Exhibit 10.28

T O R R E Y    P I N E S    C O U R T,    L A    J O L L A

O F F I C E    L E A S E

LANDLORD:

MULLROCK 3 TORREY PINES, LLC,

a Delaware limited liability company

TENANT:

THOMAS, MCNERNEY & PARTNERS MGT., LLC, a Delaware limited liability company

 

 

 

 

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

 

SUMMARY OF BASIC LEASE INFORMATION AND DEFINITIONS

This SUMMARY OF BASIC LEASE INFORMATION AND DEFINITIONS (“Summary”) is hereby
incorporated into and made a part of the attached Office Lease which pertains to
the Building described in Section 1.4 below. All references in the Lease to the
“Lease” shall include this Summary. All references in the Lease to any term
defined in this Summary shall have the meaning set forth in this Summary for
such term. Any initially capitalized terms used in this Summary and any
initially capitalized terms in the Lease which are not otherwise defined in this
Summary shall have the meaning given to such terms in the Lease. If there is any
inconsistency between the Summary and the Lease, the provisions of the Lease
shall control.

 

1.1

Landlord’s Address:

  

Mullrock 3 Torrey Pines, LLC

 

  

c/o The Muller Company

 

  

23521 Paseo de Valencia, Suite 200

 

  

Laguna Hills, California 92653

 

  

Attention:     Mr. Stephen J. Muller

 

  

Telephone:   (949) 460-5380

 

  

Facsimile:    (949) 586-0470

 

  

 

 

With a copy to:

  

Allen Matkins Leck Gamble Mallory & Natsis LLP

 

  

501 West Broadway, Fifteenth Floor

 

  

San Diego, California 92101-3541

 

  

Attention:     Martin L. Togni, Esq.

 

  

Telephone:   (619) 233-1155

 

  

Facsimile:    (619) 233-1158

 

  

 

1.2

Tenant’s Address:

  

Thomas, McNerney & Partners Mgt., LLC

 

  

60 South Sixth Street, Suite 3620

 

  

Minneapolis, MN 55402

 

  

Attention:    Susan Haedt

1.3

Site; Project: The Site consists of the parcel(s) of real property commonly
known as Torrey Pines Court, La Jolla, located at 10350 North Torrey Pines Road
and 3333, 3344, 3366 and 3377 Torrey Pines Court, City of San Diego, County of
San Diego, State of California, as shown on the site plan attached hereto as
Exhibit “A” as such area may be expanded or reduced from time to time. The
Project includes the Site and all buildings, improvements and facilities, now or
subsequently located on the Site from time to time, including, without
limitation, the Building currently located on the Site, as depicted on the site
plan attached hereto as Exhibit “A”. The aggregate rentable square feet of the
Project is (as of the date hereof) approximately 203,239 rentable square feet.

1.4

Building: A three (3) story office building located on the Site, containing
approximately 38,167 rentable square feet, the address of which is 3366 North
Torrey Pines Court, San Diego, California 92037.

1.5

Premises: Those certain premises known as Suite 220 located on the second
(2nd) floor of the Building and containing approximately 2,048 rentable and
1,727 usable square feet as generally shown on the plan attached hereto as
Exhibit “B.”

1.6

Term: Five (5) years.

1.7

Commencement Date: The date of Substantial Completion (as defined in the Work
Letter Agreement attached hereto as Exhibit “C”) of the Premises.

1.8

Monthly Basic Rent: Upon the commencement of the Term of this Lease, and on the
first day of each month thereafter during the Term of this Lease, Tenant shall
pay to Landlord, in advance and without demand, notice, offset or deduction, as
Monthly Basic Rent for the Premises the following monthly payments:

 

Months of Term

  

Monthly Basic Rent

  

Monthly Basic Rent

per Rentable Square Foot

*1 – 12

  

$7,168.00

  

$3.50

13 – 24

  

$7,393.28

  

$3.61

25 – 36

  

$7,618.56

  

$3.72

37 – 48

  

$7,843.84

  

$3.83

49 – 60

  

$8,069.12

  

$3.94

*

Including any partial month at the beginning of the Term if the Commencement
Date does not fall on the first day of the month and subject to abatement as
provided in Section 3.1 below.

(i)

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

 

1.9

Tenant’s Percentage: 5.37%, which is the ratio that the rentable square footage
of the Premises bears to the rentable square footage of the Building.
Accordingly, as more particularly set forth in Sections 4.3 and 4.4 hereof,
Tenant shall pay to Landlord 5.37% of the “Operating Expenses” (as defined in
Section 4.4) in excess of “Landlord’s Contribution to Operating Expenses” as
defined in Section 1.10 of the Summary below.

1.10

Landlord’s Contribution to Operating Expenses: Tenant’s Percentage of Operating
Expenses incurred by Landlord during calendar year 2011 (the “Base Year”),
adjusted to reflect an assumption that the Project is fully assessed for real
property tax purposes as a completed Project ready for occupancy and that the
Project is ninety-five percent (95%) occupied during such year.

1.11

Security Deposit: $8,069.12.

1.12

Permitted Use: All legally permitted uses within the IP-1-1 classification to
the extent consistent with the character of the Project as a first class
research and development Project and for no other purpose whatsoever.

1.13

Brokers: Jones Lang LaSalle representing Landlord and Cushman & Wakefield
representing Tenant.

1.14

Interest Rate: The lesser of: (a) the rate announced from time to time by Wells
Fargo Bank or, if Wells Fargo Bank ceases to exist or ceases to publish such
rate, then the rate announced from time to time by the largest (as measured by
deposits) chartered bank operating in California, as its “prime rate” or
“reference rate”, plus five percent (5%); or (b) the maximum rate permitted by
law.

1.15

Tenant Improvements: The tenant improvements previously installed in the
Premises, if any, and the tenant improvements to be installed in the Premises,
if any, as described in the Work Letter Agreement attached hereto as Exhibit
“C”.

1.16

Parking: A total of five (5) unreserved, uncovered parking privileges in the
Building’s parking facility at no additional cost to Tenant, which parking
privileges shall be subject to the provisions set forth in Section 6.2 of this
Lease. Additionally, Tenant shall have the option (exercisable no later than the
date of Tenant’s execution and delivery of this Lease to Landlord) to lease one
(1) additional parking privilege in the reserved parking structure in the
Project adjacent to the Building at a cost of One Hundred Twenty-Five Dollars
($125.00) per month.

1.17

Business Hours for the Building. 8:00 a.m. to 6:00 p.m., Mondays through Fridays
(except Building Holidays) and 8:00 a.m. to 1:00 p.m. on Saturdays (except
Building Holidays). “Building Holidays” shall mean nationally and locally
recognized holidays as designated by Landlord.

1.18

Guarantor(s): None.

 

 

 

(ii)

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

 

STANDARD FORM OFFICE LEASE

TABLE OF CONTENTS

 

Section

  

Title

  

Page

1.

  

Premises

  

1

2.

  

Term; Notice of Lease Dates; Option Term; Early Entry

  

1

3.

  

Rent and Basic Rent Abatement

  

3

4.

  

Common Areas; Operating Expenses

  

3

5.

  

Security Deposit

  

8

6.

  

Use

  

9

7.

  

Payments and Notices

  

11

8.

  

Brokers

  

12

9.

  

Surrender; Holding Over

  

12

10.

  

Taxes on Tenant’s Property

  

12

11.

  

Condition of Premises; Repairs

  

13

12.

  

Alterations

  

14

13.

  

Liens

  

15

14.

  

Assignment and Subletting

  

15

15.

  

Entry by Landlord

  

17

16.

  

Utilities and Services

  

18

17.

  

Indemnification and Exculpation

  

19

18.

  

Damage or Destruction

  

20

19.

  

Eminent Domain

  

21

20.

  

Tenant’s Insurance

  

22

21.

  

Landlord’s Insurance

  

23

22.

  

Waiver of Claims; Waiver of Subrogation

  

23

23.

  

Tenant’s Default and Landlord’s Remedies

  

24

24.

  

Landlord’s Default

  

26

25.

  

Subordination

  

26

26.

  

Estoppel Certificate

  

26

27.

  

Building Planning

  

27

28.

  

Modification and Cure Rights of Landlord’s Mortgagees and Lessors

  

27

29.

  

Quiet Enjoyment

  

27

30.

  

Transfer of Landlord’s Interest

  

27

31.

  

Limitation on Landlord’s Liability

  

27

32.

  

Miscellaneous

  

27

33.

  

Waiver of Jury Trial

  

30

34.

  

Tenant’s Early Termination Right

  

30

 

(i)

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

 

EXHIBITS

 

EXHIBIT “A”

  

Project Site Plan

EXHIBIT “B”

  

Premises

EXHIBIT “C”

  

Work Letter Agreement

EXHIBIT “D”

  

Sample Form of Notice of Lease Term Dates

EXHIBIT “E”

  

Rules and Regulations

EXHIBIT “F”

  

Sample Form of Tenant Estoppel Certificate

EXHIBIT “G”

  

Intentionally Omitted

EXHIBIT “H”

  

Form of SNDA

INDEX

 

 

  

Page(s)

 

Abandonment

  

 

24

 

Accountant

  

 

8

 

Actual Statement

  

 

8

 

ADA

  

 

13

 

Affiliate Assignee

  

 

18

 

Affiliates

  

 

17

 

Approved Working Drawings

  

 

Exhibit C

 

Base Year

  

 

ii

 

Base, Shell and Core

  

 

Exhibit C

 

BOMA

  

 

1

 

Brokers

  

 

ii

 

Building

  

 

i

 

Building Common Areas

  

 

3

 

Building Holidays

  

 

ii

 

Building’s Share

  

 

4

 

business day

  

 

12

 

Commencement Date

  

 

i

 

Common Areas

  

 

3

 

Comparable Buildings

  

 

1

 

Construction Drawings

  

 

Exhibit C

 

Contractor

  

 

Exhibit C

 

Corrective Action

  

 

11

 

Cost Pools

  

 

5

 

Cutoff Date

  

 

8

 

days

  

 

28

 

Eligibility Period

  

 

20

 

Environmental Law

  

 

11

 

Environmental Permits

  

 

11

 

Estimate Statement

  

 

7

 

Excess Expenses

  

 

4

 

Extension Notice

  

 

1

 

Extension Option

  

 

1

 

fair market rental rate

  

 

1

 

Final Space Plan

  

 

Exhibit C

 

Force Majeure Delays

  

 

29

 

Guarantor(s)

  

 

ii

 

Hazardous Materials

  

 

11

 

HVAC

  

 

13, 18

 

Indemnified Claims

  

 

20

 

Landlord

  

 

1

 

Landlord Hazardous Materials

  

 

11

 

Landlord Indemnified Parties

  

 

11

 

Landlord’s Broker

  

 

12

 

(ii)

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

 

 

  

Page(s)

 

Landlord’s Work

  

 

Exhibit C

 

Lease

  

 

1

 

Monthly Basic Rent

  

 

i

 

number of days

  

 

Exhibit C

 

Operating Expenses

  

 

4

 

Option Term

  

 

1

 

Original Tenant

  

 

2

 

Outside Agreement Date

  

 

2

 

Outside Date

  

 

1

 

PCBs

  

 

11

 

Permits

  

 

Exhibit C

 

Permitted Use

  

 

ii

 

Pre-Approved Change

  

 

14

 

Premises

  

 

i

 

Project

  

 

i

 

Project Common Areas

  

 

3

 

Real Property Taxes and Assessments

  

 

7

 

rent

  

 

3

 

Review Period

  

 

8

 

Security Deposit

  

 

ii

 

Site

  

 

i

 

Subject Space

  

 

16

 

Substantial Completion

  

 

Exhibit C

 

Summary

  

 

1, i

 

Systems

  

 

14

 

Tenant

  

 

1

 

Tenant Changes

  

 

14

 

Tenant Delays

  

 

Exhibit C

 

Tenant Improvements

  

 

Exhibit C

 

Tenant Indemnified Parties

  

 

11

 

Tenant Parties

  

 

20

 

Tenant’s Name Sign

  

 

10

 

Tenant’s Parties

  

 

11

 

Tenant’s Percentage

  

 

ii

 

Tenant’s Review Period

  

 

2

 

Term

  

 

i

 

Termination Consideration

  

 

30

 

Termination Date

  

 

30

 

Termination Notice

  

 

30

 

the Lease

  

 

Exhibit C

 

Transfer

  

 

16

 

Transfer Date

  

 

16

 

Transfer Notice

  

 

16

 

Transferee

  

 

16

 

Work Letter Agreement

  

 

Exhibit C

 

Working Drawings

  

 

Exhibit C

 

worth at the time of award

  

 

25

 

 

 

 

(iii)

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

 

OFFICE LEASE

This LEASE, which includes the preceding Summary of Basic Lease Information and
Definitions (“Summary”) attached hereto and incorporated herein by this
reference (“Lease”), is made as of the 6th day of June, 2011, by and between
MULLROCK 3 TORREY PINES, LLC, a Delaware limited liability company (“Landlord”),
and THOMAS, MCNERNEY & PARTNERS MGT., LLC, a Delaware limited liability company
(“Tenant”).

1. Premises.

1.1. Premises. Upon and subject to the terms, covenants and conditions
hereinafter set forth in this Lease, Landlord hereby leases to Tenant, and
Tenant hereby leases from Landlord, the Premises described in Section 1.5 of the
Summary above, improved or to be improved with the Tenant Improvements.

1.2. Landlord’s Reservation of Rights. Provided Tenant’s use of and access to
the Premises is not materially interfered with in an unreasonable manner, and
subject to the terms of this Lease, Landlord reserves for itself the right from
time to time to install, use, maintain, repair, replace and relocate pipes,
ducts, conduits, wires and appurtenant meters and equipment above the ceiling
surfaces, below the floor surfaces and within the walls of the Building and the
Premises.

1.3. Rentable and Usable Square Feet. The rentable and usable square feet of the
Premises are approximately as set forth in Section 1.5 of the Summary. For
purposes hereof, the “usable square feet” and “rentable square feet” of the
Premises, and the “rentable square feet” of the Building shall be calculated by
Landlord pursuant to the Standard Method for Measuring Floor Area in Office
Buildings, ANSI Z65.1-1996 (“BOMA”), as modified by Landlord with respect to
rentable square footage pursuant to Landlord’s standard rentable area
measurements for the Project, to include, among other calculations, a portion of
the common areas and service areas of the Building. The rentable and usable
square feet of the Premises and the rentable square feet of the Building are not
subject to adjustment.

2. Term; Notice of Lease Dates; Option Term; Early Entry.

2.1. The Term of this Lease shall be for the period designated in Section 1.6 of
the Summary commencing on the Commencement Date, and ending on the expiration of
such period, unless the Term is sooner terminated as provided in this Lease.
Notwithstanding the foregoing, if the Commencement Date falls on any day other
than the first day of a calendar month then the Term of this Lease will be
measured from the first day of the month following the month in which the
Commencement Date occurs. Within ten (10) days after Landlord’s written request,
Tenant shall execute a written confirmation of the Commencement Date and
expiration date of the Term in the form of the Notice of Lease Term Dates
attached hereto as Exhibit “D”. Notwithstanding anything in this Lease to the
contrary, in the event that Substantial Completion (as defined in the Work
Letter Agreement) of the Premises has not occurred by that date which is one
hundred (100) days after the date of the full execution and delivery of this
Lease by Landlord and Tenant (the “Outside Date”), as such Outside Date may be
extended by the number of days of Tenant Delays (as defined in the Work Letter
Agreement) and by the number of days of “Force Majeure Delays” (as defined in
Section 32.15 hereof), then Landlord shall provide Tenant with one (1) day of
abatement of Monthly Basic Rent for each day of such delay.

2.2. Option Term.

(a)

Subject to the terms hereof, Landlord hereby grants to Tenant one (1) option
(the “Extension Option”) to extend the Term of this Lease with respect to the
entire Premises for three (3) years (“Option Term”), on the same terms,
covenants and conditions as provided for in this Lease during the initial Term,
except that all economic terms such as, without limitation, Monthly Basic Rent,
parking charges, etc., shall be established based on the “fair market rental
rate” for the Premises for the Option Term as defined and determined in
accordance with the provisions of this Section 2.2.

(b)

The Extension Option must be exercised, if at all, by written notice (“Extension
Notice”) delivered by Tenant to Landlord no earlier than the date which is nine
(9) months, and no later than the date which is six (6) months, prior to the
expiration of the original Term of this Lease. Tenant’s failure to timely
provide the Extension Notice shall render the Extension Option null and void and
of no further force or effect.

