAGES TO LANDLORD PURSUANT TO CALIFORNIA CIVIL CODE SECTION 1671.
THE PARTIES HAVE SET FORTH THEIR INITIALS BELOW TO INDICATE THEIR AGREEMENT WITH
THE LIQUIDATED DAMAGES PROVISION CONTAINED IN THIS SECTION 21.6.2.
______/s/ MD_______________            _____/s/ HJ_____________
LANDLORD'S INITIALS            TENANT'S INITIALS

 
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22.        COMMUNICATIONS AND COMPUTER LINE    Tenant may install, maintain,
replace, remove or use any communications or computer wires and cables serving
the Premises (collectively, the "Lines"), provided that Tenant shall obtain
Landlord's prior written consent, use an experienced and qualified contractor
approved in writing by Landlord, and comply with all of the other provisions of
Articles 7 and 8 of this Lease. Tenant shall pay all costs in connection
therewith. Landlord reserves the right, upon notice to Tenant prior to the
expiration or earlier termination of this Lease, to require that Tenant, at
Tenant's sole cost and expense, remove any Lines located in or serving the
Premises prior to the expiration or earlier termination of this Lease.

23.        SIGNS
23.1    Exterior Signage. Subject to Landlord's prior written approval, which
shall not be unreasonably withheld, conditioned or delayed, and provided all
signs are in keeping with the quality, design and style of the Building and
Project, Tenant, at its sole cost and expense (but without payment of Rent or
other fee in lieu of Rent for such signage (other than Direct Expenses to the
extent allowed pursuant to the terms of Article 4 of this Lease)), may install
identification signage (i) on the interior of the Building (including interior
directional, lobby and/or directory signage), (ii) exterior Building top
signage, (iii) one signage strip on the monument sign serving the Project facing
Director's Place, and (iv) exclusive monument signage on the monument sign
facing the 805 Freeway (collectively, "Tenant Signage"); provided, however, in
no event shall Tenant's Signage include an "Objectionable Name," as that term is
defined in Section 23.3, of this Lease. All such signage shall be subject to
Tenant's obtaining all required governmental approvals. All permitted signs
shall be maintained by Tenant at its expense in a first-class and safe condition
and appearance. Upon the expiration or earlier termination of this Lease, Tenant
shall remove all of its signs at Tenant's sole cost and expense. The graphics,
materials, color, design, lettering, lighting, size, illumination,
specifications and exact location of Tenant's Signage (collectively, the "Sign
Specifications") shall be subject to the prior written approval of Landlord,
which approval shall not be unreasonably withheld, conditioned or delayed, and
shall be consistent and compatible with the quality and nature of the Project.
Tenant hereby acknowledges that, notwithstanding Landlord's approval of Tenant's
Signage, Landlord has made no representation or warranty to Tenant with respect
to the probability of obtaining all necessary governmental approvals and permits
for Tenant's Signage. In the event Tenant does not receive the necessary
governmental approvals and permits for Tenant's Signage, Tenant's and Landlord's
rights and obligations under the remaining terms and conditions of this Lease
shall be unaffected.
23.2    Objectionable Name. Tenant's Signage shall not include a name or logo
which relates to an entity which is of a character or reputation, or is
associated with a political faction or orientation, which is inconsistent with
the quality of the Project, or which would otherwise reasonably offend a
landlord of the Comparable Buildings (an "Objectionable Name"). The parties
hereby agree that the following names, or any reasonable derivation thereof,
shall be deemed not to constitute an Objectionable Name: "SCILEX
Pharmaceuticals" and "Sorrento Therapeutics."
23.3    Prohibited Signage and Other Items. Any signs, notices, logos, pictures,
names or advertisements which are installed and that have not been separately
approved by Landlord may be removed without notice by Landlord at the sole
expense of Tenant. Any signs, window coverings, or blinds (even if the same are
located behind the Landlord-approved window coverings for the Building), or
other items visible from the exterior of the Premises or Building, shall be
subject to the prior approval of Landlord, in its sole discretion.
23.4    Termination of Right to Tenant's Signage. The rights contained in this
Article 23 shall be personal to Original Tenant and its Permitted Assignee, and
may only be exercised and maintained by such parties (and not any other
assignee, sublessee or other transferee of the Original Tenant's interest in
this Lease) to the extent (x) they are not in default under this Lease (beyond
any applicable notice and cure period) and (y) if they occupy the entire
Premises.

24.        COMPLIANCE WITH LAW    Tenant shall not do anything or suffer
anything to be done in or about the Premises or the Project which will in any
way conflict with any law, statute, ordinance or other governmental rule,
regulation or requirement now in force or which may hereafter be enacted or
promulgated (collectively, "Applicable Laws"). At its sole cost and expense,
Tenant shall promptly comply with any Applicable Laws which relate to (i)
Tenant's use of the Premises, (ii) any Alterations made by Tenant to the
Premises, and, after their construction, any Tenant Improvements in the
Premises, or (iii) the Base Building, but as to the Base Building, only to the
extent such obligations are triggered by Alterations made by Tenant to the
Premises to the extent such Alterations are not normal

 
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and customary improvements for the Permitted Use, or triggered by the Tenant
Improvements to the extent such Tenant Improvements are not normal and customary
improvements for the Permitted Use, or triggered by Tenant's use of the Premises
for non Permitted Use (collectively, "Tenant's Compliance Obligations"). Should
any standard or regulation now or hereafter be imposed on Landlord or Tenant by
a state, federal or local governmental body charged with the establishment,
regulation and enforcement of occupational, health or safety standards for
employers, employees, landlords or tenants, then Tenant and Landlord each agree,
at each such party's sole cost and expense, to comply promptly with such
standards or regulations applicable to each such party. Tenant shall be
responsible, at its sole cost and expense, to make all alterations to the
Building and Premises as are required to comply with Tenant's Compliance
Obligations. The judgment of any court of competent jurisdiction or the
admission of Tenant in any judicial action, regardless of whether Landlord is a
party thereto, that Tenant has violated any of said governmental measures, shall
be conclusive of that fact as between Landlord and Tenant. Notwithstanding
anything to the contrary in this Article 24, Landlord covenants to comply with
the "Landlord Initial Compliance Obligations," as that term is defined in
Section 1 of the Tenant Work Letter, as of the Lease Commencement Date, and
Landlord shall be responsible to promptly cure, at its sole cost, any
noncompliance of the Premises as of the Lease Commencement Date with such
foregoing covenant. For purposes of Section 1938 of the California Civil Code,
Landlord hereby discloses to Tenant, and Tenant hereby acknowledges, that the
Project, Building and Premises have not undergone inspection by a Certified
Access Specialist (CASp). As required by Section 1938(e) of the California Civil
Code, Landlord hereby states as follows: "A Certified Access Specialist (CASp)
can inspect the subject premises and determine whether the subject premises
comply with all of the applicable construction-related accessibility standards
under state law. Although state law does not require a CASp inspection of the
subject premises, the commercial property owner or lessor may not prohibit the
lessee or tenant from obtaining a CASp inspection of the subject premises for
the occupancy or potential occupancy of the lessee or tenant, if requested by
the lessee or tenant. The parties shall mutually agree on the arrangements for
the time and manner of the CASp inspection, the payment of the fee for the CASp
inspection, and the cost of making any repairs necessary to correct violations
of construction-related accessibility standards within the premises." In
furtherance of the foregoing, Landlord and Tenant hereby agree as follows: (a)
any CASp inspection requested by Tenant shall be conducted, at Tenant's sole
cost and expense, by a CASp approved in advance by Landlord; and (b) pursuant to
Article 24 below, Tenant, at its cost, is responsible for making any repairs
within the Premises to correct violations of construction-related accessibility
standards; and, if anything done by or for Tenant in its use or occupancy of the
Premises shall require repairs to the Building (outside the Premises) to correct
violations of construction-related accessibility standards, then Tenant shall,
at Landlord's option, either perform such repairs at Tenant's sole cost and
expense or reimburse Landlord upon demand, as Additional Rent, for the cost to
Landlord of performing such repairs.

25.        LATE CHARGES    If any installment of Rent or any other sum due from
Tenant shall not be received by Landlord or Landlord's designee within five (5)
business days after Tenant's receipt of written notice from Landlord that said
amount is due, then Tenant shall pay to Landlord a late charge equal to five
percent (5%) of the overdue amount plus any reasonable attorneys' fees incurred
by Landlord by reason of Tenant's failure to pay Rent and/or other charges when
due hereunder. The late charge shall be deemed Additional Rent and the right to
require it shall be in addition to all of Landlord's other rights and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner. In addition to the late charge
described above, any Rent or other amounts owing hereunder which are not paid
within ten (10) days after the date they are due shall bear interest from the
date when due until paid at a rate per annum equal to the lesser of (i) the
annual "Bank Prime Loan" rate cited in the Federal Reserve Statistical Release
Publication G.13(415), published on the first Tuesday of each calendar month (or
such other comparable index as Landlord and Tenant shall reasonably agree upon
if such rate ceases to be published) plus four (4) percentage points, and (ii)
the highest rate permitted by applicable law (the "Default Rate").

26.        LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT

 
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[Sorrento Therapeutics, Inc.]

