Exhibit 10.23
LEASE AGREEMENT
     THIS LEASE AGREEMENT (this “Lease”) is made this 28 day of February, 2011,
between ARE-SD REGION NO. 31, LLC, a Delaware limited liability company
(“Landlord”), and ANADYS PHARMACEUTICALS, INC., a Delaware corporation
(“Tenant”).

     
Address:
  5871 Oberlin Drive, San Diego, California
 
   
Premises:
  That portion of the Project, containing approximately 13,674 rentable square
feet, as determined by Landlord, as shown on Exhibit A.
 
   
Project:
  The real property on which the building (the “Building”) in which the Premises
are located, together with all improvements thereon and appurtenances thereto as
described on Exhibit B.
 
   
Base Rent:
  $2.05 per rentable square foot of the Premises per month

Rentable Area of Premises: 13,674 sq. ft.

      Rentable Area of Project: 33,728 sq. ft.   Tenant’s Share of Operating
Expenses: 40.54%

Security Deposit: $28,872.65

     
Base Term:
  Beginning on the Commencement Date and ending on January 31, 2012.
 
   
Permitted Use:
  Research and development laboratory, related office and other related uses
consistent with the character of the Project and otherwise in compliance with
the provisions of Section 7 hereof.

     
Address for Rent Payment:
  Landlord’s Notice Address:
Dept LA 23447
  385 E. Colorado Boulevard, Suite 299
Pasadena, CA 91185-3447
  Pasadena, CA 91101
 
  Attention: Corporate Secretary
 
   
Tenant’s Notice Address:
   
5871 Oberlin Drive
   
San Diego, CA 92121
   
Attention: Lease Administrator
   

The following Exhibits and Addenda are attached hereto and incorporated herein
by this reference:

     
þ EXHIBIT A - PREMISES DESCRIPTION
  þ EXHIBIT B - DESCRIPTION OF PROJECT
þ EXHIBIT C - LANDLORD’S PROPERTY
  þ EXHIBIT D - COMMENCEMENT DATE
þ EXHIBIT E - RULES AND REGULATIONS
  þ EXHIBIT F - TENANT’S PERSONAL PROPERTY
þ EXHIBIT G - RENOVATION
   

