Exhibit 10.2

LEASE AGREEMENT

THIS LEASE AGREEMENT (this “Lease”) is made this 11th day of May, 2015, between
ARE-SD REGION NO. 34, LLC, a Delaware limited liability company (“Landlord”),
and OTONOMY, INC., a Delaware corporation (“Tenant”).

 

Building:

That to be constructed 3-story building to be known as 4796 Executive Drive, San
Diego, California. A subterranean parking garage shall be located directly
beneath the Building.

Premises:

The entire Building, containing approximately 61,755 rentable square feet, which
shall consist of (i) approximately 57,000 rentable square feet located on the
first through third floors of the Building, and (ii) approximately 4,755
rentable square feet located in the subterranean parking garage located beneath
the Building, as shown on Exhibit A.

Project:

The real property on which the Building is located, together with all
improvements thereon and appurtenances thereto as described on Exhibit B.

Base Rent:

$231,581.25 per month

Rentable Area of Premises: 61,755 sq. ft.

Rentable Area of Project: 61,755 sq. ft.

Tenant’s Share of Operating Expenses: 100%

Security Deposit: $694,743.75

Target Commencement Date: October 20, 2016

Rent Adjustment Percentage: 3%

 

Base Term:

Beginning on the Commencement Date and ending 130 months from the first day of
the first full month following the Commencement Date (as defined in Section 2).

Permitted Use:

Research and development laboratory, 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:

Alexandria Real Estate Equities, Inc.

385 E. Colorado Boulevard, Suite 299

Dept LA 23447

Pasadena, CA 91101

Pasadena, CA 91185-3447

Attention: Corporate Secretary

Tenant’s Notice Address

Tenant’s Notice Address

Before Delivery:

After Delivery:

6275 Nancy Ridge Drive, Suite 100

4796 Executive Drive

San Diego, CA 92121

San Diego, California 92121

Attention: Chief Financial Officer

Attention: Chief Financial Officer

 

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

 

[X] EXHIBIT A - PREMISES DESCRIPTION

[X] EXHIBIT B - DESCRIPTION OF PROJECT

[X] EXHIBIT C - WORK LETTER

[X] EXHIBIT D - COMMENCEMENT DATE

[X] EXHIBIT E - RULES AND REGULATIONS

[X] EXHIBIT F - TENANT’S PERSONAL PROPERTY

[X] EXHIBIT G - SIGNAGE

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 and provided that such modifications do
not materially increase the obligations or materially decrease the rights of
Tenant under this Lease. From and after the Commencement Date through the
expiration of the Term, Tenant shall have access to the Building and the
Premises 24 hours a day, 7 days a week, 365 days per year, except in the case of
emergencies, as the result of Legal Requirements, the performance by Landlord of
any installation, maintenance or repairs, or any other temporary interruptions,
and otherwise subject to the terms of this Lease. Notwithstanding anything to
the contrary contained herein, during the Term, Tenant shall have the exclusive
right to use the patio immediately adjacent to the Building, as more
particularly described on Exhibit A attached hereto and, to the extent allowable
under applicable Legal Requirements, install and use a grill in such patio area
in accordance with all Legal Requirements.

2. Delivery; Acceptance of Premises; Commencement Date. Landlord shall use
reasonable efforts to (a) commence construction of the Building on or before
October 31, 2015 (the “Target Construction Commencement Date”), (b) cause the
construction of the Building Shell to be at a point where the exterior vertical
envelope of the Building is erected, the roof is substantially complete, the MEP
penetrations at the roof are sealed and perimeter caulking has been commenced
(collectively, the “Building Dried-In Condition”) on or before July 30, 2016
(“Target Building Dried-In Date”), and (c) deliver the Premises to Tenant with
Landlord’s Work Substantially Completed (“Delivery” or “Deliver”) on or before
the Target Commencement Date. If Landlord fails to timely Deliver the Premises,
Landlord shall not be liable to Tenant for any loss or damage resulting
therefrom, and this Lease shall not be void or voidable except as provided
herein. Tenant shall receive a day-for-day abatement of monthly Base Rent
(without double counting) for each (i) day after the Target Construction
Commencement Date (as such date may be extended by Force Majeure delays and
Tenant Delays) that Landlord fails to commence construction of the Building
Shell, (ii) day after the Target Building Dried-In Date (as such date may be
extended for Force Majeure delays and Tenant Delays) that Landlord does not
cause the construction of the Building Shell to be in Building Dried-In
Condition; and/or (iii) day after October 20, 2016 (as such date may be extended
by Force Majeure delays and Tenant Delays), that Landlord fails to Deliver the
Premises to Tenant with Landlord’s Work Substantially Completed. If Landlord
does not (x) commence construction of the Building Shell on or before
February 15, 2016 (as such date may be delayed by Force Majeure delays and
Tenant Delays), (y) does not cause the construction of the Building Shell to be
in Building Dried-In Condition on or before November 30, 2016 (as such date may
be delayed by Force Majeure delays and Tenant Delays), or (z) Deliver the
Premises to Tenant with Landlord’s Work Substantially Completed on or before
January 31, 2017 (as such date may be delayed by Force Majeure delays and Tenant
Delays), this Lease may be terminated by Tenant by written notice to Landlord,
and if so terminated by Tenant: (1) 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, and (2) neither
Landlord nor Tenant shall have any further rights, duties or obligations under
this Lease, except with respect to provisions which expressly survive
termination of this Lease. As used herein, the terms “Landlord’s Work,”
“Building Shell,” “Tenant Delays” and “Substantially Completed” shall have the
meanings set forth for such terms in the Work Letter. If Tenant does not elect
to void this Lease within 5 business days of the lapse of the dates set forth in
subsections (x), (y) or (z) above (as each may be extended by Force Majeure
delays and Tenant Delays), respectively, such right to void this Lease shall be
waived and this Lease shall remain in full force and effect.

 

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Notwithstanding anything to the contrary contained herein and for the avoidance
of any doubt, the termination rights provided for in the preceding paragraph
shall terminate on the Commencement Date. If the Commencement Date occurs
pursuant to clause (ii) of the immediately following paragraph, Landlord shall
nonetheless thereafter continue to use reasonable efforts to Deliver the
Premises to Tenant in a timely manner following the Tenant Delays.

The “Commencement Date” shall be the earlier of: (i) the date Landlord Delivers
the Premises to Tenant; or (ii) the date Landlord could have Delivered the
Premises but for Tenant Delays. The “Rent Commencement Date” shall be the date
that is 10 months after the Commencement Date. The time period commencing on the
Commencement Date through the day immediately preceding the Rent Commencement
Date may be referred to herein as the “Abatement Period.” 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 and the Extension Term which
Tenant may elect pursuant to Section 39 hereof.

For the period of 90 consecutive days after the Commencement Date, Landlord
shall, at its sole cost and expense (which shall not constitute an Operating
Expense), be responsible for any repairs that are required to be made to the
Building or Building Systems (as defined in Section 13), unless Tenant or any
Tenant Party was responsible for the cause of such repair, in which case Tenant
shall pay the cost.

Except as set forth in this Lease or the Work Letter: (i) Tenant shall accept
the Premises in their condition as of the Commencement Date, subject to all
applicable Legal Requirements (as defined in Section 7 hereof); (ii) Landlord
shall have no obligation for any defects in the Premises; and (iii) Tenant’s
taking possession of the Premises shall be conclusive evidence that Tenant
accepts the Premises and that the Premises were in good condition at the time
possession was taken. Any occupancy of the Premises by Tenant before the
Commencement Date shall be subject to all of the terms and conditions of this
Lease, excluding the obligation to pay Base Rent or Operating Expenses.

Tenant agrees and acknowledges that, except as otherwise expressly set forth in
this Lease, 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. Base Rent for the month in which the Rent Commencement Date
occurs and the Security Deposit shall be due and payable on delivery of an
executed copy of this Lease to Landlord. 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
expressly provided in this Lease.

(b) Additional Rent. In addition to Base Rent, Tenant agrees to pay to Landlord
as additional rent (“Additional Rent”): (i) commencing on the Commencement Date,
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.

 

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4. Base Rent Adjustments. Base Rent shall be increased on each annual
anniversary of the Commencement Date (each an “Adjustment Date”)by multiplying
the Base Rent payable immediately before such Adjustment Date by the Rent
Adjustment Percentage and adding the resulting amount to the Base Rent payable
immediately before such Adjustment Date. Base Rent, as so adjusted, shall
thereafter be due as provided herein. Base Rent adjustments for any fractional
calendar month shall be prorated.

5. Operating Expense Payments. Landlord shall endeavor to deliver to Tenant, at
least 30 days prior to the beginning of each calendar year during the Term, 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, but no more than quarterly. Commencing on the
Commencement Date and continuing thereafter on the first day of each month of
the Term, 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 useful life of
such capital items (as reasonably determined by Landlord taking into account all
relevant factors) (“Approved Capital Expenses”), and the costs of Landlord’s
third party property manager (not to exceed 2.0% of Base Rent) or, if there is
no third party property manager, administration rent in the amount of 2.0% of
Base Rent (or, prior to the Rent Commencement Date, 2.0% of the Base Rent that
would have been payable each month during the Abatement Period if Tenant had
been required to pay monthly Base Rent during the Abatement Period in the amount
of the monthly Base Rent payable for the 11th month of the Base Term)),
excluding only:

(a) the original construction costs of the Project and the Tenant Improvements
and costs of correcting defects in the Project (excluding the Tenant
Improvements which Landlord has no obligation to correct other than as expressly
provided in the Work Letter);

(b) capital expenditures for expansion of the Project, including capital
expenditures for the development of additional buildings at the Project, and
other capital expenditures to the extent not Approved Capital Expenses;

(c) 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 the Commencement
Date, or (ii) 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 defined in Section 13);

(d) interest, principal payments of Mortgage (as defined in Section 27) debts of
Landlord or other debts of Landlord not otherwise includable as part of
Operating Expenses pursuant to this Section 5, financing costs and amortization
of funds borrowed by Landlord, whether secured or unsecured, and all payments of
base rent (but not taxes or operating expenses) under any ground lease or other
underlying lease of all or any portion of the Project);

(e) depreciation of the Project and reserves (except for capital improvements
amortized as provided for above, the cost of which are includable in Operating
Expenses);

 

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(f) 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;

(g) legal and other expenses incurred in the negotiation or enforcement of
leases;

(h) 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;

(i) 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;

(j) 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, provided that with respect to
such officers and employees that are assigned to the Project in part only, the
salaries, wages benefits and other compensation includable shall be reasonably
proportionate to the amount of time actually devoted to the Project when
compared to total amount of time worked;

(k) 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;

(l) 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;

(m) 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);

(n) 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;

(o) 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;

(p) costs of Landlord’s charitable or political contributions, or of fine art
maintained at the Project;

(q) costs in connection with services (including janitorial services), items or
other benefits of a type which are not standard for the Project and which are
not provided to Tenant, 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;

(r) costs incurred in the sale or refinancing of the Project;

(s) 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;

 

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(t) costs arising from the gross negligence or willful misconduct of Landlord;

(u) costs, including permit, license and inspection costs, incurred with respect
to the installation of other tenants’ or occupants’ improvements in the Project
or incurred in renovating or otherwise improving or decorating, painting or
redecorating vacant space (other than Common Areas) for occupancy by other
tenants o occupants of the Project;

(v) costs of any “tap fees” or any sewer or water connection fees for the
benefit of any particular tenant of the Project;

(w) costs reimbursed to Landlord under any warranty carried by Landlord for the
Project;

(x) in-house legal fees;

(y) services and utilities provided, taxes attributable to, and costs incurred
in connection with the operation of retail space at the Project;

(z) any cost and fees, dues, contributions or similar expenses for industry
associations or organizations in which officers or employees of Landlord are
members;

(aa) any entertainment expenses of landlord for any purpose no related to the
operation of the Project;

(bb) costs incurred by Landlord for the use of any portion of the Project to
accommodate events (other than the annual tenant event to which all tenants of
the Project are invited) including, but not limited to, shows, promotions,
kiosks, displays, filming, photography, private events or parties, ceremonies
and advertising beyond the expenses otherwise attributable to providing Building
Systems to the Common Areas of the Project in connection with the normal
operation of the Project;

(cc) any flowers, gifts, balloons, etc. provided to any entity including, but
not limited to, Tenant, other tenants, employees, vendors, contractors,
prospective tenants and agents;

(dd) 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;

(ee) the cost of constructing or operating a Common Area fitness center,
conference center and/or cafe which are constructed or installed by Landlord (or
an affiliate of Landlord) following the Commencement Date (each, a “Common Area
Amenity”) and which Common Area Amenity Tenant has elected by delivery of
written notice to Landlord not to use during the Term (provided, however, that
if the construction of such Common Area Amenity results in an increase of the
assessed valuation of the Project, Tenant shall be responsible for Tenant’s
Share of Taxes resulting from such increase in such assessed valuation as part
of Operating Expenses). Tenant understands and agrees that if Tenant has elected
by written notice to Landlord not to use a Common Area Amenity, (i) Tenant shall
have no right to the use or benefit of such Common Area Amenity, and (ii) if
Tenant or any of Tenant’s employees uses any Common Area Amenity, Tenant shall
be required to pay Tenant’s Share of Operating Expenses (other than the initial
construction costs of such Common Area Amenity) such Common Area Amenity, which
payments shall be retroactive to the date that Tenant or any of Tenant’s
employees commenced using the Common Area Amenity and shall continue through the
expiration of the Term;

(ff) costs incurred in connection with the operation of any parking concession
within the Project;

(gg) the costs incurred in connection with the performance of alterations or
modifications to the Project that are required solely due to the non-compliance
of the Project with Legal Requirements applicable to the Project as of the
Commencement Date, except to the extent such alterations or modifications are
triggered by reason of Tenant’s particular use of the Premises or Tenant’s
Alterations, in which case Tenant shall be solely responsible subject to
Section 7; and

 

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(hh) costs of repairs or other work necessitated by fire, windstorm or other
casualty and/or costs of repair or other work necessitated by the exercise of
the right of eminent domain; provided such costs of repairs or other work shall
be paid by the parties in accordance with the provisions of Sections 18 or 19
below.