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26.1    Landlord's Cure. All covenants and agreements to be kept or performed by
Tenant under this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any reduction of Rent, except to the extent, if any,
otherwise expressly provided herein. If Tenant shall fail to perform any
obligation under this Lease, and such failure shall continue in excess of the
time allowed under Section 19.1.2, above, unless a specific time period is
otherwise stated in this Lease, Landlord may, but shall not be obligated to,
make any such payment or perform any such act on Tenant's part without waiving
its rights based upon any default of Tenant and without releasing Tenant from
any obligations hereunder.
26.2    Tenant's Reimbursement. Except as may be specifically provided to the
contrary in this Lease, Tenant shall pay to Landlord, upon delivery by Landlord
to Tenant of statements therefor: (i) sums equal to expenditures reasonably made
and obligations incurred by Landlord in connection with the remedying by
Landlord of Tenant's defaults pursuant to the provisions of Section 26.1; (ii)
sums equal to all losses, costs, liabilities, damages and expenses referred to
in Article 10 of this Lease; and (iii) sums equal to all expenditures made and
obligations incurred by Landlord in collecting or attempting to collect the Rent
or in enforcing or attempting to enforce any rights of Landlord under this Lease
or pursuant to law, including, without limitation, all reasonable legal fees and
other amounts so expended. Tenant's obligations under this Section 26.2 shall
survive the expiration or sooner termination of the Lease Term.

27.        ENTRY BY LANDLORD    Landlord reserves the right at all reasonable
times and upon reasonable notice to Tenant (which shall not be less than
twenty-four (24) hours except in the case of an emergency) to enter the Premises
to (i) inspect them; (ii) show the Premises to prospective purchasers, or to
current or prospective mortgagees, ground or underlying lessors or insurers or,
during the last twelve (12) months of the Lease Term, to prospective tenants;
(iii) post notices of nonresponsibility (to the extent applicable pursuant to
then applicable law); or (iv) alter, improve or repair the Premises or the
Building, or for structural alterations, repairs or improvements to the Building
or the Building's systems and equipment. Landlord may make any such entries
without the abatement of Rent, except as otherwise provided in Section 19.5.2 of
this Lease, and may take such reasonable steps as required to accomplish the
stated purposes. Landlord shall use commercially reasonable efforts to minimize
interference with the conduct of Tenant's business in connection with such
entries into the Premises. In an emergency, Landlord shall have the right to use
any means that Landlord may deem proper to open the doors in and to the
Premises. To the extent reasonably necessary, Landlord may temporarily close all
or a portion of the Premises to perform repairs under this Lease and Tenant
shall not have any right to terminate this Lease or abate Rent (except as
otherwise provided in Section 19.5.2 of this Lease) or assert a claim of partial
or constructive eviction because of any such closure (provided that Landlord
shall perform any such repairs outside of normal business hours to the extent
reasonably possible). Any entry into the Premises by Landlord in the manner
hereinbefore described shall not be deemed to be a forcible or unlawful entry
into, or a detainer of, the Premises, or an actual or constructive eviction of
Tenant from any portion of the Premises.

28.        TENANT PARKING    Tenant shall have the right to, at no additional
rent or cost to Tenant (other than such costs and expenses include in Direct
Expenses), use the parking set forth in Section 9 of the Summary. Tenant shall
abide by all reasonable rules and regulations which are prescribed from time to
time for the orderly operation and use of the parking facility where the parking
passes are located (including any sticker or other identification system
established by Landlord and the prohibition of vehicle repair and maintenance
activities in the parking facilities), and shall cooperate in seeing that
Tenant's employees and visitors also comply with such rules and regulations.
Tenant's use of the Project parking facility shall be at Tenant's sole risk and
Tenant acknowledges and agrees that Landlord shall have no liability whatsoever
for damage to the vehicles of Tenant, its employees and/or visitors, or for
other personal injury or property damage or theft relating to or connected with
the parking rights granted herein or any of Tenant's, its employees' and/or
visitors' use of the parking facilities.

29.        MISCELLANEOUS PROVISIONS
29.1    Terms; Captions. The words "Landlord" and "Tenant" as used herein shall
include the plural as well as the singular. The necessary grammatical changes
required to make the provisions hereof apply either to corporations or
partnerships or individuals, men or women, as the case may require, shall in all
cases be assumed as though in each case fully expressed. The captions of
Articles and Sections are for convenience only and shall not be deemed to limit,
construe, affect or alter the meaning of such Articles and Sections.

 
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[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

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29.2    Binding Effect. Subject to all other provisions of this Lease, each of
the covenants, conditions and provisions of this Lease shall extend to and
shall, as the case may require, bind or inure to the benefit not only of
Landlord and of Tenant, but also of their respective heirs, personal
representatives, successors or assigns, provided this clause shall not permit
any assignment by Tenant contrary to the provisions of Article 14 of this Lease.
29.3    No Air Rights. No rights to any view or to light or air over any
property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease. If at any time any windows of the Premises are temporarily
darkened or the light or view therefrom is obstructed by reason of any repairs,
improvements, maintenance or cleaning in or about the Project, the same shall be
without liability to Landlord and without any reduction or diminution of
Tenant's obligations under this Lease.
29.4    Modification of Lease. Should any current or prospective mortgagee or
ground lessor for the Building or Project require a modification of this Lease,
which modification will not cause an increased cost or expense to Tenant or in
any other way materially and adversely change the rights and obligations of
Tenant hereunder, then and in such event, Tenant agrees that this Lease may be
so modified and agrees to execute whatever documents are reasonably required
therefor and to deliver the same to Landlord within ten (10) business days
following a request therefor. At the request of Landlord or any mortgagee or
ground lessor, Tenant agrees to execute a short form of Lease and deliver the
same to Landlord within ten (10) business days following the request therefor.
29.5    Transfer of Landlord's Interest. Tenant acknowledges that Landlord has
the right to transfer all or any portion of its interest in the Project or
Building and in this Lease, and Tenant agrees that in the event of any such
transfer, Landlord shall automatically be released from all liability under this
Lease and Tenant agrees to look solely to such transferee for the performance of
Landlord's obligations hereunder after the date of transfer and such transferee
shall be deemed to have fully assumed and be liable for all obligations of this
Lease to be performed by Landlord, including the return of any Security Deposit
(provided Landlord transfers the Security Deposit to such transferee), and
Tenant shall attorn to such transferee.
29.6    Prohibition Against Recording. Except as provided in Section 29.4 of
this Lease, neither this Lease, nor any memorandum, affidavit or other writing
with respect thereto, shall be recorded by Tenant or by anyone acting through,
under or on behalf of Tenant.
29.7    Landlord's Title. Landlord's title is and always shall be paramount to
the title of Tenant. Nothing herein contained shall empower Tenant to do any act
which can, shall or may encumber the title of Landlord.
29.8    Relationship of Parties. Nothing contained in this Lease shall be deemed
or construed by the parties hereto or by any third party to create the
relationship of principal and agent, partnership, joint venturer or any
association between Landlord and Tenant.
29.9    Application of Payments. Landlord shall have the right to apply payments
received from Tenant pursuant to this Lease, regardless of Tenant's designation
of such payments, to satisfy any obligations of Tenant hereunder, in such order
and amounts as Landlord, in its sole discretion, may elect.
29.10    Time of Essence. Time is of the essence with respect to the performance
of every provision of this Lease in which time of performance is a factor.
29.11    Partial Invalidity. If any term, provision or condition contained in
this Lease shall, to any extent, be invalid or unenforceable, the remainder of
this Lease, or the application of such term, provision or condition to persons
or circumstances other than those with respect to which it is invalid or
unenforceable, shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.
29.12    No Warranty. In executing and delivering this Lease, Tenant has not
relied on any representations, including, but not limited to, any representation
as to the amount of any item comprising Additional Rent or the amount of the
Additional Rent in the aggregate or that Landlord is furnishing the same
services to other tenants, at all, on the