(c)

The term “fair market rental rate” as used herein shall mean the annual amount
per rentable square foot, projected during the relevant period, that a willing,
comparable, non-equity renewal tenant (excluding sublease, assignment and new
tenant transactions) would pay, and a willing, comparable landlord of a
comparable quality building located in the general vicinity of the Project
(“Comparable Buildings”), together with such other San Diego County market areas
reasonably determined by Landlord, would accept, at arm’s length (what Landlord
is accepting in current transactions for the Project may be considered), from a
tenant having similar financial responsibility, credit rating and capitalization
as Tenant then has, for a three (3) year term of a lease of space unencumbered
by any other tenant’s expansion rights and comparable in size, quality and floor
height as the leased area at issue taking into account the age, quality, views
and layout of the existing improvements in the leased area at issue

 

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

 

(with consideration given to the fact that the improvements existing in the
Premises are specifically suitable to Tenant), giving appropriate consideration
to the standard of measurement by which the rentable square footage is measured,
the ratio of rentable square feet to usable square feet, and taking into account
items that professional real estate brokers customarily consider in renewal
transactions, including, but not limited to: the condition of the improvements
in the comparable premises; rental rates; office space availability; tenant
size, refurbishment allowances, credit standing and financial stature; brokerage
commissions; operating expenses; and base year and/or expense stops; parking
charges, and any other amounts then being charged by Landlord or the lessors of
such similar office buildings.

(d)

Landlord’s determination of fair market rental rate shall be delivered to Tenant
in writing not later than the later of (i) thirty (30) days following Landlord’s
receipt of Tenant’s Extension Notice or (ii) six (6) months prior to the
expiration of the initial Lease Term. Tenant will have five (5) business days
(“Tenant’s Review Period”) after receipt of Landlord’s notice of the fair market
rental rate within which to accept such fair market rental rate or to object
thereto in writing. Tenant’s failure to accept the fair market rental rate
submitted by Landlord in writing within Tenant’s Review Period will conclusively
be deemed Tenant’s disapproval thereof. If Tenant objects, or is deemed to have
disapproved, to the fair market rental rate submitted by Landlord within
Tenant’s Review Period, then Landlord and Tenant will attempt in good faith to
agree upon such fair market rental rate using their best good faith efforts. If
Landlord and Tenant fail to reach agreement on such fair market rental rate
within ten (10) days following the expiration of Tenant’s Review Period (the
“Outside Agreement Date”), then each party’s determination shall be submitted to
appraisal in accordance with the following provisions of this Section 2.2.

(e)

(1) Landlord and Tenant shall each appoint one independent, unaffiliated,
neutral appraiser who shall by profession be a real estate broker who has been
active over the five (5) year period ending on the date of such appointment in
the valuation of leases of comparable office space in comparable buildings in
the general vicinity of the Building. Each such appraiser will be appointed
within twenty (20) days after the Outside Agreement Date.

(2) The two (2) appraisers so appointed will, within ten (10) days of the date
of the appointment of the last appointed appraiser, agree upon and appoint a
third appraiser who shall be qualified under the same criteria set forth herein
above for qualification of the initial two (2) appraisers.

(3) The determination of the appraisers shall be limited solely to the issue of
whether Landlord’s or Tenant’s last proposed (as of the Outside Agreement Date)
new fair market rental rate for the Premises is the closest to the actual new
fair market rental rate for the Premises as determined by the appraisers, taking
into account the requirements of Sections 2.2(a) and 2.2(c) above and this
Section 2.2(e) regarding same.

(4) The three (3) appraisers shall, within fifteen (15) days of the appointment
of the third appraiser, reach a decision as to whether the parties shall use
Landlord’s or Tenant’s submitted new fair market rental rate (i.e., the
appraisers may only select Landlord’s or Tenant’s submission and may not select
a compromise position), and shall notify Landlord and Tenant thereof.

(5) The decision of the majority of the three (3) appraisers shall be binding
upon Landlord and Tenant. The cost of each party’s appraiser shall be the
responsibility of the party selecting such appraiser, and the cost of the third
appraiser shall be shared equally by Landlord and Tenant.

(6) If either Landlord or Tenant fails to appoint an appraiser within the time
period in Section 2.2(e)(1) hereinabove, the appraiser appointed by one of them
shall reach a decision, notify Landlord and Tenant thereof and such appraiser’s
decision shall be binding upon Landlord and Tenant.

(7) If the two (2) appraisers fail to agree upon and appoint a third appraiser,
both appraisers shall be dismissed and the matter to be decided shall be
forthwith submitted to arbitration under the provisions of the American
Arbitration Association (but subject to the requirements of Sections 2.2(a) and
2.2(c) and this Section 2.2(e)).

(8) In the event that the new Monthly Basic Rent is not established prior to end
of the initial Term of this Lease, the Monthly Basic Rent immediately payable at
the commencement of the Option Term shall be the Monthly Basic Rent payable in
the immediately preceding month. Notwithstanding the above, once the fair market
rental is determined in accordance with this Section 2.2, the parties shall
settle any underpayment or overpayment on the next Monthly Basic Rent payment
date falling not less than thirty (30) days after such determination.

(f)

Notwithstanding anything above to the contrary, the Extension Option is personal
to the original Tenant executing this Lease (“Original Tenant”) and any
Affiliate Assignee pursuant to Section 14.8 below and may be exercised only by
the Original Tenant or any such Affiliate Assignee while occupying the entire
Premises and may not be exercised or be assigned, voluntarily or involuntarily,
by any person or entity other than the Original Tenant or any such Affiliate
Assignee, as the case may be. The Extension Option is not assignable separate
and apart from this Lease, nor may the Extension Option be separated from this
Lease in any manner, either by reservation or otherwise. Tenant shall have no
right to exercise the Extension Option, notwithstanding any provision of the
grant of the Extension Option to the contrary, and Tenant’s exercise of the
Extension Option may, at Landlord’s option, be nullified by Landlord and deemed
of no further force or effect, if Tenant shall be in default under the terms of
this Lease after the expiration of applicable cure periods as of Tenant’s
exercise of the Extension Option or at any time after the exercise of the
Extension Option and prior to the commencement of the Option Term.

-2-

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

 

2.3.

Tenant’s early entry rights are set forth in Section 5.1 of Exhibit “C.”

3. Rent and Basic Rent Abatement.

3.1. Monthly Basic Rent. Tenant agrees to pay Landlord, as basic rent for the
Premises, the Monthly Basic Rent in the amounts designated in Section 1.8 of the
Summary. The Monthly Basic Rent shall be paid by Tenant in monthly installments
in the amounts designated in Section 1.8 of the Summary in advance on the first
day of each and every calendar month during the Term, without demand, notice,
deduction or offset except as otherwise set forth in this Lease and except that
the first (1st) full month’s Monthly Basic Rent shall be paid upon Tenant’s
execution and delivery of this Lease to Landlord. Monthly Basic Rent for any
partial month shall be prorated in the proportion that the number of days this
Lease is in effect during such month bears to a thirty (30) day month.
Notwithstanding anything to the contrary contained herein and provided that
Tenant faithfully performs all of the terms and conditions of this Lease,
Landlord hereby agrees to abate Tenant’s obligation to pay Tenant’s Monthly
Basic Rent for the second (2nd) and third (3rd) full months of the initial Lease
Term. During such abatement period, Tenant shall still be responsible for the
payment of all of its other monetary obligations under this Lease. In the event
of a default by Tenant under the terms of this Lease that results in early
termination pursuant to the provisions of Section 23 of this Lease, then as a
part of the recovery set forth in Section 23 of this Lease, Landlord shall be
entitled to the pro-rata recovery of the Monthly Basic Rent that was abated
under the provisions of this Section 3.1.

3.2. Additional Rent. All amounts and charges payable by Tenant under this Lease
in addition to the Monthly Basic Rent described in Section 3.1 above (including,
without limitation, payments for insurance, repairs and parking, and Tenant’s
Percentage of Operating Expenses in excess of Landlord’s Contribution to
Operating Expenses as provided in Section 1.10 of the Summary) shall be
considered additional rent for the purposes of this Lease, and the word “rent”
in this Lease shall include such additional rent unless the context specifically
or clearly implies that only the Monthly Basic Rent is referenced. The Monthly
Basic Rent and additional rent shall be paid to Landlord as provided in
Section 7, without any prior notice or demand therefor and without any deduction
or offset whatever (except as otherwise set forth in this Lease), in lawful
money of the United States of America.

4. Common Areas: Operating Expenses.

4.1. Definitions; Tenant’s Rights. During the Term of this Lease, Tenant shall
have the nonexclusive right to use, in common with other tenants in the Project,
and subject to the Rules and Regulations referred to in Section 6 below, those
portions of the Project (the “Project Common Areas”) not leased or designated
for lease to tenants that are provided for use in common by Landlord, Tenant and
any other tenants of the Project (or by the sublessees, agents, employees,
customers invitees, guests or licensees of any such party), whether or not those
areas are open to the general public. The Project Common Areas shall include,
without limitation, any fixtures, systems, decor, facilities and landscaping
contained, maintained or used in connection with those areas, and shall be
deemed to include any city sidewalks adjacent to the Project, any pedestrian
walkway system, park or other facilities located on the Site and open to the
general public. The common areas appurtenant to the Building shall be referred
to herein as the “Building Common Areas” and shall include, without limitation,
the following areas:

(a)

the common entrances, lobbies, restrooms on multi-tenant floors, elevators,
stairways and accessways, loading docks, ramps, drives and platforms and any
passageways and serviceways thereto to the extent not exclusively serving
another tenant or contained within another tenant’s premises, and the common
pipes, conduits, wires and appurtenant equipment serving the Premises; and

(b)

the parking structure and parking areas, loading and unloading areas, trash
areas, roadways, sidewalks, walkways, parkways, driveways and landscaped areas
appurtenant to the Building.

The Building Common Areas and the Project Common Areas shall be referred to
herein collectively as the “Common Areas.”

4.2. Landlord’s Reserved Rights. Landlord reserves the right from time to time
to use any of the Common Areas and to do any of the following, as long as such
acts do not unreasonably and materially interfere with Tenant’s use of or access
to the Premises:

(a)

expand the Building and construct or alter other buildings or improvements on
the Site;

(b)

make any changes, additions, improvements, repairs or replacements in or to the
Project, the Site, the Common Areas and/or the Building (including the Premises
if required to do so by any law or regulation) and the fixtures and equipment
thereof, including, without limitation: (i) maintenance, replacement and
relocation of pipes, ducts, conduits, wires and meters; and (ii) changes in the
location, size, shape and number of driveways, entrances, stairways, elevators,
loading and unloading areas, ingress, egress, direction of traffic, landscaped
areas and walkways and, subject to Section 6.2, parking spaces and parking
areas;

(c)

close temporarily any of the Common Areas while engaged in making repairs,
improvements or alterations to the Project, Site and/or Building; and

-3-

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

 

(d)

perform such other acts and make such other changes with respect to the Project,
Site, Common Areas and Building, as Landlord may, in the exercise of its good
faith business judgment, deem to be appropriate.

Without limiting the generality of the foregoing, Tenant acknowledges that
during the Lease Term, in the event Landlord performs work on the third
(3rd) floor of the Building that Landlord shall use commercially reasonable
efforts to minimize interference with Tenant’s business operations including
performing unreasonably noisy work (other than standard construction work)
outside of Business Hours.

4.3. Excess Expenses. In addition to the Monthly Basic Rent required to be paid
by Tenant pursuant to Section 3.1 above, during each month during the Term of
this Lease (after the Base Year noted in Section 1.10 of the Summary), Tenant
shall pay to Landlord the amount by which Tenant’s Percentage of Operating
Expenses for such calendar year exceeds Landlord’s Contribution to Operating
Expenses (such amount shall be referred to in this Section 4 as the “Excess
Expenses”), in the manner and at the times set forth in the following provisions
of this Section 4.

4.4. Definition of Operating Expenses. As used in this Lease, the term
“Operating Expenses” shall consist of all costs and expenses of operation,
maintenance, repair and replacement of the Project (including the Building, the
Site and the Common Areas) as determined by standard accounting practices and
calculated assuming the Project is ninety-five percent (95%) occupied, together
with the Building’s Share of all costs and expenses for the operation,
maintenance, repair and replacement of the Project and the Project Common Areas
as determined by Landlord utilizing standard accounting practices and calculated
assuming the Project is ninety-five percent (95%) occupied. The term “Building’s
Share” shall mean a fraction, the numerator of which is the rentable square
footage of the Building and the denominator of which is the rentable square
footage of the Project. Operating Expenses include the following costs by way of
illustration but not limitation: (a) Real Property Taxes and Assessments (as
defined in Section 4.5 below) and any taxes or assessments imposed in lieu
thereof; (b) any and all assessments imposed with respect to the Building,
Common Areas, and/or Site pursuant to any covenants, conditions and restrictions
affecting the Site, Common Areas or Building; (c) to the extent not charged to
and paid by Tenant pursuant to Section 16.2 below, water and sewer charges and
the costs of electricity, heating, ventilating, air conditioning and other
utilities; (d) to the extent not charged to and paid by Tenant pursuant to
Section 16.2 below, utilities surcharges and any other costs, levies or
assessments resulting from statutes or regulations promulgated by any government
authority in connection with the use or occupancy of the Site, Building or the
Premises or the parking facilities serving the Site, Building or the Premises;
(e) costs of insurance obtained by Landlord pursuant to Section 21 of this
Lease; (f) waste disposal and janitorial services; (g) security (if any);
(h) costs incurred in the management of the Site, Building and Common Areas,
including, without limitation: (1) supplies, (2) wages, salaries, benefits,
pension payments, fringe benefits, uniforms and dry-cleaning thereof (and
payroll taxes, unemployment taxes, employer’s Social Security taxes, together
with any other taxes levied on wages, salaries, compensation and benefits,
insurance and similar governmental charges related thereto) of employees used in
the operation and maintenance of the Site, Building and Common Areas, (3) the
rental of personal property used by Landlord’s personnel in the maintenance,
repair and operation of the Project, (4) management office expenses including
rent and operating costs, (5) accounting fees, legal fees and real estate
consultant’s fees, and (6) a management/administrative fee substantially
consistent with that charged by landlords of Comparable Buildings, but in any
event not to exceed four percent (4%) of the gross revenues of the Building;
(i) supplies, materials, equipment and tools; (j) repair and maintenance of the
elevators and the structural portions of the Building, including the plumbing,
heating, ventilating, air-conditioning, electrical and other utility systems
installed or furnished by Landlord; (k) maintenance, costs and upkeep of all
parking and Common Areas; (I) amortization on a straight-line basis over the
useful life (as reasonably determined by Landlord), together with interest at
the Interest Rate (as defined in Section 1.14 of the Summary of this Lease) on
the unamortized balance of all costs of a capital nature (including, without
limitation, capital improvements, capital replacements, capital repairs, capital
equipment and capital tools): (1) intended to produce a reduction in operating
charges or energy consumption or effect other economies in the operation or
maintenance of the Project; or (2) required after the date of this Lease under
any governmental law or regulation that was not in effect as of the Commencement
Date; or (3) for repair or replacement of any equipment or improvements needed
to operate and/or maintain the Building, the Common Areas and/or the Site at the
same quality levels as prior to the repair or replacement; (m) costs and
expenses of gardening and landscaping; (n) maintenance of signs; (o) personal
property taxes levied on or attributable to personal property used in connection
with the Building, the Common Areas and/or the Site; and (p) costs and expenses
of repairs, resurfacing, repairing, maintenance, painting, lighting and similar
items, including appropriate reserves. If Landlord is not furnishing any
particular work or service (the cost of which, if performed by Landlord, would
be included in Operating Expenses) to a tenant who has undertaken to perform
such work or service in lieu of the performance thereof by Landlord, Operating
Expenses shall be deemed to be increased by an amount equal to the additional
Operating Expenses which would reasonably have been incurred during such period
by Landlord if it had at its own expense furnished such work or service to such
tenant. For purposes of determining Landlord’s Contribution to Operating
Expenses, Operating Expenses shall not include (i) one-time special assessments,
charges, costs or fees or extraordinary charges or costs incurred in the Base
Year only, (ii) market-wide labor-rate increases due to extraordinary
circumstances including, but not limited to, boycotts and strikes (except to the
extent such extraordinary circumstances continue beyond the Base Year),
(iii) utility rate increases due to extraordinary circumstances including, but
not limited to, conservation surcharges, boycotts, embargoes or other shortages
(except to the extent such extraordinary circumstances continue beyond the Base
Year). In no event shall structural repairs or structural replacements to the
Building (including without limitation the structural walls, foundations,
concrete sub flooring, structural elements of the roof and underground
utilities) be included in Operating Expenses.

-4-

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

 

Landlord shall have the right, from time to time, to equitably allocate some or
all of the Operating Expenses between the Building and/or among different
tenants of the Project and/or different buildings of the Project as and when
such different buildings are constructed and added to (and/or excluded from) the
Project or otherwise (the “Cost Pools”). Such Cost Pools may include, without
limitation, the office space tenants and industrial space tenants of the Project
or of a building or buildings in the Project. Such Cost Pools may also include
an allocation of certain Operating Expenses within or under covenants,
conditions and restrictions affecting the Project. In addition, Landlord shall
have the right from time to time, in its reasonable discretion, to include or
exclude existing or future buildings in the Project for purposes of determining
Operating Expenses and/or the provision of various services and amenities
thereto, including allocation of Operating Expenses in any such Cost Pools.