Notwithstanding anything to the contrary contained in this Lease, Tenant shall
be responsible as part of Operating Expenses for (i) any earthquake deductible
applicable to the Project (including, without limitation, the Tenant
Improvements) or uninsured earthquake damage payable by Landlord but not to
exceed 5% of the full replacement cost of the Project (including, without
limitation, the Tenant Improvements), (ii) any earthquake deductible applicable
to Landlord’s contents and equipment at Project but not to exceed 5% of the
amount of such contents and equipment coverage, and (iii) any earthquake
deductible applicable to Landlord’s business interruption coverage for abated
Rent that would otherwise have been payable by Tenant but not to exceed 5% of
the amount of such business interruption coverage. Following earthquake damage
to the Project, Tenant shall pay such deductibles or uninsured damage in equal
monthly installments amortized over the remaining balance of the Term of this
Lease.

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. Landlord’s and Tenant’s
obligations to pay any overpayments or deficiencies due pursuant to this
paragraph shall survive the expiration or earlier termination of this Lease.

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 nationally or
regionally recognized public accounting firm selected by Tenant, 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.

 

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“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. The rentable
square footage of the Premises shall not be subject to re-measurement by either
party during the Term. If Landlord has a reasonable basis for doing so, Landlord
may equitably charge Tenant 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, but Landlord shall not include as part of
Operating Expenses costs that benefit only another building or buildings in the
Project, except for costs incurred in connection with a Common Area Amenity
located in any such building or buildings (except to the extent the cost thereof
is otherwise excluded from Operating Expenses pursuant to Section 5 hereof).
Base Rent, Tenant’s Share of Operating Expenses and all other amounts payable by
Tenant to Landlord hereunder are collectively referred to herein as “Rent.”

Tenant acknowledges and agrees that Landlord may, at any time(s) during the
Term, expand the Project to include (i) that certain project known as 4755 Nexus
Centre Drive, San Diego, California, (ii) that certain project known as 4757
Nexus Centre Drive, San Diego, California, and/or (iii) that certain project
known as 4767 Nexus Centre Drive, San Diego, California. Following any such
expansion(s) of the Project, (i) the definition of “Rentable Area of Project” on
page 1 of this Lease shall be amended as to reflect the actual rentable square
footage of the Project, as expanded, (ii) definitions shall be added to this
Lease for “Building’s Share of Project” and “Tenant’s Share of Operating
Expenses of Project,” and (iii) the Operating Expenses payable by Tenant
hereunder shall include the Building’s share (as reasonably determined by
Landlord) of all costs and expenses of any kind or description incurred or
accrued by Landlord (except to the extent the cost thereof is excluded from
Operating Expenses pursuant to Section 5 hereof) with respect to the Project (as
expanded pursuant to the paragraph), including, without limitation, costs and
expenses incurred or accrued by Landlord with respect to any amenities located
within the Project (as expanded pursuant to this paragraph), which are not
specific to any other building located in the Project (as expanded pursuant to
this paragraph).

        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 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 satisfactory to Landlord, and (v) redeemable by presentation of a
sight draft in the state of Landlord’s choice. 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 until Tenant shall have
replaced the expired Letter of Credit with a new Letter of Credit consistent
with the requirements set forth in this Section 6, at which time Landlord shall
refund the amount of the previously drawn Letter of Credit to Tenant less any
amounts applied by Landlord under this Lease. 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, at Landlord’s option, (x) pay Landlord on demand
the amount that will restore the Security Deposit to the amount set forth on
Page 1 of this Lease, or (y) restore the Letter of Credit to the amount defined
herein. 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. 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. Notwithstanding the foregoing, during the
Construction Period (as defined in the Work Letter), Landlord’s right to draw
upon the Letter of Credit shall be subject to and limited by the cap imposed by
the 89.9% Threshold (as defined in the Work Letter) pursuant to Section 7 of the
Work Letter.

 

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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.

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 10 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. 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 or cause the disallowance of any sprinkler or other credits 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 which will overload
the floor 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, which shall not be unreasonably withheld or
delayed. Except as may be provided under the Work Letter, 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.

 

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Landlord shall, at Landlord’s sole cost and expense, be responsible for the
compliance of the Premises and the Project with Legal Requirements, including
the ADA, as of the Commencement Date. Following the Commencement Date, Landlord
shall, as an Operating Expense (to the extent such Legal Requirement is
generally applicable to similar buildings in the area in which the Project is
located) or at Tenant’s expense (to the extent such Legal Requirement is
applicable by reason of Tenant’s, as compared to other tenants of the Project,
particular use of the Premises or Tenant’s alterations) make any alterations or
modifications to the Common Areas or the exterior of the Building that are
required by Legal Requirements. Except as otherwise provided in the 2
immediately preceding sentences, 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
particular use or occupancy of the Premises. Notwithstanding any other provision
herein to the contrary, subject to the first 2 sentences of this paragraph,
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
caused by Tenant’s failure to comply with any Legal Requirements as required in
connection with Tenant’s particular use or occupancy of the Premises as provided
in this paragraph, 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 as
required in connection with Tenant’s particular use or occupancy of the Premises
as provided in this paragraph.

8. Holding Over. If, with Landlord’s express written consent, 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 continue to pay Base Rent in the
amount payable upon the date of the expiration or earlier termination of this
Lease or such other amount as Landlord may indicate, in Landlord’s sole and
absolute discretion, in such written consent, 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. Payments of Rent payable pursuant to this Section 8 for any
fractional calendar month shall be prorated

        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.
Notwithstanding anything to the contrary herein, Landlord shall only charge
Tenant for assessments as if those assessments were paid by Landlord over the
longest possible term which Landlord is permitted to pay for the applicable
assessments without additional charge other than interest, if any, provided
under the terms of the underlying assessments. Notwithstanding anything to the
contrary contained in this Lease, Taxes shall not include any net income taxes,
estate taxes or inheritance taxes imposed on Landlord except to the extent such
net income taxes are in substitution for any Taxes payable hereunder, or any
late penalties, interest or fines. 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.

 

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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, at no additional cost to Tenant during
the Base Term, to park in the surface parking lots serving the Project
designated for non-reserved parking in common with tenants of the projects
identified in the last paragraph of Section 5 which are granted the right by
Landlord to use the surface parking lots at the Project, subject in each case to
Landlord’s rules and regulations. In addition, Tenant shall have the exclusive
right to use all of the parking spaces located in the subterranean parking
garage under the Building. Tenant’s pro rata share of parking spaces in the
Project during the Term shall be equal to 3 parking spaces per 1,000 rentable
square feet of the portion of the Premises located on the first through third
floors of the Building. Landlord may reasonably designate (taking into
consideration the proximity of such spaces to the Premises) certain parking
spaces located in the surface parking lots among Tenant and tenants of the
projects identified in the last paragraph of Section 5 which are granted the
right by Landlord to use the surface parking lots at the Project if Landlord
determines that such parking facilities are becoming crowded. Ten (10) of the
parking spaces allocated to Tenant pursuant to this Section 10 shall be marked
by Landlord, at Tenant’s cost, as reserved spaced for Tenant and Tenant’s guests
in locations immediately adjacent to the front entrance of the Building and
otherwise in locations reasonably acceptable to Landlord and Tenant. Landlord
shall not be responsible for enforcing Tenant’s parking rights against any third
parties, including other tenants of the Project or for enforcing any such
reservation of parking spaces. Notwithstanding anything to the contrary
contained herein, Tenant acknowledges and agrees that Tenant’s pro rata share of
parking spaces set forth above shall be reduced by the number of parking spaces
taken up by the approximately 4,755 rentable square foot portion of the Premises
located within the subterranean parking area. During the Extension Term,
Landlord may impose a market rent for the parking rights provided to Tenant
pursuant to this Section 10.

 

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11. Utilities, Services. Landlord’s Work shall include initial capacity,
connection and other Utilities associated with the construction of Landlord’s
Work. Tenant’s responsibilities under this section shall commence on the
Commencement Date. Tenant shall contract directly with utility providers for all
water, electricity, heat, light, power, sewer, and other utilities (including
gas and fire sprinklers to the extent the Project is plumbed for such services),
and refuse and trash collection (“Utilities”) required and/or utilized by Tenant
during the Term. Tenant shall pay directly to such Utility providers prior to
delinquency for all such Utilities furnished to Tenant or the Project during the
Term and shall pay for 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. To the extent that any Utilities, maintenance charges for
Utilities, any storm sewer charges or other similar charges for Utilities
imposed by any Governmental Authority or Utility provider, or any taxes,
penalties, surcharges or similar charges are paid for by Landlord, Tenant shall
reimburse Landlord for such costs as Operating Expenses. Landlord shall cause
meters to be installed for certain Utilities as part of Landlord’s Work. 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 shall be
responsible for obtaining and paying for its own janitorial services for the
Project.

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 make the service contract and maintenance
records (including Landlord’s monthly maintenance records) and permits for the
generators reasonably available to Tenant for Tenant’s review upon Tenant’s
prior written request. 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 after the
Commencement Date, 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 than by ordinary plugs or jacks) to Building Systems (as
defined in Section 13) (“Alterations”) shall be subject to Landlord’s prior
written consent, which shall not be unreasonably withheld. Tenant may construct
nonstructural Alterations in the Premises without Landlord’s prior approval if
the aggregate cost of all such work in any 12 month period does not exceed
$100,000 (a “Notice-Only Alteration”), provided Tenant notifies Landlord in
writing of such intended Notice-Only Alteration, and, with respect to any
Notice-Only Alteration the cost of which exceeds $20,000, such notice shall be
accompanied by plans, specifications, work contracts and such other information
concerning the nature and cost of the Notice-Only Alteration as may be
reasonably requested by Landlord, which notice and accompanying materials shall
be delivered to Landlord not less than 15 business days in advance of any
proposed construction. 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
reasonable 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 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 Landlord’s reasonable
out-of-pocket expenses for plan review, coordination, scheduling and supervision
in connection with any Alterations. 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 in connection with the
Alterations, delays caused by such faulty work, or inadequate cleanup in
connection with the Alterations.

 

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Tenant shall furnish security or make other arrangements reasonably satisfactory
to Landlord to assure payment for the completion of all Alterations work costing
in excess of $100,000 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, or at the time Tenant notifies Landlord of a Notice-Only Alteration,
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. Notwithstanding the foregoing, if Tenant delivers a written request
to Landlord prior to the date that is 60 days prior to the expiration date of
this Lease or, if applicable, the Early Termination Date, Landlord may, in
Landlord’s sole and absolute discretion, waive the requirement that Tenant
remove the items listed in sub-section (i) of the immediately preceding sentence
at the expiration of the Term. 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, trade
fixtures, machinery 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.
Notwithstanding anything to the contrary contained herein, in no event shall
Tenant be required to remove the Tenant Improvements at the expiration or
earlier termination of the Term, and Tenant shall have no right to remove any of
the Tenant Improvements at any time during the Term or at the expiration or
earlier termination of the Term.

 

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13. Landlord’s Repairs. Landlord, as an Operating Expense (except to the extent
the cost thereof is excluded from Operating Expenses pursuant to Section 5
hereof), shall maintain all of the structural, exterior, parking and other
Common Areas of the Project, including the roof, HVAC, plumbing, fire
sprinklers, fire risers, elevators and all other building systems serving the
Premises and the Project (“Building Systems”), in good repair, reasonable wear
and tear and uninsured losses and damages caused by Tenant (or any assignee or
sublessee of Tenant) or by any of Tenant’s (or any of its assignee’s or
sublessee’s) agents, servants, employees, invitees and contractors
(collectively, “Tenant Parties”) excluded. Subject to the provisions of the
penultimate paragraph of Section 17, 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
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 48 hours advance notice of any planned stoppage of
Building Systems services for routine maintenance, repairs, alterations or
improvements. Landlord shall use reasonable efforts to minimize interference
with Tenant’s operations in the Premises in connection with the stoppage of
Building Systems pursuant to this Section 13. 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. Notwithstanding anything to the contrary contained 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; provided,
however, that Landlord shall be responsible, as part of Operating Expenses, for
repairs and replacements that constitute capital expenditures that Landlord, in
its sole and absolute discretion, determines to be necessary. 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.

 

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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 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 negligence of Landlord or the
default by Landlord in the performance of its obligations under this Lease.
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,
including the Tenant Improvements. 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 particular use of the
Premises.

Tenant, at its sole cost and expense, shall maintain during the Term: “special
form” 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 (other than the Tenant
Improvements and in no event shall Landlord be responsible for insuring any of
Tenant’s Property or Alterations); 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 $5,000,000 per occurrence for bodily injury and
property damage with respect to the Premises which coverage amount may be
satisfied through a combination of primary and umbrella policies. The commercial
general liability insurance policy and umbrella policies 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 30 days advance
written notice of cancellation of such commercial general liability policy, and
(ii) request Tenant’s insurer to endeavor to provide 30 days advance written
notice to Landlord of cancellation of such commercial general liability policy
(or 10 days in the event of a cancellation due to non-payment of premium).
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.

 

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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 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. Notwithstanding
anything to the contrary contained in this Lease, 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 regardless of the negligence of the party to the Lease
receiving the benefit of the waiver, 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; provided, however,
that the increased amount of coverage is consistent with coverage amounts then
being required by institutional owners of similar projects with tenants
occupying similar size premises in the geographical area in which the Project is
located.