 
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same level or on the same basis, or any warranty or any statement of Landlord
which is not set forth herein or in one or more of the exhibits attached hereto.
29.13    Landlord Exculpation. The liability of Landlord or the Landlord Parties
to Tenant for any default by Landlord under this Lease or arising in connection
herewith or with Landlord's operation, management, leasing, repair, renovation,
alteration or any other matter relating to the Project or the Premises shall be
limited solely and exclusively to an amount which is equal to the lesser of (a)
the interest of Landlord in the Project or (b) the equity interest Landlord
would have in the Project if the Project were encumbered by third-party debt in
an amount equal to seventy percent (70%) of the value of the Project, including
any net sales or insurance proceeds received by Landlord or the Landlord Parties
in connection with the Project, Building or Premises. Neither Landlord, nor any
of the Landlord Parties shall have any personal liability therefor, and Tenant
hereby expressly waives and releases such personal liability on behalf of itself
and all persons claiming by, through or under Tenant. The limitations of
liability contained in this Section 29.13 shall inure to the benefit of
Landlord's and the Landlord Parties' present and future partners, beneficiaries,
officers, directors, trustees, shareholders, agents and employees, and their
respective partners, heirs, successors and assigns. Under no circumstances shall
any present or future partner of Landlord (if Landlord is a partnership), or
trustee or beneficiary (if Landlord or any partner of Landlord is a trust), have
any liability for the performance of Landlord's obligations under this Lease.
Notwithstanding any contrary provision herein, neither Landlord nor the Landlord
Parties shall be liable under any circumstances for injury or damage to, or
interference with, Tenant's business, including but not limited to, loss of
profits, loss of rents or other revenues, loss of business opportunity, loss of
goodwill or loss of use, in each case, however occurring, or loss to inventory,
scientific research, scientific experiments, laboratory animals, products,
specimens, samples, and/or scientific, business, accounting and other records of
every kind and description kept at the premises and any and all income derived
or derivable therefrom. . Notwithstanding anything to the contrary set forth in
this Lease, in no event shall Tenant be liable to Landlord for any consequential
or remote damages, except for (i) consequential damages expressly provided for
in Article 16 of the Lease with regard to Tenant’s failure to timely surrender
the Premises to Landlord and (ii) damages caused to Landlord as a result of
Tenant's breach of the terms and conditions of Section 5.3 of this Lease, above.
In no event shall any damages expressly provided for in Section 19.2.1 above be
deemed consequential or remote damages.
29.14    Entire Agreement. It is understood and acknowledged that there are no
oral agreements between the parties hereto affecting this Lease and this Lease
constitutes the parties' entire agreement with respect to the leasing of the
Premises and supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between the
parties hereto or displayed by Landlord to Tenant with respect to the subject
matter thereof, and none thereof shall be used to interpret or construe this
Lease. None of the terms, covenants, conditions or provisions of this Lease can
be modified, deleted or added to except in writing signed by the parties hereto.
29.15    Right to Lease. Landlord reserves the absolute right to effect such
other tenancies in the Project as Landlord in the exercise of its sole business
judgment shall determine to best promote the interests of the Building or
Project. Tenant does not rely on the fact, nor does Landlord represent, that any
specific tenant or type or number of tenants shall, during the Lease Term,
occupy any space in the Building or Project.
29.16    Force Majeure. Any prevention, delay or stoppage due to strikes,
lockouts, labor disputes, acts of God, acts of war, terrorist acts, inability to
obtain services, labor, or materials or reasonable substitutes therefor,
governmental actions, civil commotions, fire or other casualty, and other causes
beyond the reasonable control of the party obligated to perform, except with
respect to the obligations imposed with regard to Rent and other charges to be
paid by Tenant pursuant to this Lease (collectively, a "Force Majeure"),
notwithstanding anything to the contrary contained in this Lease, shall excuse
the performance of such party for a period equal to any such prevention, delay
or stoppage and, therefore, if this Lease specifies a time period for
performance of an obligation of either party, that time period shall be extended
by the period of any delay in such party's performance caused by a Force
Majeure.
29.17    Waiver of Redemption by Tenant. Tenant hereby waives, for Tenant and
for all those claiming under Tenant, any and all rights now or hereafter
existing to redeem by order or judgment of any court or by any legal process or
writ, Tenant's right of occupancy of the Premises after any termination of this
Lease.

 
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[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

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29.18    Notices. All notices, demands, statements, designations, approvals or
other communications (collectively, "Notices") given or required to be given by
either party to the other hereunder or by law shall be in writing, shall be (A)
sent by United States certified or registered mail, postage prepaid, return
receipt requested ("Mail"), (B) transmitted by telecopy, if such telecopy is
promptly followed by a Notice sent by Mail, (C) delivered by a nationally
recognized overnight courier, or (D) delivered personally. Any Notice shall be
sent, transmitted, or delivered, as the case may be, to Tenant at the
appropriate address set forth in Section 10 of the Summary, or to such other
place as Tenant may from time to time designate in a Notice to Landlord, or to
Landlord at the addresses set forth below, or to such other places as Landlord
may from time to time designate in a Notice to Tenant. Any Notice will be deemed
given (i) three (3) days after the date it is posted if sent by Mail, (ii) the
date the telecopy is transmitted, (iii) the date the overnight courier delivery
is made, or (iv) the date personal delivery is made. As of the date of this
Lease, any Notices to Landlord must be sent, transmitted, or delivered, as the
case may be, to the following addresses:
HCP Life Science Estates, Inc.
c/o HCP, Inc.
420 Stevens Avenue, Suite 170
Solana Beach, California 92075
Attention: Mike Dorris
with a copy to:
HCP Life Science Estates, Inc.
c/o HCP, Inc.
1920 Main Street, Suite 1200
Irvine, CA 92614
Attn: Legal Department

and
Allen Matkins Leck Gamble Mallory & Natsis LLP
1901 Avenue of the Stars, Suite 1800
Los Angeles, California 90067
Attention: Anton N. Natsis, Esq.
29.19    Joint and Several. If there is more than one tenant, the obligations
imposed upon Tenant under this Lease shall be joint and several.
29.20    Authority. If Tenant is a corporation, trust or partnership, each
individual executing this Lease on behalf of Tenant hereby represents and
warrants that Tenant is a duly formed and existing entity qualified to do
business in the State of California and that Tenant has full right and authority
to execute and deliver this Lease and that each person signing on behalf of
Tenant is authorized to do so. In such event, Tenant shall, within ten (10) days
after execution of this Lease, deliver to Landlord satisfactory evidence of such
authority and, if a corporation, upon demand by Landlord, also deliver to
Landlord satisfactory evidence of (i) good standing in Tenant's state of
incorporation and (ii) qualification to do business in the State of California.
29.21    Attorneys' Fees. In the event that either Landlord or Tenant should
bring suit for the possession of the Premises, for the recovery of any sum due
under this Lease, or because of the breach of any provision of this Lease or for
any other relief against the other, then all costs and expenses, including
reasonable attorneys' fees, incurred by the prevailing party therein shall be
paid by the other party, which obligation on the part of the other party shall
be deemed to have accrued on the date of the commencement of such action and
shall be enforceable whether or not the action is prosecuted to judgment.
29.22    Governing Law; WAIVER OF TRIAL BY JURY. This Lease shall be construed
and enforced in accordance with the laws of the State of California. IN ANY
ACTION OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT TO (I)
THE JURISDICTION OF ANY COMPETENT COURT

 
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WITHIN THE STATE OF CALIFORNIA, (II) SERVICE OF PROCESS BY ANY MEANS AUTHORIZED
BY CALIFORNIA LAW, AND (III) IN THE INTEREST OF SAVING TIME AND EXPENSE, TRIAL
WITHOUT A JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF
THE PARTIES HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY
MATTER ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, THE RELATIONSHIP OF
LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM
FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY. IN THE EVENT
LANDLORD COMMENCES ANY SUMMARY PROCEEDINGS OR ACTION FOR NONPAYMENT OF BASE RENT
OR ADDITIONAL RENT, TENANT SHALL NOT INTERPOSE ANY COUNTERCLAIM OF ANY NATURE OR
DESCRIPTION (UNLESS SUCH COUNTERCLAIM SHALL BE MANDATORY) IN ANY SUCH PROCEEDING
OR ACTION, BUT SHALL BE RELEGATED TO AN INDEPENDENT ACTION AT LAW.
29.23    Submission of Lease. Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of, option for or option
to lease, and it is not effective as a lease or otherwise until execution and
delivery by both Landlord and Tenant.
29.24    Brokers. Landlord and Tenant hereby warrant to each other that they
have had no dealings with any real estate broker or agent in connection with the
negotiation of this Lease, excepting only the real estate brokers or agents
specified in Section 12 of the Summary (the "Brokers"), and that they know of no
other real estate broker or agent who is entitled to a commission in connection
with this Lease. Each party agrees to indemnify and defend the other party
against and hold the other party harmless from any and all claims, demands,
losses, liabilities, lawsuits, judgments, costs and expenses (including without
limitation reasonable attorneys' fees) with respect to any leasing commission or
equivalent compensation alleged to be owing on account of any dealings with any
real estate broker or agent, other than the Brokers, occurring by, through, or
under the indemnifying party. The terms of this Section 29.24 shall survive the
expiration or earlier termination of the Lease Term. Landlord will pay the
Brokers any commission due as a result of this Lease pursuant to a separate
agreement.
29.25    Independent Covenants. This Lease shall be construed as though the
covenants herein between Landlord and Tenant are independent and not dependent
and Tenant hereby expressly waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its obligations set forth herein,
Tenant shall not be entitled to make any repairs or perform any acts hereunder
at Landlord's expense or to any setoff of the Rent or other amounts owing
hereunder against Landlord.
29.26    Project or Building Name, Address and Signage. Subject to Tenant's
rights set forth in Section 23.1, above, Landlord shall have the right at any
time to change the name and/or address of the Project or Building and to
install, affix and maintain any and all signs on the exterior and on the
interior of the Project or Building as Landlord may, in Landlord's sole
discretion, desire. Tenant shall not use the name of the Project or Building or
use pictures or illustrations of the Project or Building in advertising or other
publicity or for any purpose other than as the address of the business to be
conducted by Tenant in the Premises, without the prior written consent of
Landlord.
29.27    Counterparts. This Lease may be executed in counterparts with the same
effect as if both parties hereto had executed the same document. Both
counterparts shall be construed together and shall constitute a single lease.
29.28    Confidentiality. Tenant acknowledges that the content of this Lease and
any related documents are confidential information. Tenant shall keep such
confidential information strictly confidential and shall not disclose such
confidential information to any person or entity other than Tenant's financial,
legal, and space planning consultants , potential transferees, purchasers,
investors, brokers and as required by applicable law.
29.29    Development of the Project.
29.29.1    Subdivision. Landlord reserves the right to subdivide all or a
portion of the buildings and Common Areas. Tenant agrees to execute and deliver,
upon demand by Landlord and in the form requested by Landlord, any additional
documents needed to conform this Lease to the circumstances resulting from a
subdivision and any all