     1. Lease of Premises. Upon and subject to all of the terms and conditions
hereof, Landlord hereby leases the Premises to Tenant and Tenant hereby leases
the Premises from Landlord. The portions of the Project which are for the
non-exclusive use of tenants of the Project are collectively referred to herein
as the “Common Areas.” Landlord reserves the right to modify Common Areas,
provided that such modifications do not materially adversely affect Tenant’s use
of the Premises for the Permitted Use.
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     2. Delivery; Acceptance of Premises; Commencement Date. The “Commencement
Date” shall be February 1, 2011. The “Rent Commencement Date” shall be March 1,
2011. Upon request of Landlord, Tenant shall execute and deliver a written
acknowledgment of the Commencement Date, the “Rent Commencement Date” and the
expiration date of the Term when such are established in the form of the
“Acknowledgement of Commencement Date” attached to this Lease as Exhibit D;
provided, however, Tenant’s failure to execute and deliver such acknowledgment
shall not affect Landlord’s rights hereunder. The “Term” of this Lease shall be
the Base Term, as defined above on the first page of this Lease.
     Landlord and Tenant acknowledge and agree that immediately prior to the
date hereof, Tenant occupied the Premises pursuant to a Sublease Agreement which
has become a direct lease with Landlord (“Existing Sublease Agreement”). The
Existing Sublease Agreement expires on January 31, 2011.
     Tenant shall have the right during the Term, at no additional cost to
Tenant, to use all of the furniture, fixtures and equipment located within the
Premises as of the date of this Lease and listed on Exhibit C attached hereto
(“Landlord’s Property”). Tenant shall accept Landlord’s Property in its “as is”
condition as of the Commencement Date and shall return Landlord’s Property to
Landlord upon the expiration or earlier termination of this Lease in the same
condition as received, ordinary wear and tear excepted.
     Except as otherwise set forth in this Lease: (i) Landlord shall have no
obligation for any defects in the Premises or Landlord’s Property; and
(ii) Tenant’s occupancy of the Premises pursuant to the terms of the Existing
Sublease Agreement shall be conclusive evidence that Tenant accepts the Premises
and Landlord’s Property and that the Premises and Landlord’s Property are in
good condition. Any occupancy of the Premises by Tenant before the Commencement
Date shall be subject to all of the terms and conditions of this Lease, except
the obligation to pay Base Rent.
     Tenant agrees and acknowledges that neither Landlord nor any agent of
Landlord has made any representation or warranty with respect to the condition
of all or any portion of the Premises or the Project, and/or the suitability of
the Premises or the Project for the conduct of Tenant’s business, and Tenant
waives any implied warranty that the Premises or the Project are suitable for
the Permitted Use. This Lease constitutes the complete agreement of Landlord and
Tenant with respect to the subject matter hereof and supersedes any and all
prior representations, inducements, promises, agreements, understandings and
negotiations which are not contained herein. Landlord in executing this Lease
does so in reliance upon Tenant’s representations, warranties, acknowledgments
and agreements contained herein.
     3. Rent.
     (a) Base Rent. The Security Deposit shall be due and payable on delivery of
an executed copy of this Lease to Landlord and Base Rent for the month in which
the Rent Commencement Date occurs shall be due and payable on or before the Rent
Commencement Date. Tenant shall pay to Landlord in advance, without demand,
abatement, deduction or set-off, monthly installments of Base Rent on or before
the first day of each calendar month during the Term hereof after the Rent
Commencement Date, in lawful money of the United States of America, at the
office of Landlord for payment of Rent set forth above, or to such other person
or at such other place as Landlord may from time to time designate in writing.
Payments of Base Rent for any fractional calendar month shall be prorated. The
obligation of Tenant to pay Base Rent and other sums to Landlord and the
obligations of Landlord under this Lease are independent obligations. Tenant
shall have no right at any time to abate, reduce, or set-off any Rent (as
defined in Section 5) due hereunder except for any abatement as may be expressly
provided in this Lease.
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     Notwithstanding anything to the contrary contained herein, Tenant shall be
required to pay Base Rent in the amount of $14,015.85 for the month of
March 2011. Tenant shall commence paying full Base Rent for the Premises on
April 1, 2011.
     (b) Additional Rent. In addition to Base Rent, Tenant agrees to pay to
Landlord as additional rent (“Additional Rent”): (i) Tenant’s Share of
“Operating Expenses” (as defined in Section 5), and (ii) any and all other
amounts Tenant assumes or agrees to pay under the provisions of this Lease,
including, without limitation, any and all other sums that may become due by
reason of any default of Tenant or failure to comply with the agreements, terms,
covenants and conditions of this Lease to be performed by Tenant, after any
applicable notice and cure period.
     4. Intentionally Omitted.
     5. Operating Expense Payments. Landlord shall deliver to Tenant a written
estimate of Operating Expenses for each calendar year during the Term (the
“Annual Estimate”), which may be revised by Landlord from time to time during
such calendar year. During each month of the Term, on the same date that Base
Rent is due, Tenant shall pay Landlord an amount equal to 1/12th of Tenant’s
Share of the Annual Estimate. Payments for any fractional calendar month shall
be prorated.
     The term “Operating Expenses” means all costs and expenses of any kind or
description whatsoever incurred or accrued each calendar year by Landlord with
respect to the Project (including, without duplication, Taxes (as defined in
Section 9), capital repairs and improvements amortized over the lesser of
7 years and the useful life of such capital items, and the costs of Landlord’s
third party property manager or, if there is no third party property manager
(not to exceed 4% of Base Rent), administration rent in the amount of 4.0% of
Base Rent), excluding only:
     (a) the original construction costs of the Project and renovation prior to
the date of the Lease and costs of correcting defects in such original
construction or renovation;
     (b) capital expenditures for expansion of the Project;
     (c) interest, principal payments of Mortgage (as defined in Section 27)
debts of Landlord, financing costs and amortization of funds borrowed by
Landlord, whether secured or unsecured;
     (d) depreciation of the Project (except for capital improvements, the cost
of which are includable in Operating Expenses);
     (e) advertising, legal and space planning expenses and leasing commissions
and other costs and expenses incurred in procuring and leasing space to tenants
for the Project, including any leasing office maintained in the Project, free
rent and construction allowances for tenants;
     (f) legal and other expenses incurred in the negotiation or enforcement of
leases;
     (g) completing, fixturing, improving, renovating, painting, redecorating or
other work, which Landlord pays for or performs for other tenants within their
premises, and costs of correcting defects in such work;
     (h) costs to be reimbursed by other tenants of the Project or Taxes to be
paid directly by Tenant or other tenants of the Project, whether or not actually
paid;
     (i) salaries, wages, benefits and other compensation paid to officers and
employees of Landlord who are not assigned in whole or in part to the operation,
management, maintenance or repair of the Project;
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     (j) general organizational, administrative and overhead costs relating to
maintaining Landlord’s existence, either as a corporation, partnership, or other
entity, including general corporate, legal and accounting expenses;
     (k) costs (including attorneys’ fees and costs of settlement, judgments and
payments in lieu thereof) incurred in connection with disputes with tenants,
other occupants, or prospective tenants, and costs and expenses, including legal
fees, incurred in connection with negotiations or disputes with employees,
consultants, management agents, leasing agents, purchasers or mortgagees of the
Building;
     (l) costs incurred by Landlord due to the violation by Landlord, its
employees, agents or contractors or any tenant of the terms and conditions of
any lease of space in the Project or any Legal Requirement (as defined in
Section 7);
     (m) penalties, fines or interest incurred as a result of Landlord’s
inability or failure to make payment of Taxes and/or to file any tax or
informational returns when due, or from Landlord«’s failure to make any payment
of Taxes required to be made by Landlord hereunder before delinquency;
     (n) overhead and profit increment paid to Landlord or to subsidiaries or
affiliates of Landlord for goods and/or services in or to the Project to the
extent the same exceeds the costs of such goods and/or services rendered by
unaffiliated third parties on a competitive basis;
     (o) costs of Landlord’s charitable or political contributions, or of fine
art maintained at the Project;
     (p) costs in connection with services (including electricity), items or
other benefits of a type which are not standard for the Project and which are
not available to Tenant without specific charges therefor, but which are
provided to another tenant or occupant of the Project, whether or not such other
tenant or occupant is specifically charged therefor by Landlord;
     (q) costs incurred in the sale or refinancing of the Project;
     (r) net income taxes of Landlord or the owner of any interest in the
Project, franchise, capital stock, gift, estate or inheritance taxes or any
federal, state or local documentary taxes imposed against the Project or any
portion thereof or interest therein;
     (s) any expenses otherwise includable within Operating Expenses to the
extent actually reimbursed by persons other than tenants of the Project under
leases for space in the Project;
     (t) any costs incurred to remove, study, test, remediate or otherwise
related to the presence of Hazardous Materials in or about the Building or the
Project, which Hazardous Materials Tenant proves (i) existed prior to Tenant’s
occupancy of the Premises, (ii) originated from any separately demised tenant
space within the Project other than the Premises or (iii) were not brought upon,
kept, used, stored, handled, treated, generated in, or released or disposed of
from, the Project by Tenant or any Tenant Party (as herein defined);
     (u) reserves for Taxes, insurance or other amounts required to me impounded
by the terms of any Mortgage or other agreement relating to the Project;
     (v) costs of repair, replacement or restoration work occasioned by any
eminent domain proceeding or risks which Landlord is required under this Lease
to insure against (except for commercially reasonable insurance deductibles and
the costs of such repair, replacement and/or restoration work where Landlord
reasonably determines that it does not make business sense to submit an
insurance claim bearing in mind the potential amount of the losses and damages
and the amount of the applicable deductibles, all of which may be included as
part of Operating Expenses); and
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     (w) the initial cost of the renovation to the Project described on
Exhibit G (“Renovation”) attached hereto and the costs of correcting defects in
such Renovation.
     Notwithstanding anything to the contrary contained herein, in no event
shall Tenant be required to pay Operating Expenses (including Utilities (both
separately metered utilities and those which are required to be provided by
Landlord)) in excess of $1.45 per rentable square foot of the Premises during
the Base Term.
     Within 90 days after the end of each calendar year (or such longer period
as may be reasonably required), Landlord shall furnish to Tenant a statement (an
“Annual Statement”) showing in reasonable detail: (a) the total and Tenant’s
Share of actual Operating Expenses for the previous calendar year, and (b) the
total of Tenant’s payments in respect of Operating Expenses for such year. If
Tenant’s Share of actual Operating Expenses for such year exceeds Tenant’s
payments of Operating Expenses for such year, the excess shall be due and
payable by Tenant as Rent within 30 days after delivery of such Annual Statement
to Tenant. If Tenant’s payments of Operating Expenses for such year exceed
Tenant’s Share of actual Operating Expenses for such year Landlord shall pay the
excess to Tenant within 30 days after delivery of such Annual Statement, except
that after the expiration, or earlier termination of the Term or if Tenant is
delinquent in its obligation to pay Rent, Landlord shall pay the excess to
Tenant after deducting all other amounts due Landlord.
     The Annual Statement shall be final and binding upon Tenant unless Tenant,
within 60 days after Tenant’s receipt thereof, shall contest any item therein by
giving written notice to Landlord, specifying each item contested and the reason
therefor. If, during such 60 day period, Tenant reasonably and in good faith
questions or contests the accuracy of Landlord ‘s statement of Tenant’s Share of
Operating Expenses, Landlord will provide Tenant with access to Landlord ‘s
books and records relating to the operation of the Project and such information
as Landlord reasonably determines to be responsive to Tenant’s questions (the
“Expense Information”). If after Tenant ‘s review of such Expense Information,
Landlord and Tenant cannot agree upon the amount of Tenant’s Share of Operating
Expenses, then Tenant shall have the right to have an independent public
accounting firm selected by Tenant from among the 4 largest in the United
States, working pursuant to a fee arrangement other than a contingent fee (at
Tenant’s sole cost and expense) and approved by Landlord (which approval shall
not be unreasonably withheld or delayed), audit and/or review the Expense
Information for the year in question (the “Independent Review”). The results of
any such Independent Review shall be binding on Landlord and Tenant. If the
Independent Review shows that the payments actually made by Tenant with respect
to Operating Expenses for the calendar year in question exceeded Tenant’s Share
of Operating Expenses for such calendar year, Landlord shall at Landlord’s
option either (i) credit the excess amount to the next succeeding installments
of estimated Operating Expenses or (ii) pay the excess to Tenant within 30 days
after delivery of such statement, except that after the expiration or earlier
termination of this Lease or if Tenant is delinquent in its obligation to pay
Rent, Landlord shall pay the excess to Tenant after deducting all other amounts
due Landlord. If the Independent Review shows that Tenant’s payments with
respect to Operating Expenses for such calendar year were less than Tenant’s
Share of Operating Expenses for the calendar year, Tenant shall pay the
deficiency to Landlord within 30 days after delivery of such statement. If the
Independent Review shows that Tenant has overpaid with respect to Operating
Expenses by more than 5% then Landlord shall reimburse Tenant for all costs
incurred by Tenant for the Independent Review. Operating Expenses for the
calendar years in which Tenant’s obligation to share therein begins and ends
shall be prorated. Notwithstanding anything set forth herein to the contrary, if
the Project is not at least 95% occupied on average during any year of the Term,
Tenant’s Share of Operating Expenses for such year shall be computed as though
the Project had been 95% occupied on average during such year.
     “Tenant’s Share” shall be the percentage set forth on the first page of
this Lease as Tenant’s Share as reasonably adjusted by Landlord for changes in
the physical size of the Premises or the Project occurring thereafter. Landlord
may equitably increase Tenant’s Share for any item of expense or cost
reimbursable by Tenant that relates to a repair, replacement, or service that
benefits only the Premises or only a portion of the Project that includes the
Premises or that varies with occupancy or use. Base Rent,
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Tenant’s Share of Operating Expenses and all other amounts payable by Tenant to
Landlord hereunder are collectively referred to herein as “Rent.”
     6. Security Deposit. Tenant shall deposit with Landlord, upon delivery of
an executed copy of this Lease to Landlord, a security deposit (the “Security
Deposit”) for the performance of all of Tenant’s obligations hereunder in the
amount set forth on page 1 of this Lease, which Security Deposit shall be in the
form of an unconditional and irrevocable letter of credit (the “Letter of
Credit”): (i) in form and substance reasonably satisfactory to Landlord,
(ii) naming Landlord as beneficiary, (iii) expressly allowing Landlord to draw
upon it at any time from time to time by delivering to the issuer notice that
Landlord is entitled to draw thereunder, (iv) issued by an FDIC-insured
financial institution reasonably satisfactory to Landlord, and (v) redeemable by
presentation of a sight draft in the State of California. If Tenant does not
provide Landlord with a substitute Letter of Credit complying with all of the
requirements hereof at least 10 days before the stated expiration date of any
then current Letter of Credit, Landlord shall have the right to draw the full
amount of the current Letter of Credit and hold the funds drawn in cash without
obligation for interest thereon as the Security Deposit. The Security Deposit
shall be held by Landlord as security for the performance of Tenant’s
obligations under this Lease. The Security Deposit is not an advance rental
deposit or a measure of Landlord’s damages in case of Tenant’s default. Upon
each occurrence of a Default (as defined in Section 20), Landlord may use all or
any part of the Security Deposit to pay delinquent payments due under this
Lease, future rent damages under California Civil Code Section 1951.2, and the
cost of any damage, injury, expense or liability caused by such Default, without
prejudice to any other remedy provided herein or provided by law. Landlord’s
right to use the Security Deposit under this Section 6 includes the right to use
the Security Deposit to pay future rent damages following the termination of
this Lease pursuant to Section 21(c) below. Upon any use of all or any portion
of the Security Deposit, Tenant shall pay Landlord on demand the amount that
will restore the Security Deposit to the amount set forth on Page 1 of this
Lease. Tenant hereby waives the provisions of any law, now or hereafter in
force, including, without limitation, California Civil Code Section 1950.7,
which provide that Landlord may claim from a security deposit only those sums
reasonably necessary to remedy defaults in the payment of Rent, to repair damage
caused by Tenant or to clean the Premises, it being agreed that Landlord may, in
addition, claim those sums reasonably necessary to compensate Landlord for any
other loss or damage, foreseeable or unforeseeable, caused by the act or
omission of Tenant or any officer, employee, agent or invitee of Tenant. Upon
bankruptcy or other debtor-creditor proceedings against Tenant, the Security
Deposit shall be deemed to be applied first to the payment of Rent and other
charges due Landlord for periods prior to the filing of such proceedings. Upon
any such use of all or any portion of the Security Deposit, Tenant shall, within
5 days after demand from Landlord, restore the Security Deposit to its original
amount. If Tenant shall fully perform every provision of this Lease to be
performed by Tenant, the Security Deposit, or any balance thereof (i.e., after
deducting therefrom all amounts to which Landlord is entitled under the
provisions of this Lease), shall be returned to Tenant (or, at Landlord’s
option, to the last assignee of Tenant’s interest hereunder) within 60 days
after the expiration or earlier termination of this Lease.
     Landlord shall deliver to Tenant the unapplied cash security deposit being
held by Landlord pursuant to the Existing Sublease Agreement, if any, within
30 days after Tenant’s delivery of the Letter of Credit to Landlord pursuant to
the immediately preceding paragraph.
     If Landlord transfers its interest in the Project or this Lease, Landlord
shall either (a) transfer any Security Deposit then held by Landlord to a person
or entity assuming Landlord’s obligations under this Section 6, or (b) return to
Tenant any Security Deposit then held by Landlord and remaining after the
deductions permitted herein. Upon such transfer to such transferee or the return
of the Security Deposit to Tenant, Landlord shall have no further obligation
with respect to the Security Deposit, and Tenant’s right to the return of the
Security Deposit shall apply solely against Landlord’s transferee. The Security
Deposit is not an advance rental deposit or a measure of Landlord’s damages in
case of Tenant’s default. Landlord’s obligation respecting the Security Deposit
is that of a debtor, not a trustee, and no interest shall accrue thereon.
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     7. Use. The Premises shall be used solely for the Permitted Use set forth
in the basic lease provisions on page 1 of this Lease, and in compliance with
all laws, orders, judgments, ordinances, regulations, codes, directives,
permits, licenses, covenants and restrictions now or hereafter applicable to the
Premises, and to the use and occupancy thereof, including, without limitation,
the Americans With Disabilities Act, 42 U.S.C. § 12101, et seq. (together with
the regulations promulgated pursuant thereto, “ADA”) (collectively, “Legal
Requirements” and each, a “Legal Requirement”). Tenant shall, upon 5 days’
written notice from Landlord, discontinue any use of the Premises which is
declared by any Governmental Authority (as defined in Section 9) having
jurisdiction to be a violation of a Legal Requirement (provided that Tenant
shall have the right, at Tenant’s sole cost and expense, to dispute or appeal
such declaration). Tenant will not use or permit the Premises to be used for any
purpose or in any manner that would void Tenant’s or Landlord’s insurance,
increase the insurance risk, or cause the disallowance of any sprinkler or other
credits. The use that Tenant has disclosed to Landlord that Tenant will be
making of the Premises as of the Commencement Date will not result in the
voidance of or an increased insurance risk with respect to the insurance
currently being maintained by Landlord. Tenant shall not permit any part of the
Premises to be used as a “place of public accommodation”, as defined in the ADA
or any similar legal requirement. Tenant shall reimburse Landlord promptly upon
demand for any additional premium charged for any such insurance policy by
reason of Tenant’s failure to comply with the provisions of this Section or
otherwise caused by Tenant’s use and/or occupancy of the Premises.
     Tenant will use the Premises in a careful, safe and proper manner and will
not commit or permit waste, overload the floor or structure of the Premises,
subject the Premises to use that would damage the Premises or obstruct or
interfere with the rights of Landlord or other tenants or occupants of the
Project, including conducting or giving notice of any auction, liquidation, or
going out of business sale on the Premises, or using or allowing the Premises to
be used for any unlawful purpose. Tenant shall cause any equipment or machinery
to be installed in the Premises so as to reasonably prevent sounds or vibrations
from the Premises from extending into Common Areas, or other space in the
Project. Tenant shall not place any machinery or equipment weighing 500 pounds
or more in or upon the Premises or transport or move such items through the
Common Areas of the Project or in the Project elevators without the prior
written consent of Landlord. Tenant shall not, without the prior written consent
of Landlord, use the Premises in any manner which will require ventilation, air
exchange, heating, gas, steam, electricity or water beyond the existing capacity
of the Project as proportionately allocated to the Premises based upon Tenant’s
Share as usually furnished for the Permitted Use. As of the date of this Lease,
Landlord has no actual knowledge of any violation by Tenant of the requirements
of this second paragraph of this Section 7.
     Landlord shall be responsible, at Landlord’s sole cost, for the compliance
of the Common Areas of the Project with Legal Requirements as of the
Commencement Date. Thereafter, Landlord shall be responsible, subject to
reimbursement as part of Operating Expenses, for the compliance of the Common
Areas of the Project with Legal Requirements, except to the extent arising from