Landlord hereby agrees that the cost of any new type or increased amount of
insurance coverage (including, but not limited to, earthquake insurance) (or
increased limits of insurance or decrease in the amount of deductibles) which is
obtained or effected by Landlord during any calendar year after the Base Year
(but is not obtained or effected during the Base Year) shall be added to the
Operating Expenses for the Base Year (but at the rate which would have been in
effect during the Base Year or the rate in effect during such subsequent
calendar year, whichever is lower) prior to the calculation of Tenant’s Share of
Operating Expenses for each such calendar year in which such change in insurance
is initially obtained or effected. In the event that any of Landlord’s insurance
premiums applicable to the Project shall decrease in any calendar year
subsequent to the Base Year (including, without limitation, as a result of any
decrease in the amount or type of coverage or increase in deductibles),
Operating Expenses attributable to the Base Year, shall, commencing the year of
such decrease, but only as long as and to the extent such decrease remains in
effect, thereafter be reduced by the amount of such decrease in the insurance
premiums.

Landlord further agrees that any costs incurred in any calendar year after the
Base Year because of any added new type of discretionary services which were
readily available during the Base Year, and customarily provided by landlords of
Comparable Buildings during the Base Year (but not by Landlord), and not
included in the Base Year shall be added to and included in the Base Year for
purposes of determining the Operating Expenses payable for such calendar year in
which such added new type of discretionary services are so provided, as if such
services were provided in the Base Year (but at the rate for such services which
would have been in effect during the Base Year, or the rate in effect during
such subsequent calendar year, whichever is lower).

Notwithstanding anything to the contrary in this Lease, Operating Expenses shall
not include the following:

(a)

costs incurred in connection with defects in the original construction of the
Project or in connection with any major change in the Project, such as adding or
deleting floors or Buildings;

(b)

depreciation, interest and principal payments on mortgages or other debt costs,
if any;

(c)

marketing costs, legal fees, space planners’ fees, advertising and promotional
expenses, and brokerage fees incurred in connection with the original
development, subsequent improvement, or original or future leasing of the
Project;

(d)

costs for which the Landlord is reimbursed, or would have been reimbursed, if
Landlord had carried the insurance Landlord is required to carry pursuant to
this Lease or would have been reimbursed if Landlord had used commercially
reasonable efforts to collect such amounts from any tenant or occupant of the
Project or by insurance from its carrier or any tenant’s carrier;

(e)

any bad debt loss, rent loss, or reserves for bad debts or rent loss or any
reserves of any kind (but Operating Expenses may include reasonable reserves
imposed upon the Project as part of the assessments under any covenants,
conditions and restrictions recorded against the Project other than a reserve
for any debt or financing arrangement);

(f)

costs associated with the operation of the business of the partnership or entity
which constitutes the Landlord, as the same are distinguished from the costs of
operation of the Project, including partnership accounting and legal matters,
costs of defending any lawsuits with any mortgagee (except as the actions of the
Tenant may be in issue), costs of selling, syndicating, financing, mortgaging or
hypothecating any of the Landlord’s interest in the Project, and costs incurred
in connection with any disputes between Landlord and its employees, between
Landlord and Project management, or between Landlord and other tenants or
occupants;

(g)

the wages and benefits of any employee who does not devote substantially all of
his or her employed time to the Project unless such wages and benefits are
prorated to reflect time spent on operating and managing the Project vis-à-vis
time spent on matters unrelated to operating and managing the Project; provided,
that in no event shall Operating Expenses for purposes of this Lease include
wages and/or benefits attributable to personnel above the level of Project
manager unless those personnel are acting in the capacity of their respective
positions and the amount of salary being charged to the Project is comparable to
Comparable Buildings;

(h)

late charges, penalties, liquidated damages, and interest arising out of
Landlord’s failure to make timely payment of any of its obligations;

(i)

amount paid as ground rental for the Project;

-5-

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

 

(j)

costs, including permit, license and inspection costs, incurred with respect to
the installation of tenant improvements made for new tenants or other occupants
in the Project or incurred in renovating or otherwise improving, decorating,
painting or redecorating vacant space for tenants or other occupants of the
Project;

(k)

costs of capital repairs and capital alterations, capital improvements and
capital equipment, except as permitted in this Section 4.4 above;

(I)

any amount paid by Landlord or to the parent organization or a subsidiary or
affiliate of the Landlord for supplies and/or services in the Project to the
extent the same exceeds the typical costs of such supplies and/or services
rendered by qualified, first-class unaffiliated third parties on a competitive
basis;

(m)

any compensation paid to clerks, attendants or other persons in commercial
concessions operated by or on behalf of the Landlord (other than the parking
facilities serving the Project);

(n)

rentals and other related expenses incurred in leasing air conditioning systems,
elevators or other equipment (except when needed in connection with normal
repairs and maintenance of permanent systems) which if purchased the cost of
which would be excluded from Operating Expenses as a capital cost (excluding,
however, equipment not affixed to the Building or the Project which is used in
providing janitorial or similar services);

(o)

all items and services for which Tenant or any other tenant in the Project is
obligated to reimburse Landlord, or which Landlord provides selectively to one
or more tenants (other than Tenant) without reimbursement;

(p)

electric power costs or costs for other utilities for which any tenant
(including Tenant) directly contracts with a public service company, or any
costs for electricity, water, heat, air conditioning or other utilities provided
by Landlord to any tenant free of charge in excess of the costs for utilities
offered by Landlord to Tenant free of charge;

(q)

costs, other than those incurred in ordinary maintenance and repair, for
sculpture, paintings, fountains or other objects of art;

(r)

depreciation and amortization, except as provided herein and except on
materials, tools, supplies and vendor-type equipment purchased by Landlord to
enable Landlord to supply services Landlord might otherwise contract for with a
third party where such depreciation and amortization would otherwise have been
included in the charge for such third party’s services, all as determined in
accordance with standard real estate accounting practices, consistently applied,
and when depreciation or amortization is permitted or required, the item shall
be amortized over its reasonably anticipated useful life as reasonably
determined by Landlord in the manner described in Section 4.4(1) above, together
with interest on the unamortized costs at the Interest Rate;

(s)

any costs expressly excluded from Operating Expenses elsewhere in this Lease;

(t)

rent for any office space occupied by Project management personnel to the extent
the size or rental rate of such office space exceeds the size or fair market
rental value of office space occupied by management personnel of the Comparable
Buildings, with adjustment where appropriate for the size of the applicable
project;

(u)

Landlord’s general corporate overhead and general and administrative expenses,
except for the property management fee and except as they relate to the specific
management of the Project such as tax management services and project accounting
fees;

(v)

costs arising from the gross negligence or willful misconduct of Landlord or
Landlord’s agents, employees, contractors, invitees or licensees;

(w)

costs incurred to comply with applicable laws with respect to the cleanup,
removal, investigation and/or remediation of any Hazardous Materials (as such
term is defined in Section 6.4 below) in, on or under the Project and/or the
Building to the extent not the responsibility of Tenant under this Lease; and

(x)

costs arising from Landlord’s charitable or political contributions.

Landlord shall (i) not make a profit by charging items to Operating Expenses
that are otherwise also charged separately to others and (ii) Landlord shall not
collect Operating Expenses from Tenant and all other tenants/occupants in the
Building in an amount in excess of what Landlord incurred for the items included
in Operating Expenses.

-6-

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

 

4.5. Definition of Real Property Taxes and Assessments. All Real Property Taxes
and Assessments shall be adjusted to reflect an assumption that the Building is
fully assessed for real property tax purposes as a completed building(s) ready
for occupancy. As used in this Lease, the term “Real Property Taxes and
Assessments” shall mean: any form of assessment, license fee, license tax,
business license fee, commercial rental tax, levy, charge, improvement bond,
tax, water and sewer rents and charges, utilities and communications taxes and
charges or similar or dissimilar imposition imposed by any authority having the
direct power to tax, including any city, county, state or federal government, or
any school, agricultural, lighting, drainage or other improvement or special
assessment district thereof, or any other governmental charge, general and
special, ordinary and extraordinary, foreseen and unforeseen, which may be
assessed against any legal or equitable interest of Landlord in the Premises,
Building, Common Areas, Site or Project, including the following by way of
illustration but not limitation:

(a)

any tax on Landlord’s “right” to rent or “right” to other income from the
Premises or as against Landlord’s business of leasing the Premises;

(b)

any assessment, tax, fee, levy or charge in substitution, partially or totally,
of any assessment, tax, fee, levy or charge previously included within the
definition of real property tax, it being acknowledged by Tenant and Landlord
that Proposition 13 was adopted by the voters of the State of California in the
June, 1978 election and that assessments, taxes, fees, levies and charges may be
imposed by governmental agencies for such services as fire protection, street,
sidewalk and road maintenance, refuse removal and for other governmental
services formerly provided without charge to property owners or occupants. It is
the intention of Tenant and Landlord that all such new and increased
assessments, taxes, fees, levies and charges be included within the definition
of “real property taxes” for the purposes of this Lease;

(c)

any assessment, tax, fee, levy or charge allocable to or measured by the area of
the Premises or other premises in the Building or the rent payable by Tenant
hereunder or other tenants of the Building, including, without limitation, any
gross receipts tax or excise tax levied by state, city or federal government, or
any political subdivision thereof, with respect to the receipt of such rent, or
upon or with respect to the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or
any portion thereof but not on Landlord’s other operations;

(d)

any assessment, tax, fee, levy or charge upon this transaction or any document
to which Tenant is a party, creating or transferring an interest or an estate in
the Premises; and/or

(e)

any assessment, tax, fee, levy or charge by any governmental agency related to
any transportation plan, fund or system (including assessment districts)
instituted within the geographic area of which the Building is a part.

Notwithstanding the foregoing, if, after the Commencement Date, Real Property
Taxes and Assessments are reduced, then for purposes of all subsequent calendar
years including the calendar year in which the reduction occurs, Landlord’s
Contribution to Operating Expenses shall be proportionately reduced.
Notwithstanding the foregoing provisions of this Section 4.5 above to the
contrary, “Real Property Taxes and Assessments” shall not include Landlord’s
federal or state income, franchise, inheritance or estate taxes.

4.6. Estimate Statement. By the first day of April of each calendar year during
the Term of this Lease (after the Base Year noted in Section 1.10 of the
Summary) or as soon thereafter as reasonably possible, Landlord shall deliver to
Tenant a statement (“Estimate Statement”) estimating the Operating Expenses for
the current calendar year and the estimated amount of Excess Expenses payable by
Tenant. Landlord shall have the right no more than one (1) time in any calendar
year to deliver a revised Estimate Statement showing the Excess Expenses for
such calendar year if Landlord determines that the Excess Expenses are greater
than those set forth in the original Estimate Statement (or previously delivered
revised Estimate Statement) for such calendar year. The Excess Expenses shown on
the Estimate Statement (or revised Estimate Statement, as applicable) shall be
divided into twelve (12) equal monthly installments, and Tenant shall pay to
Landlord, concurrently with the regular monthly rent payment next due following
the receipt of the Estimate Statement (or revised Estimate Statement, as
applicable), an amount equal to one (1) monthly installment of such Excess
Expenses multiplied by the number of months from January in the calendar year in
which such statement is submitted to the month of such payment, both months
inclusive (less any amounts previously paid by Tenant with respect to any
previously delivered Estimate Statement or revised Estimate Statement for such
calendar year). Subsequent installments shall be paid concurrently with the
regular monthly rent payments for the balance of the calendar year and shall
continue until the next calendar year’s Estimate Statement (or current calendar
year’s revised Estimate Statement) is received.

4.7. Actual Statement. By the first day of April of each succeeding calendar
year during the Term of this Lease or as soon thereafter as reasonably possible,
Landlord shall deliver to Tenant a statement (“Actual Statement”) of the actual
Operating Expenses and Excess Expenses for the immediately preceding calendar
year. If the Actual Statement reveals that Excess Expenses were over-stated or
under-stated in any Estimate Statement (or revised Estimate Statement)
previously delivered by Landlord pursuant to Section 4.6 above, then within
thirty (30) days after delivery of the Actual Statement, Tenant shall pay to
Landlord the amount of any such under-payment, or, Landlord shall credit Tenant
against the next monthly rent falling due (or pay to Tenant in the event such
reconciliation takes place after the expiration of this Lease), the amount of
such over-payment, as the case may be. Such obligation will be a continuing one
which will survive the expiration or earlier termination of this Lease.

-7-

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

 

4.8. No Release. Any delay or failure by Landlord in delivering any Estimate or
Actual Statement pursuant to this Section 4 shall not constitute a waiver of its
right to receive Tenant’s payment of Excess Expenses, nor shall it relieve
Tenant of its obligations to pay Excess Expenses pursuant to this Section 4,
except that Tenant shall not be obligated to make any payments based on such
Estimate or Actual Statement until ten (10) days after receipt of such
statement. Notwithstanding the foregoing to the contrary, Tenant shall not be
responsible for Tenant’s Percentage of any Excess Expenses attributable to any
calendar year which was first billed to Tenant more than twelve (12) calendar
months after the expiration date of the Lease (the “Cutoff Date”), except that
Tenant shall be responsible for Tenant’s Percentage of any Excess Expenses
levied by any governmental authority or by any public utility company at any
time following the applicable Cutoff Date which are attributable to any calendar
year occurring prior to such Cutoff Date, so long as Landlord delivers to Tenant
a bill and supplemental Statement for such amounts within forty-five (45) days
following Landlord’s receipt of the applicable bill therefor.

4.9. Audit Rights. In the event Tenant disputes the amount of the Operating
Expenses set forth in the Actual Statement for the particular calendar year
delivered by Landlord to Tenant pursuant to Section 4.7 above, Tenant shall have
the right, at Tenant’s cost, after reasonable notice to Landlord, to have
Tenant’s authorized employees or agents inspect, at Landlord’s office during
normal business hours, Landlord’s books, records and supporting documents
concerning the Operating Expenses set forth in such Actual Statement; provided,
however, Tenant shall have no right to conduct such inspection, have an audit
performed by the Accountant as described below, or object to or otherwise
dispute the amount of the Operating Expenses set forth in any such Actual
Statement, unless Tenant notifies Landlord of such objection and dispute,
completes such inspection, and has the Accountant commence and complete such
audit within nine (9) months immediately following Landlord’s delivery of the
particular Actual Statement in question (the “Review Period”); provided,
further, that notwithstanding any such timely objection, dispute, inspection,
and/or audit, and as a condition precedent to Tenant’s exercise of its right of
objection, dispute, inspection and/or audit as set forth in this Section 4.9,
Tenant shall not be permitted to withhold payment of, and Tenant shall timely
pay to Landlord, the full amounts as required by the provisions of this
Section 4 in accordance with such Actual Statement. However, such payment may be
made under protest pending the outcome of any audit which may be performed by
the Accountant as described below. In connection with any such inspection by
Tenant, Landlord and Tenant shall reasonably cooperate with each other so that
such inspection can be performed pursuant to a mutually acceptable schedule, in
an expeditious manner and without interference with Landlord’s operation and
management of the Project. If after such inspection and/or request for
documentation, Tenant still disputes the amount of the Operating Expenses set
forth in the Actual Statement, Tenant shall have the right, within the Review
Period, to cause an independent certified public accountant which is not paid on
a contingency basis and which is mutually approved by Landlord and Tenant (the
“Accountant”) to complete an audit of Landlord’s books and records pertaining to
Operating Expenses to determine the proper amount of the Operating Expenses
incurred and amounts payable by Tenant for the calendar year which is the
subject of such Actual Statement. Such audit by the Accountant shall be final
and binding upon Landlord and Tenant. If Landlord and Tenant cannot mutually
agree as to the identity of the Accountant within thirty (30) days after Tenant
notifies Landlord that Tenant desires an audit to be performed, then the
Accountant shall be one of the “Big 4” accounting firms, which is not paid on a
contingency basis and which is selected by Tenant and reasonably approved by
Landlord. If such audit reveals that Landlord has over-charged Tenant, then
within thirty (30) days after the results of such audit are made available to
Landlord, Landlord shall reimburse to Tenant, within thirty (30) days, the
amount of such over-charge. If the audit reveals that the Tenant was
under-charged, then within thirty (30) days after the results of such audit are
made available to Tenant, Tenant shall reimburse to Landlord the amount of such
under-charge. Tenant agrees to pay the cost of such audit unless it is
subsequently determined that Landlord’s original Actual Statement which was the
subject of such audit was in error to Tenant’s disadvantage by five percent
(5%) or more of the total Operating Expenses of the Actual Statement which was
the subject of such audit, in which case Landlord shall pay the entire costs of
the audit. The payment by Tenant of any amounts pursuant to this Section 4 shall
not preclude Tenant from questioning the correctness of any Actual Statement
provided by Landlord at any time during the Review Period, but the failure of
Tenant to object thereto, conduct and complete its inspection and have the
Accountant conduct and complete the audit as described above prior to the
expiration of the Review Period shall be conclusively deemed Tenant’s approval
of the Actual Statement in question. In connection with any inspection and/or
audit conducted by Tenant pursuant to this Section 4.9, Tenant agrees to keep,
and to cause all of Tenant’s employees and consultants and the Accountant to
keep, all of Landlord’s books and records and the audit, and all information
pertaining thereto and the results thereof, strictly confidential (except as
reasonably necessary to enforce or protect Tenant’s rights under this Lease),
and in connection therewith, Tenant shall cause such employees, consultants and
the Accountant to execute such commercially reasonable confidentiality
agreements as Landlord may require prior to conducting any such inspections
and/or audits.