 
45
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

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maps in connection therewith. Notwithstanding anything to the contrary set forth
in this Lease, the separate ownership of any buildings and/or Common Areas by an
entity other than Landlord shall not affect the calculation of Direct Expenses
or Tenant's payment of Tenant's Share of Direct Expenses.
29.29.2    Construction of Property and Other Improvements. Tenant acknowledges
that portions of the Project may be under construction following Tenant's
occupancy of the Premises, and that such construction may result in levels of
noise, dust, obstruction of access, etc. which are in excess of that present in
a fully constructed project. Tenant hereby waives any and all rent offsets or
claims of constructive eviction which may arise in connection with such
construction.
29.30    No Violation. Tenant hereby warrants and represents that neither its
execution of nor performance under this Lease shall cause Tenant to be in
violation of any agreement, instrument, contract, law, rule or regulation by
which Tenant is bound, and Tenant shall protect, defend, indemnify and hold
Landlord harmless against any claims, demands, losses, damages, liabilities,
costs and expenses, including, without limitation, reasonable attorneys' fees
and costs, arising from Tenant's breach of this warranty and representation.
29.31    Transportation Management. Tenant shall fully comply with all present
or future programs intended to manage parking, transportation or traffic in and
around the Project and/or the Building, and in connection therewith, Tenant
shall take responsible action for the transportation planning and management of
all employees located at the Premises by working directly with Landlord, any
governmental transportation management organization or any other
transportation-related committees or entities. Such programs may include,
without limitation: (i) restrictions on the number of peak-hour vehicle trips
generated by Tenant; (ii) increased vehicle occupancy; (iii) implementation of
an in-house ridesharing program and an employee transportation coordinator; (iv)
working with employees and any Project, Building or area-wide ridesharing
program manager; (v) instituting employer-sponsored incentives (financial or
in-kind) to encourage employees to rideshare; and (vi) utilizing flexible work
shifts for employees.
(signature page to follow)

 
46
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

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IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed
the day and date first above written.
LANDLORD:
HCP LIFE SCIENCE ESTATES, INC.,
a Delaware corporation
By: /s/ Michael Dorris    

Its: Vice President________________

TENANT:
SORRENTO THERAPEUTICS, INC.,
a Delaware corporation
By: /s/ Henry Ji, Ph.D.                                    
Henry Ji, Ph.D.
Print Name
Its: President & CEO                                      
By: /s/ Jiong Shao                                           
Jiong Shao
Print Name
Its: CFO                                                           

 
47
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

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EXHIBIT A
SORRENTO GATEWAY
OUTLINE OF PREMISES
FIRST FLOOR (EXISTING FLOORPLAN SHOWN)
stiexhibit1030image1.gif [stiexhibit1030image1.gif]

 
EXHIBIT A
-1-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

SECOND FLOOR (EXISTING FLOORPLAN SHOWN)
stiexhibit1030image2.gif [stiexhibit1030image2.gif]

 
EXHIBIT A
-2-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

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EXHIBIT A-1
SORRENTO GATEWAY
PROJECT SITE PLAN
stiexhibit1030image3.gif [stiexhibit1030image3.gif]

 
EXHIBIT A-1
-1-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

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EXHIBIT A-2
LOCATION OF LANDLORD SPEC BUILDING
stiexhibit1030image4.gif [stiexhibit1030image4.gif]

 
EXHIBIT A-2
-1-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

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EXHIBIT B
SORRENTO GATEWAY
TENANT WORK LETTER
This Tenant Work Letter shall set forth the terms and conditions relating to the
construction of the tenant improvements in the Premises. This Tenant Work Letter
is essentially organized chronologically and addresses the issues of the
construction of the Premises, in sequence, as such issues will arise during the
actual construction of the Premises. All references in this Tenant Work Letter
to Articles or Sections of "this Lease" shall mean the relevant portion of
Articles 1 through 29 of the Lease to which this Tenant Work Letter is attached
as Exhibit B and of which this Tenant Work Letter forms a part, and all
references in this Tenant Work Letter to Sections of "this Tenant Work Letter"
shall mean the relevant portion of Sections 1 through 6 of this Tenant Work
Letter.
SECTION 1

DELIVERY OF THE PREMISES
Landlord has constructed, at its sole cost and expense, the base, shell, and
core (i) of the Premises and (ii) of the floor of the Building on which the
Premises is located (collectively, the "Base, Shell, and Core"). The Base, Shell
and Core shall consist of those portions of the Premises which were in existence
prior to the construction of any tenant improvements in the Premises.
Notwithstanding anything set forth in this Tenant Work Letter to the contrary,
Tenant shall accept the Base, Shell and Core from Landlord in their presently
existing, "as-is" condition, subject to the warranty provided in Section 1.1.4
of the Lease; provided, however, notwithstanding the foregoing, to the extent
required in order to allow Tenant to obtain a certificate of occupancy, or its
legal equivalent, for the Premises for the Permitted Use set forth in Section 7
of the Summary, Landlord shall, at Landlord's sole cost and expense (without
application of the "Tenant Improvement Allowance," as that term is defined in
Section 2.1, below) cause the Base Building to comply with applicable building
codes and other governmental laws, ordinances and regulations which were enacted
and enforced as of the date of this Lease (Landlord's compliance obligations set
forth in this sentence and the immediately foregoing sentence, collectively, are
the "Landlord Initial Compliance Obligations").
SECTION 2

TENANT IMPROVEMENT ALLOWANCE; ADDITIONAL TENANT IMPROVEMENT ALLOWANCE
2.1    Tenant Improvement Allowance; Additional Tenant Improvement Allowance.
2.1.1    Tenant Improvement Allowance. Tenant shall be entitled to a one-time
tenant improvement allowance (the "Tenant Improvement Allowance") in the amount
set forth in Section 5 of the Summary for the costs relating to the initial
design and construction of Tenant's improvements, which are permanently affixed
to the Premises (the "Tenant Improvements"), except as otherwise provided
herein. In no event shall Landlord be obligated to make disbursements pursuant
to this Tenant Work Letter in a total amount which exceeds the Tenant
Improvement Allowance. In the event that the Tenant Improvement Allowance is not
fully utilized by Tenant on or before the date that occurs eighteen (18) months
following the Lease Commencement Date, then, subject to the remaining terms of
this Section 2.1.1, such unused amounts shall revert to Landlord, and Tenant
shall have no further rights with respect thereto. All Tenant Improvements for
which the Tenant Improvement Allowance has been made available shall be deemed
Landlord's property under the terms of the Lease and Tenant shall not be
required to remove the Tenant Improvements upon the expiration of earlier
termination of the Lease Term. In the event that the Tenant Improvement
Allowance is not fully utilized by Tenant following the Substantial Completion
of the Tenant Improvements (such unused amount to be known as the "Unused TIA"),
then Tenant may, by written notice to Landlord or before the Lease Commencement
Date, elect to receive a credit against Base Rent otherwise due and owing under
this Lease commencing on the first (1st) day of Lease Month 13 (provided that
Landlord may, upon thirty (30) days' prior notice to Tenant and at Landlord's
sole option, elect to accelerate the credit against Base Rent and apply the same
to an earlier Lease Month(s)

 
EXHIBIT B
-1-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

as designated by Landlord in such notice), in an amount equal to fifty percent
(50%) of the Unused TIA, not to exceed a total of two (2) months of Base Rent
(calculated at the Base Rent for Month 13).
2.1.2    Additional Tenant Improvement Allowance. Subject to the terms and
conditions set forth in this Section 2.1.2, and Sections 2.1.3 and 2.1.4, below,
as applicable, Tenant shall be entitled to increase the Tenant Improvement
Allowance (collectively, the "Additional Tenant Improvement Allowance") by
$25.00 per rentable square foot of the Premises (i.e., $1,530,175.00 based upon
61,207 rentable square feet in the Premises), resulting in a total amount of the
Tenant Improvement Allowance plus the Additional Tenant Improvement Allowance
not to exceed Seven Million Six Hundred Fifty Thousand Eight Hundred
Seventy-Five and 00/100 Dollars ($7,650,875.00), pursuant to a notice delivered
to Landlord on or before the Lease Commencement Date. In the event that the
Additional Tenant Improvement Allowance is not fully disbursed by Landlord on
behalf of Tenant on or before the date that occurs eighteen (18) months
following the Lease Commencement Date, then Tenant shall have no further rights
with respect thereto. In the event Tenant exercises its right to use all or any
portion of the Additional Tenant Improvement Allowance, the monthly Base Rent
for the Premises shall be increased as follows.
2.1.2.1    Additional Monthly Base Rent. If Tenant exercises its right to use
any portion of the Additional Tenant Improvement Allowance, the monthly Base
Rent for the Premises shall be increased by an amount equal to the "Additional
Monthly Base Rent," as that term is defined below, in order to repay such
Additional Tenant Improvement Allowance to Landlord. The "Additional Monthly
Base Rent" shall be determined as the missing component of an annuity, which
annuity shall have (w) the amount of the Additional Tenant Improvement Allowance
which Tenant actually utilizes as the present value amount, (x) the number of
monthly rental payments that Tenant shall be required to make during the
then-remaining term of Tenant's lease of the Premises as the number of payments,
(y) seventy-five hundredths (.75), which is equal to nine percent (9%) divided
by twelve (12) months per year, as the monthly interest factor and (z) the
Additional Monthly Base Rent as the missing component of the annuity. Landlord
and Tenant acknowledge that the Additional Tenant Improvement Allowance may be
requested by Tenant, and paid to Tenant, in multiple disbursements, and the
parties shall follow the distribution process set forth in Section 2.1.3 and/or
Section 2.1.4, below, as applicable, for each such disbursement.
2.1.3    Distribution of Additional Tenant Improvement Allowance Prior to
Substantial Completion of the Premises. If Tenant elects to utilize all or a
portion of the Additional Tenant Improvement Allowance prior to the substantial
completion of the Tenant Improvements, then (i) all references in this Tenant
Work Letter to the "Tenant Improvement Allowance", shall be deemed to include
the Additional Tenant Improvement Allowance which Tenant actually utilizes, (ii)
the parties shall promptly execute an amendment (the "Pre-SC Amendment") to this
Lease setting forth the new amount of the Base Rent and Tenant Improvement
Allowance computed in accordance with Section 2.1.2 and this Section 2.1.3,
(iii) Tenant shall deliver to Landlord, concurrently with Tenant's execution and
delivery of the Pre-SC Amendment to Landlord, a new L-C or an amendment to the
existing L-C, in the form attached to this Lease as Exhibit G and subject to the
terms and conditions of Article 21 of the Lease, in an amount equal to (or
increasing the then existing L-C Amount by) fifty percent (50%) of the lesser of
(A) the Additional Tenant Improvement Allowance, and (B) the total cost of
Tenant Improvement Allowance Items incurred in connection with constructing
Tenant Improvement for other than office space and research and development
laboratories (as applicable, the "Additional LOC Amount," which Additional LOC
Amount shall be subject to reduction under the terms of Article 21 the Lease),
and (iv) the additional amount of monthly Base Rent owing in accordance with
Section 2.1.2, above, for the first full month of the Lease Term shall be paid
by Tenant to Landlord at the time of Tenant's execution of the Pre-SC Amendment.
2.1.4    Distribution of Additional Tenant Improvement Allowance Following
Substantial Completion of the Premises. If Tenant elects to utilize all or a
portion of the Additional Tenant Improvement Allowance following the substantial
completion of the Tenant Improvements, then (i) all improvements to be
constructed with such Additional Tenant Improvement Allowance (the "Additional
Improvements") shall be constructed pursuant to the terms of Article 8 of the
Lease, provided that (A) the Additional Tenant Improvement Allowance shall be
distributed pursuant to Landlord's standard disbursement procedures, and
(B) Landlord shall receive the PMA Fee with respect to such Additional
Improvements, (ii) the parties shall promptly execute an amendment (the "Post-SC
Amendment") to this Lease setting forth the new amount of the Base Rent and
Additional Tenant Improvement Allowance, and (iii) Tenant shall deliver to
Landlord, concurrently with Tenant's execution and delivery of the Post-SC
Amendment, a L-