Tenant’s Alterations or Tenant’s particular use or occupancy of the Premises, in
which case Tenant shall be responsible for the same. Notwithstanding anything in
this Lease to the contrary, Landlord shall be responsible, at Landlord’s sole
cost, for compliance of the Project with Legal Requirements triggered solely by
the Renovation. Except as otherwise provided herein, Tenant, at its sole
expense, shall make any alterations or modifications to the interior or the
exterior of the Premises or the Project that are required by Legal Requirements
(including, without limitation, compliance of the Premises with the ADA) related
to Tenant’s use or occupancy of the Premises. Notwithstanding any other
provision herein to the contrary, Tenant shall be responsible for any and all
demands, claims, liabilities, losses, costs, expenses, actions, causes of
action, damages or judgments, and all reasonable expenses incurred in
investigating or resisting the same (including, without limitation, reasonable
attorneys’ fees, charges and disbursements and costs of suit) (collectively,
“Claims”) arising out of or in connection with Legal Requirements for which
Tenant is responsible, and Tenant shall indemnify, defend, hold and save
Landlord harmless from and against any and all Claims arising out of or in
connection with any failure of the Premises to comply with any Legal Requirement
for which Tenant is responsible.
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     8. Holding Over. If, with Landlord’s express written consent, which consent
may be granted or withheld in Landlord’s sole and absolute discretion, Tenant
retains possession of the Premises after the termination of the Term, (i) unless
otherwise agreed in such written consent, such possession shall be subject to
immediate termination by Landlord at any time, (ii) all of the other terms and
provisions of this Lease (including, without limitation, the adjustment of Base
Rent pursuant to Section 4 hereof) shall remain in full force and effect
(excluding any expansion or renewal option or other similar right or option)
during such holdover period, (iii) Tenant shall pay Base Rent equal to 110% of
Rent in effect during the last 30 days of the Term, and (iv) all other payments
shall continue under the terms of this Lease. If Tenant remains in possession of
the Premises after the expiration or earlier termination of the Term without the
express written consent of Landlord, (A) Tenant shall become a tenant at
sufferance upon the terms of this Lease except that the monthly rental shall be
equal to 150% of Rent in effect during the last 30 days of the Term, and
(B) Tenant shall be responsible for all damages suffered by Landlord resulting
from or occasioned by Tenant’s holding over, including consequential damages;
provided, however, that if Tenant delivers a written inquiry to Landlord within
30 days prior to the expiration or earlier termination of the Term, Landlord
will notify Tenant whether the potential exists for consequential damages. No
holding over by Tenant, whether with or without consent of Landlord, shall
operate to extend this Lease except as otherwise expressly provided, and this
Section 8 shall not be construed as consent for Tenant to retain possession of
the Premises. Acceptance by Landlord of Rent after the expiration of the Term or
earlier termination of this Lease shall not result in a renewal or reinstatement
of this Lease.
     9. Taxes. Landlord shall pay, as part of Operating Expenses, all taxes,
levies, fees, assessments and governmental charges of any kind, existing as of
the Commencement Date or thereafter enacted (collectively referred to as
“Taxes”), imposed by any federal, state, regional, municipal, local or other
governmental authority or agency, including, without limitation, quasi-public
agencies (collectively, “Governmental Authority”) during the Term, including,
without limitation, all Taxes: (i) imposed on or measured by or based, in whole
or in part, on rent payable to (or gross receipts received by) Landlord under
this Lease and/or from the rental by Landlord of the Project or any portion
thereof, or (ii) based on the square footage, assessed value or other measure or
evaluation of any kind of the Premises or the Project, or (iii) assessed or
imposed by or on the operation or maintenance of any portion of the Premises or
the Project, including parking, or (iv) assessed or imposed by, or at the
direction of, or resulting from Legal Requirements, or interpretations thereof,
promulgated by any Governmental Authority, or (v) imposed as a license or other
fee, charge, tax, or assessment on Landlord’s business or occupation of leasing
space in the Project. Landlord may contest by appropriate legal proceedings the
amount, validity, or application of any Taxes or liens securing Taxes. Taxes
shall not include any net income taxes imposed on Landlord except to the extent
such net income taxes are in substitution for any Taxes payable hereunder. If
any such Tax is levied or assessed directly against Tenant, then Tenant shall be
responsible for and shall pay the same at such times and in such manner as the
taxing authority shall require. Tenant shall pay, prior to delinquency, any and
all Taxes levied or assessed against any personal property or trade fixtures
placed by Tenant in the Premises, whether levied or assessed against Landlord or
Tenant. If any Taxes on Tenant’s personal property or trade fixtures are levied
against Landlord or Landlord’s property, or if the assessed valuation of the
Project is increased by a value attributable to improvements in or alterations
to the Premises, whether owned by Landlord or Tenant and whether or not affixed
to the real property so as to become a part thereof, higher than the base
valuation on which Landlord from time-to-time allocates Taxes to all tenants in
the Project, Landlord shall have the right, but not the obligation, to pay such
Taxes. Landlord’s determination of any excess assessed valuation shall be
binding and conclusive, absent manifest error. The amount of any such payment by
Landlord shall constitute Additional Rent due from Tenant to Landlord
immediately upon demand.
     10. Parking. Subject to all matters of record, Force Majeure, a Taking (as
defined in Section 19 below) and the exercise by Landlord of its rights
hereunder, Tenant shall have the right, in common with other tenants of the
Project pro rata in accordance with the rentable area of the Premises and the
rentable areas of the Project occupied by such other tenants, to park in those
areas designated for non-reserved parking, subject in each case to Landlord’s
rules and regulations, at no additional cost to Tenant. Landlord may allocate
parking spaces among Tenant and other tenants in the Project pro rata as
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described above if Landlord determines that such parking facilities are becoming
crowded. Landlord shall not be responsible for enforcing Tenant’s parking rights
against any third parties, including other tenants of the Project.
     11. Utilities, Services. Landlord shall provide, subject to the terms of
this Section 11, water, electricity, heat, light, power, sewer, and other
utilities (including gas and fire sprinklers to the extent the Project is
plumbed for such services), refuse and trash collection and janitorial services
(collectively, “Utilities”). Tenant shall be permitted, at Tenant’s sole cost
and expense, to continue to use the rooftop boiler which services the autoclave
and dishwasher within the Premises as of the Commencement Date, which boiler is
owned by Landlord and shall be maintained in good working order by Tenant during
the Term. Landlord shall pay, as Operating Expenses or subject to Tenant’s
reimbursement obligation, for all Utilities used on the Premises, all
maintenance charges for Utilities, and any storm sewer charges or other similar
charges for Utilities imposed by any Governmental Authority or Utility provider,
and any taxes, penalties, surcharges or similar charges thereon. The Premises is
currently separately metered for electricity and gas. Tenant shall pay directly
to the Utility provider, prior to delinquency, any separately metered Utilities
and services which may be furnished to Tenant or the Premises during the Term.
Within 5 days after Tenant’s payment of separately metered gas and electricity
provided to the Premises, Tenant shall provide Landlord with copies of the
applicable invoices so that such amounts paid by Tenant may be factored into the
cap on Operating Expenses provided for in Section 5. Tenant shall pay, as part
of Operating Expenses, its share of all charges for jointly metered Utilities
based upon consumption, as reasonably determined by Landlord. No interruption or
failure of Utilities, from any cause whatsoever other than Landlord’s willful
misconduct, shall result in eviction or constructive eviction of Tenant,
termination of this Lease or the abatement of Rent. Tenant agrees to limit use
of water and sewer with respect to Common Areas to normal restroom use.
     Landlord’s sole obligation for either providing emergency generators or
providing emergency back-up power to Tenant shall be: (i) to provide emergency
generators with not less than the capacity of the emergency generators located
in the Building as of the Commencement Date, and (ii) to contract with a third
party to maintain the emergency generators as per the manufacturer’s standard
maintenance guidelines. Landlord shall have no obligation to provide Tenant with
operational emergency generators or back-up power or to supervise, oversee or
confirm that the third party maintaining the emergency generators is maintaining
the generators as per the manufacturer’s standard guidelines or otherwise.
During any period of replacement, repair or maintenance of the emergency
generators when the emergency generators are not operational, including any
delays thereto due to the inability to obtain parts or replacement equipment,
Landlord shall have no obligation to provide Tenant with an alternative back-up
generator or generators or alternative sources of back-up power. Tenant
expressly acknowledges and agrees that Landlord does not guaranty that such
emergency generators will be operational at all times or that emergency power
will be available to the Premises when needed.
     12. Alterations and Tenant’s Property. Any alterations, additions, or
improvements made to the Premises by or on behalf of Tenant, including
additional locks or bolts of any kind or nature upon any doors or windows in the
Premises, but excluding installation, removal or realignment of furniture
systems (other than removal of furniture systems owned or paid for by Landlord)
not involving any modifications to the structure or connections (other then by
ordinary plugs or jacks) to Building Systems (as defined in Section 13)
(“Alterations”) shall be subject to Landlord’s prior written consent, which may
be given or withheld in Landlord’s sole discretion if any such Alteration
affects the structure or Building Systems and shall not be otherwise
unreasonably withheld. If Landlord approves any Alterations, Landlord may impose
such conditions on Tenant in connection with the commencement, performance and
completion of such Alterations as Landlord may deem appropriate in Landlord’s
sole and absolute discretion. Any request for approval shall be in writing,
delivered not less than 15 business days in advance of any proposed
construction, and accompanied by plans, specifications, bid proposals, work
contracts and such other information concerning the nature and cost of the
alterations as may be reasonably requested by Landlord, including the identities
and mailing addresses of all persons performing work or supplying materials.
Landlord’s right to review plans and specifications and to monitor construction
shall be solely for its own benefit, and Landlord shall have no duty to ensure
that such plans
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and specifications or construction comply with applicable Legal Requirements.
Tenant shall cause, at its sole cost and expense, all Alterations to comply with
insurance requirements and with Legal Requirements and shall implement at its
sole cost and expense any alteration or modification required by Legal
Requirements as a result of any Alterations. Tenant shall pay to Landlord, as
Additional Rent, on demand an amount equal to 5% of all charges incurred by
Tenant or its contractors or agents in connection with any Alteration to cover
Landlord’s overhead and expenses for plan review, coordination, scheduling and
supervision. Before Tenant begins any Alteration, Landlord may post on and about
the Premises notices of non-responsibility pursuant to applicable law. Tenant
shall reimburse Landlord for, and indemnify and hold Landlord harmless from, any
expense incurred by Landlord by reason of faulty work done by Tenant or its
contractors, delays caused by such work, or inadequate cleanup.
     Tenant shall furnish security or make other arrangements satisfactory to
Landlord to assure payment for the completion of all Alterations work free and
clear of liens, and shall provide (and cause each contractor or subcontractor to
provide) certificates of insurance for workers’ compensation and other coverage
in amounts and from an insurance company satisfactory to Landlord protecting
Landlord against liability for personal injury or property damage during
construction. Upon completion of any Alterations, Tenant shall deliver to
Landlord: (i) sworn statements setting forth the names of all contractors and
subcontractors who did the work and final lien waivers from all such contractors
and subcontractors; and (ii) “as built” plans for any such Alteration.
     Except for Removable Installations (as hereinafter defined), all
Installations (as hereinafter defined) shall be and shall remain the property of
Landlord during the Term and following the expiration or earlier termination of
the Term, shall not be removed by Tenant at any time during the Term, and shall
remain upon and be surrendered with the Premises as a part thereof.
Notwithstanding the foregoing, Landlord may, at the time its approval of any
such Installation is requested, notify Tenant that Landlord requires that Tenant
remove such Installation upon the expiration or earlier termination of the Term,
in which event Tenant shall remove such Installation in accordance with the
immediately succeeding sentence. Upon the expiration or earlier termination of
the Term, Tenant shall remove (i) all wires, cables or similar equipment which
Tenant has installed in the Premises or in the risers or plenums of the
Building, (ii) any Installations for which Landlord has given Tenant notice of
removal in accordance with the immediately preceding sentence, and (iii) all of
Tenant’s Property (as hereinafter defined), and Tenant shall restore and repair
any damage caused by or occasioned as a result of such removal, including,
without limitation, capping off all such connections behind the walls of the
Premises and repairing any holes. During any restoration period beyond the
expiration or earlier termination of the Term, Tenant shall pay Rent to Landlord
as provided herein as if said space were otherwise occupied by Tenant. If
Landlord is requested by Tenant or any lender, lessor or other person or entity
claiming an interest in any of Tenant’s Property to waive any lien Landlord may
have against any of Tenant’s Property, and Landlord consents to such waiver,
then Landlord shall be entitled to be paid as administrative rent a fee of
$1,000 per occurrence for its time and effort in preparing and negotiating such
a waiver of lien.
     For purposes of this Lease, (x) “Removable Installations” means any items
listed on Exhibit F attached hereto and any items agreed by Landlord in writing
to be included on Exhibit F in the future, (y) “Tenant’s Property” means
Removable Installations and, other than Installations, any personal property or
equipment of Tenant that may be removed without material damage to the Premises,
and (z) “Installations” means all property of any kind paid for by Landlord, all
Alterations, all fixtures, and all partitions, hardware, built-in machinery,
built-in casework and cabinets and other similar additions, equipment, property
and improvements built into the Premises so as to become an integral part of the
Premises, including, without limitation, fume hoods which penetrate the roof or
plenum area, built-in cold rooms, built-in warm rooms, walk-in cold rooms,
walk-in warm rooms, deionized water systems, glass washing equipment,
autoclaves, chillers, built-in plumbing, electrical and mechanical equipment and
systems, and any power generator and transfer switch. Tenant shall not be
required to remove or restore any Alterations or Improvements existing in the
Premises as of the Commencement Date.
     13. Landlord’s Repairs. Landlord, as an Operating Expense, shall maintain
all of the structural, exterior, parking and other Common Areas of the Project,
including HVAC, plumbing, fire
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sprinklers, elevators and all other building systems serving the Premises and
other portions of the Project (“Building Systems”), in good repair, reasonable
wear and tear and uninsured losses and damages caused by Tenant, or by any of
Tenant’s agents, servants, employees, invitees and contractors (collectively,
“Tenant Parties”) excluded. Losses and damages caused by Tenant or any Tenant
Party shall be repaired by Landlord, to the extent not covered by insurance, at
Tenant’s sole cost and expense. Landlord reserves the right to temporarily stop
Building Systems services when necessary (i) by reason of accident or emergency,
or (ii) for planned repairs, alterations or improvements, which are, in the
judgment of Landlord, desirable or necessary to be made, until said repairs,
alterations or improvements shall have been completed. Landlord shall have no
responsibility or liability for failure to supply Building Systems services
during any such period of interruption; provided, however, that Landlord shall,
except in case of emergency, make a commercially reasonable effort to give
Tenant 24 hours advance notice of any planned stoppage of Building Systems
services for routine maintenance, repairs, alterations or improvements. Landlord
shall endeavor to minimize interruption of Tenant’s operations at the Premises
during such planned stoppages of Building Systems. Tenant shall promptly give
Landlord written notice of any repair required by Landlord pursuant to this
Section, after which Landlord shall make a commercially reasonable effort to
effect such repair. Landlord shall not be liable for any failure to make any
repairs or to perform any maintenance unless such failure shall persist for an
unreasonable time after Tenant’s written notice of the need for such repairs or
maintenance. Tenant waives its rights under any state or local law to terminate
this Lease or to make such repairs at Landlord’s expense and agrees that the
parties’ respective rights with respect to such matters shall be solely as set
forth herein. Repairs required as the result of fire, earthquake, flood,
vandalism, war, or similar cause of damage or destruction shall be controlled by
Section 18.
     14. Tenant’s Repairs. Subject to Section 13 hereof, Tenant, at its expense,
shall repair, replace and maintain in good condition all portions of the
Premises, including, without limitation, entries, doors, ceilings, interior
windows, interior walls, and the interior side of demising walls. Such repair
and replacement may include capital expenditures and repairs whose benefit may
extend beyond the Term. Should Tenant fail to make any such repair or
replacement or fail to maintain the Premises, Landlord shall give Tenant notice
of such failure. If Tenant fails to commence cure of such failure within 10 days
of Landlord’s notice, and thereafter diligently prosecute such cure to
completion, Landlord may perform such work and shall be reimbursed by Tenant
within 10 days after demand therefor; provided, however, that if such failure by
Tenant creates or could create an emergency, Landlord may immediately commence
cure of such failure and shall thereafter be entitled to recover the costs of
such cure from Tenant. Subject to Sections 17 and 18, Tenant shall bear the full
uninsured cost of any repair or replacement to any part of the Project that
results from damage caused by Tenant or any Tenant Party and any repair that
benefits only the Premises.
     15. Mechanic’s Liens. Tenant shall discharge, by bond or otherwise, any
mechanic’s lien filed against the Premises or against the Project for work
claimed to have been done for, or materials claimed to have been furnished to,
Tenant within 10 days after the filing thereof, at Tenant’s sole cost and shall
otherwise keep the Premises and the Project free from any liens arising out of
work performed, materials furnished or obligations incurred by Tenant. Should
Tenant fail to discharge any lien described herein, Landlord shall have the
right, but not the obligation, to pay such claim or post a bond or otherwise
provide security to eliminate the lien as a claim against title to the Project
and the cost thereof shall be immediately due from Tenant as Additional Rent. If
Tenant shall lease or finance the acquisition of office equipment, furnishings,
or other personal property of a removable nature utilized by Tenant in the
operation of Tenant’s business, Tenant warrants that any Uniform Commercial Code
Financing Statement filed as a matter of public record by any lessor or creditor
of Tenant will upon its face or by exhibit thereto indicate that such Financing
Statement is applicable only to removable personal property of Tenant located
within the Premises. In no event shall the address of the Project be furnished
on the statement without qualifying language as to applicability of the lien
only to removable personal property, located in an identified suite held by
Tenant.
     16. Indemnification. Tenant hereby indemnifies and agrees to defend, save
and hold Landlord harmless from and against any and all Claims for injury or
death to persons or damage to
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property occurring within or about the Premises, arising directly or indirectly
out of use or occupancy of the Premises or a breach or default by Tenant in the
performance of any of its obligations hereunder, except to the extent caused by
the willful misconduct or gross negligence of Landlord. Landlord shall not be
liable to Tenant for, and Tenant assumes all risk of damage to, personal
property (including, without limitation, loss of records kept within the
Premises). Tenant further waives any and all Claims for injury to Tenant’s
business or loss of income relating to any such damage or destruction of
personal property (including, without limitation, any loss of records). Landlord
shall not be liable for any damages arising from any act, omission or neglect of
any tenant in the Project or of any other third party.
     17. Insurance. Landlord shall maintain all risk property and, if
applicable, sprinkler damage insurance covering the full replacement cost of the
Project or such lesser coverage amount as Landlord may elect provided such
coverage amount is not less than 90% of such full replacement cost. Landlord
shall further procure and maintain commercial general liability insurance with a
single loss limit of not less than $2,000,000 for bodily injury and property
damage with respect to the Project. Landlord may, but is not obligated to,
maintain such other insurance and additional coverages as it may deem necessary,
including, but not limited to, flood, environmental hazard and earthquake, loss
or failure of building equipment, errors and omissions, rental loss during the
period of repair or rebuilding, workers’ compensation insurance and fidelity
bonds for employees employed to perform services and insurance for any
improvements installed by Tenant or which are in addition to the standard
improvements customarily furnished by Landlord without regard to whether or not
such are made a part of the Project. All such insurance shall be included as
part of the Operating Expenses. The Project may be included in a blanket policy
(in which case the cost of such insurance allocable to the Project will be
determined by Landlord based upon the insurer’s cost calculations). Tenant shall
also reimburse Landlord for any increased premiums or additional insurance which
Landlord reasonably deems necessary as a result of Tenant’s use of the Premises.
     Tenant, at its sole cost and expense, shall maintain during the Term: all
risk property insurance with business interruption and extra expense coverage,
covering the full replacement cost of all property and improvements installed or
placed in the Premises by Tenant at Tenant’s expense; workers’ compensation
insurance with no less than the minimum limits required by law; employer’s
liability insurance with such limits as required by law; and commercial general
liability insurance, with a minimum limit of not less than $2,000,000 per
occurrence for bodily injury and property damage with respect to the Premises.
The commercial general liability insurance policy shall name Alexandria Real