18. Restoration. If, at any time during the Term, the Building or the Premises
are damaged or destroyed by a fire or other 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 Building or the
Premises, as applicable (the “Restoration Period”). If the Restoration Period is
estimated to exceed 12 months after the discovery of the damage (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; provided, however, that notwithstanding Landlord’s election to
restore, Tenant may elect to terminate this Lease by written notice to Landlord
delivered within 5 business days of receipt of a notice from Landlord estimating
a Restoration Period for the Premises longer than the Maximum Restoration
Period. Unless either Landlord or Tenant 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 except to the extent the
cost thereof is excluded from Operating Expenses pursuant to Section 5 hereof),
promptly restore the Premises (including the Tenant Improvements but excluding
any improvements or Alterations 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 for Tenant to obtain any license,
clearance or other authorization of any kind required by Legal Requirements to
be obtained by Tenant for Landlord 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, Tenant may by written notice to Landlord delivered within 5
business days of the expiration of the Maximum Restoration Period or, if longer,
the Restoration Period, elect to terminate this Lease, 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. In the event that this Lease terminates pursuant to the
provisions of this Section 18 as a result of an earthquake, Tenant shall not be
required to pay any deductibles applicable thereto as part of Operating
Expenses.

 

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If this Lease is not terminated by Landlord or Tenant pursuant to the
immediately preceding paragraph, 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;
provided, however, that Tenant shall nonetheless (and even if Tenant does not
re-enter the Premises) continue to be responsible for all of its obligations
under the Lease. Notwithstanding the foregoing, Landlord may terminate this
Lease if the Premises are damaged during the last 1 year of the Term and
Landlord reasonably estimates that it will take more than 3 months to repair
such damage, or 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 the Premises, if any, which is not usable by Tenant bears to
the total area of the Premises. In the event that no Hazardous Material
Clearances are required to be obtained by Tenant with respect to the Premises,
rent abatement shall commence on the date of discovery of the damage or
destruction. 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, materially interfere with or impair Landlord’s ownership or
operation of the Project or would in the reasonable judgment of Landlord and
Tenant either prevent or materially interfere with Tenant’s use of the Premises
(as resolved, if the parties are unable to agree, by arbitration by a single
arbitrator with the qualifications and experience appropriate to resolve the
matter and appointed pursuant to and acting in accordance with the rules of the
American Arbitration Association), then upon written notice by Landlord or
Tenant, as applicable, to the other party delivered within 10 business days
after such party receives notice of the Taking, 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 (except for any portion of such award
awarded specifically for Tenant’s moving expenses or damage to Tenant’s trade
fixtures if a separate award is made to Tenant for such items), 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.

 

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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 twice in any 12 month period.

(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 before the
expiration of the current coverage.

(c) Abandonment. Tenant shall abandon the Premises.

(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
Tenant receives written notice of 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) be dissolved or otherwise fail to
maintain its legal existence.

(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 receiving a second notice from Landlord 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
30 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 30 days to cure, then Tenant shall not be deemed to be in default if
Tenant commences such cure within said 30 day period and thereafter diligently
prosecutes the same to completion; provided, however, that such cure shall be
completed no later than 90 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.

 

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(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.
Notwithstanding the foregoing, before assessing a late charge the first time in
any calendar year, Landlord shall provide Tenant written notice of the
delinquency and will waive the right if Tenant pays such delinquency within 5
days thereafter. 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 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, to the extent allocable
to the remainder of the Term, 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.

 

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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.

(iv) After Landlord terminates 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.
Following a Default by Tenant under this Lease, 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. Notwithstanding the foregoing, nothing contained
herein shall constitute Tenant’s waiver of its right under applicable Legal
Requirements to receive a 3 day notice from Landlord to quit or pay rent prior
to Landlord commencing an unlawful detainer action. 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 (including, without limitation,
Section 22(b) below), 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.

 

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(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 below), then at least 10 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 materially 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 such that they may
(i) attract or cause negative publicity for or about the Building or the
Project, (ii) negatively affect the reputation of the Building, the Project or
Landlord, (iii) attract protestors to the Building or the Project, or
(iv) lessen the attractiveness of the Building or the Project to any tenants or
prospective tenants, purchasers or lenders; (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) Landlord has experienced previous defaults by or is in litigation
with the proposed assignee or subtenant; (6) the use of the Premises by the
proposed assignee or subtenant will violate any applicable Legal Requirement;
(7) the proposed assignee or subtenant is an entity with whom Landlord is
then-currently negotiating to lease space in the Project; or (8) the assignment
or sublease is prohibited by Landlord’s lender. No failure of Landlord 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 (which approval shall not be unreasonably withheld
or delayed). In addition, Tenant shall have the right to assign this Lease, upon
10 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 is not less than the
net worth (as determined in accordance with GAAP) of Tenant as of the date of
Tenant’s most current quarterly or annual financial statements, and (iii) such
assignee shall agree in writing to assume all of the terms, covenants and
conditions of this Lease (a “Corporate Permitted Assignment”). Control Permitted
Assignments and Corporate Permitted Assignments are hereinafter referred to as
“Permitted Assignments.”

 

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(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 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 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 with respect to 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
attributable to the assignment or sublease) exceeds the rental payable under
this Lease, (excluding however, any Rent payable under this Section) and actual
and reasonable brokerage fees, legal costs and any design or construction fees
directly related to and required pursuant to the terms of any such
sublease)(“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, so long
as no Default has occurred, 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 such proposed assignee or sublessee,
Landlord shall have the absolute right to refuse to consent to any assignment or
subletting to any such party.

 

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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, to Tenant’s
knowledge, 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 reasonably 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 5 business days after Tenant’s receipt of a second notice from
Landlord 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.
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. As of the date of this Lease, there is no existing Mortgage
encumbering the Project.

 

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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, which approval shall not be unreasonably
withheld or delayed. 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 reasonable 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 $2,500. 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 to parking, the Project,
restrooms or all or any portion of the Premises furnished to or otherwise
procured by Tenant. If any such key is lost, Tenant shall pay to Landlord, at
Landlord’s election, either the cost of replacing such lost key 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 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.

 

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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
Building, the Project or any adjacent property caused or permitted by Tenant or
any Tenant Party results in any contamination of the Premises, the Building, 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 Building, 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, the Building or the Project. Notwithstanding anything to the contrary
contained in Section 28 or this Section 30, Tenant shall not be responsible for
or have any liability to Landlord, and the indemnification and hold harmless
obligation set forth in this paragraph shall not apply to Hazardous Materials in
or about the Building or the Project, which Hazardous Materials Tenant proves to
Landlord’s reasonable satisfaction (i) existed prior to the Commencement Date,
(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, unless in any such case, to the extent 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.

 

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(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 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 to be brought upon, kept,
used, stored, handled, treated, generated on, or released or disposed of from,
the Premises by Tenant or any Tenant Party (other than products customarily used
by tenants in de minimis quantities for ordinary cleaning and office purposes)
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 list
at any additional time that Tenant is required to deliver a Hazardous Materials
List to any Governmental Authority (e.g., the fire department) in connection
with its use or occupancy of 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, upon reasonable prior notice to Tenant, 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 a 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 reasonably 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, upon
reasonable prior notice to Tenant, 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 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.

 

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(e) Intentionally Omitted.

(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 for which Tenant is responsible under this Section 30 (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, 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.

 

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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. Landlord shall use reasonable efforts to minimize interruption of
Tenant’s business during such inspections or repairs. 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.

Tenant agrees that Landlord may from time to time during the Term, during
regular business hours at times mutually acceptable to Landlord and Tenant,
conduct third party tours of the Premises (“Tours”) which may be held with not
less than 1 business day’s advance notice. Landlord shall endeavor to minimize
disruption to Tenant’s operations in the Premises during such Tours. Landlord
shall comply with Tenant’s reasonable security and safety requirements with
respect to entering the Premises to conduct such Tours; provided, however, that
Tenant has notified Landlord of such security and safety requirements
simultaneously with or prior to Landlord’s entry into the Premises.

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 Tenant nor Landlord
shall be 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, extreme 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 similar causes or events beyond the reasonable control of
such party (“Force Majeure”). Any party claiming Force Majeure shall be required
to notify the other party of such Force Majeure promptly after the commencement
of such Force Majeure and shall be required to keep such other party reasonably
informed regarding the same throughout the period during which Force Majeure is
being claimed. If the happening of any such Force Majeure event only partially
impairs the performance of a party’s obligations hereunder, such party shall
continue to perform under this Lease to the fullest extent possible in light of
such Force Majeure event.

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 Brokerage, Inc. and Cushman and
Wakefield. Landlord and Tenant each hereby agree to indemnify and hold the other
harmless from and against any claims by any Broker, other than 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
commissions due to Jones Lang LaSalle Brokerage, Inc. and Cushman and Wakefield
arising out of the execution of this Lease in accordance with the terms of one
or more separate written agreements between Landlord, on the one hand, and Jones
Lang LaSalle Brokerage, Inc. and Cushman and Wakefield, on the other hand.

 

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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 which can be viewed from the
exterior of the Premises, 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.

Tenant shall, at Tenant’s sole cost and expense, have (i) the exclusive right to
install and maintain a sign bearing Tenant’s name and logo on the monument sign
serving the Building (“Monument Sign”) as reflected on Exhibit G attached
hereto, and (ii) the exclusive right to install and maintain, at Tenant’s sole
cost and expense, 1 sign bearing Tenant’s name and logo on the Building top
(“Building Sign”), in the location shown and as otherwise reflected on Exhibit G
attached hereto. Tenant acknowledges and agrees that Tenant’s signage on the
Monument Sign and the Building Sign including, without limitation, the size,
color and type, shall be subject to Landlord’s prior written approval, which
shall not be unreasonably withheld, conditioned or delayed and shall be
consistent with Landlord’s signage program at the Project and applicable Legal
Requirements. Subject to applicable Legal Requirements, Tenant’s Building Sign
shall be illuminated at night, with letters the maximum size permitted by Legal
Requirements. Tenant shall be responsible, at Tenant’s sole cost and expense,
for the maintenance of Tenant’s signage on the Monument Sign and the Building
Sign, for the removal of Tenant’s signage from the Monument Sign and the
Building Sign at the expiration or earlier termination of this Lease and for the
repair of all damage resulting from such removal. Tenant shall have the right to
assign its rights to such Monument Sign or Building Sign in connection with an
assignment of the Lease and in connection with a single sublease of more than
50% of the Building; provided, however, that any such assignee of Tenant’s
signage rights shall be subject to the same requirements as Tenant with respect
to the Monument Sign and/or Building Sign.

 

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39. Right to Extend Term. Tenant shall have the right to extend the Term of the
Lease upon the following terms and conditions:

(a) Extension Right. Tenant shall have 1 right (an “Extension Right”) to extend
the term of this Lease for 5 years (an “Extension Term”) on the same terms and
conditions as this Lease (other than with respect to Base Rent and the Work
Letter) by giving Landlord written notice of its election to exercise such
Extension Right at least 12 months, and no earlier than 15 months, prior to the
expiration of the Base Term of the Lease.

Upon the commencement of the Extension Term, Base Rent shall be payable at the
Market Rate (as defined below). Base Rent shall thereafter be adjusted on each
annual anniversary of the commencement of such Extension Term by a percentage as
determined by Landlord and agreed to by Tenant at the time the Market Rate is
determined. As used herein, “Market Rate” shall mean the rate that institutional
landlords of comparable buildings have accepted in current transactions from
non-equity (i.e., not being offered equity in the buildings), nonrenewal,
non-expansion and nonaffiliated tenants of similar financial strength for space
of comparable size, quality (including all Alterations and other improvements)
and floor height in Class A laboratory buildings, as applicable, in the
University Towne Centre area of San Diego for a comparable term, with the
determination of the Market Rate to take into account all relevant factors,
including the age of the Building, age of the Building Systems, tenant
inducements (to the extent available or not provided to Tenant with respect to
the Extension Term), percentage of laboratory and office space, specialized
improvements, the availability of amenities such as those found at the Torreyana
Project and the 10300 Campus Project, parking costs, leasing commissions,
amenities available at the Project, allowances or concessions, if any.

If, on or before the date which is 210 days prior to the expiration of the Base
Term of this Lease, Landlord and Tenant have not agreed upon the Market Rate and
the rent escalations during the Extension Term after negotiating in good faith,
Tenant shall be deemed to have elected arbitration as described in
Section 39(b). Tenant acknowledges and agrees that, if Tenant has elected to
exercise the Extension Right by delivering notice to Landlord as required in
this Section 39(a), Tenant shall have no right thereafter to rescind or elect
not to extend the term of the Lease for the Extension Term.

(b) Arbitration.

(i) Within 10 days of Tenant’s notice to Landlord of its election (or deemed
election) to arbitrate Market Rate and escalations, each party shall deliver to
the other a proposal containing the Market Rate and escalations that the
submitting party believes to be correct (“Extension Proposal”). If either party
fails to timely submit an Extension Proposal, the other party’s submitted
proposal shall determine the Base Rent and escalations for the Extension Term.
If both parties submit Extension Proposals, then Landlord and Tenant shall meet
within 7 days after delivery of the last Extension Proposal and make a good
faith attempt to mutually appoint a single Arbitrator (and defined below) to
determine the Market Rate and escalations. If Landlord and Tenant are unable to
agree upon a single Arbitrator, then each shall, by written notice delivered to
the other within 10 days after the meeting, select an Arbitrator. If either
party fails to timely give notice of its selection for an Arbitrator, the other
party’s submitted proposal shall determine the Base Rent and escalations for the
Extension Term. The 2 Arbitrators so appointed shall, within 5 business days
after their appointment, appoint a third Arbitrator. If the 2 Arbitrators so
selected cannot agree on the selection of the third Arbitrator within the time
above specified, then either party, on behalf of both parties, may request such
appointment of such third Arbitrator by application to any state court of
general jurisdiction in the jurisdiction in which the Premises are located, upon
10 days prior written notice to the other party of such intent.