 
EXHIBIT B
-2-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

C or an amendment to the existing L-C, in the form attached to the Lease as
Exhibit G and subject to the terms and conditions of Article 21 of the Lease, in
the Additional LOC Amount (which Additional LOC Amount shall be subject to
reduction under the terms of Article 21 of the Lease), and (iv) the additional
amount of monthly Base Rent owing in accordance with Section 2.1.2, above, for
the first month following the anticipated date of disbursement shall be paid by
Tenant to Landlord at the time of Tenant's execution of the Post-SC Amendment.
2.2    Disbursement of the Tenant Improvement Allowance.
2.2.1    Except as otherwise set forth in this Tenant Work Letter, the Tenant
Improvement Allowance shall be disbursed by Landlord (each of which
disbursements shall be made pursuant to Landlord's disbursement process) only
for the following items and costs (collectively, the "Tenant Improvement
Allowance Items"):
2.2.1.1    Payment of the fees of the "Architect" and the "Engineers," as those
terms are defined in Section 3.1 of this Tenant Work Letter, which fees shall,
notwithstanding anything to the contrary contained in this Tenant Work Letter,
not exceed an aggregate amount equal to $8.00 per rentable square foot of the
Premises, and payment of the third-party out-of-pocket fees incurred by, and the
cost of documents and materials supplied by, Landlord and Landlord's consultants
in connection with the preparation and review of the "Construction Drawings," as
that term is defined in Section 3.1 of this Tenant Work Letter;
2.2.1.2    The payment of plan check, permit and license fees relating to
construction of the Tenant Improvements;
2.2.1.3    The cost of construction of the Tenant Improvements, including,
without limitation, testing and inspection costs, hoisting and trash removal
costs, and contractors' fees and general conditions;
2.2.1.4    The cost of any changes in the Base, Shell and Core when such changes
are required by the Construction Drawings (including if such changes are due to
the fact that such work is prepared on an unoccupied basis), such cost to
include all direct architectural and/or engineering fees and expenses incurred
in connection therewith;
2.2.1.5    The cost of any changes to the Construction Drawings or Tenant
Improvements required by all applicable building codes (the "Code");
2.2.1.6    The cost of Tenant's Signage;
2.2.1.7    The cost of the "PMA Fee," as that term is defined in Section 4.3.2
of this Tenant Work Letter;
2.2.1.8    The cost of Tenant's project manager;
2.2.1.9    Sales and use taxes and Title 24 fees; and
2.2.1.10    The cost of installing Tenant's telephone and data cabling in the
Premises, not exceed an aggregate amount equal to $5.00 per rentable square foot
of the Premises;
2.2.1.11    All other costs to be expended by Landlord in connection with the
construction of the Tenant Improvements, provided such costs have been
reasonably approved by Tenant in advance.
Tenant will not be charged for freight elevator use, utilities, parking, staging
area (if any) use or similar fees in connection with the construction of the
Tenant Improvements.
SECTION 3

CONSTRUCTION DRAWINGS

 
EXHIBIT B
-3-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

3.1    Selection of Architect/Construction Drawings. Tenant shall retain the
architect/space planner selected by Tenant and reasaonbly approved by Landlord
(the "Architect") to prepare the "Construction Drawings," as that term is
defined in this Section 3.1. Tenant shall retain (or cause the Architect to
retain) engineering consultants (the "Engineers") mutually and reasonable
approved by Landlord and Tenant to prepare all plans and engineering working
drawings; provided, however, the following engineering consultants are hereby
approved by Landlord and Tenant: Creo Engineering for HVAC design; MPE
Consulting for electrical design; and Prime Structural Engineers for structural
engineering. Plumbing and life safety will be performed on a "Design/Building"
basis. The plans and drawings to be prepared by Architect and the Engineers
hereunder shall be known collectively as the "Construction Drawings." All
Construction Drawings shall comply with the drawing format and specifications as
determined by Landlord, and shall be subject to Landlord's and Tenant's
approval. Tenant shall be responsible for ensuring that all elements of the
design of the Construction Drawings are suitable for Tenant’s use of the
Premises. Tenant and Architect shall verify, in the field, the dimensions and
conditions as shown on the relevant portions of the base Building plans, and
Tenant and Architect shall be solely responsible for the same, and Landlord
shall have no responsibility in connection therewith. Landlord's review of the
Construction Drawings as set forth in this Section 3, shall be for its sole
purpose and shall not imply Landlord's review of the same, or obligate Landlord
to review the same, for quality, design, Code compliance or other like matters.
Accordingly, notwithstanding that any Construction Drawings are reviewed by
Landlord or its space planner, architect, engineers and consultants, and
notwithstanding any advice or assistance which may be rendered to Tenant by
Landlord or Landlord's space planner, 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, and Tenant's waiver and indemnity set forth in this Lease shall
specifically apply to the Construction Drawings.
3.2    Space Plan. On or before the date set forth in Schedule 1, attached
hereto, Tenant and the Architect shall prepare the final space plan for Tenant
Improvements in the Premises (collectively, the "Final Space Plan"), which Final
Space Plan shall include a layout and designation of all offices, rooms and
other partitioning, their intended use, and equipment to be contained therein,
and shall deliver four (4) copies signed by Tenant of the Final Space Plan to
Landlord for Landlord's approval. After receiving such notice of disapproval,
Tenant shall cause the Architect to revise the Space Plan, taking into account
the reasons for Tenant’s disapproval, and resubmit the Space Plan to Landlord
for its approval. Such procedure shall be repeated as necessary until Landlord
has approved the Space Plan.
3.3    Approved Working Drawings. On or before the date set forth in Schedule 1,
Tenant, the Architect and the Engineers shall complete the architectural and
engineering drawings for the Premises, and the final architectural working
drawings in a form which is complete to allow subcontractors to bid on the work
and to obtain all applicable permits (collectively, the "Final Working
Drawings") and shall submit two (2) copies signed by Tenant of the same to
Landlord for Landlord's approval. After receiving such notice of disapproval,
Tenant shall cause the Architect and/or the Engineers to revise the Final
Working Drawings, taking into account the reasons for Landlord's disapproval,
and resubmit the Final Working Drawings to Landlord for its approval. Such
procedure shall be repeated as necessary until Landlord has approved the Final
Working Drawings.
3.6    Permits. The Final Working Drawings shall be approved by Landlord (the
"Approved Working Drawings") prior to the commencement of the construction of
the Tenant Improvements. Tenant shall immediately submit the Approved Working
Drawings to the appropriate municipal authorities for all applicable building
permits necessary to allow "Contractor," as that term is defined in Section 4.1,
below, to commence and fully complete the construction of the Tenant
Improvements (the "Permits") and, in connection therewith, Tenant shall
coordinate with Landlord in order to allow Landlord, at its option, to take part
in all phases of the permitting process and shall supply Landlord, as soon as
possible, with all plan check numbers and dates of submittal and obtain the
Permits on or before the date set forth in Schedule 1. . Notwithstanding
anything to the contrary set forth in this Section 3.4, Tenant hereby agrees
that neither Landlord nor Landlord's consultants shall be responsible for
obtaining any building permit or certificate of occupancy for the Premises and
that the obtaining of the same shall be Tenant's responsibility; provided
however that Landlord shall, in any event, cooperate with Tenant in executing
permit applications and performing other ministerial acts reasonably necessary
to enable Tenant to obtain any such permit or certificate of occupancy. No
changes, modifications or alterations in the Approved Working Drawings may be
made without the prior written consent of Landlord, provided that Landlord may
withhold its consent, in its sole discretion, to any change in the Approved
Working