Estate Equities, Inc., and Landlord, its officers, directors, employees,
managers, agents, invitees and contractors (collectively, “Landlord Parties”),
as additional insureds; insure on an occurrence and not a claims-made basis; be
issued by insurance companies which have a rating of not less than policyholder
rating of A and financial category rating of at least Class X in “Best’s
Insurance Guide”; contain a hostile fire endorsement and a contractual liability
endorsement; and provide primary coverage to Landlord (any policy issued to
Landlord providing duplicate or similar coverage shall be deemed excess over
Tenant’s policies). Tenant shall (i) provide Landlord with advance written
notice of cancellation of such commercial general liability policy, and
(ii) require Tenant’s insurer to endeavor to provide 30 days advance written
notice of cancellation of such commercial general liability policy. Copies of
such policies (if requested by Landlord), or certificates of insurance showing
the limits of coverage required hereunder and showing Landlord as an additional
insured, along with reasonable evidence of the payment of premiums for the
applicable period, shall be delivered to Landlord by Tenant upon commencement of
the Term and upon each renewal of said insurance. Tenant’s policy may be a
“blanket policy” with an aggregate per location endorsement which specifically
provides that the amount of insurance shall not be prejudiced by other losses
covered by the policy. Tenant shall, at least 5 days prior to the expiration of
such policies, furnish Landlord with renewal certificates.
     In each instance where insurance is to name Landlord as an additional
insured, Tenant shall upon written request of Landlord also designate and
furnish certificates so evidencing Landlord as additional insured to: (i) any
lender of Landlord holding a security interest in the Project or any portion
thereof, (ii) the landlord under any lease wherein Landlord is tenant of the
real property on which the Project is located, if the interest of Landlord is or
shall become that of a tenant under a ground or other
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underlying lease rather than that of a fee owner, and/or (iii) any management
company retained by Landlord to manage the Project.
     The property insurance obtained by Landlord and Tenant shall include a
waiver of subrogation by the insurers and all rights based upon an assignment
from its insured, against Landlord or Tenant, and their respective officers,
directors, employees, managers, agents, invitees and contractors (“Related
Parties”), in connection with any loss or damage thereby insured against.
Neither party nor its respective Related Parties shall be liable to the other
for loss or damage caused by any risk insured against under property insurance
required to be maintained hereunder, and each party waives any claims against
the other party, and its respective Related Parties, for such loss or damage.
The failure of a party to insure its property shall not void this waiver.
Landlord and its respective Related Parties shall not be liable for, and Tenant
hereby waives all claims against such parties for, business interruption and
losses occasioned thereby sustained by Tenant or any person claiming through
Tenant resulting from any accident or occurrence in or upon the Premises or the
Project from any cause whatsoever. If the foregoing waivers shall contravene any
law with respect to exculpatory agreements, the liability of Landlord or Tenant
shall be deemed not released but shall be secondary to the other’s insurer.
     Landlord may require insurance policy limits to be raised to conform with
requirements of Landlord’s lender and/or to bring coverage limits to levels then
being generally required of new tenants within the Project.
     18. Restoration. If, at any time during the Term, the Project or the
Premises are damaged or destroyed by a fire or other insured casualty, Landlord
shall notify Tenant within 60 days after discovery of such damage as to the
amount of time Landlord reasonably estimates it will take to restore the Project
or the Premises, as applicable (the “Restoration Period”). If the Restoration
Period is estimated to exceed 6 months (the “Maximum Restoration Period”),
Landlord may, in such notice, elect to terminate this Lease as of the date that
is 75 days after the date of discovery of such damage or destruction. Unless
Landlord so elects to terminate this Lease, Landlord shall, subject to receipt
of sufficient insurance proceeds (with any deductible to be treated as a current
Operating Expense), promptly restore the Premises (excluding the improvements
installed by Tenant or by Landlord and paid for by Tenant), subject to delays
arising from the collection of insurance proceeds, from Force Majeure events or
as needed to obtain any license, clearance or other authorization of any kind
required to enter into and restore the Premises issued by any Governmental
Authority having jurisdiction over the use, storage, handling, treatment,
generation, release, disposal, removal or remediation of Hazardous Materials (as
defined in Section 30) in, on or about the Premises (collectively referred to
herein as “Hazardous Materials Clearances”); provided, however, that if repair
or restoration of the Premises is not substantially complete as of the end of
the Maximum Restoration Period or, if longer, the Restoration Period, Landlord
may, in its sole and absolute discretion, elect not to proceed with such repair
and restoration, in which event Landlord shall be relieved of its obligation to
make such repairs or restoration and this Lease shall terminate as of the date
that is 75 days after the later of: (i) discovery of such damage or destruction,
or (ii) the date all required Hazardous Materials Clearances are obtained, but
Landlord shall retain any Rent paid and the right to any Rent payable by Tenant
prior to such election by Landlord or Tenant.
     Tenant, at its expense, shall promptly perform, subject to delays arising
from the collection of insurance proceeds, from Force Majeure (as defined in
Section 34) events or to obtain Hazardous Material Clearances, all repairs or
restoration not required to be done by Landlord and shall promptly re-enter the
Premises and commence doing business in accordance with this Lease.
Notwithstanding the foregoing, either Landlord or Tenant may terminate this
Lease upon written notice to the other if the Premises are damaged during the
last year of the Term and Landlord reasonably estimates that it will take more
than 2 months to repair such damage; provided, however, that such notice is
delivered within 10 business days after the date that Landlord provides Tenant
with written notice of the estimated Restoration Period. Landlord shall also
have the right to terminate this Lease if insurance proceeds are not available
for such restoration. Rent shall be abated from the date all required Hazardous
Material Clearances are obtained until the Premises are repaired and restored,
in the proportion which the area of
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the Premises, if any, which is not usable by Tenant bears to the total area of
the Premises, unless Landlord provides Tenant with other space during the period
of repair that is suitable for the temporary conduct of Tenant’s business. Such
abatement shall be the sole remedy of Tenant, and except as provided in this
Section 18, Tenant waives any right to terminate the Lease by reason of damage
or casualty loss.
     The provisions of this Lease, including this Section 18, 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, or any other portion of
the Project, and any statute or regulation which is now or may hereafter be in
effect shall have no application to this Lease or any damage or destruction to
all or any part of the Premises or any other portion of the Project, the parties
hereto expressly agreeing that this Section 18 sets forth their entire
understanding and agreement with respect to such matters.
     19. Condemnation. If the whole or any material part of the Premises or the
Project is taken for any public or quasi-public use under governmental law,
ordinance, or regulation, or by right of eminent domain, or by private purchase
in lieu thereof (a “Taking” or “Taken”), and the Taking would in Landlord’s
reasonable judgment, either prevent or materially interfere with Tenant’s use of
the Premises or materially interfere with or impair Landlord’s ownership or
operation of the Project, then upon written notice by Landlord this Lease shall
terminate and Rent shall be apportioned as of said date. If part of the Premises
shall be Taken, and this Lease is not terminated as provided above, Landlord
shall promptly restore the Premises and the Project as nearly as is commercially
reasonable under the circumstances to their condition prior to such partial
Taking and the rentable square footage of the Building, the rentable square
footage of the Premises, Tenant’s Share of Operating Expenses and the Rent
payable hereunder during the unexpired Term shall be reduced to such extent as
may be fair and reasonable under the circumstances. Upon any such Taking,
Landlord shall be entitled to receive the entire price or award from any such
Taking without any payment to Tenant, and Tenant hereby assigns to Landlord
Tenant’s interest, if any, in such award. Tenant shall have the right, to the
extent that same shall not diminish Landlord’s award, to make a separate claim
against the condemning authority (but not Landlord) for such compensation as may
be separately awarded or recoverable by Tenant for moving expenses and damage to
Tenant’s trade fixtures, if a separate award for such items is made to Tenant.
Tenant hereby waives any and all rights it might otherwise have pursuant to any
provision of state law to terminate this Lease upon a partial Taking of the
Premises or the Project.
     20. Events of Default. Each of the following events shall be a default
(“Default”) by Tenant under this Lease:
     (a) Payment Defaults. Tenant shall fail to pay any installment of Rent or
any other payment hereunder when due; provided, however, that Landlord will give
Tenant notice and an opportunity to cure any failure to pay Rent within 3 days
of any such notice not more than once in any 12 month period and Tenant agrees
that such notice shall be in lieu of and not in addition to, or shall be deemed
to be, any notice required by law.
     (b) Insurance. Any insurance required to be maintained by Tenant pursuant
to this Lease shall be canceled or terminated or shall expire or shall be
reduced or materially changed, or Landlord shall receive a notice of nonrenewal
of any such insurance and Tenant shall fail to obtain replacement insurance at
least 20 days before the expiration of the current coverage.
     (c) Abandonment. Tenant shall abandon the Premises. Tenant shall not be
deemed to have abandoned the Premises if (i) Tenant provides Landlord with
reasonable advance notice prior to vacating and, at the time of vacating the
Premises, Tenant continues to work diligently to complete Tenant’s obligations
with respect to the Surrender Plan in compliance with Section 28, (ii) Tenant
has made reasonable arrangements with Landlord for the security of the Premises
for the balance of the Term, and (iii) Tenant continues during the balance of
the Term to satisfy all of its obligations under the Lease as they come due
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     (d) Improper Transfer. Tenant shall assign, sublease or otherwise transfer
or attempt to transfer all or any portion of Tenant’s interest in this Lease or
the Premises except as expressly permitted herein, or Tenant’s interest in this
Lease shall be attached, executed upon, or otherwise judicially seized and such
action is not released within 90 days of the action.
     (e) Liens. Tenant shall fail to discharge or otherwise obtain the release
of any lien placed upon the Premises in violation of this Lease within 10 days
after any such lien is filed against the Premises.
     (f) Insolvency Events. Tenant or any guarantor or surety of Tenant’s
obligations hereunder shall: (A) make a general assignment for the benefit of
creditors; (B) commence any case, proceeding or other action seeking to have an
order for relief entered on its behalf as a debtor or to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or of any substantial part of its property (collectively a
“Proceeding for Relief”); (C) become the subject of any Proceeding for Relief
which is not dismissed within 90 days of its filing or entry; or (D) die or
suffer a legal disability (if Tenant, guarantor, or surety is an individual) or
be dissolved or otherwise fail to maintain its legal existence (if Tenant,
guarantor or surety is a corporation, partnership or other entity).
     (g) Estoppel Certificate or Subordination Agreement. Tenant fails to
execute any document required from Tenant under Sections 23 or 27 within 5
business days after a second notice requesting such document.
     (h) Other Defaults. Tenant shall fail to comply with any provision of this
Lease other than those specifically referred to in this Section 20, and, except
as otherwise expressly provided herein, such failure shall continue for a period
of 10 days after written notice thereof from Landlord to Tenant.
Any notice given under Section 20(h) hereof shall: (i) specify the alleged
default, (ii) demand that Tenant cure such default, (iii) be in lieu of, and not
in addition to, or shall be deemed to be, any notice required under any
provision of applicable law, and (iv) not be deemed a forfeiture or a
termination of this Lease unless Landlord elects otherwise in such notice;
provided that if the nature of Tenant’s default pursuant to Section 20(h) is
such that it cannot be cured by the payment of money and reasonably requires
more than 10 days to cure, then Tenant shall not be deemed to be in default if
Tenant commences such cure within said 10 day period and thereafter diligently
prosecutes the same to completion; provided, however, that such cure shall be
completed no later than 30 days from the date of Landlord’s notice.
     21. Landlord’s Remedies.
     (a) Payment By Landlord; Interest. Upon a Default by Tenant hereunder,
Landlord may, without waiving or releasing any obligation of Tenant hereunder,
make such payment or perform such act. All sums so paid or incurred by Landlord,
together with interest thereon, from the date such sums were paid or incurred,
at the annual rate equal to 12% per annum or the highest rate permitted by law
(the “Default Rate”), whichever is less, shall be payable to Landlord on demand
as Additional Rent. Nothing herein shall be construed to create or impose a duty
on Landlord to mitigate any damages resulting from Tenant’s Default hereunder.
     (b) Late Payment Rent. Late payment by Tenant to Landlord of Rent and other
sums due will cause Landlord to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult and impracticable to
ascertain. Such costs include, but are not limited to, processing and accounting
charges and late charges which may be imposed on Landlord under any Mortgage
covering the Premises. Therefore, if any installment of Rent due from Tenant is
not received by Landlord within 5 days after the date such payment is due,
Tenant shall pay to Landlord an additional sum equal to 6% of the overdue Rent
as a late charge. The parties agree that this late charge represents a fair and
reasonable estimate of the costs Landlord will incur by reason of late payment
by Tenant. In addition to
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the late charge, Rent not paid when due shall bear interest at the Default Rate
from the 5th day after the date due until paid.
     (c) Remedies. Upon the occurrence of a Default, Landlord, at its option,
without further notice or demand to Tenant, shall have in addition to all other
rights and remedies provided in this Lease, at law or in equity, 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.
     (i) Terminate this Lease, or at Landlord’s option, Tenant’s right to
possession only, 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;
     (ii) Upon any termination of this Lease, whether pursuant to the foregoing
Section 21(c)(i) or otherwise, Landlord may recover from Tenant the following:
     (A) The worth at the time of award of any unpaid rent which has been earned
at the time of such termination; plus
     (B) 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
     (C) The worth at the time of award of the amount by which the unpaid rent
for the balance of the Term after the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided; plus
     (D) 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, specifically including, but not limited to, brokerage commissions and
advertising expenses incurred, expenses of remodeling the Premises or any
portion thereof for a new tenant, whether for the same or a different use, and
any special concessions made to obtain a new tenant; and
     (E) 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 21 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 21(c)(ii)(A) and
(B), above, the “worth at the time of award” shall be computed by allowing
interest at the Default Rate. As used in Section 21(c)(ii)(C) 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 1%.
     (iii) Landlord may continue this Lease in effect after Tenant’s Default and
recover rent as it becomes due (Landlord and Tenant hereby agreeing that Tenant
has the right to sublet or assign hereunder, subject only to reasonable
limitations). Accordingly, if Landlord does not elect to terminate this Lease
following a Default by Tenant, Landlord may, from time to time, without
terminating this Lease, enforce all of its rights and remedies hereunder,
including the right to recover all Rent as it becomes due.
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     (iv) Whether or not Landlord elects to terminate this Lease following a
Default by Tenant, 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. Upon 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.
     (v) Independent of the exercise of any other remedy of Landlord hereunder
or under applicable law, Landlord may conduct an environmental test of the
Premises as generally described in Section 30(d) hereof, at Tenant’s expense.
     (d) Effect of Exercise. Exercise by Landlord of any remedies hereunder or
otherwise available shall not be deemed to be an acceptance of surrender of the
Premises and/or a termination of this Lease by Landlord, it being understood
that such surrender and/or termination can be effected only by the express
written agreement of Landlord and Tenant. Any law, usage, or custom to the
contrary notwithstanding, Landlord shall have the right at all times to enforce
the provisions of this Lease in strict accordance with the terms hereof; and the
failure of Landlord at any time to enforce its rights under this Lease strictly
in accordance with same shall not be construed as having created a custom in any
way or manner contrary to the specific terms, provisions, and covenants of this
Lease or as having modified the same and shall not be deemed a waiver of
Landlord’s right to enforce one or more of its rights in connection with any
subsequent default. A receipt by Landlord of Rent or other payment with
knowledge of the breach of any covenant hereof shall not be deemed a waiver of
such breach, and no waiver by Landlord of any provision of this Lease shall be
deemed to have been made unless expressed in writing and signed by Landlord. To
the greatest extent permitted by law, Tenant waives the service of notice of
Landlord’s intention to re-enter, re-take or otherwise obtain possession of the
Premises as provided in any statute, or to institute legal proceedings to that
end, and also waives all right of redemption in case Tenant shall be
dispossessed by a judgment or by warrant of any court or judge. Any reletting of
the Premises or any portion thereof shall be on such terms and conditions as
Landlord in its sole discretion may determine. Landlord shall not be liable for,
nor shall Tenant’s obligations hereunder be diminished because of, Landlord’s
failure to relet the Premises or collect rent due in respect of such reletting
or otherwise to mitigate any damages arising by reason of Tenant’s Default.
     22. Assignment and Subletting.
     (a) General Prohibition. Without Landlord’s prior written consent subject
to and on the conditions described in this Section 22, Tenant shall not,
directly or indirectly, voluntarily or by operation of law, assign this Lease or
sublease the Premises or any part thereof or mortgage, pledge, or hypothecate
its leasehold interest or grant any concession or license within the Premises,
and any attempt to do any of the foregoing shall be void and of no effect. If
Tenant is a corporation, partnership or limited liability company, the shares or
other ownership interests thereof which are not actively traded upon a stock
exchange or in the over-the-counter market, a transfer or series of transfers
whereby 49% or more of the issued and outstanding shares or other ownership
interests of such corporation are, or voting control is, transferred (but
excepting transfers upon deaths of individual owners) from a person or persons
or entity or entities which were owners thereof at time of execution of this
Lease to persons or entities who were not owners of shares or other ownership
interests of the corporation, partnership or limited liability company at time
of execution of this Lease, shall be deemed an assignment of this Lease
requiring the consent of Landlord as provided in this Section 22.
Notwithstanding the foregoing, any sale of shares or ownership interests in
Tenant over a recognized exchange, or any raising of capital by an offering of
stock or ownership interests in Tenant shall not be deemed an assignment under
this Section 22 requiring Landlord consent.
     (b) Permitted Transfers. If Tenant desires to assign, sublease, hypothecate
or otherwise transfer this Lease or sublet the Premises other than pursuant to a
Permitted Assignment (as defined
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below), then at least 15 business days, but not more than 45 business days,
before the date Tenant desires the assignment or sublease to be effective (the
“Assignment Date”), Tenant shall give Landlord a notice (the “Assignment
Notice”) containing such information about the proposed assignee or sublessee,
including the proposed use of the Premises and any Hazardous Materials proposed
to be used, stored handled, treated, generated in or released or disposed of
from the Premises, the Assignment Date, any relationship between Tenant and the
proposed assignee or sublessee, and all material terms and conditions of the
proposed assignment or sublease, including a copy of any proposed assignment or
sublease in its final form, and such other information as Landlord may deem
reasonably necessary or appropriate to its consideration whether to grant its
consent. Landlord may, by giving written notice to Tenant within 15 business
days after receipt of the Assignment Notice: (i) grant such consent, or
(ii) refuse such consent, in its reasonable discretion. Among other reasons, it
shall be reasonable for Landlord to withhold its consent in any of these
instances: (1) the proposed assignee or subtenant is a governmental agency;
(2) in Landlord’s reasonable judgment, the use of the Premises by the proposed
assignee or subtenant would entail any alterations that would lessen the value
of the leasehold improvements in the Premises, or would require increased
services by Landlord; (3) in Landlord’s reasonable judgment, the proposed
assignee or subtenant is engaged in areas of scientific research or other
business concerns that are controversial; (4) in Landlord’s reasonable judgment,
the proposed assignee or subtenant lacks the creditworthiness to support the
financial obligations it will incur under the proposed assignment or sublease;
(5) in Landlord’s reasonable judgment, the character, reputation, or business of
the proposed assignee or subtenant is inconsistent with the desired tenant-mix
or the quality of other tenancies in the Project or is inconsistent with the
type and quality of the nature of the Building; (6) Landlord has received from
any prior landlord to the proposed assignee or subtenant a negative report
concerning such prior landlord’s experience with the proposed assignee or
subtenant; (7) Landlord has experienced previous defaults by or is in litigation
with the proposed assignee or subtenant; (8) the use of the Premises by the
proposed assignee or subtenant will violate any applicable Legal Requirement;
(9) the proposed assignee or subtenant is an entity with whom Landlord is
negotiating to lease space in the Project; or (10) the assignment or sublease is
prohibited by Landlord’s lender. No failure of Landlord to exercise any such
option to terminate this Lease, or to deliver a timely notice in response to the
Assignment Notice, shall be deemed to be Landlord’s consent to the proposed
assignment, sublease or other transfer. Tenant shall pay to Landlord a fee equal
to One Thousand Five Hundred Dollars ($1,500) in connection with its
consideration of any Assignment Notice and/or its preparation or review of any