 

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(ii) The decision of the Arbitrator(s) shall be made within 30 days after the
appointment of a single Arbitrator or the third Arbitrator, as applicable. The
decision of the single Arbitrator shall be final and binding upon the parties.
The average of the two closest Arbitrators in a three Arbitrator panel shall be
final and binding upon the parties. Each party shall pay the fees and expenses
of the Arbitrator appointed by or on behalf of such party and the fees and
expenses of the third Arbitrator shall be borne equally by both parties. If the
Market Rate for the first year of the Extension Term is not determined by the
first day of the Extension Term, then Tenant shall pay Landlord Base Rent in an
amount equal to the Base Rent in effect immediately prior to the Extension Term
and increased by the Rent Adjustment Percentage until such determination is
made. After the determination of the Market Rate and escalations, the parties
shall make any necessary adjustments to such payments made by Tenant. Landlord
and Tenant shall then execute an amendment recognizing the Market Rate and
escalations for the Extension Term.

(iii) An “Arbitrator” shall be any person appointed by or on behalf of either
party or appointed pursuant to the provisions hereof and: (i) shall be (A) a
member of the American Institute of Real Estate Appraisers with not less than 10
years of experience in the appraisal of improved office and high tech industrial
real estate in the greater San Diego metropolitan area, or (B) a licensed
commercial real estate broker with not less than 15 years’ experience
representing landlords and/or tenants in the leasing of high tech or life
sciences space in the greater San Diego metropolitan area, (ii) devoting
substantially all of their time to professional appraisal or brokerage work, as
applicable, at the time of appointment and (iii) be in all respects impartial
and disinterested.

(c) Rights Personal. The Extension Right is personal to Tenant and is not
assignable without Landlord’s consent, which may be granted or withheld in
Landlord’s sole discretion separate and apart from any consent by Landlord to an
assignment of Tenant’s interest in the Lease, except that they may be assigned
in connection with any Permitted Assignment of this Lease.

(d) Exceptions. Notwithstanding anything set forth above to the contrary, the
Extension Right shall, at Landlord’s option, not be in effect and Tenant may not
exercise the Extension Right:

(i) during any period of time that Tenant is in Default under any provision of
this Lease; or

(ii) if Tenant has been in Default under any provision of this Lease 3 or more
times, whether or not the Defaults are cured, during the 12 month period
immediately prior to the date that Tenant intends to exercise the Extension
Right, whether or not the Defaults are cured.

(e) No Extensions. The period of time within which the Extension Right may be
exercised shall not be extended or enlarged by reason of Tenant’s inability to
exercise the Extension Right.

(f) Termination. The Extension Right shall, at Landlord’s option, terminate and
be of no further force or effect even after Tenant’s due and timely exercise of
the Extension Right, if, after such exercise, but prior to the commencement date
of the Extension Term, (i) Tenant fails to timely cure any default by Tenant
under this Lease; or (ii) Tenant has Defaulted 3 or more times during the period
from the date of the exercise of the Extension Right to the date of the
commencement of the Extension Term, whether or not such Defaults are cured.

 

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40. Early Termination Right. If Tenant assigns this Lease pursuant to a bona
fide merger or asset sale (which merger or asset sale shall be subject to the
terms of Section 22 above) or if substantially all of Tenant’s stock is acquired
by a third party (which stock acquisition shall be subject to the terms of
Section 22 above), Tenant shall have the right, subject to the provisions of
this Section 40, to terminate this Lease (“Termination Right”) with respect to
the entire Premises only as of expiration of the 94th month after the
Commencement Date (“Early Termination Date”), so long as Tenant delivers to
Landlord (i) a written notice (“Termination Notice”), of its election to
exercise its Termination Right no less than 9 months in advance of the Early
Termination Date, and (ii) concurrent with Tenant’s delivery of the Termination
Notice to Landlord, an early termination payment equal to $5,500,000 (the “Early
Termination Payment”). If Tenant timely and properly exercises the Termination
Right, Tenant shall vacate the Premises and deliver possession thereof to
Landlord in the condition required by the terms of this Lease on or before the
Early Termination Date and Tenant shall have no further obligations under this
Lease except for those accruing prior to the Early Termination Date and those
which, pursuant to the terms of this Lease, survive the expiration or early
termination of this Lease. If Tenant does not deliver to Landlord the
Termination Notice and the Early Termination Payment within the time period
provided in this paragraph, Tenant shall be deemed to have waived its
Termination Right and the provisions of this Section 40 shall have no further
force or effect.

41. Roof Equipment. Tenant shall have the right, at its sole cost and expense,
subject to compliance with all Legal Requirements including, without limitation,
any height restrictions applicable to the Building, to install, maintain, and
remove on the top of the roof of the Building, in locations designated by
Landlord, one satellite dish or antenna for the transmission or reception of
communication signals to the extent reasonably necessary to support Tenant’s
operations within the Premises, including ancillary cabling to connect such
equipment to the Premises and other equipment serving the Premises reasonably
acceptable to Landlord (collectively, the “Roof Equipment”) on the following
terms and conditions:

(a) Requirements. Tenant shall submit to Landlord (i) the plans and
specifications for the installation of the Roof Equipment, (ii) copies of all
required governmental and quasi-governmental permits, licenses, and
authorizations that Tenant will and must obtain at its own expense, with the
cooperation of Landlord, if necessary for the installation and operation of the
Roof Equipment, and (iii) an insurance policy or certificate of insurance
evidencing insurance coverage as required by this Lease and any other insurance
as reasonably required by Landlord for the installation and operation of the
Roof Equipment. Landlord shall not unreasonably withhold or delay its approval
for the installation and operation of the Roof Equipment; provided, however,
that Landlord may reasonably withhold its approval if the installation or
operation of the Roof Equipment (A) may damage the structural integrity of the
Building, (B) may void, terminate, or invalidate any applicable roof warranty,
(C) may interfere with any service provided by Landlord or any tenant of the
Project, (D) may reduce the leasable space in the Building on which Tenant would
otherwise be paying Base Rent, or (E) is not properly screened from the viewing
public.

(b) No Damage to Roof. If installation of the Roof Equipment requires Tenant to
make any roof cuts or perform any other roofing work, such cuts shall only be
made to the roof area of the Building designated in writing by Landlord and only
in the manner designated in writing by Landlord; and any such installation work
(including any roof cuts or other roofing work) shall be performed by Tenant, at
Tenant’s sole cost and expense by a roofing contractor designated by Landlord.
If Tenant or its agents shall otherwise cause any damage to the roof during the
installation, operation, and removal of the Roof Equipment such damage shall be
repaired promptly at Tenant’s expense and the roof shall be restored in the same
condition it was in before the damage. Landlord shall not charge Tenant
Additional Rent for the installation and use of the Roof Equipment. If, however,
Landlord’s insurance premium or Tax assessment increases as a result of the Roof
Equipment, Tenant shall pay such increase as Additional Rent within 10 after
receipt of a reasonably detailed invoice from Landlord. Tenant shall not be
entitled to any abatement or reduction in the amount of Rent payable under this
Lease if for any reason Tenant is unable to use the Roof Equipment. In no event
whatsoever shall the installation, operation, maintenance, or removal of the
Roof Equipment by Tenant or its agents void, terminate, or invalidate any
applicable roof warranty.

 

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(c) Protection. The installation, operation, and removal of the Roof Equipment
shall be at Tenant’s sole risk. Tenant shall indemnify, defend, and hold
Landlord harmless from and against any and all claims, costs, damages,
liabilities and expenses (including, but not limited to, attorneys’ fees) of
every kind and description that may arise out of or be connected in any way with
Tenant’s installation, operation, or removal of the Roof Equipment.

(d) Removal. At the expiration or earlier termination of this Lease or the
discontinuance of the use of the Roof Equipment by Tenant, Tenant shall, at its
sole cost and expense, remove the Roof Equipment from the Building. Tenant shall
leave the portion of the roof where the Roof Equipment was located in good order
and repair, reasonable wear and tear excepted. If Tenant does not so remove the
Roof Equipment, Tenant hereby authorizes Landlord to remove and dispose of the
Roof Equipment and charge Tenant as Additional Rent for all costs and expenses
incurred by Landlord in such removal and disposal. Tenant agrees that Landlord
shall not be liable for any Roof Equipment or related property disposed of or
removed by Landlord.

(e) No Interference. The Roof Equipment shall not interfere with the proper
functioning of any telecommunications equipment or devices that installed by
Landlord or for any other tenant of the Project. Landlord shall have no right to
make any installations on the roof other than as required for the operation of
the Building.

(f) Relocation. Landlord shall have the right, at its expense and after 60 days
prior notice to Tenant, to relocate the Roof Equipment to another site on the
roof of the Building as long as such site reasonably meets Tenant’s sight line
and interference requirements and does not unreasonably interfere with Tenant’s
use and operation of the Roof Equipment.

(g) Access. Landlord grants to Tenant the right of ingress and egress on a 24
hour 7 day per week basis to install, operate, and maintain the Roof Equipment.
Before receiving access to the roof of the Building, Tenant shall give Landlord
at least 24 hours’ advance written or oral notice, except in emergency
situations, in which case 2 hours’ advance oral notice shall be given by Tenant.
Landlord shall supply Tenant with the name, telephone, and pager numbers of the
contact individual(s) responsible for providing access during emergencies.

(h) Appearance. If permissible by Legal Requirements, the Roof Equipment shall
be painted the same color as the Building so as to render the Roof Equipment
virtually invisible from ground level.

(i) No Assignment. The right of Tenant to use and operate the Roof Equipment
shall be personal solely to Tenant and any assignee subject to a Permitted
Assignment, and (i) no other person or entity shall have any right to use or
operate the Roof Equipment, and (ii) Tenant shall not assign, convey, or
otherwise transfer to any person or entity any right, title, or interest in all
or any portion of the Roof Equipment or the use and operation thereof, other
than in connection with a Permitted Assignment.

42. Torreyana Community Center Amenities.

(a) Generally. Subject to the provisions of this Section 42, Landlord’s
affiliate, ARE-SD Region No. 17, LLC, a Delaware limited liability company
(“Torreyana Landlord”) is constructing certain amenities at the property owned
by Torreyana Landlord located at 10996 Torreyana Road, San Diego, California
(“Torreyana Project”), which include, without limitation, shared conference
facilities (“Shared Conference Facilities”), a fitness center and restaurant
(collectively, the “Amenities”) for non-exclusive use by (a) Tenant, (b) other
tenants of the Project, (c) Landlord, (d) the tenants of Torreyana Landlord,
(e) Torreyana Landlord, (e) other affiliates of Landlord, Torreyana Landlord and
Alexandria Real Estate Equities, Inc. (“ARE”), (f) the tenants of such other
affiliates of Landlord, Torreyana Landlord and ARE, and (g) any other parties
permitted by Torreyana Landlord (collectively, “Users”). Landlord, Torreyana
Landlord, ARE, and all affiliates of Landlord, Torreyana and ARE may be referred
to collectively herein as the “ARE Parties.” Notwithstanding anything to the
contrary contained herein, Tenant acknowledges and agrees that Torreyana
Landlord shall have the right, at the sole discretion of Torreyana Landlord, to
construct any Amenities desired by Torreyana Landlord at the Torreyana Project
but not make such constructed Amenities available for use by some or all
currently contemplated Users. Torreyana Landlord shall have the sole right to
determine all matters related to the Amenities including, without limitation,
relating to the design and construction thereof; provided, however, that the
Amenities will, if provided, be of a Class A standard and will include, at a
minimum, a fitness center, Shared Conference Facility and eatery. If the
Amenities are made available for use by Tenant, if at all, Tenant shall have the
right, at a minimum, to use the fitness center, the Shared Conference Facility
and the eatery. Tenant acknowledges and agrees that Landlord has not made any
representations or warranties regarding the development of any of the Amenities
and that Tenant is not entering into this Lease relying on the completion of the
Amenities or with an expectation that the Amenities will ever be made available
to Tenant.

 

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(b) License. Commencing on the date that the Amenities become available for use
by Tenant, if at all, and so long as the Torreyana Project and the Project
continue to be owned by affiliates of ARE, Tenant shall have the non-exclusive
right to the use of the available Amenities in common with other Users pursuant
to the terms of this Section 42. A total of 150 passes to the fitness center
shall be issued to Tenant (so long as the persons using such passes are employed
at the Premises or any other space leased by Tenant from Landlord or an
affiliate of Landlord in the San Diego area); provided, however, that for so
long as the fitness center at the 10300 Campus Project (as defined in Section 43
below), remains available for use by Tenant pursuant to Section 43 below, Tenant
may elect to have a portion of the 150 fitness center passes allocated to Tenant
above issued to Tenant for the use of the fitness center at the 10300 Campus
Project instead of the fitness center at the Torreyana Project (in which case
the number of fitness center passes available for use at the Torreyana Project
shall be reduced by the number of passes issued to Tenant for the fitness center
at the 10300 Campus Project). Commencing on the date that the Amenities become
available for use by Tenant (“Amenities Commencement Date”) Tenant shall
commence paying Landlord a fixed fee during the Base Term equal to $0.12 per
rentable square foot of the Premises per month (“Amenities Fee”), which
Amenities Fee shall by payable on the first day of each month during the Term
whether or not Tenant elects to use any or all of the Amenities. The Amenities
Fee shall be increased annually on each anniversary of the Commencement Date by
3%. In the event that the Amenities are constructed but not made available for
use by Tenant, Tenant shall have no right to use the Amenities, if any, nor
shall Tenant be required to pay the Amenities Fee.