 
EXHIBIT B
-4-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

Drawings if such change would directly or indirectly delay the "Substantial
Completion" of the Premises as that term is defined in Section 5.1 of this
Tenant Work Letter.
3.7    Time Deadlines. Tenant shall use its best, good faith, efforts and all
due diligence to cooperate with the Architect, the Engineers, and Landlord to
complete all phases of the Construction Drawings and the permitting process and
to receive the permits, and with Contractor for approval of the "Cost Proposal,"
as that term is defined in Section 4.2 of this Tenant Work Letter, as soon as
possible after the execution of the Lease, and, in that regard, shall meet with
Landlord on a scheduled basis to be determined by Landlord, to discuss Tenant's
progress in connection with the same. The applicable dates for approval of
items, plans and drawings as described in this Section 3, Section 4, below, and
in this Tenant Work Letter are set forth and further elaborated upon in
Schedule 1 (the "Time Deadlines"), attached hereto. Tenant agrees to comply with
the Time Deadlines.
SECTION 4

CONSTRUCTION OF THE TENANT IMPROVEMENTS
4.1    Contractor. Tenant shall select a contractor (“Contractor”) to construct
the Tenant Improvements pursuant to the terms of this Section 4.1. Promptly
following the full execution and delivery of the Lease, Landlord shall deliver a
construction proposal bid package (the "RFP") to Prevost Construction, Pacific
Building Group and Good and Roberts (each a "Bidding Contractor," and,
collectively, the "Bidding Contractors") requesting each Bidding Contractor to
bid on the construction of the Tenant Improvements. Each of the Bidding
Contractors shall be notified in the RFP, which shall be prepared by Landlord,
of (i) the time schedule for construction of the Tenant Improvements, (ii) the
requirement that, unless Landlord otherwise requires, the selected Bidding
Contractor shall use the Engineers set forth in Section 3.1, above, and (iii)
all major subcontractors must be bid to at least two (2) qualified
subcontractors. Tenant shall, within three (3) business days following the date
upon which Landlord delivers such bids to Tenant, select the Contractor from
among the Bidding Contractors that Landlord determines have (a) submitted
qualified bids which were consistent with the bid assumptions and directions,
and (b) have committed to Landlord's time schedule for construction of the
Tenant Improvements.
4.2    Cost Proposal. After the Approved Working Drawings are signed by Landlord
and Tenant, Landlord shall provide Tenant with a cost proposal in accordance
with the Approved Working Drawings, which cost proposal shall include, as nearly
as possible, the cost of all Tenant Improvement Allowance Items to be incurred
by Tenant in connection with the design and construction of the Tenant
Improvements (the "Cost Proposal"), and which shall also include the bid amount
submitted by each qualified major subcontractor; provided, however, the
Contractor shall be required to bid each of the major subcontractors (as
reasonably determined by Landlord) with at least two (2) qualified
subcontractors, and Landlord shall, unless otherwise directed by Tenant at the
time Tenant approves the Cost Proposal, select the lowest cost bid which is
conforming and consistent with the bid assumptions and directions. Tenant shall
approve and deliver the Cost Proposal to Landlord within five (5) business days
of the receipt of the same, and upon receipt of the same by Landlord, Landlord
shall be released by Tenant to purchase the items set forth in the Cost Proposal
and to commence the construction relating to such items. The date by which
Tenant must approve and deliver the Cost Proposal to Landlord shall be known
hereafter as the "Cost Proposal Delivery Date".
4.3    Construction of Tenant Improvements by Contractor under the Supervision
of Landlord.
4.3.1    Over-Allowance Amount. On the Cost Proposal Delivery Date, Tenant shall
deliver to Landlord cash in an amount (the "Over-Allowance Amount") equal to the
difference between (i) the amount of the Cost Proposal and (ii) the amount of
the Tenant Improvement Allowance (as increased by any Additional Tenant
Improvement Allowance which Tenant elects to utilize). The Over-Allowance Amount
shall be disbursed by Landlord prior to the disbursement of any then remaining
portion of the Tenant Improvement Allowance, and such disbursement shall be
pursuant to the same procedure as the Tenant Improvement Allowance. In the event
that, after the Cost Proposal Delivery Date, any revisions, changes, or
substitutions shall be made to the Construction Drawings or the Tenant
Improvements, any additional costs which arise in connection with such
revisions, changes or substitutions or any other additional costs shall be paid
by Tenant to Landlord immediately upon Landlord's request as an addition to the
Over-Allowance Amount.

 
EXHIBIT B
-5-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

4.3.2    Landlord's Retention of Contractor. Landlord shall independently retain
Contractor, on behalf of Tenant, to construct the Tenant Improvements in
accordance with the Approved Working Drawings (subject to the following
sentence) and the Cost Proposal and Landlord shall supervise the construction by
Contractor, and Tenant shall not be required pay a construction supervision and
management fee to Landlord; provided, however, Tenant shall pay Landlord for the
construction supervision and management fee (the "PMA Fee") in an amount equal
to the actual out-of-pocket management fee that Landlord pays to its project
manager, Project Management Advisors ("PMA"); provided further that the PMA Fee
shall not exceed an amount equal to two and 65/100 percent (2.65%) of the total
cost of all Tenant Improvement Allowance Items. Notwithstanding anything set
forth in this Tenant Work Letter to the contrary, construction of the Tenant
Improvements shall not commence until (a) Landlord has a fully executed and
delivered contract with Contractor for the construction of the Tenant
Improvements, and (b) Tenant has delivered to Landlord the Over-Allowance
Amount.
4.3.3    Contractor's Warranties and Guaranties. Landlord hereby agrees to
obtain industry standard warranties from the Contractor and all subcontractors
and assigns to Tenant all warranties and guaranties by Contractor relating to
the Tenant Improvements, and Tenant hereby waives all claims against Landlord
relating to, or arising out of the construction of, the Tenant Improvements.
Landlord will assist Tenant in enforcing all warranties against the applicable
parties.
4.3.4    Intentionally Omitted.
SECTION 5

COMPLETION OF THE TENANT IMPROVEMENTS;
LEASE COMMENCEMENT DATE
5.1    Ready for Occupancy. The Premises shall be deemed "Ready for Occupancy"
upon the Substantial Completion of the Premises. For purposes of this Lease,
"Substantial Completion" of the Premises shall occur upon the completion of
construction of the Tenant Improvements in the Premises pursuant to the Approved
Working Drawings, with the exception of any punch list items and any tenant
fixtures, work-stations, built-in furniture, or equipment to be installed by
Tenant or under the supervision of Contractor, and receipt of a certificate of
occupancy or its equivalent (e.g., a final sign off by the Building Inspector
allowing legal occupancy of the Premises).
5.2    Delay of the Substantial Completion of the Premises. Except as provided
in this Section 5.2, the Lease Commencement Date shall occur as set forth in the
Lease and Section 5.1, above. If there shall be a delay or there are delays in
the Substantial Completion of the Premises or in the occurrence of any of the
other conditions precedent to the Lease Commencement Date, as set forth in the
Lease, as a result of:
5.2.1    Tenant's failure to comply with the Time Deadlines;
5.2.2    Tenant's failure to timely approve any matter requiring Tenant's
approval;
5.2.3    A breach by Tenant of the terms of this Tenant Work Letter or the
Lease;
5.2.4    Changes in any of the Construction Drawings after disapproval of the
same by Landlord or because the same do not comply with Code or other applicable
laws;
5.2.5    Tenant's request for changes in the Approved Working Drawings;
5.2.6    Tenant's requirement for materials, components, finishes or
improvements which are not available in a commercially reasonable time given the
anticipated date of Substantial Completion of the Premises, as set forth in the
Lease, or which are different from, or not included in, the Standard Improvement
Package;
5.2.7    Changes to the Base, Shell and Core required by the Approved Working
Drawings; or

 
EXHIBIT B
-6-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

5.2.8    Any other acts or omissions of Tenant, or its agents, or employees;
then, notwithstanding anything to the contrary set forth in the Lease or this
Tenant Work Letter and regardless of the actual date of the Substantial
Completion of the Premises, the date of the Substantial Completion of the
Premises shall be deemed to be the date the Substantial Completion of the
Premises would have occurred if no Tenant delay or delays, as set forth above,
had occurred. Notwithstanding the foregoing, no Tenant Delay pursuant to Section
5.2.2 (except as to items for which the time period for Tenant's approval is
expressly set forth herein), 5.2.3 or 5.2.8 above shall be deemed to have
occurred unless and until Landlord has provided written notice to Tenant
specifying the action or inaction that Landlord contends constitutes a Tenant
Delay. If such action or inaction is not cured within one (1) day after receipt
of such notice, then a Tenant Delay, as set forth in such notice, shall be
deemed to have occurred commencing as of the date such notice is received and
continuing for the number of days that Substantial Completion of the
Improvements was in fact delayed as a result of such action or inaction.
SECTION 6