5. Security Deposit. Concurrently with Tenant’s execution and delivery of this
Lease to Landlord, Tenant shall deposit with Landlord the Security Deposit
designated in Section 1.11 of the Summary. The Security Deposit shall be held by
Landlord as security for the full and faithful performance by Tenant of all of
the terms, covenants and conditions of this Lease to be performed by Tenant
during the Term. If Tenant defaults with respect to any of its obligations under
this Lease, Landlord may (but shall not be required to) use, apply or retain all
or any part of the Security Deposit for the payment of any rent or any other sum
in default, or for the payment of any other amount, loss or damage which
Landlord may spend, incur or suffer by reason of Tenant’s default. If any
portion of the Security Deposit is so used or applied, Tenant shall, within ten
(10) days after demand therefor, deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to its original amount. Landlord
shall not be required to keep the Security Deposit separate from its general
funds, and Tenant shall not be entitled to interest on the Security Deposit. If
Tenant shall fully and faithfully

-8-

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

 

perform every provision of this Lease to be performed by it, the Security
Deposit or any balance thereof shall be returned to Tenant within sixty
(60) days following the expiration of the Lease term. If Landlord sells its
interest in the Building during the Term and if Landlord deposits with the
purchaser the Security Deposit (or balance thereof), then, upon such sale,
Landlord shall be discharged from any further liability with respect to the
Security Deposit. Tenant hereby waives the provisions of Section 1950.7 of the
California Civil Code, and all other provisions of law, now or hereafter in
force, 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 Tenant Parties (as defined in Section 6.4 below).

6. Use.

6.1. General. Tenant shall use the Premises solely for the Permitted Use
specified in Section 1.12 of the Summary, and shall not use or permit the
Premises to be used for any other use or purpose whatsoever. Tenant shall
observe and comply with the “Rules and Regulations” attached hereto as Exhibit
“E”, and all reasonable, non-discriminatory modifications thereof and additions
thereto from time to time put into effect and furnished to Tenant by Landlord so
long as the same do not unreasonably interfere with Tenant’s rights, or
materially expand Tenant’s obligations, under this Lease. Landlord shall
endeavor to enforce the Rules and Regulations, but shall have no liability to
Tenant for the violation or non-performance by any other tenant or occupant of
the Project or the Building of any such Rules and Regulations. Tenant shall, at
its sole cost and expense, observe and comply with all requirements of any board
of fire underwriters or similar body relating to the Premises, all recorded
covenants, conditions and restrictions now or hereafter affecting the Premises
(provided that Landlord will not permit the recording of any covenants,
conditions or restrictions after the date of this Lease to the extent the same
would materially interfere with Tenant’s rights, or materially expand Tenant’s
obligations, under this Lease) and all laws, statutes, codes, rules and
regulations now or hereafter in force relating to or affecting the condition,
use, occupancy, alteration or improvement of the Premises, including, without
limitation, the provisions of Title III of the = with Disabilities Act of 1990
as it pertains to Tenant’s use, occupancy, improvement and alteration of the
Premises (whether, except as otherwise expressly provided herein, structural or
nonstructural, including unforeseen and/or extraordinary alterations and/or
improvements to the Premises, regardless of the period of time remaining in the
Lease Term). Tenant shall not use or allow the Premises to be used (a) in
violation of any recorded covenants, conditions and restrictions now or
hereafter affecting the Site or of any law or governmental rule or regulation,
or of any certificate of occupancy issued for the Premises or Building, or
(b) for any improper, immoral, unlawful or reasonably objectionable purpose.
Tenant shall not do or permit to be done anything which will obstruct or
interfere with the rights of other tenants or occupants of the Project or the
Building, or injure or annoy them. Tenant shall not cause, maintain or permit
any nuisance in, on or about the Premises, the Building, the Project or the
Site, nor commit or suffer to be committed any waste in, on or about the
Premises.

6.2. Parking.

(a)

Tenant’s Parking Privileges. During the Term of this Lease, Landlord shall lease
to Tenant (at no additional cost to Tenant), and Tenant shall lease from
Landlord, the number of parking privileges specified in Section 1.16 of the
Summary hereof for use by Tenant’s employees in the common parking areas for the
Building within the Project, as designated by Landlord from time to time.
Landlord shall at all times have the right to establish and modify the nature
and extent of the parking areas for the Building and Project (including whether
such areas shall be surface, underground and/or other structures) as long as
Tenant is provided the number of parking privileges designated in Section 1.16
of the Summary. In addition, Landlord may, in its sole discretion, assign any
unreserved and unassigned parking privileges, and/or make all or a portion of
such privileges reserved.

(b)

Parking Validation. In addition to such parking privileges for use by Tenant’s
employees, Landlord shall permit access to the parking areas for Tenant’s
visitors, subject to availability of spaces and payment (by validation charges
or otherwise) of daily visitor parking charges therefor as may be established
and adjusted by Landlord from time to time.

(c)

Parking Rules. The use of the parking areas shall be subject to the Parking
Rules and Regulations contained in Exhibit “E” attached hereto and any other
reasonable, non-discriminatory rules and regulations adopted by Landlord and/or
Landlord’s parking operators from time to time, including any system for
controlled ingress and egress and charging visitors and invitees, with
appropriate provision for validation of such charges. Tenant shall not use more
parking privileges than its allotment and shall not use any parking spaces
specifically assigned by Landlord to other tenants of the Building or Project or
for visitor parking. Tenant’s parking privileges shall be used only for parking
by vehicles no larger than normally sized passenger automobiles or pick-up
trucks. Tenant shall not permit or allow any vehicles that belong to or are
controlled by Tenant or Tenant’s employees, suppliers, shippers, customers or
invitees to be loaded, unloaded, or parked in areas other than those designated
by Landlord for such activities. If Tenant permits or allows any of the
prohibited activities described herein, then Landlord shall have the right,
without notice, in addition to such other rights and remedies that it may have,
to remove or tow away the vehicle involved and charge the cost thereof to
Tenant, which cost shall be immediately payable by Tenant upon demand by
Landlord.

-9-

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

 

6.3. Signs and Auctions.

(a)

Interior Signs. Tenant shall be entitled, at Landlord’s initial cost and
expense, to (i) one (1) identification sign on or near the entry doors of the
Premises, and (ii) for multi-tenant floors, one (1) identification or
directional sign, as designated by Landlord, in the elevator lobby on the floor
on which the Premises are located; provided, however, that any Landlord approved
changes to such signage shall be at Tenant’s sole cost and expense. Such signs
shall be installed by a signage contractor designated by Landlord. The location,
quality, design, style, lighting and size of such signs shall be consistent with
the Landlord’s Building standard signage program and shall be subject to
Landlord’s prior written approval, in its reasonable discretion. Upon the
expiration or earlier termination of this Lease, Tenant shall be responsible, at
its sole cost and expense, for the removal of such signage and the repair of all
damage to the Building caused by such removal. Except for such identification
signs (and the signage permitted under Section 6.3(b) below), Tenant may not
install any signs on the exterior or roof of the Building or the common areas of
the Building or the Project. Any signs, window coverings, or blinds (even if the
same are located behind the Landlord approved window coverings for the
Building), or other items visible from the exterior of the Premises or Building
are subject to the prior approval of Landlord, in its sole and absolute
discretion. Tenant shall have no right to conduct any auction in, on or about
the Premises, the Building or Site. Tenant shall, at Landlord’s initial cost and
expense, be entitled to one (1) line on the Building directory to display
Tenant’s name and suite number; provided, however, that any Landlord approved
changes to such directory identification shall be at Tenant’s sole cost and
expense.

(b)

Tenant’s Name Sign. Subject to the approval of all applicable governmental and
quasi-governmental entities, and subject to any covenants, conditions and
restrictions and all applicable governmental and quasi-governmental laws, rules,
regulations and codes, Landlord hereby grants Tenant the exclusive right to
install one (1) name sign on the monument located at the northwestern corner of
the Building (“Tenant’s Name Sign”).” The design, size, specifications,
graphics, materials, manner of affixing, exact location, colors and lighting (if
applicable) of Tenant’s Name Sign shall be (i) consistent with the quality and
appearance of the Project, (ii) subject to the approval of all applicable
governmental and quasi-governmental authorities, and subject to any covenants,
conditions and restrictions and all applicable governmental and
quasi-governmental laws, rules, regulations and codes, and (iii) subject to
Landlord’s reasonable approval. Landlord shall install Tenant’s Name Sign at
Tenant’s sole cost and expense and Tenant shall pay to Landlord a fee of Two
Hundred Dollars ($200.00) per month for said signage concurrently with Tenant’s
payment of Monthly Basic Rent. In addition, Tenant shall be responsible for all
other costs attributable to the fabrication, insurance, lighting (if
applicable), maintenance, repair and removal of Tenant’s Name Sign. The signage
rights granted to Tenant under this Section 6.3(b) are personal to the Original
Tenant and any Affiliate Assignee and may not be exercised or used by or
assigned to any other person or entity. In addition, Original Tenant and/or any
such Affiliate Assignee shall no longer have any right to Tenant’s Name Sign if
at any time during the Term the Original Tenant and/or any such Affiliate
Assignee does not lease and occupy the entire Premises. Tenant must expressly
exercise (in writing) Tenant’s Name Sign right within the first (1st) six
(6) months of the initial Lease Term, or such signage right will be null and
void and of no further force or effect. Upon the expiration or sooner
termination of this Lease, or upon the earlier termination of Tenant’s signage
rights under this Section 6.3(b), Landlord shall have the right to permanently
remove Tenant’s Name Sign, and to repair all damage to the Building resulting
from such removal and restore the affected area to its original condition
existing prior to the installation of such Tenant’s Name Sign and Tenant shall
reimburse Landlord for the costs thereof.

6.4. Hazardous Materials. Tenant will (i) obtain and maintain in full force and
effect all Environmental Permits (as defined below) that may be required from
time to time under any Environmental Permits (as defined below) that may be
required from time to time under any Environmental Laws (as defined below)
applicable to Tenant or the Premises and (ii) be and remain in compliance in all
material respects with all terms and conditions of all such Environmental
Permits and with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
all Environmental Laws applicable to Tenant or the Premises. As used in this
Lease, the term “Environmental Law” means any past, present or future federal,
state, local, statutory or common law, or any regulation, ordinance, code, plan,
order, permit, grant, franchise, concession, restriction or agreement issued,
entered, promulgated or approved thereunder, relating to (a) the environment,
human health or safety, including, without limitation, emissions, discharges,
releases or threatened releases of Hazardous Materials (as defined below) into
the environment (including, without limitation, air, surface water, groundwater
or land), or (b) the manufacture, generation, refining, processing,
distribution, use, sale, treatment, receipt, storage, disposal, transport,
arranging for transport, or handling of Hazardous Materials. “Environmental
Permits” means, collectively, any and all permits, consents, licenses, approvals
and registrations of any nature at any time required pursuant to, or in order to
comply with, any Environmental Law. Except for ordinary and general office
supplies (used by Tenant in strict compliance with all applicable Environmental
Laws), such as copier toner, liquid paper, glue, ink and common household
cleaning materials (some or all of which may constitute “Hazardous Materials” as
defined in this Lease), Tenant agrees not to cause or permit any Hazardous
Materials to be brought upon, stored, used, handled, generated, released or
disposed of on, in, under or about the Premises, the Building, the Common Areas
or any other portion of the Project by Tenant, its agents, employees,
subtenants, assignees, licensees, contractors or invitees (collectively,
“Tenant’s Parties”), without the prior written consent of Landlord, which
consent Landlord may withhold in its sole and absolute discretion. Upon the
expiration or earlier termination of this Lease, Tenant agrees to promptly
remove from the Premises, the Building and the Project, at its sole cost and
expense, any and all Hazardous Materials, including any equipment or systems
containing Hazardous Materials which are installed, brought upon, stored, used,
generated or released upon, in, under or about the Premises, the Building and/or
the Project or any portion

-10-

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

 

thereof by Tenant or any of Tenant’s Parties. To the fullest extent permitted by
law, Tenant agrees to promptly indemnify, protect, defend and hold harmless
Landlord, any Mortgagee and their respective partners, officers, directors,
employees, agents, successors and assigns (collectively, “Landlord Indemnified
Parties”) from and against any and all claims, damages, judgments, suits, causes
of action, losses, liabilities, penalties, fines, expenses and costs (including,
without limitation, clean-up, removal, remediation and restoration costs, sums
paid in settlement of claims, attorneys’ fees, consultant fees and expert fees
and court costs) which arise or result from the presence of Hazardous Materials
on, in, under or about the Premises, the Building or any other portion of the
Project and which are caused by Tenant or any of Tenant’s Parties. Tenant agrees
to promptly notify Landlord of any release of Hazardous Materials in the
Premises, the Building or any other portion of the Project which Tenant becomes
aware of during the Term of this Lease, whether caused by Tenant or any other
persons or entities. In the event of any release of Hazardous Materials caused
by Tenant or any of Tenant’s Parties, Landlord shall have the right, but not the
obligation, to cause Tenant, at Tenant’s sole cost and expense, to immediately
take all steps Landlord deems necessary or appropriate to remediate such release
and prevent any similar future release to the satisfaction of Landlord and
Landlord’s mortgagee(s). At all times during the Term of this Lease, Landlord
will have the right, but not the obligation, to enter upon the Premises to
inspect, investigate, sample and/or monitor the Premises to determine if Tenant
is in compliance with the terms of this Lease regarding Hazardous Materials.
Tenant will, upon the request of Landlord or any mortgagee at any time during
which Tenant is in default under this Section 6.4 of this Lease, cause to be
performed an environmental audit of the Premises at Tenant’s expense by an
established environmental consulting firm reasonably acceptable to Tenant,
Landlord and Landlord’s mortgagee(s). As used in this Lease, the term “Hazardous
Materials” shall mean and include any hazardous or toxic materials, substances
or wastes as now or hereafter designated under any Environmental Law, including,
without limitation, asbestos, petroleum, petroleum hydrocarbons and petroleum
based products, urea formaldehyde foam insulation, polychlorinated biphenyls
(“PCBs”), and freon and other chlorofluorocarbons. The provisions of this
Section 6.4 will survive the expiration or earlier termination of this Lease.

The following Hazardous Materials are collectively referred to in this Lease as
“Landlord Hazardous Materials”: (A) Hazardous Materials existing in the Project
as of the Commencement Date, or (B) Hazardous Materials introduced into the
Project subsequent to the Commencement Date, where the same was not caused by
Tenant or any of the Tenant Parties. Landlord shall defend, reimburse, and hold
Tenant and Tenant’s members, partners, officers, directors, shareholders,
employees, agents, successors and assigns (collectively, “Tenant Indemnified
Parties”) harmless from and against any and all claims, damages, judgments,
suits, causes of action, losses, liabilities, penalties, fines, expenses and
costs (including, without limitation, clean-up, removal, remediation and
restoration costs, sums paid in settlement of claims, attorneys’ fees,
consultant fees and expert fees and court costs) which arise or result from the
presence of Landlord Hazardous Materials on, in, under or about the Premises or
any other portion of the Project including, without limitation, the cost of
remediation of Landlord Hazardous Materials. The provisions of this Section 6.4
will survive the expiration or earlier termination of this Lease. Unless a
determination is made by a court of law or governmental authority exercising
jurisdiction with respect to an Environmental Law that Tenant and/or any
Tenant’s Parties is/are the source of a release of Hazardous Materials on, under
or emanating from the Premises and/or are otherwise caused by the acts or
omission of Tenant or any Tenant’s Parties, if Hazardous Materials are
discovered to be present on, under or emanating from the Premises, or onto the
Premises, Landlord shall, subject to this Section 6.4, immediately undertake
Corrective Action with respect to the presence of such Hazardous Materials to
the extent required by Environmental Laws at Landlord’s sole cost. As used in
this Lease, “Corrective Action” shall mean any investigation and/or active
response action, including without limitation active or passive remediation and
monitoring or any combination of these activities.