(c) Shared Conference Facilities. Use by Tenant of the Shared Conference
Facilities and restaurant at the Torreyana Project shall be in common with other
Users with scheduling procedures reasonably determined by Torreyana Landlord.
Torreyana Landlord reserves the right to exercise its reasonable discretion in
the event of conflicting scheduling requests among Users. Tenant hereby
acknowledges that (i) Biocom/San Diego, a California non-profit corporation
(“Biocom”) has the right to reserve the Shared Conference Facilities and any
reservable dining area(s) included within the Amenities for up to 50% of the
time that such Shared Conference Facilities and reservable dining area(s) are
available for use by Users each calendar month, and (ii) Illumina, Inc., a
Delaware corporation, has the exclusive use of the main conference room within
the Shared Conference Facilities for up to 4 days per calendar month.

Any vendors engaged by Tenant in connection with Tenant’s use of the Shared
Conference Facilities shall be professional licensed vendors. Torreyana Landlord
shall have the right to reasonably approve any vendors utilized by Tenant in
connection with Tenant’s use of the Shared Conference Facilities. Prior to any
entry by any such vendor onto the Torreyana Project, Tenant shall deliver to
Landlord a copy of the contract between Tenant and such vendor and certificates
of insurance from such vendor evidencing industry standard commercial general
liability, automotive liability, and workers’ compensation insurance. Tenant
shall cause all such vendors utilized by Tenant to provide a certificate of
insurance naming Landlord, ARE, and Torreyana Landlord as additional insureds
under the vendor’s liability policies. Notwithstanding the foregoing, Tenant
shall be required to use the food service operator used by Torreyana Landlord at
the Torreyana Project for any food service or catered events held by Tenant in
the Shared Conference Facilities.

 

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Tenant shall, at Tenant’s sole cost and expense, (i) be responsible for the
set-up of the Shared Conference Facilities in connection with Tenant’s use
(including, without limitation ensuring that Tenant has a sufficient number of
chairs and tables and the appropriate equipment), and (ii) surrender the Shared
Conference Facilities after each time that Tenant uses the Shared Conference
Facilities free of Tenant’s personal property, in substantially the same set up
and same condition as received, subject to casualty, and free of any debris and
trash. If Tenant fails to restore and surrender the Shared Conference Facilities
as required by sub-section (ii) of the immediately preceding sentence, such
failure shall constitute a “Shared Facilities Default.” Each time that Landlord
reasonably determines that Tenant has committed a Shared Facilities Default,
Tenant shall be required to pay Landlord a penalty within 5 days after notice
from Landlord of such Shared Facilities Default. The penalty payable by Tenant
in connection with the first Shared Facilities Default shall be $200. The
penalty payable shall increase by $50 for each subsequent Shared Facilities
Default (for the avoidance of doubt, the penalty shall be $250 for the second
Shared Facilities Default, shall be $300 for the third Shared Facilities
Default, etc.). In addition to the foregoing, Tenant shall be responsible for
reimbursing Torreyana Landlord or Landlord, as applicable, for all costs
expended by Torreyana Landlord or Landlord, as applicable, in repairing any
damage to the Shared Conference Facilities, the Amenities, or the Torreyana
Project caused by Tenant or any Tenant Related Party. The provisions of this
Section 42(c) shall survive the expiration or earlier termination of this Lease.

(d) Rules and Regulations. Tenant shall be solely responsible for paying for any
and all ancillary services (e.g., audio visual equipment) provided to Tenant,
all food services operators and any other third party vendors providing services
to Tenant at the Torreyana Project. Tenant shall use the Amenities (including,
without limitation, the Shared Conference Facilities) in compliance with all
applicable Legal Requirements and any reasonable rules and regulations imposed
by Torreyana Landlord or Landlord from time to time (which rules shall not be
enforced in a discriminatory manner) and in a manner that will not interfere
with the rights of other Users. The use of Amenities other than the Shared
Conference Facilities by employees of Tenant shall be in accordance with the
terms and conditions of the standard licenses, indemnification and waiver
agreement required by Torreyana Landlord or the operator of the Amenities to be
executed by all persons wishing to use such Amenities. Neither Torreyana
Landlord nor Landlord (nor, if applicable, any other affiliate of Landlord)
shall have any liability or obligation for the breach of any rules or
regulations by other Users with respect to the Amenities. Tenant shall not make
any alterations, additions, or improvements of any kind to the Shared Conference
Facilities, the Amenities or the Torreyana Project.

Tenant acknowledges and agrees that Torreyana Landlord shall have the right at
any time and from time to time to reconfigure, relocate, modify or remove any of
the Amenities at the Torreyana Project and/or to revise, expand or discontinue
any of the services (if any) provided in connection with the Amenities.

(e) Waiver of Liability and Indemnification. Tenant warrants that it will use
reasonable care to prevent damage to property and injury to persons while on the
Torreyana Project. To the extent permitted by applicable law, Tenant waives any
claims it or any Tenant Parties may have against any ARE Parties relating to,
arising out of or in connection with the Amenities and any entry by Tenant
and/or any Tenant Parties onto the Torreyana Project, and Tenant releases and
exculpates all ARE Parties from any liability relating to, arising out of or in
connection with the Amenities and any entry by Tenant and/or any Tenant Parties
onto the Torreyana Project. Tenant hereby agrees to indemnify, defend, and hold
harmless the ARE Parties from any claim of damage to property or injury to
person relating to, arising out of or in connection with (i) the use of the
Amenities by Tenant or any Tenant Parties, and (ii) any entry by Tenant and/or
any Tenant Parties onto the Torreyana Project, except to the extent caused by
the willful misconduct or negligence of Landlord or an ARE Party. The provisions
of this Section 42 shall survive the expiration or earlier termination of this
Lease.

(f) Insurance. As of the Amenities Commencement Date, Tenant shall cause
Torreyana Landlord to be named as an additional insured under the commercial
general liability policy of insurance that Tenant is required to maintain
pursuant to Section 17 of this Lease.

 

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43. 10300 Campus Point Amenities.

(a) Tenant shall have the right during the Term (for so long as the 10300 Campus
Project is owned by an affiliate of Landlord), subject and subordinate to the
rights of the tenants at the project located at 10300 Campus Point Drive, San
Diego, California (“10300 Campus Project”) and any rules, regulations and
conditions imposed on Tenant by the owner of the 10300 Campus Point Project
(“10300 Campus Owner”), to use the conference center, fitness center and
restaurant located at the 10300 Campus Project (collectively, the “10300 Campus
Amenities”), at no additional fee for use, to Tenant. The 10300 Campus Amenities
shall only be available to employees of Tenant that work at the Project. Tenant
acknowledges and agrees that 10300 Campus Owner shall have the right at any time
and from time to time to reconfigure, relocate, modify or remove any of the
10300 Campus Amenities and/or to revise, expand, or, based on objections of
tenants of the 10300 Campus Project having superior rights as of the date of
this Lease to the 10300 Campus Amenities and upon no less than 90 days prior
written notice to Tenant, limit the number of Tenant’s employees authorized to
use such 10300 Campus Amenities or the hours which the 10300 Campus Amenities
are available for Tenant’s use, or discontinue any of the services (if any)
provided in connection with such 10300 Campus Amenities. In the event that any
of the existing tenants of the 10300 Campus Project object to the use by Tenant
of the 10300 Campus Amenities, Landlord shall endeavor, at no cost or expense to
Landlord, to obtain approval of Tenant’s use of the 10300 Campus Amenities from
such objecting tenants.

(b) Waiver of Liability and Indemnification. Tenant warrants that it will use
reasonable care to prevent damage to property and injury to persons while on the
10300 Campus Project. To the extent permitted by applicable law, Tenant waives
any claims it or any Tenant Parties may have against any ARE Parties relating
to, arising out of or in connection with the 10300 Campus Amenities and any
entry by Tenant and/or any Tenant Parties onto the 10300 Campus Project, and
Tenant releases and exculpates all ARE Parties from any liability relating to,
arising out of or in connection with the 10300 Campus Amenities and any entry by
Tenant and/or any Tenant Parties onto the 10300 Campus Project. Tenant hereby
agrees to indemnify, defend, and hold harmless the ARE Parties from any claim of
damage to property or injury to person relating to, arising out of or in
connection with (i) the use of the 10300 Campus Amenities by Tenant or any
Tenant Parties, and (ii) any entry by Tenant and/or any Tenant Parties onto the
10300 Campus Project, except to the extent caused by the willful misconduct or
negligence of Landlord or an ARE Party. The provisions of this Section 43 shall
survive the expiration or earlier termination of this Lease.

(c) Use Agreements. Neither Tenant nor its employees shall have any right to
access and/or use the 10300 Campus Amenities unless Tenant and its employees
have entered into license and use agreements (including indemnification and
waiver agreements reasonably required by 10300 Campus Owner) with respect to
such 10300 Campus Amenities which are in form and content acceptable to Landlord
and/or 10300 Campus Owner in their respective reasonable discretion, and Tenant
and its employees shall be required to comply with all of 10300 Project Owner’s
rules, regulations, conditions and scheduling procedures in connection with the
use of the 10300 Campus Amenities.

(d) Insurance. As of the Commencement Date, Tenant shall cause 10300 Campus
Landlord to be named as an additional insured under the commercial general
liability policy of insurance that Tenant is required to maintain pursuant to
Section 17 of this Lease.

44. 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.

 

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(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 Tenant’s most recent audited annual financial statements within 90
after the issuance of such audited financial statements, but in no event later
than 180 days after the end of each of Tenant’s fiscal years during the Term. In
addition, Tenant’s Chief Executive Officer or Chief Financial Officer shall, at
Landlord’s request not more frequently than twice each year, meet with Landlord
at Tenant’s offices and make available for review during such meetings
additional information regarding Tenant’s financial condition and business
progress. If Landlord is considering a sale of the Project or obtaining
financing secured by the Project, Landlord shall have right to be accompanied at
such meetings by representatives of the prospective purchaser or lender.
Notwithstanding anything to the contrary contained herein, so long as Tenant is
a “public company” and its financial information is publicly available, then the
foregoing delivery requirements of this Section 44(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.

(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.

(i) Time. Time is of the essence as to the performance of Tenant’s obligations
under this Lease.

(j) OFAC. Tenant, and, to Tenant’s knowledge, all beneficial owners of Tenant,
are 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.

 

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(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.

(o) Redevelopment of Project. Tenant acknowledges that Landlord, in its sole
discretion, may, subject to the terms of the third sentence of Section 1, 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, location or Tenant’s Permitted Use of the
Premises.

(p) Discontinued Use. If, at any time following the Rent Commencement Date,
Tenant does not continuously operate its business in the Premises for a period
of 180 consecutive days for reasons other than casualty, condemnation or Force
Majeure, Landlord may, but is not obligated to, elect to terminate this Lease
upon 30 days’ written notice to Tenant, whereupon this Lease shall terminate 30
days’ after Landlord’s delivery of such written notice (“Termination Date”), and
Tenant shall vacate the Premises and deliver possession thereof to Landlord in
the condition required by the terms of this Lease on or before the Termination
Date and Tenant shall have no further obligations under this Lease except for
those accruing prior to the Termination Date and those which, pursuant to the
terms of the Lease, survive the expiration or early termination of the Lease.

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

 

TENANT:

OTONOMY, INC.,

a Delaware corporation

By:

/s/ David Weber

Its:

President & CEO

LANDLORD:

ARE-SD REGION NO. 34, 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: Senior Vice President RE Legal Affairs     

 

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EXHIBIT A TO LEASE

DESCRIPTION OF PREMISES

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EXHIBIT B TO LEASE

DESCRIPTION OF PROJECT

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE COUNTY OF SAN DIEGO, STATE
OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

PARCEL 1 OF PARCEL MAP NO. 20044, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO,
STATE OF CALIFORNIA, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO
COUNTY, JULY 7, 2006 AS DOCUMENT NO. 2006-0482471.

Assessor’s Parcel Number: 345-012-01

 

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EXHIBIT C TO LEASE

WORK LETTER

THIS WORK LETTER dated May 11, 2015 (this “Work Letter”) is made and entered
into by and between ARE-SD REGION NO. 34, LLC, a Delaware limited liability
company (“Landlord”), and OTONOMY, INC., a Delaware corporation (“Tenant”), and
is attached to and made a part of the Lease Agreement dated May 11, 2015 (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.

1. General Requirements.

(a) Tenant’s Authorized Representative. Tenant designates Bob Savel and Erik
Nelson (either such individual acting alone, “Tenant’s Representative”) as the
only persons authorized to act for Tenant pursuant to this Work Letter. Landlord
shall not be obligated to respond to or act upon any request, approval, inquiry
or other communication (“Communication”) from or on behalf of Tenant in
connection with this Work Letter unless such Communication is in writing from
Tenant’s Representative. Tenant may change either Tenant’s Representative at any
time upon not less than 5 business days advance written notice to Landlord.
Neither Tenant nor Tenant’s Representative shall be authorized to direct
Landlord’s contractors in the performance of Landlord’s Work (as hereinafter
defined).

(b) Landlord’s Authorized Representative. Landlord designates Mike Barbera and
Steve Pomerenke (either such individual acting alone, “Landlord’s
Representative”) as the only persons authorized to act for Landlord pursuant to
this Work Letter. Tenant shall not be obligated to respond to or act upon any
request, approval, inquiry or other Communication from or on behalf of Landlord
in connection with this Work Letter unless such Communication is in writing from
Landlord’s Representative. Landlord may change either Landlord’s Representative
at any time upon not less than 5 business days advance written notice to Tenant.
Landlord’s Representative shall be the sole persons authorized to direct
Landlord’s contractors in the performance of Landlord’s Work.