consent documents. Notwithstanding the foregoing, Landlord’s consent to an
assignment of this Lease or a subletting of any portion of the Premises to any
entity controlling, controlled by or under common control with Tenant (a
“Control Permitted Assignment”) shall not be required, provided that Landlord
shall have the right to approve the form of any such sublease or assignment. In
addition, Tenant shall have the right to assign this Lease, upon 30 days prior
written notice to Landlord but without obtaining Landlord’s prior written
consent, to a corporation or other entity which is a successor-in-interest to
Tenant, by way of merger, consolidation or corporate reorganization, or by the
purchase of all or substantially all of the assets or the ownership interests of
Tenant provided that (i) such merger or consolidation, or such acquisition or
assumption, as the case may be, is for a good business purpose and not
principally for the purpose of transferring the Lease, and (ii) the net worth
(as determined in accordance with generally accepted accounting principles
(“GAAP”)) of the assignee satisfies Landlord’s then underwriting criteria and is
sufficient for the remaining Term to satisfy such assignee’s obligations under
this Lease and its other business obligations, and (iii) such assignee shall
agree in writing to assume all of the terms, covenants and conditions of this
Lease arising after the effective date of the assignment (a “Corporate Permitted
Assignment”). Control Permitted Assignments and Corporate Permitted Assignments
are hereinafter referred to as “Permitted Assignments.”
     (c) Additional Conditions. As a condition to any such assignment or
subletting, whether or not Landlord’s consent is required, Landlord may require:
     (i) that any assignee or subtenant agree, in writing at the time of such
assignment or subletting, that if Landlord gives such party notice that Tenant
is in default under this Lease, such party shall thereafter make all payments
otherwise due Tenant directly to Landlord, which payments will be received by
Landlord without any liability except to credit such payment against
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those due under the Lease, and any such third party shall agree to attorn to
Landlord or its successors and assigns should this Lease be terminated for any
reason; provided, however, in no event shall Landlord or its successors or
assigns be obligated to accept such attornment; and
     (ii) a list of Hazardous Materials, certified by the proposed assignee or
sublessee to be true and correct, which the proposed assignee or sublessee
intends to use, store, handle, treat, generate in or release or dispose of from
the Premises, together with copies of all documents relating to such use,
storage, handling, treatment, generation, release or disposal of Hazardous
Materials by the proposed assignee or subtenant in the Premises or on the
Project, prior to the proposed assignment or subletting, including, without
limitation: permits; approvals; reports and correspondence; storage and
management plans; plans relating to the installation of any storage tanks to be
installed in or under the Project (provided, said installation of tanks shall
only be permitted after Landlord has given its written consent to do so, which
consent may be withheld in Landlord’s sole and absolute discretion); and all
closure plans or any other documents required by any and all federal, state and
local Governmental Authorities for any storage tanks installed in, on or under
the Project for the closure of any such tanks. Neither Tenant nor any such
proposed assignee or subtenant is required, however, to provide Landlord with
any portion(s) of the such documents containing information of a proprietary
nature which, in and of themselves, do not contain a reference to any Hazardous
Materials or hazardous activities.
     (d) No Release of Tenant, Sharing of Excess Rents. Notwithstanding any
assignment or subletting, Tenant and any guarantor or surety of Tenant’s
obligations under this Lease shall at all times remain fully and primarily
responsible and liable for the payment of Rent and for compliance with all of
Tenant’s other obligations under this Lease. Except in connection with a
Permitted Assignment, if the Rent due and payable by a sublessee or assignee (or
a combination of the rental payable under such sublease or assignment plus any
bonus or other consideration therefor or incident thereto in any form) exceeds
the rental payable under this Lease, (excluding however, any Rent payable under
this Section) (“Excess Rent”), then Tenant shall be bound and obligated to pay
Landlord as Additional Rent hereunder 50% of such Excess Rent within 10 days
following receipt thereof by Tenant. If Tenant shall sublet the Premises or any
part thereof, Tenant hereby immediately and irrevocably assigns to Landlord, as
security for Tenant’s obligations under this Lease, all rent from any such
subletting, and Landlord as assignee and as attorney-in-fact for Tenant, or a
receiver for Tenant appointed on Landlord’s application, may collect such rent
and apply it toward Tenant’s obligations under this Lease; except that, until
the occurrence of a Default, Tenant shall have the right to collect such rent.
     (e) No Waiver. The consent by Landlord to an assignment or subletting shall
not relieve Tenant or any assignees of this Lease or any sublessees of the
Premises from obtaining the consent of Landlord to any further assignment or
subletting nor shall it release Tenant or any assignee or sublessee of Tenant
from full and primary liability under the Lease. The acceptance of Rent
hereunder, or the acceptance of performance of any other term, covenant, or
condition thereof, from any other person or entity shall not be deemed to be a
waiver of any of the provisions of this Lease or a consent to any subletting,
assignment or other transfer of the Premises.
     (f) Prior Conduct of Proposed Transferee. Notwithstanding any other
provision of this Section 22, if (i) the proposed assignee or sublessee of
Tenant has been required by any prior landlord, lender or Governmental Authority
to take remedial action in connection with Hazardous Materials contaminating a
property, where the contamination resulted from such party’s action or use of
the property in question, (ii) the proposed assignee or sublessee is subject to
an enforcement order issued by any Governmental Authority in connection with the
use, storage, handling, treatment, generation, release or disposal of Hazardous
Materials (including, without limitation, any order related to the failure to
make a required reporting to any Governmental Authority), or (iii) because of
the existence of a pre-existing environmental condition in the vicinity of or
underlying the Project, the risk that Landlord would be targeted as a
responsible party in connection with the remediation of such pre-existing
environmental condition would be materially increased or exacerbated by the
proposed use of Hazardous Materials by
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such proposed assignee or sublessee, Landlord shall have the absolute right to
refuse to consent to any assignment or subletting to any such party.
     23. Estoppel Certificate. Tenant shall, within 10 business days of written
notice from Landlord, execute, acknowledge and deliver a statement in writing in
any form reasonably requested by a proposed lender or purchaser, (i) certifying
that this Lease is unmodified and in full force and effect (or, if modified,
stating the nature of such modification and certifying that this Lease as so
modified is in full force and effect) and the dates to which the rental and
other charges are paid in advance, if any, (ii) acknowledging that there are not
any uncured defaults on the part of Landlord hereunder, or specifying such
defaults if any are claimed, and (iii) setting forth such further information
with respect to the status of this Lease or the Premises as may be requested
thereon. Any such statement may be relied upon by any prospective purchaser or
encumbrancer of all or any portion of the real property of which the Premises
are a part. Tenant’s failure to deliver such statement within such time shall,
at the option of Landlord, constitute a Default under this Lease, and, in any
event, shall be conclusive upon Tenant that the Lease is in full force and
effect and without modification except as may be represented by Landlord in any
certificate prepared by Landlord and delivered to Tenant for execution.
     24. Quiet Enjoyment. So long as Tenant is not in Default under this Lease,
Tenant shall, subject to the terms of this Lease, at all times during the Term,
have peaceful and quiet enjoyment of the Premises against any person claiming
by, through or under Landlord.
     25. Prorations. All prorations required or permitted to be made hereunder
shall be made on the basis of a 360 day year and 30 day months.
     26. Rules and Regulations. Tenant shall, at all times during the Term and
any extension thereof, comply with all reasonable rules and regulations at any
time or from time to time established by Landlord covering use of the Premises
and the Project. The current rules and regulations are attached hereto as
Exhibit E. If there is any conflict between said rules and regulations and other
provisions of this Lease, the terms and provisions of this Lease shall control.
Landlord shall not have any liability or obligation for the breach of any rules
or regulations by other tenants in the Project and shall not enforce such rules
and regulations in a discriminatory manner.
     27. Subordination. This Lease and Tenant’s interest and rights hereunder
are hereby made and shall be subject and subordinate at all times to the lien of
any Mortgage now existing or hereafter created on or against the Project or the
Premises, and all amendments, restatements, renewals, modifications,
consolidations, refinancing, assignments and extensions thereof, without the
necessity of any further instrument or act on the part of Tenant; provided,
however that so long as there is no Default hereunder, Tenant’s right to
possession of the Premises shall not be disturbed by the Holder of any such
Mortgage. Tenant agrees, at the election of the Holder of any such Mortgage, to
attorn to any such Holder. Tenant agrees upon demand to execute, acknowledge and
deliver such instruments, confirming such subordination, and such instruments of
attornment as shall be requested by any such Holder, provided any such
instruments contain appropriate non-disturbance provisions assuring Tenant’s
quiet enjoyment of the Premises as set forth in Section 24 hereof. Tenant hereby
appoints Landlord attorney-in-fact for Tenant irrevocably (such power of
attorney being coupled with an interest) to execute, acknowledge and deliver any
such instrument and instruments for and in the name of Tenant and to cause any
such instrument to be recorded. Notwithstanding the foregoing, any such Holder
may at any time subordinate its Mortgage to this Lease, without Tenant’s
consent, by notice in writing to Tenant, and thereupon this Lease shall be
deemed prior to such Mortgage without regard to their respective dates of
execution, delivery or recording and in that event such Holder shall have the
same rights with respect to this Lease as though this Lease had been executed
prior to the execution, delivery and recording of such Mortgage and had been
assigned to such Holder. The term “Mortgage” whenever used in this Lease shall
be deemed to include deeds of trust, security assignments and any other
encumbrances, and any reference to the “Holder” of a Mortgage shall be deemed to
include the beneficiary under a deed of trust. Landlord agrees to use reasonable
efforts to cause the Holder of the current Mortgage to enter into a
subordination, non-disturbance and attornment agreement (“SNDA”) with Tenant
with respect to this
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Lease. The SNDA shall be on the form proscribed by the Holder and Tenant shall
pay the Holder’s fees and costs in connection with obtaining such SNDA;
provided, however, that Landlord shall request that Holder make any changes to
the SNDA requested by Tenant. Landlord’s failure to cause the Holder to enter
into the SNDA with Tenant (or make any of the changes requested by Tenant) shall
not be a default by Landlord under this Lease.
     28. Surrender. Upon the expiration of the Term or earlier termination of
Tenant’s right of possession, Tenant shall surrender the Premises to Landlord in
the same condition as received, subject to any Alterations or Installations
permitted by Landlord to remain in the Premises, free of Hazardous Materials
brought upon, kept, used, stored, handled, treated, generated in, or released or
disposed of from, the Premises by any person other than a Landlord Party
(collectively, “Tenant HazMat Operations”) and released of all Hazardous
Materials Clearances, broom clean, ordinary wear and tear and casualty loss and
condemnation covered by Sections 18 and 19 excepted. At least 3 months prior to
the surrender of the Premises, Tenant shall deliver to Landlord a narrative
description of the actions proposed (or required by any Governmental Authority)
to be taken by Tenant in order to surrender the Premises (including any
Installations permitted by Landlord to remain in the Premises) at the expiration
or earlier termination of the Term, free from any residual impact from the
Tenant HazMat Operations and otherwise released for unrestricted use and
occupancy (the “Surrender Plan”). Such Surrender Plan shall be accompanied by a
current listing of (i) all Hazardous Materials licenses and permits held by or
on behalf of any Tenant Party with respect to the Premises, and (ii) all
Hazardous Materials used, stored, handled, treated, generated, released or
disposed of from the Premises, and shall be subject to the review and approval
of Landlord’s environmental consultant. In connection with the review and
approval of the Surrender Plan, upon the request of Landlord, Tenant shall
deliver to Landlord or its consultant such additional non-proprietary
information concerning Tenant HazMat Operations as Landlord shall request. On or
before such surrender, Tenant shall deliver to Landlord evidence that the
approved Surrender Plan shall have been satisfactorily completed and Landlord
shall have the right, subject to reimbursement at Tenant’s expense as set forth
below, to cause Landlord’s environmental consultant to inspect the Premises and
perform such additional procedures as may be deemed reasonably necessary to
confirm that the Premises are, as of the effective date of such surrender or
early termination of the Lease, free from any residual impact from Tenant HazMat
Operations. Tenant shall reimburse Landlord, as Additional Rent, for the actual
out-of pocket expense incurred by Landlord for Landlord’s environmental
consultant to review and approve the Surrender Plan and to visit the Premises
and verify satisfactory completion of the same, which cost shall not exceed
$5,000. Landlord shall have the unrestricted right to deliver such Surrender
Plan and any report by Landlord’s environmental consultant with respect to the
surrender of the Premises to third parties.
     If Tenant shall fail to prepare or submit a Surrender Plan approved by
Landlord, or if Tenant shall fail to complete the approved Surrender Plan, or if
such Surrender Plan, whether or not approved by Landlord, shall fail to
adequately address any residual effect of Tenant HazMat Operations in, on or
about the Premises, Landlord shall have the right to take such actions as
Landlord may deem reasonable or appropriate to assure that the Premises and the
Project are surrendered free from any residual impact from Tenant HazMat
Operations, the cost of which actions shall be reimbursed by Tenant as
Additional Rent, without regard to the limitation set forth in the first
paragraph of this Section 28.
     Tenant shall immediately return to Landlord all keys and/or access cards to
parking, the Project, restrooms or all or any portion of the Premises furnished
to or otherwise procured by Tenant. If any such access card or key is lost,
Tenant shall pay to Landlord, at Landlord’s election, either the cost of
replacing such lost access card or key or the cost of reprogramming the access
security system in which such access card was used or changing the lock or locks
opened by such lost key. Any Tenant’s Property, Alterations and property not so
removed by Tenant as permitted or required herein shall be deemed abandoned and
may be stored, removed, and disposed of by Landlord at Tenant’s expense, and
Tenant waives all claims against Landlord for any damages resulting from
Landlord’s retention and/or disposition of such property. All obligations of
Tenant hereunder not fully performed as of the termination of the Term,
including the obligations of Tenant under Section 30 hereof, shall survive the
expiration or earlier
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termination of the Term, including, without limitation, indemnity obligations,
payment obligations with respect to Rent and obligations concerning the
condition and repair of the Premises.
     29. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY LAW, TENANT AND
LANDLORD WAIVE ANY RIGHT TO TRIAL BY JURY OR TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN
LANDLORD AND TENANT ARISING OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT,
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED HERETO.
     30. Environmental Requirements.
     (a) Prohibition/Compliance/Indemnity. Tenant shall not cause or permit any
Hazardous Materials (as hereinafter defined) to be brought upon, kept, used,
stored, handled, treated, generated in or about, or released or disposed of
from, the Premises or the Project in violation of applicable Environmental
Requirements (as hereinafter defined) by Tenant or any Tenant Party. If Tenant
breaches the obligation stated in the preceding sentence, or if the presence of
Hazardous Materials in the Premises during the Term or any holding over results
in contamination of the Premises, the Project or any adjacent property or if
contamination of the Premises, the Project or any adjacent property by Hazardous
Materials brought into, kept, used, stored, handled, treated, generated in or
about, or released or disposed of from, the Premises by anyone other than
Landlord and Landlord’s employees, agents and contractors otherwise occurs
during the Term or any holding over, Tenant hereby indemnifies and shall defend
and hold Landlord, its officers, directors, employees, agents and contractors
harmless from any and all actions (including, without limitation, remedial or
enforcement actions of any kind, administrative or judicial proceedings, and
orders or judgments arising out of or resulting therefrom), costs, claims,
damages (including, without limitation, punitive damages and damages based upon
diminution in value of the Premises or the Project, or the loss of, or
restriction on, use of the Premises or any portion of the Project), expenses
(including, without limitation, attorneys’, consultants’ and experts’ fees,
court costs and amounts paid in settlement of any claims or actions), fines,
forfeitures or other civil, administrative or criminal penalties, injunctive or
other relief (whether or not based upon personal injury, property damage, or
contamination of, or adverse effects upon, the environment, water tables or
natural resources), liabilities or losses (collectively, “Environmental Claims”)
which arise during or after the Term as a result of such contamination. This
indemnification of Landlord by Tenant includes, without limitation, costs
incurred in connection with any investigation of site conditions or any cleanup,
treatment, remedial, removal, or restoration work required by any federal, state
or local Governmental Authority because of Hazardous Materials present in the
air, soil or ground water above, on, or under the Premises. Without limiting the
foregoing, if the presence of any Hazardous Materials on the Premises, the
Project or any adjacent property caused or permitted by Tenant or any Tenant
Party results in any contamination of the Premises, the Project or any adjacent
property, Tenant shall promptly take all actions at its sole expense and in
accordance with applicable Environmental Requirements as are necessary to return
the Premises, the Project or any adjacent property to the condition existing
prior to the time of such contamination, provided that Landlord’s approval of
such action shall first be obtained, which approval shall not unreasonably be
withheld so long as such actions would not potentially have any material adverse
long-term or short-term effect on the Premises or the Project. Notwithstanding
anything to the contrary contained in Section 28 or this Section 30, Tenant
shall not be responsible for, and the indemnification and hold harmless
obligation set forth in this paragraph shall not apply to (i) contamination in
the Premises which Tenant can prove to Landlord’s reasonable satisfaction
existed in the Premises immediately prior to Tenant’s occupancy of the Premises,
or (ii) the presence of any Hazardous Materials in the Premises which Tenant can
prove to Landlord’s reasonable satisfaction migrated from outside of the
Premises into the Premises, unless in either case, the presence of such
Hazardous Materials (x) is the result of a breach by Tenant of any of its
obligations under this Lease, or (y) was caused, contributed to or exacerbated
by Tenant or any Tenant Party.
     (b) Business. Landlord acknowledges that it is not the intent of this
Section 30 to prohibit Tenant from using the Premises for the Permitted Use.
Tenant may operate its business according to
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prudent industry practices so long as the use or presence of Hazardous Materials
is strictly and properly monitored according to all then applicable
Environmental Requirements. As a material inducement to Landlord to allow Tenant
to use Hazardous Materials in connection with its business, Tenant agrees to
deliver to Landlord prior to the Commencement Date a list identifying each type
of Hazardous Materials (other than products customarily used by tenants in de
minimis quantities for ordinary cleaning and office purposes) to be brought
upon, kept, used, stored, handled, treated, generated on, or released or
disposed of from, the Premises and setting forth any and all governmental
approvals or permits required in connection with the presence, use, storage,
handling, treatment, generation, release or disposal of such Hazardous Materials
on or from the Premises (“Hazardous Materials List”). Tenant shall deliver to
Landlord an updated Hazardous Materials List at least once a year and shall also
deliver an updated list before any new Hazardous Material is brought onto, kept,
used, stored, handled, treated, generated on, or released or disposed of from,
the Premises. Tenant shall deliver to Landlord true and correct copies of the
following documents (the “Haz Mat Documents”) relating to the use, storage,
handling, treatment, generation, release or disposal of Hazardous Materials
prior to the Commencement Date, or if unavailable at that time, concurrent with
the receipt from or submission to a Governmental Authority: permits; approvals;
reports and correspondence; storage and management plans, notice of violations
of any Legal Requirements; plans relating to the installation of any storage
tanks to be installed in or under the Project (provided, said installation of
tanks shall only be permitted after Landlord has given Tenant its written
consent to do so, which consent may be withheld in Landlord’s sole and absolute
discretion); all closure plans or any other documents required by any and all
federal, state and local Governmental Authorities for any storage tanks
installed in, on or under the Project for the closure of any such tanks; and a
Surrender Plan (to the extent surrender in accordance with Section 28 cannot be
accomplished in 3 months). Tenant is not required, however, to provide Landlord
with any portion(s) of the Haz Mat Documents containing information of a
proprietary nature which, in and of themselves, do not contain a reference to
any Hazardous Materials or hazardous activities. It is not the intent of this
Section to provide Landlord with information which could be detrimental to
Tenant’s business should such information become possessed by Tenant’s
competitors.
     (c) Tenant Representation and Warranty. Tenant hereby represents and
warrants to Landlord that (i) neither Tenant nor any of its legal predecessors
has been required by any prior landlord, lender or Governmental Authority at any
time to take remedial action in connection with Hazardous Materials
contaminating a property which contamination was permitted by Tenant of such
predecessor or resulted from Tenant’s or such predecessor’s action or use of the
property in question, and (ii) Tenant is not subject to any enforcement order
issued by any Governmental Authority in connection with the use, storage,
handling, treatment, generation, release or disposal of Hazardous Materials
(including, without limitation, any order related to the failure to make a