7. Payments and Notices. All rent and other sums payable by Tenant to Landlord
hereunder shall be paid to Landlord at the first address designated in
Section 1.1 of the Summary, or to such other persons and/or at such other places
as Landlord may hereafter designate in writing. Any notice required or permitted
to be given hereunder must be in writing and may be given by personal delivery
(including delivery by nationally recognized overnight courier or express
mailing service), facsimile transmission sent by a machine capable of confirming
transmission receipt, with a hard copy of such notice delivered no later than
one (1) business day after facsimile transmission by another method specified in
this Section 7, or by registered or certified mail, postage prepaid, return
receipt requested, addressed to Tenant at the address(es) designated in
Section 1.2 of the Summary, or to Landlord at the address designated in
Section 1.1 of the Summary. Either party may, by prior written notice to the
other, specify a different address for notice purposes. Notice given in the
foregoing manner shall be deemed given (i) upon confirmed transmission if sent
by facsimile transmission, provided such transmission is prior to 5:00 p.m. on a
business day (if such transmission is after 5:00 p.m. on a business day or is on
a non-business day, such notice will be deemed given on the following business
day), (ii) when actually received or refused by the party to whom sent if
delivered by a carrier or personally served or (iii) if mailed, on the day of
actual delivery or refusal as shown by the certified mail return receipt or the
expiration of three (3) business days after the day of mailing, whichever first
occurs. For purposes of this Section 7, a “business day” is Monday through
Friday, excluding holidays observed by the United States Postal Service.

-11-

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

 

8. Brokers. Landlord has entered into an agreement with the real estate broker
specified in Section 1.13 of the Summary as representing Landlord (“Landlord’s
Broker”), and Landlord shall pay any commissions or fees that are payable to
Landlord’s Broker with respect to this Lease in accordance with the provisions
of a separate commission contract. Landlord shall have no further or separate
obligation for payment of commissions or fees to any other real estate broker,
finder or intermediary. Tenant represents that it has not had any dealings with
any real estate broker, finder or intermediary with respect to this Lease, other
than Landlord’s Broker and the broker specified in Section 1.13 of the Summary
as representing Tenant (“Tenant’s Broker”). Any commissions or fees payable to
Tenant’s Broker with respect to this Lease shall be paid exclusively by
Landlord’s Broker. Each party represents and warrants to the other, that, to its
knowledge, no other broker, agent or finder (a) negotiated or was instrumental
in negotiating or consummating this Lease on its behalf, and (b) is or might be
entitled to a commission or compensation in connection with this Lease. Tenant
shall indemnify, defend (by counsel reasonably approved in writing by Landlord)
and hold Landlord harmless from and against any and all claims, judgments,
suits, causes of action, damages, losses, liabilities and expenses (including
attorneys’ fees and court costs) resulting from any breach by Tenant of the
foregoing representation, including, without limitation, any claims that may be
asserted against Landlord by any broker, agent or finder undisclosed by Tenant
herein. Landlord shall indemnify, defend (by counsel reasonably approved in
writing by Tenant) and hold Tenant harmless from and against any and all claims,
judgments, suits, causes of action, damages, losses, liabilities and expenses
(including attorneys’ fees and court costs) resulting from any breach by
Landlord of the foregoing representation, including, without limitation, any
claims that may be asserted against Tenant by any broker, agent or finder
undisclosed by Landlord herein. The foregoing indemnities shall survive the
expiration or earlier termination of this Lease.

9. Surrender; Holding Over.

9.1. Surrender of Premises. Upon the expiration or sooner termination of this
Lease, Tenant shall surrender all keys for the Premises to Landlord, and
exclusive possession of the Premises to Landlord broom clean and in good
condition and repair, reasonable wear and tear excepted, with all of Tenant’s
personal property (and those items, if any, of Tenant Changes identified by
Landlord pursuant to Section 12.2 below) removed therefrom and all damage caused
by such removal repaired, as required pursuant to Sections 12.2 and 12.3 below.
If, for any reason, Tenant fails to surrender the Premises on the expiration or
earlier termination of this Lease (including upon the expiration of any
subsequent month-to-month tenancy consented to by Landlord pursuant to
Section 9.2 below), with such removal and repair obligations completed, then, in
addition to the provisions of Section 9.3 below and Landlord’s rights and
remedies under Section 12.4 and the other provisions of this Lease, Tenant shall
indemnify, protect, defend (by counsel approved in writing by Landlord) and hold
Landlord harmless from and against any and all claims, judgments, suits, causes
of action, damages, losses, liabilities and expenses (including attorneys’ fees
and court costs) resulting from such failure to surrender, including, without
limitation, any claim made by any succeeding tenant based thereon. The foregoing
indemnity shall survive the expiration or earlier termination of this Lease.

9.2. Hold Over With Landlord’s Consent. If, with Landlord’s express written
consent, Tenant remains in possession of the Premises after the expiration or
earlier termination of the Lease Term, Tenant shall become a tenant from
month-to-month upon the terms and conditions set forth in this Lease (including
Tenant’s obligation to pay all Excess Expenses and any other additional rent
under this Lease), but at a Monthly Basic Rent equal to one hundred fifty
percent (150%) of the Monthly Basic Rent applicable to the Premises immediately
prior to the date of such expiration or earlier termination. Tenant shall pay an
entire month’s Monthly Basic Rent calculated in accordance with this Section 9.2
for any portion of a month it holds over and remains in possession of the
Premises pursuant to this Section 9.2. This Section 9.2 shall not be construed
to create any expressed or implied right to holdover beyond the expiration of
the Lease Term or any extension thereof.

9.3. Hold Over Without Landlord’s Consent. If Tenant holds over after the
expiration or earlier termination of the Lease Term without the express written
consent of Landlord, then, in addition to all other remedies available to
Landlord, Tenant shall become a tenant at sufferance only, upon the terms and
conditions set forth in this Lease so far as applicable (including Tenant’s
obligation to pay all Excess Expenses and any other additional rent under this
Lease), but at a Monthly Basic Rent equal to one hundred fifty percent (150%) of
the Monthly Basic Rent applicable to the Premises immediately prior to the date
of such expiration or earlier termination. Acceptance by Landlord of rent after
such expiration or earlier termination shall not constitute a consent to a hold
over hereunder or result in an extension of this Lease. Tenant shall pay an
entire month’s Monthly Basic Rent calculated in accordance with this Section 9.3
for any portion of a month it holds over and remains in possession of the
Premises pursuant to this Section 9.3.

9.4. No Effect on Landlord’s Rights. The foregoing provisions of this Section 9
are in addition to, and do not affect, Landlord’s right of re-entry or any other
rights of Landlord hereunder or otherwise provided by law or equity.

-12-

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

 

10. Taxes on Tenant’s Property. Tenant shall be liable for, and shall pay before
delinquency, all taxes and assessments (real and personal) levied against
(a) any personal property or trade fixtures placed by Tenant in or about the
Premises (including any increase in the assessed value of the Premises based
upon the value of any such personal property or trade fixtures); and (b) any
Tenant Improvements or alterations in the Premises (whether installed and/or
paid for by Landlord or Tenant) to the extent such items are assessed at a
valuation higher than the valuation at which tenant improvements conforming to
the Building’s standard tenant improvements are assessed. If any such taxes or
assessments are levied against Landlord or Landlord’s property, Landlord may,
after written notice to Tenant, pay such taxes and assessments, and Tenant shall
reimburse Landlord therefor within ten (10) days after demand by Landlord.

11. Condition of Premises; Repairs.

11.1. Condition of Premises. Except as specifically set forth in this Lease
(including without limitation the Work Letter Agreement), upon Substantial
Completion of the Tenant Improvements, Tenant agrees to accept Premises in its
“as-is” condition as of the date thereof (except for punch list items). Tenant
also acknowledges that, except as otherwise expressly set forth in this Lease
(including without limitation the Work Letter Agreement), neither Landlord nor
any agent of Landlord has made any representation or warranty with respect to
the Premises, the Building, the Site or the Project or their condition, or with
respect to the suitability thereof for the conduct of Tenant’s business. The
taking of possession of the Premises by Tenant shall conclusively establish that
the Project, the Site, the Premises (including the Tenant Improvements therein),
the Building and the Common Areas were at such time complete and in good,
sanitary and satisfactory condition and without any obligation on Landlord’s
part to make any alterations, upgrades or improvements thereto except for punch
list items as described above and except as expressly set forth in this Lease
(including the Work Letter Agreement); provided, however, in the event that, as
of the Commencement Date, the Base, Shell and Core of the Building (as defined
in Section 1 of Exhibit “C”), the Common Areas and/or the Premises (including
without limitation the Tenant Improvements and Landlord’s Work) in their
respective conditions existing as of such date without regard to Tenant’s use of
the Premises for general office purposes, and based solely on an unoccupied
basis, (A) do not comply with applicable laws (including without limitation the
Americans with Disabilities Act (the “ADA”)) in effect as of the Commencement
Date or (B) contains latent defects, then Landlord shall be responsible, at its
sole cost and expense which shall not be included in Operating Expenses (except
as otherwise permitted in (and not excluded in) Section 4 hereof), for
correcting any such non-compliance to the extent and as and when required by
applicable laws and/or correcting any such latent defects as soon as reasonably
possible after receiving notice thereof from Tenant. In addition, any code
compliance or ADA modifications that are expressly required by any governmental
entity to be performed by Landlord inside or outside of the Premises in
connection with Landlord’s construction of the Tenant Improvements shall be at
Landlord’s sole cost and expense and not included in Operating Expenses.

11.2. Landlord’s Repair Obligations. Subject to Section 18.1 and 18.2 of this
Lease, Landlord shall, as part of the Operating Expenses (except to the extent
excluded from Operating Expenses in Section 4 above), repair, maintain and
replace, in a first-class condition and in compliance with all applicable laws
(a) the Building shell and other structural portions of the Building (including
the roof and foundations), (b) the basic heating, ventilating, air conditioning
(“HVAC”), sprinkler and electrical systems within the Building core and standard
conduits, connections and distribution systems thereof within the Premises (but
not any above standard improvements installed in the Premises such as, for
example, but by way of limitation, custom lighting, special or supplementary
HVAC or plumbing systems or distribution extensions, special or supplemental
electrical panels or distribution systems, or kitchen or restroom facilities and
appliances to the extent such facilities and appliances are intended for the
exclusive use of Tenant), and (c) the Common Areas; provided, however, to the
extent such maintenance, repairs or replacements are required as a result of any
act, neglect, fault or omission of Tenant or any of Tenant’s agents, employees,
contractors, licensees or invitees, Tenant shall pay to Landlord, as additional
rent, the costs of such maintenance, repairs and replacements. Subject to
Section 16.5 below, there shall be no abatement of rent and no liability of
Landlord by reason of any injury to or interference with Tenant’s business
arising from the making of any repairs, alterations or improvements in or to any
portion of the Project, Building or the Premises or in or to fixtures,
appurtenances and equipment therein. Without limiting the foregoing, Tenant
waives the right to make repairs at Landlord’s expense under any law, statute or
ordinance now or hereafter in effect (including the provisions of California
Civil Code Section 1942 and any successive sections or statutes of a similar
nature).

-13-

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

 

11.3. Tenant’s Repair Obligations. Except for Landlord’s obligations
specifically set forth in Sections 11.2, 16.1, 18.1 and 19.2 hereof, Tenant
shall at all times and at Tenant’s sole cost and expense, keep, maintain, clean,
repair, preserve and replace, as necessary, the Premises and all parts thereof
including, without limitation, all Tenant Improvements, Tenant Changes, utility
meters, all special or supplemental HVAC systems, electrical systems, pipes and
conduits, located within the Premises, all fixtures, furniture and equipment,
Tenant’s storefront (if any), Tenant’s signs, locks, closing devices, security
devices, windows, window sashes, casements and frames, floors and floor
coverings, shelving, kitchen and/or restroom facilities and appliances located
within the Premises to the extent such facilities and appliances are intended
for the exclusive use of Tenant, custom lighting, and any alterations, additions
and other property located within the Premises in first-class condition and
repair, reasonable wear and tear excepted. Tenant shall replace, at its expense,
any and all plate and other glass in and about the Premises which is damaged or
broken from any cause whatsoever except due to the gross negligence or willful
misconduct of Landlord, its agents or employees and not covered by insurance
maintained, or required to be maintained, by Tenant hereunder. Such maintenance
and repairs shall be performed with due diligence, lien-free and in a
first-class and workmanlike manner, by licensed contractors) which are selected
by Tenant and approved by Landlord, which approval Landlord shall not
unreasonably withhold or delay. Except as otherwise expressly provided in this
Lease, Landlord shall have no obligation to alter, remodel, improve, repair,
renovate, redecorate or paint all or any part of the Premises.

12. Alterations.

12.1. Tenant Changes; Conditions. Tenant may, at its sole cost and expense, make
alterations, additions, improvements and decorations to the Premises
(collectively, “Tenant Changes”) subject to and upon the following terms and
conditions:

(a)

Tenant may not, without the prior written consent of Landlord which may be
withheld in Landlord’s sole and absolute (but good faith) discretion, make any
alterations, additions, improvements or decorations which: (i) affect any area
outside the Premises; (ii) affect the Building’s structure or the mechanical,
HVAC, electrical, plumbing, sprinkler or life safety systems of the Premises,
Building and/or the Project (collectively, the “Systems”), equipment, services
or systems, or the proper functioning thereof, or Landlord’s access thereto;
(iii) affect the outside appearance, character or use of the Project, the
Building or the Common Areas; (iv) weaken or impair the structural strength of
the Building; (v) in the reasonable opinion of Landlord, lessen the value of the
Project or Building; or (vi) will violate or require a change in any occupancy
certificate applicable to the Premises. Notwithstanding anything to the contrary
in this Lease and subject to Tenant’s compliance with the terms and conditions
of this Section 12, Landlord hereby approves, in concept, the following Tenant
Changes and agrees that Tenant shall have no obligation to remove or restore
such Tenant Changes on the expiration of this Lease: (a) install a door on the
wall adjoining the Premises to the premises leased by Auspex, and (b) install a
curtain fixture behind the glass wall inside the Premises.

(b)

Before proceeding with any Tenant Change which is not otherwise prohibited in
Section 12.1(a) above, Tenant must first obtain Landlord’s written approval
thereof (including approval of all plans, specifications and working drawings
for such Tenant Change), which approval shall not be unreasonably withheld.
However, Landlord’s prior approval shall not be required for any Tenant Change
which satisfies the following conditions (hereinafter a “Pre-Approved Change”):
(i) the costs of such Tenant Change does not exceed Five Hundred Dollars
($500.00) individually; (ii) the costs of such Tenant Change when aggregated
with the costs of all other Tenant Changes made by Tenant during the Term of
this Lease do not exceed Fifteen Hundred Dollars ($1,500.00); (iii) Tenant
delivers to Landlord final plans, specifications and working drawings for such
Tenant Change at least ten (10) days prior to commencement of the work thereof;
(iv) the Tenant Change is not prohibited in Section 12.1(a) above; (v) the
Tenant Change does not require a building permit, and (vi) Tenant and such
Tenant Change otherwise satisfy all other conditions set forth in this
Section 12.1.

(c)

After Landlord has approved the Tenant Changes and the plans, specifications and
working drawings therefor (or is deemed to have approved the Pre-Approved
Changes as set forth in Section 12.1(b) above), Tenant shall: (i) enter into an
agreement for the performance of such Tenant Changes with such contractors and
subcontractors selected by Tenant and approved by Landlord, which approval shall
not be unreasonably withheld; and (ii) before proceeding with any Tenant Change
(including any Pre-Approved Change), provide Landlord with ten (10) days’ prior
written notice thereof. In addition, before proceeding with any Tenant Change,
Tenant’s contractors shall obtain, on behalf of Tenant and at Tenant’s sole cost
and expense: (A) all necessary governmental permits and approvals for the
commencement and completion of such Tenant Change; and (B) a completion and lien
indemnity bond, or other surety, satisfactory to Landlord for such Tenant
Change. Landlord’s approval of any contractor(s) and subcontractor(s) of Tenant
shall not release Tenant or any such contractor(s) and/or subcontractor(s) from
any liability for any conduct or acts of such contractor(s) and/or
subcontractor(s).

(d)

Tenant shall pay to Landlord, as additional rent, the reasonable costs of
Landlord’s engineers and other consultants for review of all plans,
specifications and working drawings for the Tenant Changes, within ten
(10) business days after Tenant’s receipt of invoices either from Landlord or
such consultants together with (in any event) an administrative charge of five
percent (5%) of the actual costs of such work. In addition to such costs, Tenant
shall pay to Landlord, within ten (10) days after completion of any Tenant
Change, the actual, reasonable costs incurred by Landlord for services rendered
by Landlord’s management personnel and engineers to coordinate and/or supervise
any of the Tenant Changes to the extent such services are provided in excess of
or after the normal on-site hours of such engineers and management personnel.