(c) Architects, Consultants and Contractors. Landlord and Tenant hereby
acknowledge and agree that: (i) the general contractor and subcontractors for
the Building Shell shall be selected by Landlord in Landlord’s sole and absolute
discretion, (ii) the general contractor and any subcontractors for the Tenant
Improvements shall be selected by Landlord, subject to Tenant’s approval, which
approval shall not be unreasonably withheld, conditioned or delayed, and
(iii) Gensler shall be the architect (the “Architect”) for the Building Shell
and the Tenant Improvements.

2. Tenant Improvements.

(a) Definition of Building Shell, Tenant Improvements and Landlord’s Work. As
used herein, the term, “Building Shell” shall mean a warm shell consisting of
the items reflected on the base building description attached to this Work
Letter as Annex 1 (“Base Building Description”). As used herein, the term
“Tenant Improvements” shall mean all improvements to the Building of a fixed and
permanent nature as shown on the TI Construction Drawings, as defined in
Section 2(c) below. As used herein, the term “Landlord’s Work” shall mean
collectively the work of constructing the Building Shell and the Tenant
Improvements.

Tenant has approved the Base Building Description. Tenant may not request
changes to the Base Building Description or the Building Shell other than
changes required to correct material inconsistencies between the Base Building
Description and the construction drawings for the Building Shell (the “Building
Shell Construction Drawings”), a copy of which shall be provided to the Tenant
once such Building Shell Construction Drawings have been completed; provided,
however, that in no event shall Landlord be obligated to make any changes to the
Building Shell (including Landlord’s plans for the Building Shell) requested by
Tenant.

 

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Tenant hereby confirms that (i) the Base Building Improvements as reflected in
the Base Building Description are consistent with Tenant’s requirements, and
(ii) the Tenant Improvements design and specifications for the Premises
reflected in the Tenant Improvements Specifications and Space Plan (as defined
in Section 2(b) below), are consistent with Tenant’s requirements. Landlord
shall have no obligation to, and shall not, secure any operating permits,
approvals or entitlements related to Tenant’s specific use of the Premises or
Tenant’s business operations therein other than the normal and customary
permits, approvals and entitlements specifically required for the construction
of Landlord’s Work. Landlord and Tenant agree that the quality and finishes of
the Tenant Improvements shall be generally consistent with quality and finishes
of Tenant’s existing premises at 6275 Nancy Ridge Drive in San Diego. Other than
its obligation to perform Landlord’s Work, Landlord shall not have any
obligation whatsoever with respect to the finishing of the Premises for Tenant’s
use and occupancy.

On or before the date that is 30 days after the mutual execution and delivery of
the Lease by the parties, Landlord shall deliver to Tenant a preliminary project
schedule for Landlord’s Work outlining the traditional and customary activities
of Landlord and Tenant in connection therewith. Tenant shall review such
preliminary project schedule and deliver any reasonable comments to Landlord
within 10 business days of receipt. Tenant’s failure to deliver any comments to
Landlord within such 10-business day period shall be deemed Tenant’s approval of
the preliminary project schedule. Landlord shall consider Tenant’s comments to
the preliminary project schedule in good faith and, within 10 business days
after receipt of Tenant’s comments, either incorporate Tenant’s comments or
provide Tenant with a reasonable rationale for exclusion. Upon Tenant’s request
to Landlord each month, Landlord shall deliver updates of the schedule to Tenant
on a monthly basis through the Substantial Completion of Landlord’s Work. Tenant
acknowledges and agrees that any and all dates set forth in the project schedule
shall be subject to Force Majeure delays and Tenant Delays.

(b) Tenant’s Space Plans. Landlord and Tenant acknowledge and agree that the
tenant improvement specifications (“Tenant Improvements Specifications”) and
space plan for the Tenant Improvements (“Space Plan”) have been mutually agreed
upon by Landlord and Tenant. Landlord and Tenant further acknowledge and agree
that any changes to the Tenant Improvement Specifications or the Space Plan
requested by Tenant constitute a Change Request (as defined in Section 4 below),
which Change Request shall be subject to the terms of Section 4 below.

(c) Working Drawings. Landlord shall cause the Architect to prepare and deliver
to Tenant for review and comment construction plans, specifications and drawings
for the Tenant Improvements (“TI Construction Drawings”), which TI Construction
Drawings shall be prepared substantially in accordance with the Space Plan and
the Tenant Improvement Specifications. Tenant shall be solely responsible for
ensuring that the TI Construction Drawings reflect Tenant’s requirements for the
Tenant Improvements. Tenant shall deliver its written comments on the TI
Construction Drawings to Landlord not later than 10 business days after Tenant’s
receipt of the same; provided, however, that Tenant may not disapprove any
matter that is consistent with the Space Plan and the Tenant Improvement
Specifications without submitting a Change Request. Landlord and the Architect
shall consider all such comments in good faith and shall, within 10 business
days after receipt, notify Tenant how Landlord proposes to respond to such
comments, but Tenant’s review rights pursuant to the foregoing sentence shall
not delay the design or construction schedule for the Tenant Improvements. Any
disputes in connection with such comments shall be resolved in accordance with
Section 2(d) hereof. Provided that the design reflected in the TI Construction
Drawings is consistent with the Space Plan and the Tenant Improvement
Specifications, Tenant shall approve the TI Construction Drawings submitted by
Landlord, unless Tenant submits a Change Request. Once approved by Tenant,
subject to the provisions of Section 4 below, Landlord shall not materially
modify the TI Construction Drawings except as may be reasonably required in
connection with the issuance of the TI Permit (as defined in Section 3(a)
below).

(d) Approval and Completion. Upon any dispute regarding the design of the Tenant
Improvements, which is not settled within 10 business days after notice of such
dispute is delivered by one party to the other, Tenant may make the final
decision regarding the design of the Tenant Improvements, provided (i) Tenant
acts reasonably and such final decision is either consistent with or a
compromise between Landlord’s and Tenant’s positions with respect to such
dispute, (ii) that all costs and expenses resulting from any such decision by
Tenant shall not cause the TI Costs to exceed the Maximum TI Cost Amount (as
defined in Section 4 below), and (iii) Tenant’s decision will not affect the
base Building, structural components of the Building or any Building Systems.
Any changes to the TI Construction Drawings following Landlord’s and Tenant’s
approval of same requested by Tenant shall be processed as provided in Section 4
hereof.

 

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3. Performance of Landlord’s Work.

(a) Commencement and Permitting. Landlord shall obtain the necessary permits
authorizing the construction of the Building Shell consistent with the Building
Shell Construction Drawings (the “Building Shell Permit”) and a building permit
authorizing the construction of the Tenant Improvements (the “TI Permit”)
consistent with the TI Construction Drawings approved by Tenant. The cost of
obtaining the Building Shell Permit and the TI Permit shall be payable by
Landlord. Tenant shall reasonably assist Landlord in obtaining the Building
Shell Permit and the TI Permit. If any Governmental Authority having
jurisdiction over the construction of Landlord’s Work or any portion thereof
shall impose terms or conditions upon the construction thereof that: (i) are
inconsistent with Landlord’s obligations hereunder, (ii) increase the cost of
constructing Landlord’s Work, or (iii) will materially delay the construction of
Landlord’s Work, Landlord and Tenant shall reasonably and in good faith seek
means by which to mitigate or eliminate any such adverse terms and conditions.

(b) Completion of Landlord’s Work. On or before the Target Commencement Date
(subject to Tenant Delays and Force Majeure delays), Landlord shall
substantially complete or cause to be substantially completed Landlord’s Work in
a good and workmanlike manner, in accordance with the Building Shell Permit and
the TI Permit subject, in each case, to Minor Variations and normal “punch list”
items of a non-material nature that do not interfere with Tenant’s Permitted Use
of the Premises and with a certificate or temporary certificate of occupancy (or
an equivalent approval having been issued) for the Premises permitting lawful
occupancy of the Premises (but specifically excluding any permits, licenses or
other governmental approvals required to be obtained in connection with Tenant’s
operations in the Premises)(“Substantial Completion” or “Substantially
Complete”). Upon Substantial Completion of Landlord’s Work, Landlord shall
require the Architect and the general contractor(s) to execute and deliver, for
the benefit of Tenant and Landlord, a Certificate of Substantial Completion in
the form of the American Institute of Architects (“AIA”) document G704. For
purposes of this Work Letter, “Minor Variations” shall mean any modifications
reasonably required that do not materially impact Tenant’s ability to operate in
the Premises: (i) to comply with all applicable Legal Requirements and/or to
obtain or to comply with any required permit (including the Base Building Permit
and the TI Permit); (ii) to comply with any request by Tenant for modifications
to Landlord’s Work; (iii) to comport with good design, engineering, and
construction practices that are not material; or (iv) to make reasonable
adjustments for field deviations or conditions encountered during the
construction of Landlord’s Work.

(c) Selection of Materials. Where more than one type of material or structure is
indicated on the TI Construction Drawings approved by Landlord and Tenant, the
option will be selected at Landlord’s reasonable discretion. As to all building
materials and equipment that Landlord is obligated to supply under this Work
Letter, unless a manufacturer is specified in the TI Construction Drawings,
Landlord shall select the manufacturer thereof in its reasonable discretion.

(d) Delivery of the Premises. When Landlord’s Work is Substantially Complete,
subject to the remaining terms and provisions of this Section 3(d), Tenant shall
accept the Premises. Tenant’s taking possession and acceptance of the Premises
shall not constitute a waiver of: (i) any warranty with respect to workmanship
(including installation of equipment) or material (exclusive of equipment
provided directly by manufacturers), (ii) any non-compliance of Landlord’s Work
with applicable Legal Requirements, (iii) any claim that the Building Shell was
not substantially completed in accordance with the Building Shell Construction
Drawings, or (iv) the Tenant Improvements were not completed substantially in
accordance with the TI Construction Drawings (subject to Minor Variations and
such other changes as are permitted hereunder) (collectively, a “Construction
Defect”). Tenant shall have one year after Substantial Completion within which
to notify Landlord of any such Construction Defect discovered by Tenant, and
Landlord shall use reasonable efforts to remedy or cause the responsible
contractor to remedy any such Construction Defect within 30 days thereafter.
Notwithstanding the foregoing, Landlord shall not be in default under the Lease
if the applicable contractor, despite Landlord’s reasonable efforts, fails to
remedy such Construction Defect within such 30-day period. If the contractor
fails to remedy such Construction Defect within a reasonable time, Landlord
shall use reasonable efforts to remedy the Construction Defect within a
reasonable period.

 

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Tenant shall be entitled to receive the benefit of all construction warranties
and manufacturer’s equipment warranties relating to equipment installed in the
Premises. Landlord shall promptly undertake and complete, or cause to be
completed, all punch list items.

(e) Commencement Date Delay. Except as otherwise provided in the Lease, Delivery
of the Premises shall occur when Landlord’s Work has been Substantially
Completed, except to the extent that completion of Landlord’s Work shall have
been actually delayed by any one or more of the following causes (“Tenant
Delay”):

(i) Tenant’s Representative was not reasonably available to give or receive any
Communication or to take any other action required to be taken by Tenant
hereunder;

(ii) Tenant’s request for Change Requests (as defined in Section 4(a) below)
whether or not any such Change Requests are actually performed;

(iii) Construction of any Change Requests;

(iv) Tenant’s request for materials, finishes or installations requiring
unusually long lead times;

(v) Tenant’s delay in reviewing, revising or approving plans and specifications
beyond the periods set forth herein;

(vi) Tenant’s delay in providing information critical to the normal progression
of the Project. Tenant shall provide such information as soon as reasonably
possible, but in no event longer than one week after receipt of any written
request for such information from Landlord; or

(vii) Any other act or omission by Tenant or any Tenant Party (as defined in the
Lease), or persons employed by any of such persons that continues for more than
1 day after Landlord’s notice thereof to Tenant.

If Delivery is delayed for any of the foregoing reasons, then Landlord shall
cause the Architect to certify the date on which the Tenant Improvements would
have been Substantially Completed but for such Tenant Delay and such certified
date shall be deemed to be the Commencement Date for purposes of Tenant’s
obligation to pay Base Rent, Operating Expenses and all other amounts due under
the Lease. Upon Tenant’s request, Landlord shall advise Tenant of any materials,
finishes or installations which are required as part of any Change Request that
will result in unusually long lead times. Notwithstanding anything to the
contrary contained in this Work Letter, if at any time during the design or
construction of the Tenant Improvements it is reasonably determined by Architect
that the total number of days of Tenant Delay (pursuant to this Section 3(e)
and/or resulting from Changes or Change Requests) is expected to exceed 90 days
in the aggregate, Landlord may, in Landlord’s sole discretion, following such
determination by Architect, unilaterally make all remaining decisions and take
all actions determined necessary by Landlord relating to the design and
construction of the Tenant Improvements so that there are no further Tenant
Delays.

4. Changes. Any changes requested by Tenant to the Tenant Improvements as
reflected in the Space Plan and the Tenant Improvement Specifications shall be
requested and instituted in accordance with the provisions of this Section 4 and
shall be subject to the written approval of Landlord and the Architect, such
approval not to be unreasonably withheld, conditioned or delayed.
Notwithstanding anything to the contrary contained in this Work Letter, in no
event shall Landlord be required to approve any Change or Change Request if such
Change or Change Request would (i) cause the TI Costs to exceed $204 per
rentable square foot of the Premises (the “Maximum TI Cost Amount”), and/or
(ii) result in the number of days of Tenant Delay under this Work Letter
exceeding 90 days in the aggregate.