MISCELLANEOUS
6.1    Tenant's Entry Into the Premises Prior to Substantial Completion.
Provided that Tenant and its agents do not interfere with Contractor's work in
the Building and the Premises, Contractor shall allow Tenant access to the
Premises prior to the Substantial Completion of the Premises (without the
payment of Rent) for the purpose of Tenant installing overstandard equipment or
fixtures (including Tenant's data and telephone equipment) in the Premises.
Prior to Tenant's entry into the Premises as permitted by the terms of this
Section 6.1, Tenant shall submit a schedule to Landlord and Contractor, for
their approval, which schedule shall detail the timing and purpose of Tenant's
entry. Tenant shall hold Landlord harmless from and indemnify, protect and
defend Landlord against any loss or damage to the Building or Premises and
against injury to any persons caused by Tenant's actions pursuant to this
Section 6.1.
6.2    Intentionally Omitted.
6.3    Tenant's Representative. Tenant has designated Kirt Gilliland of
Gilliland Construction Management as its sole representative with respect to the
matters set forth in this Tenant Work Letter, who, until further notice to
Landlord, shall have full authority and responsibility to act on behalf of the
Tenant as required in this Tenant Work Letter.
6.4    Landlord's Representative. Landlord has designated Jeff Sobczyk of PMA as
its sole representative with respect to the matters set forth in this Tenant
Work Letter, who, until further notice to Tenant, shall have full authority and
responsibility to act on behalf of the Landlord as required in this Tenant Work
Letter.
6.5    Tenant's Agents. All contractors, subcontractors, laborers, materialmen,
and suppliers retained directly by Tenant shall be from a list of supplied by
Landlord.
6.6    Time of the Essence in This Tenant Work Letter. Unless otherwise
indicated, all references herein to a "number of days" shall mean and refer to
calendar days. Time is of the essence with respect to the performance of every
provision of this Tenant Work Letter in which time of performance is a factor.
6.7    Tenant's Lease Default. Notwithstanding any provision to the contrary
contained in this Lease, if an event of default as described in the Lease, or a
default by Tenant under this Tenant Work Letter, has occurred at any time on or
before the Substantial Completion of the Premises, then (i) in addition to all
other rights and remedies granted to Landlord pursuant to the Lease, Landlord
shall have the right to withhold payment of all or any portion of the Tenant
Improvement Allowance and/or Landlord may cause Contractor to cease the
construction of the Premises (in which case, Tenant shall be responsible for any
delay in the Substantial Completion of the Premises caused by such work stoppage
as set forth in Section 5 of this Tenant Work Letter), and (ii) all other
obligations of Landlord under the terms of this Tenant Work Letter shall be
forgiven until such time as such default is cured pursuant to the terms of the
Lease.

 
EXHIBIT B
-7-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

SCHEDULE 1 TO EXHIBIT B
TIME DEADLINES
 
Dates
Actions to be Performed
A.
N/A
Final Space Plan to be completed by Tenant and delivered to Landlord.
B.
N/A
Tenant to deliver Final Working Drawings to Landlord.
C.
N/A
Tenant to deliver Permits to Contractor.
D.
N/A
Tenant to approve Cost Proposal and deliver Cost Proposal to Landlord.

 
SCHEDULE 1 TO EXHIBIT B
-1-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

EXHIBIT C
SORRENTO GATEWAY
NOTICE OF LEASE TERM DATES
To:
_______________________

_______________________
_______________________

_______________________

Re:
Lease dated ____________, 20__ between ____________________, a
_____________________ ("Landlord"), and _______________________, a
_______________________ ("Tenant") concerning Suite ______ on floor(s)
__________ of the building located at ___________________________, California.

Gentlemen:
In accordance with the Lease (the "Lease"), we wish to advise you and/or confirm
as follows:
1.
The Lease Term shall commence on or has commenced on _____________ for a term of
_______________ ending on _______________.

2.
Rent commenced to accrue on ____________, in the amount of ____________.

3.
If the Lease Commencement Date is other than the first day of the month, the
first billing will contain a pro rata adjustment. Each billing thereafter, with
the exception of the final billing, shall be for the full amount of the monthly
installment as provided for in the Lease.

4.
Your rent checks should be made payable to __________ at ______________.

5.
The exact number of rentable/usable square feet within the Premises is _________
square feet.

6.
Tenant's Share as adjusted based upon the exact number of usable square feet
within the Premises is ____________%.

 
"Landlord":
   ,
a
                                                                                       
By:
                                                                                 
      Its:
                                                                           

 
EXHIBIT C
-1-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

Agreed to and Accepted as
of                , 201  .
"Tenant":
                                                                                          
a
                                                                                       
By:
                                                                                   
      Its:
                                                                              
 

 
EXHIBIT C
-2-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

EXHIBIT D
SORRENTO GATEWAY
FORM OF TENANT'S ESTOPPEL CERTIFICATE
The undersigned as Tenant under that certain Lease (the "Lease") made and
entered into as of ___________, 20___ by and between _______________ as
Landlord, and the undersigned as Tenant, for Premises consisting of the entire
office building located at ______________________________, California, certifies
as follows:
1.    Attached hereto as Exhibit A is a true and correct copy of the Lease and
all amendments and modifications thereto. The documents contained in Exhibit A
represent the entire agreement between the parties as to the Premises.
2.    The undersigned currently occupies the Premises described in the Lease,
the Lease Term commenced on __________, and the Lease Term expires on
___________, and the undersigned has no option to terminate or cancel the Lease
or to purchase all or any part of the Premises, the Building and/or the Project.
3.    Base Rent became payable on ____________.
4.    The Lease is in full force and effect and has not been modified,
supplemented or amended in any way except as provided in Exhibit A.
5.    Tenant has not transferred, assigned, or sublet any portion of the
Premises nor entered into any license or concession agreements with respect
thereto except as follows:
6.    Tenant shall not modify the documents contained in Exhibit A without the
prior written consent of Landlord's mortgagee.
7.    All monthly installments of Base Rent, all Additional Rent and all monthly
installments of estimated Additional Rent have been paid when due through
___________. The current monthly installment of Base Rent is
$_____________________.
8.    All conditions of the Lease to be performed by Landlord necessary to the
enforceability of the Lease have been satisfied and Landlord is not in default
thereunder. In addition, the undersigned has not delivered any notice to
Landlord regarding a default by Landlord thereunder. The Lease does not require
Landlord to provide any rental concessions or to pay any leasing brokerage
commissions.
9.    No rental has been paid more than thirty (30) days in advance and no
security has been deposited with Landlord except as provided in the Lease.
Neither Landlord, nor its successors or assigns, shall in any event be liable or
responsible for, or with respect to, the retention, application and/or return to
Tenant of any security deposit paid to any prior landlord of the Premises,
whether or not still held by any such prior landlord, unless and until the party
from whom the security deposit is being sought, whether it be a lender, or any
of its successors or assigns, has actually received for its own account, as
landlord, the full amount of such security deposit.
10.    As of the date hereof, there are no existing defenses or offsets, or, to
the undersigned's knowledge, claims or any basis for a claim, that the
undersigned has against Landlord.
11.    If Tenant is a corporation or partnership, each individual executing this
Estoppel Certificate on behalf of Tenant hereby represents and warrants that
Tenant is a duly formed and existing entity qualified to do business in
California and that Tenant has full right and authority to execute and deliver
this Estoppel Certificate and that each person signing on behalf of Tenant is
authorized to do so.

 
EXHIBIT D
-1-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

12.    There are no actions pending against the undersigned under the bankruptcy
or similar laws of the United States or any state.
13.    Tenant is in full compliance with all federal, state and local laws,
ordinances, rules and regulations affecting its use of the Premises, including,
but not limited to, those laws, ordinances, rules or regulations relating to
hazardous or toxic materials. Tenant has never permitted or suffered, nor does
Tenant have any knowledge of, the generation, manufacture, treatment, use,
storage, disposal or discharge of any hazardous, toxic or dangerous waste,
substance or material in, on, under or about the Project or the Premises or any
adjacent premises or property in violation of any federal, state or local law,
ordinance, rule or regulation.
14.    To the undersigned's knowledge, all tenant improvement work to be
performed by Landlord under the Lease has been completed in accordance with the
Lease and has been accepted by the undersigned and all reimbursements and
allowances due to the undersigned under the Lease in connection with any tenant
improvement work have been paid in full. All work (if any) in the common areas
required by the Lease to be completed by Landlord has been completed and all
parking spaces required by the Lease have been furnished and/or all parking
ratios required by the Lease have been met.
The undersigned acknowledges that this Estoppel Certificate may be delivered to
Landlord or to a prospective mortgagee or prospective purchaser, and
acknowledges that said prospective mortgagee or prospective purchaser will be
relying upon the statements contained herein in making the loan or acquiring the
property of which the Premises are a part and that receipt by it of this
certificate is a condition of making such loan or acquiring such property.
Executed at ______________ on the ____ day of ___________, 201_.
 
"Tenant":
                                                                                             ,
 a
                                                                                       
By:
                                                                                   
      Its:
                                                                             
By:
                                                                                  
       Its:
                                                                            

 
EXHIBIT D
-2-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

EXHIBIT E
INTENTIONALLY OMITTED

EXHIBIT E
-1-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

EXHIBIT F
SORRENTO GATEWAY
ENVIRONMENTAL QUESTIONNAIRE
ENVIRONMENTAL QUESTIONNAIRE
FOR COMMERCIAL AND INDUSTRIAL PROPERTIES
Property Name:    
Property Address:        
Instructions: The following questionnaire is to be completed by the Lessee
representative with knowledge of the planned operations for the specified
building/location. Please print clearly and attach additional sheets as
necessary.
1.0    PROCESS INFORMATION
Describe planned use, and include brief description of manufacturing processes
employed.
    