-14-

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

 

(e)

All Tenant Changes shall be performed: (i) in accordance with the approved
plans, specifications and working drawings; (ii) lien-free and in a first-class
workmanlike manner; (iii) in compliance with all laws, rules, regulations of all
governmental agencies and authorities including, without limitation, the
provisions of Title III of the Americans with Disabilities Act of 1990; (iv) in
such a manner so as not to interfere with the occupancy of any other tenant in
the Project or Building, nor impose any additional expense upon nor delay
Landlord in the maintenance and operation of the Project or Building; and (v) at
such times, in such manner and subject to such rules and regulations as Landlord
may from time to time reasonably designate.

(f)

Throughout the performance of the Tenant Changes, Tenant shall obtain, or cause
its contractors to obtain, workers compensation insurance and general liability
insurance in compliance with the provisions of Section 20 of this Lease.

12.2. Removal of Tenant Changes and Tenant Improvements. All Tenant Changes and
the initial Tenant Improvements in the Premises (whether installed or paid for
by Landlord or Tenant), shall become the property of Landlord and shall remain
upon and be surrendered with the Premises at the end of the Term of this Lease;
provided, however, Landlord may, by written notice delivered to Tenant at the
time of its approval of any Tenant Change (but not the initial Tenant
Improvements which Tenant shall have no obligation to remove), require Tenant to
remove such Tenant Change at the end of the Term of this Lease. If Landlord
requires Tenant to remove any such items as described above, Tenant shall, at
its sole cost, remove the identified items on or before the expiration or sooner
termination of this Lease and repair any damage to the Premises caused by such
removal (or, at Landlord’s option, shall pay to Landlord all of Landlord’s costs
of such removal and repair).

12.3. Removal of Personal Property. All articles of personal property owned by
Tenant or installed by Tenant at its expense in the Premises (including business
and trade fixtures, furniture and moveable partitions) shall be, and remain, the
property of Tenant, and shall be removed by Tenant from the Premises, at
Tenant’s sole cost and expense, on or before the expiration or sooner
termination of this Lease. Tenant shall promptly repair any damage to Premises,
Building and/or the Project caused by such removal.

12.4. Tenant’s Failure to Remove. If Tenant fails to remove by the expiration or
sooner termination of this Lease all of its personal property, or any items of
Tenant Improvements or Tenant Changes identified by Landlord for removal
pursuant to Section 12.2 above, or if Tenant fails to comply with its
obligations under Section 12.3 above, Landlord may, at its option, treat such
failure as a hold over pursuant to Section 9.3 above, and/or may (without
liability to Tenant for loss thereof, at Tenant’s sole cost and in addition to
Landlord’s other rights and remedies under this Lease, at law or in equity):
(a) remove and store such items in accordance with applicable law; and/or
(b) upon ten (10) days’ prior notice to Tenant, sell all or any such items at
private or public sale for such price as Landlord may obtain as permitted under
applicable law. Landlord shall apply the proceeds of any such sale to any
amounts due to Landlord under this Lease from Tenant (including Landlord’s
attorneys’ fees and other costs incurred in the removal, storage and/or sale of
such items), with any remainder to be paid to Tenant.

13. Liens.  Tenant shall not permit any mechanic’s, materialmen’s or other liens
to be filed against all or any part of the Project, the Site, the Building or
the Premises, nor against Tenant’s leasehold interest in the Premises, by reason
of or in connection with any repairs, alterations, improvements or other work
contracted for or undertaken by Tenant or any other act or omission of Tenant or
any Tenant Parties. Tenant shall, at Landlord’s request, provide Landlord with
enforceable, unconditional and final lien releases (and other evidence
reasonably requested by Landlord to demonstrate protection from liens) from all
persons furnishing labor and/or materials with respect to the Premises. Landlord
shall have the right at all reasonable times to post on the Premises and record
any notices of non-responsibility which it deems necessary for protection from
such liens. If any such liens are filed, Tenant shall, at its sole cost,
immediately cause such lien to be released of record or bonded to Landlord’s
reasonable satisfaction so that it no longer affects title to the Project, the
Site, the Building or the Premises. If Tenant fails to cause such lien to be so
released or bonded within twenty (20) days after filing thereof, Landlord may,
without waiving its rights and remedies based on such breach, and without
releasing Tenant from any of its obligations, cause such lien to be released by
any means it shall deem proper, including payment in satisfaction of the claim
giving rise to such lien. Tenant shall pay to Landlord within five (5) days
after receipt of invoice from Landlord, any sum paid by Landlord to remove such
liens, together with interest at the Interest Rate from the date of such payment
by Landlord. NOTICE IS HEREBY GIVEN THAT LANDLORD SHALL NOT BE LIABLE FOR ANY
LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT, OR TO
ANYONE HOLDING THE PREMISES THROUGH OR UNDER TENANT, AND THAT NO MECHANICS’ OR
OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT
THE INTEREST OF LANDLORD IN THE PREMISES.

14. Assignment and Subletting.

14.1. Restriction on Transfer. Tenant shall not, without the prior written
consent of Landlord, which consent Landlord will not unreasonably withhold,
assign this Lease or any interest herein or sublet the Premises or any part
thereof, or permit the use or occupancy of the Premises by any party other than
Tenant (any such assignment, encumbrance, sublease, license or the like shall
sometimes be referred to as a “Transfer”). In no event may Tenant encumber this
Lease. Any Transfer without Landlord’s consent shall constitute a default by
Tenant under this Lease, and in addition to all of Landlord’s other remedies at
law, in equity or under this Lease, such Transfer shall be voidable at
Landlord’s election.

-15-

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

 

14.2. Administrative and Attorneys’ Fees. If Tenant effects a Transfer or
requests the consent of Landlord to any Transfer, then Tenant shall, upon
demand, pay Landlord a non-refundable administrative fee of Five Hundred Dollars
($500.00), plus any reasonable attorneys’ and paralegal fees and costs incurred
by Landlord in connection with such Transfer or request for consent (whether
attributable to Landlord’s in-house attorneys or paralegals or otherwise).
Acceptance of the Five Hundred Dollar ($500.00) administrative fee and/or
reimbursement of Landlord’s attorneys’ and paralegal fees shall in no event
obligate Landlord to consent to any proposed Transfer.

14.3. Landlord’s Options. If at any time or from time to time during the Term
Tenant desires to effect a Transfer, Tenant shall deliver to Landlord, at least
thirty (30) days prior to the date Tenant desires the Transfer to be effective
(“Transfer Date”), written notice (“Transfer Notice”) setting forth the Transfer
Date, the terms and provisions of the proposed Transfer, the identity of the
proposed assignee, sublessee or other transferee (sometimes referred to
hereinafter as a “Transferee”), and any ownership or commercial relationship
between Tenant and the proposed Transferee. Tenant shall also deliver to
Landlord with the Transfer Notice, a current financial statement and financial
statements for the preceding two (2) years of the Transferee which have been
certified or audited by a reputable independent accounting firm acceptable to
Landlord, and such other information concerning the business background and
financial condition of the proposed Transferee (including references) as
Landlord may reasonably request. Landlord shall have the option, exercisable by
written notice delivered to Tenant within thirty (30) days after Landlord’s
receipt of the Transfer Notice, and such financial statements and other
information requested by Landlord, either to:

(a)

approve or disapprove such Transfer, which approval shall not be unreasonably
withheld, conditioned or delayed; or

(b)

recapture the space (“Subject Space”) that is the subject of the Transfer. Such
recapture notice shall cancel and terminate this Lease with respect to the
Subject Space as of the date stated in the Transfer Notice as the effective date
of the proposed Transfer until the last day of the term of the Transfer as set
forth in the Transfer Notice. If this Lease shall be canceled with respect to
less than the entire Premises, the Rent reserved herein shall be prorated on the
basis of the number of rentable square feet retained by Tenant in proportion to
the number of rentable square feet contained in the Premises, and this Lease as
so amended shall continue thereafter in full force and effect, and upon request
of either party, the parties shall execute written confirmation of the same.
Notwithstanding any provision herein to the contrary, in the event that Landlord
elects to recapture as provided in this Section 14.3(b), Tenant shall have five
(5) days to rescind its Transfer Notice in which case such election to recapture
shall no longer be effective and Tenant shall retain all rights under this
Lease. If Landlord does not respond to Tenant’s Transfer Notice within ten
(10) business days of receiving such Transfer Notice (together with all required
information provided above) and if such failure continues for an additional five
(5) business days after Tenant’s second (2nd) submittal of such Transfer Notice
(together with all required information provided above) to Landlord, then such
lack of response shall conclusively be deemed approval by Landlord of such
Transfer.

14.4. Additional Conditions; Excess Rent. If Landlord does not exercise its
recapture option described in Section 14.3(b) above and instead approves of the
proposed Transfer pursuant to Section 14.3(a) above, Tenant may enter into the
proposed Transfer with such proposed Transferee subject to the following further
conditions:

(a)

the Transfer shall be on the same terms set forth in the Transfer Notice
delivered to Landlord (if the terms have changed, Tenant must submit a revised
Transfer Notice to Landlord and Landlord shall have another thirty (30) days
after receipt thereof to make the election in Sections 14.3(a) or 14.3(b)
above);

(b)

no Transfer shall be valid and no Transferee shall take possession of the
Premises until an executed counterpart of the assignment, sublease or other
instrument effecting the Transfer has been delivered to Landlord pursuant to
which the Transferee shall expressly assume all of Tenant’s obligations under
this Lease (or with respect to a sublease of a portion of the Premises or for a
portion of the Term, all of Tenant’s obligations applicable to such portion);

(c)

no Transferee shall have a further right to assign, encumber or sublet, except
on the terms herein contained; and

(d)

fifty percent (50%) of any rent or other economic consideration received by
Tenant as a result of such Transfer which exceeds, in the aggregate, (i) the
total rent which Tenant is obligated to pay Landlord under this Lease (prorated
to reflect obligations allocable to any portion of the Premises subleased), plus
(ii) any documented and reasonable brokerage commissions, attorneys’ fees and
moving costs actually paid by Tenant in connection with such Transfer, shall be
paid to Landlord within ten (10) days after receipt thereof as additional rental
under this Lease, without affecting or reducing any other obligations of Tenant
hereunder.

14.5. Reasonable Disapproval. Landlord and Tenant hereby acknowledge that
Landlord’s disapproval of any proposed Transfer pursuant to Section 14.3(a)
shall be deemed reasonably withheld, conditioned or delayed if based upon any
reasonable factor, including, without limitation, any or all of the following
factors: (a) the proposed Transfer would result in more than two subleases of
portions of the Premises being in effect at any one time during the Term;
(b) the proposed Transferee is an existing tenant of the Project or is
negotiating with Landlord (or has negotiated with Landlord in the last six
(6) months) for space in the Project; (c) the proposed Transferee is a
governmental entity; (d) the portion of the Premises to be sublet or assigned is
irregular in shape with inadequate means of ingress and egress; (e) the use of
the Premises by the Transferee (1) is not permitted by the use provisions in

-16-

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

 

Section 6 hereof, or (2) violates any exclusive use granted by Landlord to
another tenant in the Building; (f) the Transfer would likely result in
significant increase in the use of the parking areas or Common Areas by the
Transferee’s employees or visitors, and/or significantly increase the demand
upon services to be provided by Landlord to the Premises; (g) the Transferee
does not have the financial capability to fulfill the obligations imposed by the
Transfer; or (h) the Transferee is not, in Landlord’s reasonable opinion, of
reputable or good character or consistent with Landlord’s desired tenant mix.
Notwithstanding any contrary provision of this Lease, if Tenant or any proposed
Transferee claims that Landlord has unreasonably withheld or delayed its consent
to a proposed Transfer or otherwise has breached its obligations under this
Section 14, Tenant’s and such Transferee’s only remedy shall be to seek a
declaratory judgment and/or injunctive relief, and Tenant, on behalf of itself
and, to the extent permitted by law, such proposed Transferee, waives all other
remedies against Landlord, including, without limitation, the right to seek
monetary damages or to terminate this Lease.

14.6. No Release. No Transfer shall release Tenant of Tenant’s obligations under
this Lease or alter the primary liability of Tenant to pay the rent and to
perform all other obligations to be performed by Tenant hereunder. Landlord may
require that any Transferee remit directly to Landlord on a monthly basis, all
monies due Tenant by said Transferee, and each sublease shall provide that if
Landlord gives said sublessee written notice that Tenant is in default under
this Lease, said sublessee will thereafter make all payments due under the
sublease directly to or as directed by Landlord, which payments will be credited
against any payments due under this Lease. Tenant hereby irrevocably and
unconditionally assigns to Landlord all rents and other sums payable under any
sublease of the Premises; provided, however, that Landlord hereby grants Tenant
a license to collect all such rents and other sums so long as Tenant is not in
default under this Lease. Tenant shall, within ten (10) days after the execution
and delivery of any assignment or sublease, deliver a duplicate original copy
thereof to Landlord. However, the acceptance of rent by Landlord from any other
person shall not be deemed to be a waiver by Landlord of any provision hereof.
Consent by Landlord to one Transfer shall not be deemed consent to any
subsequent Transfer. In the event of default by any Transferee of Tenant or any
successor of Tenant in the performance of any of the terms hereof, Landlord may
proceed directly against Tenant without the necessity of exhausting remedies
against such Transferee or successor. Landlord may consent to subsequent
assignments of the Lease or sublettings or amendments or modifications to the
Lease with assignees of Tenant, without notifying Tenant, or any successor of
Tenant, and without obtaining its or their consent thereto and any such actions
shall not relieve Tenant of liability under this Lease.

14.7. Material Inducement. Tenant understands, acknowledges and agrees that
(a) Landlord’s option to recapture all or any portion of the Subject Space as
provided in Section 14.3(b) above rather than approve the proposed Transfer, and
(b) Landlord’s right to receive a portion of any excess consideration paid by a
Transferee in connection with an approved Transfer as provided in
Section 14.4(d) above, are a material inducement for Landlord’s agreement to
lease the Premises to Tenant upon the terms and conditions herein set forth.

14.8. Affiliated Companies/Restructuring of Business Organization. The Transfer
by Tenant with respect to all or any portion of this Lease or the Premises to
(i) a parent, subsidiary or spin-off company of Tenant (or an entity that
becomes a parent, subsidiary or spin-off company of Tenant), or (ii) any person
or entity which controls, is controlled by or under common control with Tenant,
or (iii) any entity which purchases or acquires all or substantially all of the
assets, stock or other ownership interests of Tenant, or (iv) any successor of
Tenant by reason of merger, consolidation, public offering, reorganization,
dissolution, or sale of stock, membership or partnership interests or assets
(all such persons or entities described in (i), (ii), (iii) and (iv) being
sometimes hereinafter referred to as “Affiliates”) shall not be deemed a
Transfer under this Section 14 and shall not entitle Landlord to exercise its
recapture rights nor entitle Landlord to any excess consideration pursuant to
Section 14.4(d) above, provided that:

(a)

Any such Affiliate was not formed as a subterfuge to avoid the obligations of
this Section 14;

(b)

the use of the Premises remains substantially unchanged;

(c)

Intentionally deleted;

(d)

Tenant gives Landlord prior written notice of any such assignment or sublease to
an Affiliate;

(e)

Any such Affiliate has, as of the effective date of any such assignment or
sublease, a tangible net worth and net income, in the aggregate, computed in
accordance with generally accepted accounting principles (but excluding goodwill
as an asset), sufficient to meet the obligations of Tenant under this Lease;

(f)

Any such assignment or sublease shall be subject to all of the terms and
provisions of this Lease, and such assignee or sublessee shall assume, in a
written document reasonably satisfactory to Landlord and delivered to Landlord
upon or prior to the effective date of such assignment or sublease, all the
obligations of Tenant under this Lease; and

(g)

Tenant shall remain fully liable for all obligations to be performed by Tenant
under this Lease.

An Affiliate that is an assignee of Tenant’s entire interest in this Lease may
be referred to herein as an “Affiliate Assignee”.