 

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(a) Tenant’s Request For Changes. If Tenant shall request changes to the Tenant
Improvements (“Changes”), Tenant shall request such Changes by notifying
Landlord in writing in substantially the same form as the AIA standard change
order form (a “Change Request”), which Change Request shall detail the nature
and extent of any such Change. Such Change Request must be signed by Tenant’s
Representative. Landlord shall, before proceeding with any Change, respond to
Tenant as soon as is reasonably possible with an estimate of: (i) the time it
will take, and (ii) the architectural and engineering fees and costs that will
be incurred, to analyze such Change Request. Landlord shall thereafter submit to
Tenant in writing, within 5 business days of receipt of the Change Request (or
such longer period of time as is reasonably required depending on the extent of
the Change Request), an analysis of the additional cost or savings involved,
including, without limitation, architectural and engineering costs and the
period of time, if any, that the Change will extend the date on which Landlord’s
Work will be Substantially Complete. Any such delay in the completion of
Landlord’s Work caused by a Change, including any suspension of Landlord’s Work
while any such Change is being evaluated and/or designed, shall be Tenant Delay.

(b) Implementation of Changes. If Tenant approves in writing the estimated
extension in the time for completion of Landlord’s Work, if any, and the
approved Change will not cause TI Costs to exceed the Maximum TI Cost Amount,
Landlord shall cause the approved Change to be instituted. Notwithstanding any
approval or disapproval by Tenant of any estimate of the delay caused by such
proposed Change, the Architect’s determination of the amount of Tenant Delay in
connection with such Change shall be final and binding on Landlord and Tenant.

5. Costs. Landlord shall be responsible for the payment of design, permits and
construction costs in connection with the construction of the Base Building
Improvements including, without limitation, the cost of preparing the Base
Building Shell Construction Drawings. Landlord shall also be responsible for the
payment of design, permits and construction costs in connection with the
construction of the Tenant Improvements, including, without limitation, the cost
of preparing the TI Construction Drawings and the Space Plans (collectively, “TI
Costs”). TI Costs shall include a payment to Landlord of administrative rent
equal to 2% of the TI Costs for monitoring and inspecting the construction of
the Base Building Improvements, the Tenant Improvements and Changes. TI Costs
shall also include and Landlord shall pay a fee to Tenant’s construction manager
equal to 2% of the total hard costs of the Tenant Improvements. Notwithstanding
anything to the contrary contained herein, in no event shall Landlord be
required to pay for any furniture, personal property or other non-Building
System materials or equipment, including, but not limited to, Tenant’s voice or
data cabling, non-ducted biological safety cabinets and other scientific
equipment not incorporated into the Tenant Improvements. In no event shall
Tenant be permitted to request Changes and/or cause Tenant Delays that would
cause TI Costs to exceed the Maximum TI Cost Amount.

6. Tenant Access.

(a) Tenant’s Access Rights. Landlord hereby agrees to permit Tenant access, at
Tenant’s sole risk and expense, to the Building (i) 30 days prior to the
Commencement Date (or such additional period as may be reasonably required by
Tenant and reasonably agreed upon by Landlord) to perform any work (“Tenant’s
Work”) required by Tenant other than Landlord’s Work, provided that such
Tenant’s Work is coordinated with the Architect and the general contractor, and
complies with the Lease and all other reasonable restrictions and conditions
Landlord may impose, and (ii) prior to the completion of Landlord’s Work, to
inspect and observe work in process; all such access shall be during normal
business hours or at such other times as are reasonably designated by Landlord.
Notwithstanding the foregoing, Tenant shall have no right to enter onto the
Premises or the Project unless and until Tenant shall deliver to Landlord
evidence reasonably satisfactory to Landlord demonstrating that any insurance
reasonably required by Landlord in connection with such pre-commencement access
(including, but not limited to, any insurance that Landlord may require pursuant
to the Lease) is in full force and effect. Any entry by Tenant shall comply with
all established safety practices of Landlord’s contractor and Landlord until
completion of Landlord’s Work and acceptance thereof by Tenant.

 

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(b) No Interference. Neither Tenant nor any Tenant Party (as defined in the
Lease) shall interfere with the performance of Landlord’s Work, nor with any
inspections or issuance of final approvals by applicable Governmental
Authorities, and upon any such interference, Landlord shall have the right to
exclude Tenant and any Tenant Party from the Premises and the Project until
Substantial Completion of Landlord’s Work.

(c) No Acceptance of Premises. The fact that Tenant may, with Landlord’s
consent, enter into the Project prior to the date Landlord’s Work is
Substantially Complete for the purpose of performing Tenant’s Work shall not be
deemed an acceptance by Tenant of possession of the Premises, but in such event
Tenant shall defend with counsel reasonably acceptable by Landlord, indemnify
and hold Landlord harmless from and against any loss of or damage to Tenant’s
property, completed work, fixtures, equipment, materials or merchandise, and
from liability for death of, or injury to, any person, caused by the act or
omission of Tenant or any Tenant Party.

7. Limitation on Tenant’s Liability.

(a) Notwithstanding anything to the contrary contained in the Lease (including
this Work Letter), Tenant shall not be required to pay for Construction Period
Costs (as defined below) during the Construction Period (as defined below). Any
Construction Period Costs paid by Landlord or which Tenant is responsible for
during the Construction Period shall be reimbursed or paid by Tenant to Landlord
with interest at 8% per annum as a one-time additional Rent payment within 30
days after Landlord’s delivery to Tenant of an invoice therefor; provided,
however, that in no event shall Landlord deliver such invoice to Tenant prior to
the expiration of the Construction Period.

(b) Notwithstanding anything to the contrary contained in the Lease (including
this Work Letter), during the Construction Period (as defined below), Tenant’s
liability to Landlord under the Lease (including the Work Letter) for Rental
Payments (as defined below) shall at no time exceed 89.9% of Landlord’s Project
Costs (as defined below) incurred as of the date of Landlord’s claim for such
amount owed by Tenant (the “89.9% Threshold”) as reasonably determined by the
Landlord; provided that such 89.9% Threshold will be calculated by taking into
consideration whether at any point during the Construction Period, the sum of
the Rental Payments could exceed the 89.9% Threshold, with the Rental Payments
calculated to include (i) the accreted value of any Rental Payments previously
made by Tenant plus (ii) the present value of the maximum amount of Rental
Payments that Tenant could be required to pay as of that point in time (whether
or not construction is completed). With respect to clause (ii) in the preceding
sentence, for the avoidance of any doubt, any amounts previously deferred shall
not be deemed currently payable for purposes of the calculation. Any Rental
Payments owed by Tenant to Landlord in excess of such 89.9% Threshold (the
“Excess Amounts”) shall not be payable during the Construction Period, and will
instead be amortized on a straight line basis over the Base Term of the Lease
(commencing after the date of Delivery of the Premises to Tenant with Landlord’s
Work Substantially Complete) with interest at 8% per annum as Additional Rent,
and such amortized Excess Amounts will be payable by Tenant monthly at the same
time and place as Base Rent commencing with the first payment of Base Rent after
the Construction Period. For purposes of calculating the 89.9% Threshold, the
Rental Payments owed by Tenant to Landlord at the time of the applicable
calculation shall be discounted to their then present value using 9% on the date
hereof, applied on a monthly basis. All remedies of Landlord which arise under
the Lease and this Work Letter during the Construction Period will be subject to
this Section 7 (including remedies in the event the Lease is terminated during
the Construction Period), excepting only amounts due from Tenant to Landlord by
reason of fraud, willful misconduct, bankruptcy or illegal acts by Tenant.

 

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(c) As used in this Section 7,

(i) “Construction Period” shall mean the period from the date of the Lease until
the date of Delivery of the Premises to Tenant with Landlord’s Work
Substantially Complete (regardless of any Tenant Delays); provided, however,
that, if there are more than 270 days of Tenant Delay, Landlord may if it so
elects, notwithstanding anything to the contrary contained in the Lease (and/or
this Work Letter), (x) terminate the Lease, upon written notice to Tenant, in
which case the Construction Period shall terminate and Landlord may pursue all
of its rights and remedies under the Lease (and this Work Letter) or
(y) construct and Deliver the Premises with Tenant Improvements as determined by
Landlord, in its sole and absolute discretion including, without limitation,
changing the TI Construction Drawings so that the Tenant Improvements are
consistent with a so-called spec build-out for one or more tenants and without
any further input required or permitted by Tenant, and Tenant agrees to accept
the Premises in their as is condition upon Delivery.

(ii) “Construction Period Costs” shall mean the following costs incurred for the
Project during the Construction Period that are the responsibility of Tenant
elsewhere under the Lease (including this Work Letter): Costs arising from
(x) Utilities, Insurance and Taxes, (y) any amount owed to Landlord pursuant to
any indemnification obligation on the part of Tenant in favor of Landlord (with
the parties agreeing that, during the Construction Period, Tenant’s
indemnification obligation shall be limited as set forth in Section 7(f) below),
to the extent such indemnification obligation constitutes part of Project Costs
(as defined below), or (z) any and all other costs payable to Landlord including
payments arising from a Default by Tenant, to the extent such costs (including
payments arising from a Default by Tenant) constitute part of Project Costs.

(iii) “Rental Payments” shall mean all of the following amounts which are
required to be paid by Tenant to Landlord elsewhere under the Lease (and this
Work Letter), including, without limitation, as a result of Tenant Delay:
(w) Base Rent, (x) Operating Expenses (other than Utilities, Insurance and
Taxes), (y) any amount owed to Landlord pursuant to any indemnification
obligation on the part of Tenant in favor of Landlord (with the parties agreeing
that, during the Construction Period, Tenant’s indemnification obligation shall
be limited as set forth in Section 7(f) below), to the extent such
indemnification obligation does not constitute part of Project Costs, and
(z) any and all other costs payable by Tenant to Landlord including payments
arising from a Default by Tenant, to the extent such costs (including payments
arising from a Default by Tenant) do not constitute part of Project Costs.
Rental Payments will not include (and the 89.9% Threshold will not apply to)
amounts due from Tenant to Landlord by reason of fraud, willful misconduct,
bankruptcy or illegal acts by Tenant.

(iv) “Project Costs” shall include the following as reasonably determined by the
Landlord:

 

  (a)

the amount capitalized in the Building (including related site improvements and
other Project costs as allocated to the Building) by the Landlord in accordance
with generally accepted accounting principles in the United States,

 

  (b)

any amounts related to the Building (including related site improvements and
other Project costs as allocated to the Building) paid by the Landlord to third
parties other than lenders or owners. These costs exclude transaction costs not
otherwise capitalized by the Landlord in accordance with GAAP, and

 

  (c)

land carrying costs, such as interest or ground rentals incurred during the
Construction Period.

Project Costs shall exclude land acquisition costs and imputed yield on equity
in the Building. Any allocated Project Costs shall be based on relative value or
other value methods as appropriate under the circumstances as reasonably
determined by the Landlord.

 

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(d) For the avoidance of any doubt, if there are any Excess Amounts, such Excess
Amounts shall be payable in accordance with Section 7(b) above.

(e) If Tenant fails to pay any Excess Amounts or Construction Period Costs to
Landlord as and when required, Landlord shall have all of the rights and
remedies set forth in the Lease for nonpayment of Rent (including, but not
limited to, the right to interest at the Default Rate and the right to assess a
late charge). Notwithstanding anything to the contrary contained herein, all
Excess Amounts and Construction Period Costs shall become immediately due and
payable to Landlord if any of the insolvency defaults described in
Section 20(f)(A)(B) and (C) occur and no further Rental Payments shall be
deferred pursuant to Section 7(b).

(f) Notwithstanding any other provision of the Lease or this Work Letter to the
contrary, with respect to any indemnity obligation of Tenant arising at any time
during the Construction Period only, (A) the term “Landlord” shall mean and
shall be limited to ARE-SD Region No. 34, LLC (and any entity that that succeeds
to ARE-SD Region No. 34, LLC’s interest as Landlord under the Lease) and shall
not include any other person or entity; provided, however, that Landlord may
include in any claim owed by Tenant to Landlord any amount which Landlord shall
pay or be obligated to indemnify any other person or entity, and (B) any
indemnity obligation shall be limited to losses caused by, or arising as a
result of any act or failure to act of, Tenant or Tenant’s employees, agents or
contractors.

(g) It is the intention of the parties that any Force Majeure delay which occurs
during the Construction Period will postpone the Commencement Date of the Lease
by the number of days such Force Majeure continues (i.e., if Substantial
Completion of Landlord’s Work is delayed by ten (10) days due to a Force Majeure
event, then the Commencement Date will be postponed for a period of ten
(10) days).

8. Miscellaneous.

(a) Consents. Whenever consent or approval of either party is required under
this Work Letter, that party shall not unreasonably withhold, condition or delay
such consent or approval, unless expressly set forth herein to the contrary.

(b) Modification. No modification, waiver or amendment of this Work Letter or of
any of its conditions or provisions shall be binding upon Landlord or Tenant
unless in writing signed by Landlord and Tenant.

(c) Default. Notwithstanding anything set forth herein or in the Lease to the
contrary, Landlord shall not have any obligation to perform any work hereunder
or to fund any portion of cost of Landlord’s Work during any period that there
is a Default by Tenant under the Lease.