    
2.0    HAZARDOUS MATERIALS
Are hazardous materials used or stored? If so, continue with the next question.
If not, go to Section 3.0.
2.1
Are any of the following materials handled on the Property?    Yes No

(A material is handled if it is used, generated, processed, produced, packaged,
treated, stored, emitted, discharged, or disposed.) If so, complete this
section. If this question is not applicable, skip this section and go on to
Section 5.0.
Explosives
Fuels
Oils
Solvents
Oxidizers
Organics/Inorganics
Acids
Bases
Pesticides
Gases
PCBs
Radioactive Materials
Other (please specify)
 
 

2-2.
If any of the groups of materials checked in Section 2.1, please list the
specific material(s), use(s), and quantity of each chemical used or stored on
the site in the Table below. If convenient, you may substitute a chemical
inventory and list the uses of each of the chemicals in each category
separately.

Material
Physical State (Solid, Liquid, or Gas)
Usage
Container Size
Number of Containers
Total Quantity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
EXHIBIT F
-1-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

2-3.
Describe the planned storage area location(s) for these materials. Please
include site maps and drawings as appropriate.

    
    
    
3.0    HAZARDOUS WASTES
Are hazardous wastes generated?    Yes No
If yes, continue with the next question. If not, skip this section and go to
section 4.0.
3.1
Are any of the following wastes generated, handled, or disposed of (where
applicable) on the Property?

Hazardous wastes
Industrial Wastewater
Waste oils
PCBs
Air emissions
Sludges
Regulated Wastes
Other (please specify)

3-2.
List and quantify the materials identified in Question 3‑1 of this section.

WASTE GENERATED
RCRA listed Waste?
SOURCE
APPROXIMATE MONTHLY QUANTITY
WASTE CHARACTERIZATION
DISPOSITION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

3-3.
Please include name, location, and permit number (e.g. EPA ID No.) for
transporter and disposal facility, if applicable). Attach separate pages as
necessary.

Transporter/Disposal Facility Name
Facility Location
Transporter (T) or Disposal (D) Facility
Permit Number
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

3-4.
Are pollution controls or monitoring employed in the process to prevent or
minimize the release of wastes into the environment?    Yes o No o

 
EXHIBIT F
-2-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

3-5.
If so, please describe.

    

    
4.0    USTS/ASTS
4.1
Are underground storage tanks (USTs), aboveground storage tanks (ASTs), or
associated pipelines used for the storage of petroleum products, chemicals, or
liquid wastes present on site (lease renewals) or required for planned
operations (new tenants)?    Yes___    No___

If not, continue with section 5.0. If yes, please describe capacity, contents,
age, type of the USTs or ASTs, as well any associated leak detection/spill
prevention measures. Please attach additional pages if necessary.

Capacity
Contents
Year Installed
Type (Steel, Fiberglass, etc)
Associated Leak Detection / Spill Prevention Measures*
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

*Note:
The following are examples of leak detection / spill prevention measures:

Integrity testing
Inventory reconciliation
Leak detection system
Overfill spill protection
Secondary containment
Cathodic protection

4-2.
Please provide copies of written tank integrity test results and/or monitoring
documentation, if available.

4-3.
Is the UST/AST registered and permitted with the appropriate regulatory
agencies?    Yes o No o
If so, please attach a copy of the required permits.

4-4.
If this Questionnaire is being completed for a lease renewal, and if any of the
USTs/ASTs have leaked, please state the substance released, the media(s)
impacted (e.g., soil, water, asphalt, etc.), the actions taken, and all remedial
responses to the incident.

    
    
    
4-5.
If this Questionnaire is being completed for a lease renewal, have USTs/ASTs
been removed from the Property?    Yes o No o

If yes, please provide any official closure letters or reports and supporting
documentation (e.g., analytical test results, remediation report results, etc.).
4-6.
For Lease renewals, are there any above or below ground pipelines on site used
to transfer chemicals or wastes?    Yes o No o

For new tenants, are installations of this type required for the planned
operations?
Yes o No o

 
EXHIBIT F
-3-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

If yes to either question, please describe.
    

    
5.0    ASBESTOS CONTAINING BUILDING MATERIALS
Please be advised that an asbestos survey may have been performed at the
Property. If provided, please review the information that identifies the
locations of known asbestos containing material or presumed asbestos containing
material. All personnel and appropriate subcontractors should be notified of the
presence of these materials, and informed not to disturb these materials. Any
activity that involves the disturbance or removal of these materials must be
done by an appropriately trained individual/contractor.
6.0    REGULATORY
6-1.
Does the operation have or require a National Pollutant Discharge Elimination
System (NPDES) or equivalent permit?    Yes o No o
If so, please attach a copy of this permit.

6-2.
Has a Hazardous Materials Business Plan been developed for the site?    Yes o No
o
If so, please attach a copy.

CERTIFICATION
I am familiar with the real property described in this questionnaire. By signing
below, I represent and warrant that the answers to the above questions are
complete and accurate to the best of my knowledge. I also understand that Lessor
will rely on the completeness and accuracy of my answers in assessing any
environmental liability risks associated with the property.
Signature:        
Name:        
Title:        
Date:        
Telephone:        

 
EXHIBIT F
-4-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

EXHIBIT G
FORM OF LETTER OF CREDIT
(Letterhead of a money center bank
acceptable to the Landlord)
______________, 20__
________________________
________________________
________________________
________________________
Gentlemen:
We hereby establish our Irrevocable Letter of Credit and authorize you to draw
on us at sight for the account of [INSERT TENANT NAME] ("Applicant"), a [PLEASE
PROVIDE], the aggregate amount of _______________ and ____ Dollars
($_______________).
Funds under this Letter of Credit are available to the beneficiary hereof as
follows:
Any or all of the sums hereunder may be drawn down at any time and from time to
time from and after the date hereof by [______________] ("Beneficiary") when
accompanied by this Letter of Credit and a written statement signed by a
representative of Beneficiary, (i) certifying that Beneficiary is otherwise
allowed to draw down on the Letter of Credit pursuant to the terms of that
certain office lease by and between Beneficiary and Applicant dated [insert
lease date], as amended (collectively, the “Lease”), (ii) certifying that
Beneficiary is entitled to draw down the full amount of letter of credit
no. ___________ as the result of the filing of a voluntary petition under the
U.S. Bankruptcy Code or a State Bankruptcy Code by the tenant under the Lease,
which filing has not been dismissed at the time of this drawing, or
(iii) certifying that Beneficiary is entitled to draw down the full amount of
letter of credit no. ___________ as the result of an involuntary petition having
been filed under the U.S. Bankruptcy Code or a State Bankruptcy Code against the
tenant under the Lease, which filing has not been dismissed at the time of this
drawing.
This Letter of Credit is transferable in its entirety. Should a transfer be
desired, such transfer will be subject to the return to us of this advice,
together with written instructions.
The amount of each draft must be endorsed on the reverse hereof by the
negotiating bank.
We hereby agree with you that if drafts are presented to the [bank name] under
this Letter of Credit at or prior to 11:00 a.m.         time, on a business day,
and provided that such drafts presented conform to the terms and conditions of
this Letter of Credit, payment shall be initiated by us in immediately available
funds by our close of business on the succeeding business day. If drafts are
presented to [bank name] under this Letter of Credit after 11:00 a.m.
             time, on a business day, and provided that such drafts conform with
the terms and conditions of this Letter of Credit, payment shall be initiated by
us in immediately available funds by our close of business on the second
succeeding business day. As used in this Letter of Credit, “business day” shall
mean any day other than a Saturday, Sunday or a day on which banking
institutions in the state of California are authorized or required by law to
close. If the expiration date for this Letter of Credit shall ever fall on a day
which is not a business day then such expiration date shall automatically be
extended to the date which is the next business day.
We hereby engage with you that drafts drawn under and in compliance with the
terms and conditions of this Letter of Credit will be duly honored by us if
presented at our offices located at              attention:          (or at such
other office of the bank as to which you have received written notice from us by
registered mail, courier service or hand delivery, as being the applicable such
address) on or before the then current expiration date. We agree to notify you
in writing by registered mail, courier service or hand delivery, of any change
in such address.

EXHIBIT G
-1-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

Presentation of a drawing under this Letter of Credit may be made on or prior to
the then current expiration date hereof by hand delivery, courier service,
overnight mail, or facsimile. Presentation by facsimile transmission shall be by
transmission of the above required sight draft drawn on us together with this
Letter of Credit to our facsimile number, (___) ________ attention: the manager,
standby letter of credit department, with telephonic confirmation of our receipt
of such facsimile transmission at our telephone number (___) ________ or to such
other facsimile or telephone numbers, as to which you have received written
notice from us as being the applicable such number). We agree to notify you in
writing, by registered mail, courier service or hand delivery, of any change in
such direction. Any facsimile presentation pursuant to this paragraph shall also
state thereon that the original of such sight draft and Letter of Credit are
being remitted, for delivery on the next business day, to [bank name] at the
applicable address for presentment pursuant to the paragraph preceding this one.
This Letter of Credit shall expire on ______________.
Notwithstanding the above expiration date of this Letter of Credit, the term of
this Letter of Credit shall be automatically renewed for successive, additional
one (1) year periods unless, at least sixty (60) days prior to any such date of
expiration, the undersigned shall give written notice to Beneficiary, by
certified mail, return receipt requested and at the address set forth above or
at such other address as may be given to the undersigned by Beneficiary, that
this Letter of Credit will not be renewed. (FINAL EXPIRATION DATE NOT LESS THAN
120 DAYS FOLLOWING LEASE EXPIRATION DATE)
This Letter of Credit is governed by the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication 500.
 

Very truly yours,
(Name of Issuing Bank)

By:__________________________________

EXHIBIT G
-2-
HCP, INC.
[4939 Director's Place]
[Sorrento Therapeutics, Inc.]