required reporting to any Governmental Authority). If Landlord determines that
this representation and warranty was not true as of the date of this lease,
Landlord shall have the right to terminate this Lease in Landlord’s sole and
absolute discretion.
     (d) Testing. Landlord shall have the right to conduct annual tests of the
Premises to determine whether any contamination of the Premises or the Project
has occurred as a result of Tenant’s use. Tenant shall be required to pay the
cost of such annual test of the Premises if there is violation of this
Section 30 or if contamination for which Tenant is responsible under this
Section 30 is identified; provided, however, that if Tenant conducts its own
tests of the Premises using third party contractors and test procedures
acceptable to Landlord which tests are certified to Landlord, Landlord shall
accept such tests in lieu of the annual tests to be paid for by Tenant. In
addition, at any time, and from time to time, prior to the expiration or earlier
termination of the Term, Landlord shall have the right to conduct appropriate
tests of the Premises and the Project to determine if contamination has occurred
as a result of Tenant’s use of the Premises. In connection with such testing,
upon the request of Landlord, Tenant shall deliver to Landlord or its consultant
such non-proprietary information concerning the use of Hazardous Materials in or
about the Premises by Tenant or any Tenant Party. If contamination has occurred
for which Tenant is liable under this Section 30, Tenant shall pay all costs to
conduct such tests. If no such contamination is found, Landlord shall pay the
costs of such tests (which shall not constitute an Operating Expense). Landlord
shall provide Tenant with a copy of all third party, non-confidential reports
and tests of the Premises made by or on behalf of Landlord during the Term
without representation or
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warranty and subject to a confidentiality agreement. Tenant shall, at its sole
cost and expense, promptly and satisfactorily remediate any environmental
conditions identified by such testing in accordance with all Environmental
Requirements. Landlord’s receipt of or satisfaction with any environmental
assessment in no way waives any rights which Landlord may have against Tenant.
     (e) Control Areas. Tenant shall be allowed to utilize up to its pro rata
share of the Hazardous Materials inventory within any control area or zone
(located within the Premises), as designated by the applicable building code,
for chemical use or storage. As used in the preceding sentence, Tenant’s pro
rata share of any control areas or zones located within the Premises shall be
determined based on the rentable square footage that Tenant leases within the
applicable control area or zone. For purposes of example only, if a control area
or zone contains 10,000 rentable square feet and 2,000 rentable square feet of a
tenant’s premises are located within such control area or zone (while such
premises as a whole contains 5,000 rentable square feet), the applicable
tenant’s pro rata share of such control area would be 20%.
     (f) Underground Tanks. If underground or other storage tanks storing
Hazardous Materials located on the Premises or the Project are used by Tenant or
are hereafter placed on the Premises or the Project by Tenant, Tenant shall
install, use, monitor, operate, maintain, upgrade and manage such storage tanks,
maintain appropriate records, obtain and maintain appropriate insurance,
implement reporting procedures, properly close any underground storage tanks,
and take or cause to be taken all other actions necessary or required under
applicable state and federal Legal Requirements, as such now exists or may
hereafter be adopted or amended in connection with the installation, use,
maintenance, management, operation, upgrading and closure of such storage tanks.
     (g) Tenant’s Obligations. Tenant’s obligations under this Section 30 shall
survive the expiration or earlier termination of the Lease. During any period of
time after the expiration or earlier termination of this Lease required by
Tenant or Landlord to complete the removal from the Premises of any Hazardous
Materials (including, without limitation, the release and termination of any
licenses or permits restricting the use of the Premises and the completion of
the approved Surrender Plan), Tenant shall continue to pay the full Rent in
accordance with this Lease for any portion of the Premises not relet by Landlord
in Landlord’s sole discretion, which Rent shall be prorated daily.
     (h) Definitions. As used herein, the term “Environmental Requirements”
means all applicable present and future statutes, regulations, ordinances,
rules, codes, judgments, orders or other similar enactments of any Governmental
Authority regulating or relating to health, safety, or environmental conditions
on, under, or about the Premises or the Project, or the environment, including
without limitation, the following: the Comprehensive Environmental Response,
Compensation and Liability Act; the Resource Conservation and Recovery Act; and
all state and local counterparts thereto, and any regulations or policies
promulgated or issued thereunder. As used herein, the term “Hazardous Materials”
means and includes any substance, material, waste, pollutant, or contaminant
listed or defined as hazardous or toxic, or regulated by reason of its impact or
potential impact on humans, animals and/or the environment under any
Environmental Requirements, asbestos and petroleum, including crude oil or any
fraction thereof, natural gas liquids, liquefied natural gas, or synthetic gas
usable for fuel (or mixtures of natural gas and such synthetic gas). As defined
in Environmental Requirements, Tenant is and shall be deemed to be the
“operator” of Tenant’s “facility” and the “owner” of all Hazardous Materials
brought on the Premises by Tenant or any Tenant Party, and the wastes,
by-products, or residues generated, resulting, or produced therefrom.
     31. Tenant’s Remedies/Limitation of Liability. Landlord shall not be in
default hereunder unless Landlord fails to perform any of its obligations
hereunder within 30 days after written notice from Tenant specifying such
failure (unless such performance will, due to the nature of the obligation,
require a period of time in excess of 30 days, then after such period of time as
is reasonably necessary). Upon any default by Landlord, Tenant shall give notice
by registered or certified mail to any Holder of a Mortgage covering the
Premises and to any landlord of any lease of property in or on which the
Premises are located and Tenant shall offer such Holder and/or landlord a
reasonable opportunity to cure the default,
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including time to obtain possession of the Project by power of sale or a
judicial action if such should prove necessary to effect a cure; provided
Landlord shall have furnished to Tenant in writing the names and addresses of
all such persons who are to receive such notices. All obligations of Landlord
hereunder shall be construed as covenants, not conditions; and, except as may be
otherwise expressly provided in this Lease, Tenant may not terminate this Lease
for breach of Landlord’s obligations hereunder.
     All obligations of Landlord under this Lease will be binding upon Landlord
only during the period of its ownership of the Premises and not thereafter. The
term “Landlord” in this Lease shall mean only the owner for the time being of
the Premises. Upon the transfer by such owner of its interest in the Premises,
such owner shall thereupon be released and discharged from all obligations of
Landlord thereafter accruing, but such obligations shall be binding during the
Term upon each new owner for the duration of such owner’s ownership.
     32. Inspection and Access. Landlord and its agents, representatives, and
contractors may enter the Premises at any reasonable time to inspect the
Premises and to make such repairs as may be required or permitted pursuant to
this Lease and for any other business purpose. Landlord and Landlord’s
representatives may enter the Premises during business hours on not less than 48
hours advance written notice (except in the case of emergencies in which case no
such notice shall be required and such entry may be at any time) for the purpose
of effecting any such repairs, inspecting the Premises, showing the Premises to
prospective purchasers and, during the last year of the Term, to prospective
tenants or for any other business purpose. Landlord may erect a suitable sign on
the Premises stating the Premises are available to let or that the Project is
available for sale. Landlord may grant easements, make public dedications,
designate Common Areas and create restrictions on or about the Premises,
provided that no such easement, dedication, designation or restriction
materially, adversely affects Tenant’s use or occupancy of the Premises for the
Permitted Use. At Landlord’s request, Tenant shall execute such instruments as
may be necessary for such easements, dedications or restrictions. Tenant shall
at all times, except in the case of emergencies, have the right to escort
Landlord or its agents, representatives, contractors or guests while the same
are in the Premises, provided such escort does not materially and adversely
affect Landlord’s access rights hereunder.
     33. Security. Tenant acknowledges and agrees that security devices and
services, if any, while intended to deter crime may not in given instances
prevent theft or other criminal acts and that Landlord is not providing any
security services with respect to the Premises. Tenant agrees that Landlord
shall not be liable to Tenant for, and Tenant waives any claim against Landlord
with respect to, any loss by theft or any other damage suffered or incurred by
Tenant in connection with any unauthorized entry into the Premises or any other
breach of security with respect to the Premises. Tenant shall be solely
responsible for the personal safety of Tenant’s officers, employees, agents,
contractors, guests and invitees while any such person is in, on or about the
Premises and/or the Project. Tenant shall at Tenant’s cost obtain insurance
coverage to the extent Tenant desires protection against such criminal acts.
     34. Force Majeure. Except for the payment of Rent, neither Landlord nor
Tenant shall be held responsible or liable for delays in the performance of its
obligations hereunder when caused by, related to, or arising out of acts of God,
sinkholes or subsidence, strikes, lockouts, or other labor disputes, embargoes,
quarantines, weather, national, regional, or local disasters, calamities, or
catastrophes, inability to obtain labor or materials (or reasonable substitutes
therefor) at reasonable costs or failure of, or inability to obtain, utilities
necessary for performance, governmental restrictions, orders, limitations,
regulations, or controls, national emergencies, delay in issuance or revocation
of permits, enemy or hostile governmental action, terrorism, insurrection,
riots, civil disturbance or commotion, fire or other casualty, and other causes
or events beyond their reasonable control (“Force Majeure”).
     35. Brokers. Landlord and Tenant each represents and warrants that it has
not dealt with any broker, agent or other person (collectively, “Broker”) in
connection with this transaction and that no Broker brought about this
transaction, other than Jones Lang LaSalle. Landlord and Tenant each hereby
agree to indemnify and hold the other harmless from and against any claims by
any Broker, other than
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the broker, if any named in this Section 35, claiming a commission or other form
of compensation by virtue of having dealt with Tenant or Landlord, as
applicable, with regard to this leasing transaction. Landlord shall be
responsible for all fees of Jones Lang LaSalle arising out of the execution of
this Lease in accordance with the terms of a separate written agreement between
Jones Lang LaSalle and Landlord.
     36. Limitation on Landlord’s Liability. NOTWITHSTANDING ANYTHING SET FORTH
HEREIN OR IN ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT TO THE CONTRARY:
(A) LANDLORD SHALL NOT BE LIABLE TO TENANT OR ANY OTHER PERSON FOR (AND TENANT
AND EACH SUCH OTHER PERSON ASSUME ALL RISK OF) LOSS, DAMAGE OR INJURY, WHETHER
ACTUAL OR CONSEQUENTIAL TO: TENANT’S PERSONAL PROPERTY OF EVERY KIND AND
DESCRIPTION, INCLUDING, WITHOUT LIMITATION TRADE FIXTURES, EQUIPMENT, INVENTORY,
SCIENTIFIC RESEARCH, SCIENTIFIC EXPERIMENTS, LABORATORY ANIMALS, PRODUCT,
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; (B) THERE SHALL BE NO PERSONAL RECOURSE TO LANDLORD FOR
ANY ACT OR OCCURRENCE IN, ON OR ABOUT THE PREMISES OR ARISING IN ANY WAY UNDER
THIS LEASE OR ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT WITH RESPECT TO
THE SUBJECT MATTER HEREOF AND ANY LIABILITY OF LANDLORD HEREUNDER SHALL BE
STRICTLY LIMITED SOLELY TO LANDLORD’S INTEREST IN THE PROJECT OR ANY PROCEEDS
FROM SALE OR CONDEMNATION THEREOF AND ANY INSURANCE PROCEEDS PAYABLE IN RESPECT
OF LANDLORD’S INTEREST IN THE PROJECT OR IN CONNECTION WITH ANY SUCH LOSS; AND
(C) IN NO EVENT SHALL ANY PERSONAL LIABILITY BE ASSERTED AGAINST LANDLORD IN
CONNECTION WITH THIS LEASE NOR SHALL ANY RECOURSE BE HAD TO ANY OTHER PROPERTY
OR ASSETS OF LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS OR CONTRACTORS. UNDER NO CIRCUMSTANCES SHALL LANDLORD OR ANY OF
LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR CONTRACTORS BE LIABLE FOR
INJURY TO TENANT’S BUSINESS OR FOR ANY LOSS OF INCOME OR PROFIT THEREFROM.
     37. Severability. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws, then and in that event,
it is the intention of the parties hereto that the remainder of this Lease shall
not be affected thereby. It is also the intention of the parties to this Lease
that in lieu of each clause or provision of this Lease that is illegal, invalid
or unenforceable, there be added, as a part of this Lease, a clause or provision
as similar in effect to such illegal, invalid or unenforceable clause or
provision as shall be legal, valid and enforceable.
     38. Signs; Exterior Appearance. Tenant shall not, without the prior written
consent of Landlord, which may be granted or withheld in Landlord’s sole
discretion: (i) attach any awnings, exterior lights, decorations, balloons,
flags, pennants, banners, painting or other projection to any outside wall of
the Project, (ii) use any curtains, blinds, shades or screens other than
Landlord’s standard window coverings, (iii) coat or otherwise sunscreen the
interior or exterior of any windows, (iv) place any bottles, parcels, or other
articles on the window sills, (v) place any equipment, furniture or other items
of personal property on any exterior balcony, or (vi) paint, affix or exhibit on
any part of the Premises or the Project any signs, notices, window or door
lettering, placards, decorations, or advertising media of any type which can be
viewed from the exterior of the Premises. Interior signs on doors and the
directory tablet shall be inscribed, painted or affixed for Tenant by Landlord
at the sole cost and expense of Tenant, and shall be of a size, color and type
acceptable to Landlord. Nothing may be placed on the exterior of corridor walls
or corridor doors other than Landlord’s standard lettering. The directory tablet
shall be provided exclusively for the display of the name and location of
tenants.
     Notwithstanding anything to the contrary contained herein, Tenant’s signage
located on the Project monument sign and Tenant’s suite identification signage
existing as of the date of this Lease may remain in place during the Term.
Tenant shall be responsible, at Tenant’s sole cost and expense, for the
maintenance of Tenant’s signage, for the removal of Tenant’s signage at the
expiration or earlier termination of this Lease and for the repair all damage
resulting from such removal.
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     39. Intentionally Omitted.
     40. Redevelopment of Project. Tenant acknowledges that Landlord, in its
sole discretion, may from time to time expand, renovate and/or reconfigure the
Project as the same may exist from time to time and, in connection therewith or
in addition thereto, as the case may be, from time to time without limitation:
(a) change the shape, size, location, number and/or extent of any improvements,
buildings, structures, lobbies, hallways, entrances, exits, parking and/or
parking areas relative to any portion of the Project; (b) modify, eliminate
and/or add any buildings, improvements, and parking structure(s) either above or
below grade, to the Project, the Common Areas and/or any other portion of the
Project and/or make any other changes thereto affecting the same; and (c) make
any other changes, additions and/or deletions in any way affecting the Project
and/or any portion thereof as Landlord may elect from time to time, including
without limitation, additions to and/or deletions from the land comprising the
Project, the Common Areas and/or any other portion of the Project.
Notwithstanding anything to the contrary contained in this Lease, Tenant shall
have no right to seek damages (including abatement of Rent) or to cancel or
terminate this Lease because of any proposed changes, expansion, renovation or
reconfiguration of the Project nor shall Tenant have the right to restrict,
inhibit or prohibit any such changes, expansion, renovation or reconfiguration;
provided, however, Landlord shall not change the size, dimensions or location of
the Premises or adversely affect Tenant’s parking or access to the Premises
other than on a temporary basis. Landlord shall endeavor to minimize
interruption of Tenant’s operations at the Premises during such expansion,
renovation or reconfiguration of the Project. Landlord agrees to perform any
such expansion, renovation or reconfiguration of the Project that will, in
Landlord’s reasonable discretion, materially adversely affect Tenant’s
operations at the Premises outside of the hours of 8:00 a.m. to 6:00 p.m.,
Monday through Friday. Tenant acknowledges and agrees that for a period of
approximately 6-8 weeks during the Term, the lobby of the Building shall be
closed in connection with the redevelopment of the Project and that during such
time, Tenant will be required to access the Premises through the doors of the
Premises other than those which provide access to and from the lobby.
Notwithstanding anything to the contrary contained herein, capital expenditures
for the redevelopment of the Project (not including capital repairs and
improvements which shall continue to be included in Operating Expenses pursuant
to Section 5) shall be excluded from Operating Expenses.
     41. Roof Equipment. Subject to the provisions of this Lease, Tenant may, at
its sole cost, install, maintain, and from time to time replace a communication
antenna weighing up to 50 pounds and having a diameter or height of up to 20
inches and other related equipment on the roof of the Building (collectively,
“Roof Equipment”) in a location reasonably selected by Landlord and reasonably
acceptable to Tenant for Tenant’s own communication purposely use only;
provided, however, that (i) Tenant shall obtain Landlord’s prior written
approval with respect to the installation of such Roof Equipment which approval
shall not be unreasonably withheld, conditioned or delayed and shall include
consideration all relevant factors including, without limitation, the proposed
size, weight and location of the Roof Equipment and method for fastening the
same to the roof, (ii) Tenant shall, at its sole cost, comply with any
reasonable requirements imposed by Landlord and all Legal Requirements and the
conditions of any bond or warranty maintained by Landlord on the roof,
(iii) Tenant shall be responsible for paying for any structural upgrades that
may be required by Landlord in connection with the Roof Equipment, and
(iv) Tenant shall remove, at its expense, at the expiration or earlier
termination of this Lease, any Roof Equipment which Landlord requires to be
removed. Landlord shall have the right to supervise any roof penetration. Tenant
may not access the roof without a representative of Landlord (who shall be
reasonably available) being present. Tenant shall repair any damage to the
Building caused by Tenant’s installation, maintenance, replacement, use or
removal of the Roof Equipment. Tenant shall remove any Roof Equipment at its
cost upon expiration or termination of the Lease. Tenant shall install, use,
maintain and repair the Roof Equipment, and use the access areas, so as not to
damage or interfere with the operation of the Building. Tenant shall protect,
defend, indemnify and hold harmless Landlord from and against claims, damages,
liabilities, costs and expenses of every kind and nature, including reasonable
attorneys’ fees, incurred by or asserted against Landlord arising out of
Tenant’s installation, maintenance, replacement, use or removal of the Roof
Equipment.
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     42. Miscellaneous.
     (a) Notices. All notices or other communications between the parties shall
be in writing and shall be deemed duly given upon delivery or refusal to accept
delivery by the addressee thereof if delivered in person, or upon actual receipt
if delivered by reputable overnight guaranty courier, addressed and sent to the
parties at their addresses set forth above. Landlord and Tenant may from time to
time by written notice to the other designate another address for receipt of
future notices.
     (b) Joint and Several Liability. If and when included within the term
“Tenant,” as used in this instrument, there is more than one person or entity,
each shall be jointly and severally liable for the obligations of Tenant.
     (c) Financial Information. Tenant shall furnish Landlord with true and
complete copies of (i) Tenant’s most recent audited annual financial statements
within 90 days of the end of each of Tenant’s fiscal years during the Term,
(ii) Tenant’s most recent unaudited quarterly financial statements within
45 days of the end of each of Tenant’s first three fiscal quarters of each of
Tenant’s fiscal years during the Term, (iii) at Landlord’s request from time to
time, updated business plans, including cash flow projections and/or pro forma
balance sheets and income statements, all of which shall be treated by Landlord
as confidential information belonging to Tenant, (iv) corporate brochures and/or
profiles prepared by Tenant for prospective investors, and (v) any other
financial information or summaries that Tenant typically provides to its lenders
or shareholders. So long as Tenant is a “public company” and its financial
information is publicly available, then the foregoing delivery requirements of
this Section 42(c) shall not apply.
     (d) Recordation. Neither this Lease nor a memorandum of lease shall be
filed by or on behalf of Tenant in any public record. Landlord may prepare and
file, and upon request by Landlord Tenant will execute, a memorandum of lease.
The foregoing is not intended to prohibit Tenant from filing this Lease pursuant
to applicable SEC requirements.
     (e) Interpretation. The normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Lease or any exhibits or amendments hereto. Words
of any gender used in this Lease shall be held and construed to include any
other gender, and words in the singular number shall be held to include the
plural, unless the context otherwise requires. The captions inserted in this
Lease are for convenience only and in no way define, limit or otherwise describe
the scope or intent of this Lease, or any provision hereof, or in any way affect
the interpretation of this Lease.
     (f) Not Binding Until Executed. The submission by Landlord to Tenant of
this Lease shall have no binding force or effect, shall not constitute an option
for the leasing of the Premises, nor confer any right or impose any obligations
upon either party until execution of this Lease by both parties.
     (g) Limitations on Interest. It is expressly the intent of Landlord and
Tenant at all times to comply with applicable law governing the maximum rate or
amount of any interest payable on or in connection with this Lease. If
applicable law is ever judicially interpreted so as to render usurious any
interest called for under this Lease, or contracted for, charged, taken,
reserved, or received with respect to this Lease, then it is Landlord’s and
Tenant’s express intent that all excess amounts theretofore collected by
Landlord be credited on the applicable obligation (or, if the obligation has
been or would thereby be paid in full, refunded to Tenant), and the provisions
of this Lease immediately shall be deemed reformed and the amounts thereafter
collectible hereunder reduced, without the necessity of the execution of any new
document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder.
     (h) Choice of Law. Construction and interpretation of this Lease shall be
governed by the internal laws of the state in which the Premises are located,
excluding any principles of conflicts of laws.
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      Net Multi-Tenant Laboratory   5871 Oberlin/Anadys — Page 29