 

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Annex 1

Base Building Improvements

Base Building Description

Building Shell

 

PROJECT:

Esplanade Building 4 - Otonomy Building Build to Suit

ADDRESS:

4796 Executive Drive, San Diego, CA 92121

DATE: 3/31//2015

General Base Building Information

 

1. Project: 57,000 RSF Build to suit, cast-in-place concrete building with
surface and below grade parking. Also included is a 4,755 RSF specialized
research space constructed in the subterranean garage. 2. Number of Buildings
One (1) 3. Number of Stories 3 stories above ground with 1 level of below grade
parking. 4. Floor-to-Floor Height 14’-0” L1 – L3 5. Construction Type Type III
B, Fully Sprinklered 6. Use Office, lab, and related uses. 7. Parking provided
3.0/1000 RSF of 57,000 RSF allocated from a below grade parking garage and
shared surface parking to be completed as part of Landlord’s Work 8. Layout
Building layout and configuration to be substantially consistent with Exhibit A
to the Lease 9. Applicable Codes: Most current versions of the following:
California Building Code (CBC) California Green Building Standards Code (GBC)
California Electrical Code (CEC) California Mechanical Code (CMC) California
Plumbing Code (CPC) California Fire Code (CFC) California Energy Efficiency
Standards Other Regulations: NFPA (Current Edition) CAL-OSHA CCR 2010 Title 24
California Code of Regulations Energy Commission Handicap Standards – Federal
Regulations and American Disabilities Act (ADA) Note: Applicable codes may
change as the applicable local and state governing bodies adopt new codes, and
the Building Shell will be constructed in accordance with the most current codes
as of the date of construction.

 

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SHELL OUTLINE SPECIFICATIONS

Lobby Vision

The lobby will offer visual connectivity to the outdoor plaza and draw natural
light in through its double high glass entry lobby. The visual landmark of the
space is captured in the spiral staircase comprised of steel, wood and visual
transparency. Users will engage natural materials throughout like exposed warm
concrete, trellis like wood ceiling and patina steel; blurring the lines between
the users outdoor and indoor experience drawing them through the space and
creating a memorable yet comfortable experience.

SITE WORK

Site Utilities

All sewer, gas, water, storm drain, electrical, services as required with the
following minimum sizes:

1.

Fire Service – one 8 inch service to meet Ordinary Hazard Group 2 building
density including any required backflow devices. Main loop on floors one through
four provided for by landlord and shall be adaptable for tenant improvement
drops at tenant expense.

2.

Sanitary Sewer – one 6 inch main.

3.

Industrial Waste – 1 ea-4” branch tee off of sanitary main to a polypropylene
sampling port stubbed into the building for future connection of Tenant
Improvement branch lines and fixtures.

4.

Domestic Water – Two 1-1/2” meters that manifold into a 3” main that will be
stubbed into the building.

5.

Natural Gas – medium pressure sized for building loads.

6.

Landscape irrigation service and associated meter(s) or backflow devices tied
into campus service, if applicable.

2 ea - 4” underground conduit raceways for incoming cabling from communication
utility providers dedicated to Tenant.

All site utilities above (except landscape) to be stubbed into the building in
locations mutually agreed to by Landlord and Tenant. All permit fees for water,
sewer, gas and electric service shall be paid by Landlord.

Site Area         All site scope including asphalt paving, curb and gutter,
concrete walkways, and landscaping, exterior lighting including code required
egress lighting, and any code required ADA parking or path of travel to the
right of way. Overall look and feel of new site improvements to be consistent
with the appearance and quality of the existing campus.

Loading Dock, Service Yard

New CMU enclosure area to be provided with one surface grade loading area.

Service Yard enclosure pad to be provided with the shell along with service yard
enclosure walls and standard slab. MEP systems, other than those noted herein,
to be provided as part of the Tenant Improvements.

BUILDING ENVELOPE

Design The building envelope will be in compliance with the applicable energy
standards.

BUILDING SKIN

Glass Walls

Curtain wall system, insulated high performance low ‘E’ glass by Viracon or
equal.

 

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Windows

TBD to meet Title 24 requirements.

Entry Doors

Pair of 3’-0” x 9’-0” x 1-3/4” narrow style aluminum and glass system with
concealed overhead closers at the patio. Finish to match glass aluminum framing.
One (1) main entry to have  1⁄2” thick Herculite doors.

Loading Door

3’-0” x 9’-0” pair of doors (double door).

Parking Garage Door

Parking control gate/arm.

STRUCTURAL SYSTEM

Design

Cast in place concrete structure. Cast in place elevated slab with 12” x 12”
concrete columns with floors designed for live load of 110 pounds per square
foot and partition loading of 15 psf. Roof shall be designed for 20 psf live
load and increased to 125 psf for mechanical equipment loads at approximately
30% of the roof area, and the roof screen and related structural elements. The
building will be designed to a seismic importance factor of 1.00 and hold to
14’-0” floor-to-floor heights.

Foundations

Subterranean CMU foundation walls. The foundation system will consist of
isolated spread footings at gravity columns and continuous footings at bearing
walls. Grade beams will occur at lateral force resisting walls.

Slab on Grade

5” thick 3,500 PSI concrete with #4 reinforcing bars @ 18” on center each way
near the center of slab, over a 10 mil visqueen vapor barrier.

Floor Decks

The first through third floor deck systems will consist of 12” elevated concrete
slabs.

Roof Deck

Consists of a 10” elevated concrete slab. The mechanical screened area will be
designated to carry a designed live load of 125 psf. The balance of the roof
deck will carry a designed live load of at least 20 psf.

MOISTURE AND THERMAL PROTECTION

Membrane Roofing

A sprayed polyurethane foam roof system with a minimum fifteen (15) year
warranty will be provided.

Thermal Insulation

All insulation to be defined as required by Title 24.

Sound Insulation

Unfaced batt insulation at all elevator hoistway and machine room walls.

STAIRWAYS

Exit Stairs

Fabricate stairs with closed risers and pan treads to receive concrete fill, as
indicated. Form treads with minimum 12 gage bent plate with deformed bars full
length of tread welded to bent ends. Form stringers of structural steel channel
sections or rolled steel rectangular hollow sections.

 

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Monument Stairs

Rough exposed blackened two channel stringers with metal mesh risers and solid
wood Douglas fir treads. Railings are vertical steel 1.5” rods hung at 4” OC
from above the structure to each stringer with 2” flat bar railing. All
connections and welds shall be rough and exposed.

MISCELLANEOUS

Sealants

Sealant Standard: Provide manufacturer’s standard sealant of type indicated,
complying with ASTM C 920 requirements. Use silicone based sealants at all
glazing conditions. In general, for use on areas subject to foot or vehicle
traffic use multi-part, pourable, urethane sealant. At exterior or perimeters of
openings in exterior walls use non-sag, urethane sealant

Sheet Metal

Provide minimum 24 GA galvanized sheet metal to comply with recommendations of
SMACNA “Architectural Sheet Metal Manual”

Steel Doors

Provide 18 gauge hollow metal steel doors, frames and stops. Applicable
weatherstripping to be provided at all exterior doors

Hardware

Lock and latch sets shall be equal to Schlage Series L, Full mortise with lever
handle design. All fire rated doors and storefront entry doors shall be equipped
with closers. All hardware shall meet state Title 24 requirements for
handicapped accessibility.

All exterior perimeter doors and the parking garage access door shall be
provided with electrified hardware as part of the shell. Landlord shall provide
access control at building exterior doors, parking garage doors, lobby doors,
and elevators. Tenant to provide and install tenant improvement card readers as
part of the Tenant Improvements. Access control system shall be Hirsch Velocity
Management System.

Restrooms

Restrooms on levels 1 thru 3, located along the building core will be
constructed and finished by Landlord.

FINISHES

Interior Walls and Finishes

As required for main electrical room, elevator hoistways, elevator machine room,
and stairwell shafts. Interior perimeter wall furring and finishes to be
provided as part of the Tenant Improvements

Metal Framing

Wall framing with gauge metal steel studs spaced at 16” on center or as required
to meet rated wall assemblies.

Drywall

Board thickness to be 5/8” at vertical and horizontal surface applications. In
areas requiring fire ratings, wall board shall be 5/8” Type “X”. Finish joint
taping to a smooth level 4 smooth texture in finished rooms and level 3 finish
at surface in non finished areas.

Paint

All interior gypsum drywall (Lo-Glo satin sheen), exposed steel surfaces, hollow
metal doors and frames and interior columns to receive paint

SPECIALTIES

Signage Tenant to install all tenant improvement signage per Lease. Landlord
will be responsible for ADA and City of San Diego required signage associated
strictly with the site, building shell and interior restrooms and core
functions. Landlord shall also be responsible for monument sign at street
entrance including Tenant provided graphics. Wayfinding signage will be by
tenant. Tenant shall be responsible for its building sign (on building façade)
within Tenant Improvements being provided as part of Landlord’s Work under the
Work Letter. All exterior tenant signage shall comply with Project signage
guidelines and City of San Diego regulations.

 

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CONVEYING SYSTEMS

Hydraulic Elevators

One (1) 3000# passenger elevator accessible at all levels. One (1) 4,000#
passenger/ service elevator that will also be accessible at all levels. 150 fpm,
hydraulic elevators by Otis Elevator, Thyssen Krupp, Schindler, or equal with
standard hoistway entrances and cab finishes. Hydraulic power unit pump, tank,
and control system equipment to be located in adjacent Elevator Machine Room.
Landlord to install finishes in elevator cab in keeping with finishes and
materials in Project. Elevators to be tested and operational as designed upon
delivery to Tenant.

FIRE PROTECTION

Fire Protection

Full building shell fire sprinkler system meeting Ordinary Hazard Group 2
density per the CBC, CFC and NFPA requirements

Fire Alarm System

Fully functional fire alarm system monitoring elevators and fire protection flow
switches. System to be expandable to cover future Tenant Improvements

Fireproofing

As a concrete building, there is no fireproofing.

Vertical control area walls and separation will be part of the Tenant
Improvements.

PLUMBING

Storm Drain

Cast Iron roof drain, and overflow systems sized in accordance with CPC
requirements and local rainfall rates. Roof drains shall connect to the site
storm drain system. Rainwater overflow system shall be hard piped to a point of
discharge near grade. Bioswales will be utilized to the greatest extent
possible.

Domestic Water

Domestic water for plumbing fixtures will be provided by a single 3” cold water
pipe that is manifolded off of two 1 1⁄2” meters and shut off valves stubbed
into the building to allow for future extension of Tenant Improvement branch
lines and fixture connections.

Sanitary Sewer

Drains shall be routed through a conventional waste and vent system to a single
6” Schedule 40 below grade sanitary main. Single point sample port to be include
at appropriate location. Design according to 2003 California Plumbing Code.
Slope gravity at 1/4” per foot if first approved by the jurisdictional agency.

Industrial Waste

1 ea-4” branch tee off of sanitary main to a polypropylene sampling port stubbed
into the building for future connection of Tenant Improvement branch lines and
fixtures.

HVAC

Shell Provisions

No HVAC equipment and distribution shall be provided with the shell unless
otherwise noted.

HVAC equipment and distribution shall be part of the Tenant Improvements.

Shell Ventilation

Restrooms will be exhausted by Landlord. Landlord will also stub a transfer duct
out of each pair of restrooms for Tenant Improvement connection of supply air.

 

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DDC Controls

A new DDC system shall control all landlord provided heating, ventilating, and
air conditioning equipment and devices. DDC system shall be Johnson Metasys.

ELECTRICAL

Normal Electrical Power

277/480V - 3000A primary electrical service provided to building main electrical
room (to be built with the shell to SDGE standards) underground pull section
including the main breaker. Shell house panelboard with distribution and
connections to elevators, elevator equipment room, Landlord provided HVAC
equipment, stairwells, exit signs, monument and building signage and exterior
lighting.

Emergency Power

Emergency generators, pads and UPS systems to be provided as part of the Tenant
Improvements.

Tenant shall be required to provide any information to Landlord which may impact
Landlord’s Work in sufficient time for Landlord’s Work to progress in an orderly
fashion in accordance with the detailed schedule of key milestones and so as not
to delay Landlord’s Work.

FIBER OPTIC

Landlord will arrange for fiber optic lines to be run to the Building by a
service provider designated in writing by Tenant to Landlord promptly after the
date of this Lease; provided, however, that such service provider provides
service in the area where the Project is located and such service provider is
willing to provide service to Tenant at the Project. Tenant shall be responsible
for reimbursing Landlord for all reasonable costs incurred by Landlord in
connection with the same including, without limitation, any actual fees charged
by the service provider for installation of such fiber optic line.

THE ABOVE MENTIONED DOCUMENT IS A DESCRIPTION OF THE “COLD” BUILDING SHELL THAT
THE LANDLORD INTENDS TO BUILD. TENANT IMPROVEMENT COMPONENTS (INCLUDING ANY
ITEMS DESCRIBED ABOVE AS BEING PART OF THE TENANT IMPROVEMENTS) ARE NOT INCLUDED
IN THE BASE BUILDING THAT LANDLORD WILL BE PROVIDING, AND SHALL BE INCLUDED AS
PART OF TI COSTS (WHICH TI COSTS ARE SUBJECT TO THE TERMS SET FORTH IN THE WORK
LETTER).

 

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EXHIBIT D TO LEASE

ACKNOWLEDGMENT OF COMMENCEMENT DATE

This ACKNOWLEDGMENT OF COMMENCEMENT DATE is made this      day of
                    ,         , between ARE-SD REGION NO. 34, LLC, a Delaware
limited liability company (“Landlord”), and OTONOMY, 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
                    ,         , the Rent Commencement Date is
                    ,         , and the termination date of the Base Term of the
Lease shall be midnight on                     ,         . 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:

OTONOMY, INC.,

a Delaware corporation

By:                                          
                                                 

Its:                                          
                                                 

LANDLORD:

ARE-SD REGION NO. 34, 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

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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. Except as otherwise expressly provided for in the Lease, 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, exterior 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

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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 (except for
food preparation and service for Tenant’s personnel consistent with Tenant’s
business at the Premises and the Permitted Use), 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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EXHIBIT F TO LEASE

TENANT’S PERSONAL PROPERTY

The following items to the extent paid for by Tenant:

Non-ducted biosafety cabinets

Scientific equipment

Portable fume hoods

 

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EXHIBIT G TO LEASE

SIGNAGE

 

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