-17-

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

 

15. Entry by Landlord. Landlord and its employees and agents shall at all
reasonable times have the right to enter the Premises to inspect the same, to
supply janitorial service and any other service required to be provided by
Landlord to Tenant under this Lease, to exhibit the Premises to prospective
lenders or purchasers (or during the last year of the Term, to prospective
tenants), to post notices of non-responsibility, and/or to alter, improve or
repair the Premises or any other portion of the Building or Project, all without
being deemed guilty of or liable for any breach of Landlord’s covenant of quiet
enjoyment or any eviction of Tenant, and without abatement of rent. In
exercising such entry rights, Landlord shall use commercially reasonable efforts
to minimize, as reasonably practicable, the interference with Tenant’s business,
and shall provide Tenant with reasonable advance written notice of such entry
(except in emergency situations and for scheduled services). For each of the
foregoing purposes, Landlord shall at all times have and retain a key with which
to unlock all of the doors in, upon and about the Premises, excluding Tenant’s
vaults and safes, and Landlord shall have the means which Landlord may deem
proper to open said doors in an emergency in order to obtain entry to the
Premises. Any entry to the Premises obtained by Landlord by any of said means or
otherwise shall not under any circumstances be construed or deemed to be a
forcible or unlawful entry into, or a detainer of, the Premises, or an eviction
of Tenant from the Premises or any portion thereof, or grounds for any abatement
or reduction of rent and Landlord shall not have any liability to Tenant for any
damages or losses on account of any such entry by Landlord.

16. Utilities and Services.

16.1. Standard Utilities and Services. Subject to the terms and conditions of
this Lease, and the obligations of Tenant as set forth hereinbelow, Landlord
shall furnish or cause to be furnished to the Premises the following utilities
and services, the costs of which shall be included in Operating Expenses, unless
otherwise specified below (Landlord reserves the right to adopt
non-discriminatory modifications and additions to the following provisions from
time to time).

(a)

Landlord shall make the elevator of the Building available for Tenant’s
non-exclusive use, twenty-four (24) hours per day.

(b)

Landlord shall furnish during the Business Hours for the Building specified in
Section 1.17 of the Summary, heating, ventilation and air conditioning (“HVAC”)
for the Premises as required in Landlord’s judgment for the comfortable and
normal occupancy of the Premises. The cost of maintenance and service calls to
adjust and regulate the HVAC system shall be charged to Tenant if the need for
maintenance work results from either Tenant’s adjustment of room thermostats or
Tenant’s failure to comply with its obligations under this Section 16, including
keeping window coverings closed as needed. Such work shall be charged at hourly
rates equal to then-current journeyman’s wages for HVAC mechanics. If Tenant
desires HVAC at any time other than during the Business Hours for the Building,
Landlord shall provide such “after-hours” usage after advance reasonable request
by Tenant, and Tenant shall pay to Landlord, as additional rent (and not as part
of the Operating Expenses) the cost, as fairly determined by Landlord, of such
after-hours usage (as well as the cost of any HVAC used by Tenant in excess of
what Landlord considers reasonable or normal), including any minimum hour
charges for after-hours requests and any special start-up costs for after-hours
services which requires a special start-up (such as late evenings, weekends and
holidays) together with an administrative fee of fifteen percent (15%) of the
cost of such after-hours usage, which administrative fee shall also be payable
by Tenant to Landlord for the cost of any other services provided by Landlord to
Tenant that are not otherwise required to be provided by Landlord to Tenant
hereunder. The current cost for such after-hours services is Thirty-Five Dollars
($35.00) per hour. The charge for after-hours HVAC shall not increase by more
than Three Dollars ($3.00) per hour annually on a cumulative and compounded
basis.

(c)

Landlord shall provide adequate electrical wiring and facilities and power and
water for normal general office use as determined by Landlord. As part of
Operating Expenses, Landlord shall replace lamps, starters and ballasts for
Building standard lighting fixtures within the Premises. Tenant shall bear the
cost of replacement of lamps, starters and ballasts for non-Building standard
lighting fixtures within the Premises.

(d)

Landlord shall furnish janitorial services to the Premises five (5) days per
week pursuant to janitorial and cleaning specifications as may be adopted by
Landlord from time to time. No person(s) other than those persons approved by
Landlord shall be permitted to enter the Premises for such purposes. Janitorial
service shall include ordinary dusting and cleaning by the janitor assigned to
do such work and shall not include cleaning of carpets or rugs, except normal
vacuuming, or moving of furniture, interior window cleaning, coffee or eating
area cleaning and other special services. Such additional services may be
rendered by Landlord pursuant to written agreement with Tenant as to the extent
of such services and the payment of the cost thereof. Janitorial service will
not be furnished on nights when rooms are occupied after 7:30 p.m. or to rooms
which are locked unless a key is furnished to the Landlord for use by the
janitorial contractor. Window cleaning shall be done only by Landlord, at such
time and frequency as determined by Landlord at Landlord’s sole discretion.
Tenant shall pay to Landlord the cost of removal of any of Tenant’s refuse and
rubbish to the extent that the same exceeds the refuse and rubbish usually
attendant upon the use of the Premises for general office uses.

(e)

Landlord may, in Landlord’s sole discretion, provide security service or
protection in the Building and/or the Project, in any manner deemed reasonable
by Landlord at Landlord’s sole discretion, from the Commencement Date throughout
the Term.

-18-

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

 

(f)

In the event Tenant utilizes any specialized HVAC system in the Premises then
Landlord, at Landlord’s option, Landlord may install HVAC meters in the Premises
to measure Tenant’s consumption of HVAC, including any after-hours and
extraordinary usage described above. Tenant shall pay to Landlord, within ten
(10) days after demand, the cost of the installation, maintenance and repair of
such meter(s) (together with the administrative fee described in Section 16.1(b)
above).

16.2. Tenant’s Obligations. Landlord shall designate the electricity utility
provider from time to time. At no time shall use of electricity in the Premises
exceed the capacity of existing feeders and risers to or wiring in the Premises.
Any risers or wiring to meet Tenant’s excess electrical requirements shall, upon
Tenant’s written request, be installed by Landlord, at Tenant’s sole cost, if,
in Landlord’s reasonable judgment, the same are necessary and shall not
(i) cause damage or injury to the Project, the Building or the Premises,
(ii) cause or create a dangerous or hazardous condition, (iii) entail excessive
or unreasonable alterations, repairs or expenses, or (iv) interfere with or
disturb other tenants or occupants of the Building. Tenant shall cooperate fully
at all times with Landlord, and abide by all reasonable regulations and
requirements which Landlord may prescribe for the proper functioning and
protection of the Building’s services and systems. Tenant shall not use any
apparatus or device in, upon or about the Premises which may in any way increase
the amount of services or utilities usually furnished or supplied to the
Premises or other premises in the Building. In addition, Tenant shall not
connect any conduit, pipe, apparatus or other device to the Building’s water,
waste or other supply lines or systems for any purpose. Neither Tenant nor its
employees, agents, contractors, licensees or invitees shall at any time enter,
adjust, tamper with, touch or otherwise in any manner affect the Systems of the
Building and/or the Project.

16.3. Overstandard Use. Tenant shall not, without Landlord’s prior written
consent, use heat-generating machines, machines other than normal fractional
horsepower office machines, or equipment or lighting other than building
standard lights in the Premises, which may affect the temperature otherwise
maintained by the air conditioning system or increase the need for water
normally furnished for the Premises by Landlord pursuant to the terms of
Section 16.1 above. If Tenant uses water in excess of that supplied by Landlord
pursuant to Section 16.1 above, then Tenant shall pay to Landlord, within ten
(10) days after billing and as additional rent, the cost of such excess
consumption, the cost of the installation, operation, and maintenance of
equipment which is installed in order to supply such excess consumption, and the
cost of the increased wear and tear on existing equipment caused by such excess
consumption; and Landlord may install devices to separately meter any increased
use, and in such event Tenant shall pay, as additional rent, the increased cost
directly to Landlord, within ten (10) days after demand, including the cost of
such additional metering devices.

16.4. Failure to Provide Utilities. Landlord’s failure to furnish or delay in
furnishing any of the services described in Section 16.1 above when such failure
is caused by all or any of the following shall not result in any liability of
Landlord: (a) casualty, accident, breakage or repairs; (b) strikes, lockouts or
other labor disturbances or labor disputes of any such character;
(c) governmental regulation, moratorium or other governmental action;
(d) inability, despite the exercise of reasonable diligence, to obtain
electricity, water or fuel including due to shortages, blackouts or any other
cause; or (e) any other cause beyond Landlord’s reasonable control. In addition,
in the event of the failure of any said utilities or services, Tenant shall not
be entitled to any abatement or reduction of rent (except as expressly provided
in Sections 16.5, 18.3 and 19.2 if such failure is a result of a damage or
taking described therein), no eviction of Tenant shall result, and Tenant shall
not be relieved from the performance of any covenant or agreement in this Lease.
Furthermore, Landlord shall not be liable under any circumstances for a loss of,
or injury to, property or for injury to, or interference with, Tenant’s
business, including, without limitation, loss of profits, however occurring,
through or in connection with or incidental to a failure to furnish any of the
services as set forth in this Section 16. In the event of any stoppage or
interruption of services, Landlord shall diligently attempt to resume such
services as promptly as reasonably practicable. Tenant hereby waives the
provisions of California Civil Code Section 1932(1) or any other applicable
existing or future law, ordinance or governmental regulation permitting the
termination of this Lease due to an interruption, failure or inability to
provide any services.

16.5. Abatement of Rent When Tenant Is Prevented From Using Premises. In the
event that Tenant is prevented from using, and does not use, the Premises or any
portion thereof, for five (5) consecutive business days (the “Eligibility
Period”) as a result of (i) any repair, maintenance or alteration performed by
Landlord after the Commencement Date and required to be performed by Landlord
under this Lease, or (ii) any failure to provide to the Premises any of the
essential utilities and services required to be provided in Sections 16.1(a),
16.1(b) and 16.1(c) above, or (iii) any failure to provide access to the
Premises, then Tenant’s obligation to pay Monthly Basic Rent and Operating
Expenses shall be abated or reduced, as the case may be, from and after the
first (1st) day following the Eligibility Period and continuing until such time
that Tenant continues to be so prevented from using, and does not use, the
Premises or a portion thereof, in the proportion that the rentable square feet
of the portion of the Premises that Tenant is prevented from using, and does not
use, bears to the total rentable square feet of the Premises; provided, however,
that Tenant shall only be entitled to such abatement of rent if the matter
described in clauses (i), (ii) or (iii) of this sentence is not caused by
Tenant’s gross negligence or willful misconduct. To the extent Tenant shall be
entitled to abatement of rent because of a damage or destruction pursuant to
Section 18 or a taking pursuant to Section 19, then the Eligibility Period shall
not be applicable.

-19-

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

 

17. Indemnification and Exculpation.

17.1. Tenant’s Assumption of Risk and Waiver. Except to the extent such matter
is not covered by the insurance required to be maintained by Tenant under this
Lease and such matter is attributable to the gross negligence or willful
misconduct of Landlord, Landlord shall not be liable to Tenant, Tenant’s
employees, agents or invitees for: (i) any damage to property of Tenant, or of
others, located in, on or about the Premises, nor for (ii) the loss of or damage
to any property of Tenant or of others by theft or otherwise, (iii) any injury
or damage to persons or property resulting from fire, explosion, falling
plaster, steam, gas, electricity, water, rain or leaks from any part of the
Premises or from the pipes, plumbing works or from the roof, street or
subsurface or from any other places or by dampness or by any other cause of
whatsoever nature, or (iv) any such damage caused by other tenants or persons in
the Project, occupants of adjacent property of the Project, or the public, or
caused by operations in construction of any private, public or quasi-public
work. Landlord shall in no event be liable to Tenant for any consequential
damages or for loss of revenue or income and Tenant waives any and all claims
for any such damages. Notwithstanding anything to the contrary contained in this
Section 17.1, all property of Tenant, its agents, employees and invitees kept or
stored on the Premises, whether leased or owned by any such parties, shall be so
kept or stored at the sole risk of Tenant and Tenant shall hold Landlord
harmless from any claims arising out of damage to the same, including
subrogation claims by Tenant’s insurance carriers.

17.2. Tenant’s Indemnification of Landlord and Mortgagee. Tenant shall be liable
for, and shall indemnify, defend, protect and hold Landlord, any Mortgagee (as
defined in Section 25 below) and their respective partners, officers, directors,
employees, agents, successors and assigns (collectively, “Indemnified Parties”)
harmless from and against, any and all claims, damages, judgments, suits, causes
of action, losses, liabilities and expenses, including attorneys’ fees and court
costs (collectively, “Indemnified Claims”) (but not including any loss of
business, loss of profits or other consequential damages), arising or resulting
from (a) any occurrence at the Premises, unless caused by the gross negligence
or willful misconduct of Landlord or its agents, employees or contractors,
(b) any act or omission of Tenant or any of Tenant’s agents, employees,
contractors, subtenants, assignees, licensees or invitees (collectively, “Tenant
Parties”); (c) the use of the Premises and Common Areas and conduct of Tenant’s
business by Tenant or any Tenant Parties, or any other activity, work or thing
done or suffered by Tenant or any Tenant Parties, in or about the Premises, the
Building or elsewhere in the Project; and/or (d) any default by Tenant of any
obligations on Tenant’s part to be performed under the terms of this Lease or
the terms of any contract or agreement to which Tenant is a party or by which it
is bound, affecting this Lease or the Premises. In case any action or proceeding
is brought against Landlord, any Mortgagee or any other Indemnified Parties by
reason of any such Indemnified Claims, Tenant, upon notice from Landlord, shall
defend the same at Tenant’s expense by counsel approved in writing by Landlord
and any Mortgagee, which approval shall not be unreasonably withheld.

17.3. Reciprocal Indemnity. Landlord shall indemnify and hold Tenant harmless
from any Indemnified Claims resulting from the gross negligence or willful
misconduct of Landlord or its agents, contractors, servants, employees, or
licensees (but not including any loss of business, loss of profits or other
consequential damages). In addition, to the extent any damage or repair
obligation is covered by insurance obtained by Landlord, but is not covered by
insurance obtained by Tenant, then Tenant shall be relieved of its indemnity
obligation up to the amount of the insurance proceeds which Landlord is entitled
to receive.

17.4. Survival; No Release of Insurers. The indemnification obligations under
Section 17.2 and Section 17.3 shall survive the expiration or earlier
termination of this Lease. The covenants, agreements and indemnification in
Sections 17.1, 17.2 and 17.3 above are not intended to and shall not relieve any
insurance carrier of its obligations under policies required to be carried by
Tenant pursuant to the provisions of this Lease.

18. Damage or Destruction.

18.1. Landlord’s Rights and Obligations. In the event the Premises or any part
of the Building is damaged by fire or other casualty to an extent not exceeding
twenty-five percent (25%) of the full replacement cost thereof, and Landlord’s
contractor estimates in a writing delivered to the parties that the damage
thereto is such that the Building and/or Premises may be repaired, reconstructed
or restored to substantially its condition immediately prior to such damage
within one hundred twenty (120) days from the date of such casualty, and
Landlord will receive insurance proceeds sufficient to cover the costs of such
repairs, reconstruction and restoration (including proceeds from Tenant and/or
Tenant’s insurance which Tenant is required to deliver to Landlord pursuant to
Section 18.2 below), then Landlord shall commence and proceed diligently with
the work of repair, reconstruction and restoration and this Lease shall continue
in full force and effect. If, however, the Premises or any other part of the
Building is damaged to an extent exceeding twenty-five percent (25%) of the full
replacement cost thereof, or Landlord’s contractor estimates that such work of
repair, reconstruction and restoration will require longer than one hundred
twenty (120) days to complete, or Landlord will not receive insurance proceeds
(and/or proceeds from Tenant, as applicable) sufficient to cover the costs of
such repairs, reconstruction and restoration, then Landlord may elect to either:

(a)

repair, reconstruct and restore the portion of the Building and Premises damaged
by such casualty (including, to the extent of insurance proceeds received from
Tenant, the Tenant Improvements and Tenant Changes), in which case this Lease
shall continue in full force and effect; or

-20-

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

 

(b)

terminate this Lease effective as of the date which is thirty (30) days after
Tenant’s receipt of Landlord’s election to so terminate.

Under any of the conditions of this Section 18.1, Landlord shall give written
notice to Tenant of its intention to repair or terminate within the later of
sixty (60) days after the occurrence of such casualty, or fifteen (15) days
after Landlord’s receipt of the estimate from Landlord’s contractor.

18.2. Tenant’s Costs and Insurance Proceeds. In the event of any damage or
destruction of all or any part of the Premises, Tenant shall immediately:
(a) notify Landlord thereof; and (b) deliver to Landlord all insurance proceeds
received by Tenant with respect to the Tenant Improvements and Tenant Changes in
the Premises (excluding proceeds for Tenant’s furniture and other personal
property), whether or not this Lease is terminated as permitted in this
Section 18, and Tenant hereby assigns to Landlord all rights to receive such
insurance proceeds. If, for any reason (including Tenant’s failure to obtain
insurance for the full replacement cost of the Tenant Improvements and any
Tenant Changes which Tenant is required to insure pursuant to Sections 12.1(c)
and/or 20.1(a) hereof), Tenant fails to receive insurance proceeds covering the
full replacement cost of such Tenant Improvements and Tenant Changes which are
damaged, Tenant shall be deemed to have self-insured the replacement cost of
such Tenant Improvements and Tenant Changes, and upon any damage or destruction
thereto, Tenant shall immediately pay to Landlord the full replacement cost of
such items, less any insurance proceeds actually received by Landlord from
Landlord’s or Tenant’s insurance with respect to such items.