     (i) Time. Time is of the essence as to the performance of Tenant’s
obligations under this Lease.
     (j) OFAC. Tenant is currently (a) in compliance with and shall at all times
during the Term of this Lease remain in compliance with the regulations of the
Office of Foreign Assets Control (“OFAC”) of the U.S. Department of Treasury and
any statute, executive order, or regulation relating thereto (collectively, the
“OFAC Rules”), (b) not listed on, and shall not during the term of this Lease be
listed on, the Specially Designated Nationals and Blocked Persons List
maintained by OFAC and/or on any other similar list maintained by OFAC or other
governmental authority pursuant to any authorizing statute, executive order, or
regulation, and (c) not a person or entity with whom a U.S. person is prohibited
from conducting business under the OFAC Rules.
     (k) Incorporation by Reference. All exhibits and addenda attached hereto
are hereby incorporated into this Lease and made a part hereof. If there is any
conflict between such exhibits or addenda and the terms of this Lease, such
exhibits or addenda shall control.
     (l) Entire Agreement. This Lease, including the exhibits attached hereto,
constitutes the entire agreement between Landlord and Tenant pertaining to the
subject matter hereof and supersedes all prior and contemporaneous agreements,
understandings, letters of intent, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or other
agreements, express or implied, made to either party by the other party in
connection with the subject matter hereof except as specifically set forth
herein.
     (m) No Accord and Satisfaction. No payment by Tenant or receipt by Landlord
of a lesser amount than the monthly installment of Base Rent or any Additional
Rent will be other than on account of the earliest stipulated Base Rent and
Additional Rent, nor will any endorsement or statement on any check or letter
accompanying a check for payment of any Base Rent or Additional Rent be an
accord and satisfaction. Landlord may accept such check or payment without
prejudice to Landlord’s right to recover the balance of such Rent or to pursue
any other remedy provided in this Lease.
     (n) Hazardous Activities. Notwithstanding any other provision of this
Lease, Landlord, for itself and its employees, agents and contractors, reserves
the right to refuse to perform any repairs or services in any portion of the
Premises which, pursuant to Tenant’s routine safety guidelines, practices or
custom or prudent industry practices, require any form of protective clothing or
equipment other than safety glasses. In any such case, Tenant shall contract
with parties who are acceptable to Landlord, in Landlord’s reasonable
discretion, for all such repairs and services, and Landlord shall, to the extent
required, equitably adjust Tenant’s Share of Operating Expenses in respect of
such repairs or services to reflect that Landlord is not providing such repairs
or services to Tenant.
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      Net Multi-Tenant Laboratory   5871 Oberlin/Anadys — Page 30

     IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
day and year first above written.

            TENANT:

ANADYS PHARMACEUTICALS, INC.,
a Delaware corporation
      By:   /s/ Peter Slover       Its:  Vice President, Finance and Operations
              LANDLORD:

ARE-SD REGION NO. 31, LLC,
a Delaware limited liability company
      By:   ALEXANDRIA REAL ESTATE EQUITIES, L.P.,
a Delaware limited partnership,
managing member    

                  By:   ARE-QRS CORP.,
a Maryland corporation,
general partner    

                  By:   /s/ Gary Dean       Its:  VP - RE LEGAL AFFAIRS  

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5871 Oberlin/Anadys — Page 1
EXHIBIT A TO LEASE
DESCRIPTION OF PREMISES
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5871 Oberlin/Anadys — Page 1
EXHIBIT B TO LEASE
DESCRIPTION OF PROJECT
All that certain real property situated in the County of San Diego, State of
California, described as follows:
Lots 32 and 33 of Lusk Industrial Park Unit No. 1, in the City of San Diego,
County of San Diego, State of California, according to Map thereof No. 9694,
filed in the Office of the County Recorder of San Diego County, June 27, 1980.
Excepting therefrom all coal, oil, gas, petroleum and other hydrocarbon
substances in and under such property, a prior grantor, for itself and its
successors and assigns, retaining the exclusive title and right to remove said
substances, together with sole right to negotiate and conclude leases and
agreements with respect to all such substances under the property and to use
those portions of the property which underlie a plane parallel to and 500 feet
below the present surface of this property for the purposes of prospecting for,
developing and/or extracting such substances from the property by means of wells
drilled into or through said portions of the property from drill sites located
on other property, it being expressly understood and agreed that such prior
grantor, its successors and assigns, shall have no right to enter upon the
surface of the property or to use the property or any portion thereof above the
level of the aforesaid plane, as reserved by Lusk/Mira Mesa, a Limited
Partnership, in deed recorded February 24, 1981 as File No. 81-054855 of
Official Records.
Assessor’s Parcel Number 341-322-42
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5871 Oberlin/Anadys -Page 1
EXHIBIT C TO LEASE
LANDLORD’S PROPERTY

                  BarCode   Model No./Description   Serial No.   Vendor  
000-1255
  N750 Access / Intrusion Control System           Northern Computer
000-1261
  9 HP Boiler steam plant & 42 HP boiler steam plant
Emergency Generator           Parker
000-1235
  Cage & Rack Washer R630     630-1203-N1405     NorthWestern Systems  
000-1224
  Sterilizer SSR-3A-PB     6045     Laboratory Equipment
000-1250
  RO/DI system           Robert E Byrne Company
000-1242
  Video Camera System           AIS / Mitsubishi
000-1225
  Glass washer #470     3601894003     Amsco
000-1226
  Glass dryer #475     3632493002     Amsco
000-1001/1002
  Phone System           Siemens

                  Office   Office Furniture   Qty          
203
  Desk   1        
 
  Side Chair - Red   2        
 
  Bookcase   1        
 
  Cabinet   1        
 
               
204
  Desk   1        
 
  Side Chair   4        
 
  Bookcase   1        
 
  Cabinet   1        
 
  Round Table (205)   1        
 
               
206
  Desk   2        
 
  Bookcase (207)   2        
 
               
208
  Desk   1        
 
  Side Chair-Red   2        
 
  Round Table   1        
 
               
210
  Desk   1        
 
  Bookcase   1        
 
  Round Table   1        
 
               
211
  Desk   1        
 
  Side Chair   1        
 
               
212
  Desk   1        
 
  Side Chair   3        
 
  Round Table   1        
 
               
213
  Conference Table   1        
 
  Office Chair - Green   1        
 
  Bookcase   2        
 
               
214
  Round Table   1        
Kitchen
  Side Chair - Black   3        
 
               
217
  Tech Stations   12        
Tech Area
  Cubes   5        
 
               
201
  Cubes   17        
Open Offices
               

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5871 Oberlin/Anadys — Page 1
EXHIBIT D TO LEASE
ACKNOWLEDGMENT OF COMMENCEMENT DATE
     This ACKNOWLEDGMENT OF COMMENCEMENT DATE is made this _____ day of
______________, ____, between ARE-SD REGION NO. 31, LLC, a Delaware limited
liability company (“Landlord”), and ANADYS PHARMACEUTICALS, INC., a Delaware
corporation (“Tenant”), and is attached to and made a part of the Lease dated
______________, _____ (the “Lease”), by and between Landlord and Tenant. Any
initially capitalized terms used but not defined herein shall have the meanings
given them in the Lease.
     Landlord and Tenant hereby acknowledge and agree, for all purposes of the
Lease, that the Commencement Date of the Base Term of the Lease is February 1,
2011, the Rent Commencement Date is March 1, 2011 and the termination date of
the Base Term of the Lease shall be midnight on January 31, 2012. In case of a
conflict between the terms of the Lease and the terms of this Acknowledgment of
Commencement Date, this Acknowledgment of Commencement Date shall control for
all purposes.
     IN WITNESS WHEREOF, Landlord and Tenant have executed this ACKNOWLEDGMENT
OF COMMENCEMENT DATE to be effective on the date first above written.

            TENANT:

ANADYS PHARMACEUTICALS, INC.,
a Delaware corporation
      By:           Its:               

            LANDLORD:

ARE-SD REGION NO. 31, LLC,
a Delaware limited liability company
      By:   ALEXANDRIA REAL ESTATE EQUITIES, L.P.,         a Delaware limited
partnership,        managing member     

        By:   ARE-QRS CORP.,         a Maryland corporation,        general
partner     

        By:           Its:               

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Rules and Regulations   5871 Oberlin/Anadys — Page 1

EXHIBIT E TO LEASE
Rules and Regulations
     1. The sidewalk, entries, and driveways of the Project shall not be
obstructed by Tenant, or any Tenant Party, or used by them for any purpose other
than ingress and egress to and from the Premises.
     2. Tenant shall not place any objects, including antennas, outdoor
furniture, etc., in the parking areas, landscaped areas or other areas outside
of its Premises, or on the roof of the Project.
     3. Except for animals assisting the disabled, no animals shall be allowed
in the offices, halls, or corridors in the Project.
     4. Tenant shall not disturb the occupants of the Project or adjoining
buildings by the use of any radio or musical instrument or by the making of loud
or improper noises.
     5. If Tenant desires telegraphic, telephonic or other electric connections
in the Premises, Landlord or its agent will direct the electrician as to where
and how the wires may be introduced; and, without such direction, no boring or
cutting of wires will be permitted. Any such installation or connection shall be
made at Tenant’s expense.
     6. Tenant shall not install or operate any steam or gas engine or boiler,
or other mechanical apparatus in the Premises, except as specifically approved
in the Lease. The use of oil, gas or inflammable liquids for heating, lighting
or any other purpose is expressly prohibited. Explosives or other articles
deemed extra hazardous shall not be brought into the Project.
     7. Parking any type of recreational vehicles is specifically prohibited on
or about the Project. Except for the overnight parking of operative vehicles, no
vehicle of any type shall be stored in the parking areas at any time. In the
event that a vehicle is disabled, it shall be removed within 48 hours. There
shall be no “For Sale” or other advertising signs on or about any parked
vehicle. All vehicles shall be parked in the designated parking areas in
conformity with all signs and other markings. All parking will be open parking,
and no reserved parking, numbering or lettering of individual spaces will be
permitted except as specified by Landlord.
     8. Tenant shall maintain the Premises free from rodents, insects and other
pests.
     9. Landlord reserves the right to exclude or expel from the Project any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs or who shall in any manner do any act in violation of the
Rules and Regulations of the Project.
     10. Tenant shall not cause any unnecessary labor by reason of Tenant’s
carelessness or indifference in the preservation of good order and cleanliness.
Landlord shall not be responsible to Tenant for any loss of property on the
Premises, however occurring, or for any damage done to the effects of Tenant by
the janitors or any other employee or person.
     11. Tenant shall give Landlord prompt notice of any defects in the water,
lawn sprinkler, sewage, gas pipes, electrical lights and fixtures, heating
apparatus, or any other service equipment affecting the Premises.
     12. Tenant shall not permit storage outside the Premises, including without
limitation, outside storage of trucks and other vehicles, or dumping of waste or
refuse or permit any harmful materials to be placed in any drainage system or
sanitary system in or about the Premises.
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Rules and Regulations   5871 Oberlin/Anadys — Page 2

     13. All moveable trash receptacles provided by the trash disposal firm for
the Premises must be kept in the trash enclosure areas, if any, provided for
that purpose.
     14. No auction, public or private, will be permitted on the Premises or the
Project.
     15. No awnings shall be placed over the windows in the Premises except with
the prior written consent of Landlord.
     16. The Premises shall not be used for lodging, sleeping or cooking or for
any immoral or illegal purposes or for any purpose other than that specified in
the Lease. No gaming devices shall be operated in the Premises.
     17. Tenant shall ascertain from Landlord the maximum amount of electrical
current which can safely be used in the Premises, taking into account the
capacity of the electrical wiring in the Project and the Premises and the needs
of other tenants, and shall not use more than such safe capacity. Landlord’s
consent to the installation of electric equipment shall not relieve Tenant from
the obligation not to use more electricity than such safe capacity.
     18. Tenant assumes full responsibility for protecting the Premises from
theft, robbery and pilferage.
     19. Tenant shall not install or operate on the Premises any machinery or
mechanical devices of a nature not directly related to Tenant’s ordinary use of
the Premises and shall keep all such machinery free of vibration, noise and air
waves which may be transmitted beyond the Premises.
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5871 Oberlin/Anadys — Page 1
EXHIBIT F TO LEASE
TENANT’S PERSONAL PROPERTY
Server racks in the IT room
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5871 Oberlin/Anadys — Page 1
EXHIBIT G TO LEASE
RENOVATION

1.   New enhanced concrete entry walk, curb and drive   2.   New planters, seat
walls, landscaping, site lighting, and irrigation at west side   3.   New
exterior entry canopy   4.   New rooftop mechanical screen   5.   New stucco
skimcoat on west elevation (front of bldg)   6.   New lobby entry storefront
system and minor lobby floor and wall patching   7.   New storefront extensions
and clear glazing at southwest and south elevations

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