18.3. Abatement of Rent. In the event that as a result of any such damage,
repair, reconstruction and/or restoration of the Premises or the Building,
Tenant is prevented from using, and does not use, the Premises or any portion
thereof, then the Monthly Basic Rent shall be abated or reduced, as the case may
be, during the period that Tenant continues to be so prevented from using and
does not use the Premises or portion thereof, in the proportion that the
rentable square feet of the portion of the Premises that Tenant is prevented
from using, and does not use, bears to the total rentable square feet of the
Premises. Notwithstanding the foregoing to the contrary, if the damage is due to
the gross negligence or willful misconduct of Tenant or any Tenant Parties,
there shall be no abatement of Monthly Basic Rent. Except for abatement of
Monthly Basic Rent as provided hereinabove, Tenant shall not be entitled to any
compensation or damages for loss of, or interference with, Tenant’s business or
use or access of all or any part of the Premises resulting from any such damage,
repair, reconstruction or restoration.

18.4. Inability to Complete. Notwithstanding anything to the contrary contained
in this Section 18, in the event Landlord is obligated or elects to repair,
reconstruct and/or restore the damaged portion of the Building or Premises
pursuant to Section 18.1 above, but is delayed from completing such repair,
reconstruction and/or restoration beyond the date which is six (6) months after
the date estimated by Landlord’s contractor for completion thereof pursuant to
Section 18.1, by reason of any causes beyond the reasonable control of Landlord
(including, without limitation, delays due to Force Majeure Delays as defined in
Section 32.15, and delays caused by Tenant or any Tenant Parties), then Landlord
and, so long as the delay is not caused by Tenant Delays, Tenant may elect to
terminate this Lease upon thirty (30) days’ prior written notice to the other.

18.5. Damage Near End of Term. In addition to its termination rights set forth
herein, Landlord and Tenant shall have the right to terminate this Lease if any
damage to the Building or Premises occurs during the last twelve (12) months of
the Term of this Lease and Landlord’s contractor estimates in a writing
delivered to the parties that the repair, reconstruction or restoration of such
damage cannot be completed within the earlier of (a) the scheduled expiration
date of the Lease Term, or (b) sixty (60) days after the date of such casualty.

18.6. Tenant’s Additional Termination Right. Tenant shall have the right to
terminate this Lease if Landlord’s contractor estimates that such work of
repair, reconstruction and restoration will require longer than one hundred
eighty (180) days to complete, which termination shall be effective as of the
date which is thirty (30) days after Landlord’s receipt of Tenant’s election to
so terminate.

18.7. Waiver of Termination Right. This Lease sets forth the terms and
conditions upon which this Lease may terminate in the event of any damage or
destruction. Accordingly, the parties hereby waive the provisions of California
Civil Code Section 1932, Subsection 2, and Section 1933, Subsection 4 (and any
successor statutes thereof permitting the parties to terminate this Lease as a
result of any damage or destruction).

19. Eminent Domain.

19.1. Substantial Taking. Subject to the provisions of Section 19.4 below in
case the whole of the Premises, or such part thereof as shall substantially
interfere with Tenant’s use and occupancy of the Premises as reasonably
determined by Landlord, shall be taken for any public or quasi-public purpose by
any lawful power or authority by exercise of the right of appropriation,
condemnation or eminent domain, or sold to prevent such taking, either party
shall have the right to terminate this Lease effective as of the date possession
is required to be surrendered to said authority.

-21-

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

 

19.2. Partial Taking; Abatement of Rent. In the event of a taking of a portion
of the Premises which does not substantially interfere with the conduct of
Tenant’s business, then, except as otherwise provided in the immediately
following sentence, neither party shall have the right to terminate this Lease
and Landlord shall thereafter proceed to make a functional unit of the remaining
portion of the Premises (but only to the extent Landlord receives proceeds
therefor from the condemning authority), and Monthly Basic Rent shall be abated
with respect to the part of the Premises which Tenant shall be so deprived on
account of such taking. Notwithstanding the immediately preceding sentence to
the contrary, if any part of the Building or the Site shall be taken (whether or
not such taking substantially interferes with Tenant’s use of the Premises),
Landlord may terminate this Lease upon thirty (30) days’ prior written notice to
Tenant.

19.3. Condemnation Award. Subject to the provisions of Section 19.4 below, in
connection with any taking of the Premises or Building, Landlord shall be
entitled to receive the entire amount of any award which may be made or given in
such taking or condemnation, without deduction or apportionment for any estate
or interest of Tenant, it being expressly understood and agreed by Tenant that
no portion of any such award shall be allowed or paid to Tenant for any
so-called bonus or excess value of this Lease, and such bonus or excess value
shall be the sole property of Landlord. Tenant shall not assert any claim
against Landlord or the taking authority for any compensation because of such
taking (including any claim for bonus or excess value of this Lease); provided,
however, if any portion of the Premises is taken, Tenant shall be granted the
right to recover from the condemning authority (but not from Landlord) any
compensation as may be separately awarded or recoverable by Tenant for the
taking of Tenant’s furniture, fixtures, equipment and other personal property
within the Premises, for Tenant’s relocation expenses, and for any loss of
goodwill or other damage to Tenant’s business by reason of such taking.

19.4. Temporary Taking. In the event of a taking of the Premises or any part
thereof for temporary use, (a) this Lease shall be and remain unaffected thereby
and rent shall not abate, and (b) Tenant shall be entitled to receive for itself
such portion or portions of any award made for such use with respect to the
period of the taking which is within the Term, provided that if such taking
shall remain in force at the expiration or earlier termination of this Lease,
Tenant shall perform its obligations under Section 9 with respect to surrender
of the Premises and shall pay to Landlord the portion of any award which is
attributable to any period of time beyond the Term expiration date. For purpose
of this Section 19.4, a temporary taking shall be defined as a taking for a
period of two hundred seventy (270) days or less.

19.5. Waiver of Termination Right. This Lease sets forth the terms and
conditions upon which this Lease may terminate in the event of a taking.
Accordingly, the parties waive the provisions of the California Code of Civil
Procedure Section 1265.130 and any successor or similar statutes permitting the
parties to terminate this Lease as a result of a taking.

20. Tenant’s Insurance.

20.1. Types of Insurance. On or before the earlier of the Commencement Date or
the date Tenant occupies all or any portion of the Premises or commences or
causes to be commenced any work of any type in or on the Premises pursuant to
this Lease, and continuing during the entire Term, Tenant shall obtain and keep
in full force and effect, the following insurance:

(a)

Special Form insurance, including fire and extended coverage, sprinkler leakage
(including earthquake sprinkler leakage), vandalism, and malicious mischief upon
property owned by Tenant and located in the Premises or Building, or for which
Tenant is legally liable or installed by or on behalf of Tenant including
furniture, equipment and any other personal property, and any Tenant Changes
(and including the Tenant Improvements previously existing or installed in the
Premises), in an amount not less than the full replacement cost thereof.

(b)

Commercial general liability insurance coverage, on an occurrence basis, with a
primary limit of not less than One Million Dollars ($1,000,000.00) per
occurrence and Two Million Dollars in the aggregate, which commercial general
liability insurance coverage includes personal injury, bodily injury (including
wrongful death), owner’s protective coverage, contractual liability (including
Tenant’s indemnification obligations under this Lease, including Section 17
hereof), host liquor liability (if Tenant serves alcohol on the Premises), and
products and completed operations liability. Tenant shall also carry hired and
non-owned automobile liability, with an initial combined single limit of
liability of not less than One Million Dollars ($1,000,000.00).

(c)

Worker’s compensation and employer’s liability insurance, in statutory amounts
and limits, covering all persons employed by Tenant in connection with any work
done in, on or about the Premises for which claims for death or bodily injury
could be asserted against Landlord, Tenant or the Premises.

(d)

Loss of income, extra expense and business interruption insurance in such
amounts as will reimburse Tenant for direct or indirect loss of earnings
attributable to all perils commonly insured against by prudent tenants or
attributable to prevention of access to the Premises or to the Building as a
result of such perils.

-22-

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

 

20.2. Requirements. Each policy required to be obtained by Tenant hereunder
shall: (a) be issued by insurers which are approved by Landlord and/or
Landlord’s mortgagees and are authorized to do business in the state in which
the Building is located and are rated not less than financial class X, and not
less than policyholder rating A in the most recent version of Best’s Key Rating
Guide (provided that, in any event, the same insurance company shall provide the
coverages described in Sections 20.1(a) and 20.1(d) above); (b) be in form
reasonably satisfactory from time to time to Landlord; (c) name Tenant as named
insured thereunder and shall name Landlord and, at Landlord’s request,
Landlord’s mortgagees, ground lessors (if any) and managers of which Tenant has
been informed in writing, as additional insureds thereunder, all as their
respective interests may appear; (d) not have a deductible amount exceeding a
commercially reasonable level, which amount shall be deemed self-insured with
full waiver of subrogation; (e) specifically provide that the insurance afforded
by such policy for the benefit of Landlord and Landlord’s mortgagees and ground
lessors shall be primary, and any insurance carried by Landlord or Landlord’s
mortgagees and ground lessors shall be excess and non-contributing; (f) contain
an endorsement that the insurer waives its right to subrogation as described in
Section 22 below; (g) intentionally deleted; (h) contain a cross liability or
severability of interest endorsement; and (i) be in amounts sufficient at all
times to satisfy any coinsurance requirements thereof. Each such policy shall
also provide that any loss otherwise payable thereunder shall be payable
notwithstanding (i) any act or omission of Landlord or Tenant which might,
absent such provision, result in a forfeiture of all or a part of such insurance
payment, (ii) the occupation or use of the Premises for purposes more hazardous
than permitted by the provisions of such policy, (iii) any foreclosure or other
action or proceeding taken by any mortgagee pursuant to any provision of the
mortgage upon the happening of a default thereunder, or (iv) any change in title
or ownership of the Premises. Tenant agrees to deliver to Landlord, in no event
later than the earlier of (i) the Commencement Date or (ii) the date Tenant
takes possession of all or any part of the Premises, certified copies of each
such insurance policy (or certificates from the insurance company evidencing the
existence of such insurance and Tenant’s compliance with the foregoing
provisions of this Section 20). Tenant shall cause replacement policies or
certificates to be delivered to Landlord not less than thirty (30) days prior to
the expiration of any such policy or policies. If any such initial or
replacement policies or certificates are not furnished within the time(s)
specified herein, Tenant shall be deemed to be in material default under this
Lease without the benefit of any additional notice or cure period provided in
Section 23.1 below, and Landlord shall have the right, but not the obligation,
to procure such policies and certificates at Tenant’s expense. Tenant agrees to
use good faith efforts to notify Landlord in writing prior to any material
change or cancellation of the insurance required to be carried by Tenant
hereunder.

20.3. Effect on Insurance. Tenant shall not do or permit to be done anything
which will (a) violate or invalidate any insurance policy maintained by Landlord
or Tenant hereunder, or (b) increase the costs of any insurance policy
maintained by Landlord pursuant to Section 21 or otherwise with respect to the
Building or the Project. If Tenant’s occupancy or conduct of its business in, on
or about the Premises results in any increase in premiums for any insurance
carried by Landlord with respect to the Building or the Project, Tenant shall
pay such increase as additional rent within ten (10) days after being billed
therefor by Landlord. If any insurance coverage carried by Landlord pursuant to
Section 21 or otherwise with respect to the Building or the Project shall be
cancelled or reduced (or cancellation or reduction thereof shall be threatened)
by reason of the use or occupancy of the Premises by Tenant or by anyone
permitted by Tenant to be upon the Premises, and if Tenant fails to remedy such
condition within five (5) days after notice thereof, Tenant shall be deemed to
be in default under this Lease, without the benefit of any additional notice or
cure period specified in Section 23.1 below, and Landlord shall have all
remedies provided in this Lease, at law or in equity, including, without
limitation, the right (but not the obligation) to enter upon the Premises and
attempt to remedy such condition at Tenant’s cost.

21. Landlord’s Insurance. During the Term, Landlord shall insure the Building
and the Premises (excluding, however, Tenant’s furniture, equipment and other
personal property and the Tenant Improvements and any Tenant Changes) against
damage by fire and standard extended coverage perils and with vandalism and
malicious mischief endorsements, rental loss coverage, at Landlord’s option,
earthquake damage coverage, and such additional coverage as Landlord deems
appropriate. Landlord shall also carry commercial general liability insurance,
in such reasonable amounts and with such reasonable deductibles as would be
carried by a prudent owner of a similar building in the state in which the
Building is located. At Landlord’s option, all such insurance may be carried
under any blanket or umbrella policies which Landlord has in force for other
buildings and projects. In addition, at Landlord’s option, Landlord may elect to
self-insure all or any part of such required insurance coverage. Landlord may,
but shall not be obligated to, carry any other form or forms of insurance as
Landlord or the mortgagees or ground lessors of Landlord may reasonably
determine is advisable. The cost of insurance obtained by Landlord pursuant to
this Section 21 (including self-insured amounts and deductibles) shall be
included in Operating Expenses.

22. Waiver of Claims: Waiver of Subrogation.

22.1. Mutual Waiver of Parties. Landlord and Tenant hereby waive their rights
against each other with respect to any claims or damages or losses which are
caused by or result from (a) occurrences insured against under any insurance
policy carried by Landlord or Tenant (as the case may be) pursuant to the
provisions of this Lease and enforceable at the time of such damage or loss, or
(b) occurrences which would have been covered under any insurance required to be
obtained and maintained by Landlord or Tenant (as the case may be) under
Sections 20 and 21 of this Lease (as applicable) had such insurance been
obtained and maintained as required therein. The foregoing waivers shall be in
addition to, and not a limitation of, any other waivers or releases contained in
this Lease.

-23-

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

 

22.2. Waiver of Insurers. Each party shall cause each property and loss of
income insurance policy required to be obtained by it pursuant to Sections 20
and 21 to provide that the insurer waives all rights of recovery by way of
subrogation against either Landlord or Tenant, as the case may be, in connection
with any claims, losses and damages covered by such policy. If either party
fails to maintain property or loss of income insurance required hereunder, such
insurance shall be deemed to be self-insured with a deemed full waiver of
subrogation as set forth in the immediately preceding sentence.

23. Tenant’s Default and Landlord’s Remedies.

23.1. Tenant’s Default. The occurrence of any one or more of the following
events shall constitute a default under this Lease by Tenant:

(a)

the vacation or abandonment of the Premises by Tenant. “Abandonment” is herein
defined to include, but is not limited to, any absence by Tenant from the
Premises for five (5) business days or longer while in monetary default of any
other provision of this Lease pursuant to Section 23.1(b) below;

(b)

the failure by Tenant to make any payment of rent or additional rent or any
other payment required to be made by Tenant hereunder where such failure
continues for five (5) days after written notice from Landlord to Tenant of such
failure; provided, however, that any such notice shall be in lieu of, and not in
addition to, any notice required under California Code of Civil Procedure,
Section 1161;

(c)

the failure by Tenant to observe or perform any of the express or implied
covenants or provisions of this Lease to be observed or performed by Tenant,
other than as specified in Sections 23.1(a) or (b) above, where such failure
shall continue for a period of thirty (30) days after written notice thereof
from Landlord to Tenant; provided, however, that any such notice shall be in
lieu of, and not in addition to, any notice required under California Code of
Civil Procedure, Section 1161 and provided further that, if the nature of
Tenant’s default is such that more than thirty (30) days are reasonably required
for its cure, then Tenant shall not be deemed to be in default if Tenant shall
commence such cure within said thirty (30) day period and thereafter diligently
prosecute such cure to completion, which completion shall occur not later than
sixty (60) days from the date of such notice from Landlord;

(d)

(i) the making by Tenant or any guarantor hereof of any general assignment for
the benefit of creditors, (ii) the filing by or against Tenant or any guarantor
hereof of a petition to have Tenant or any guarantor hereof adjudged a bankrupt
or a petition for reorganization or arrangement under any law relating to
bankruptcy (unless, in the case of a petition filed against Tenant or any
guarantor hereof, the same is dismissed within sixty (60) days), (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Tenant’s assets located at the Premises or of Tenant’s interest in this Lease or
of substantially all of guarantor’s assets, where possession is not restored to
Tenant or guarantor within sixty (60) days, or (iv) the attachment, execution or
other judicial seizure of substantially all of Tenant’s assets located at the
Premises or of substantially all of guarantor’s assets or of Tenant’s interest
in this Lease where such seizure is not discharged within sixty (60) days;

(e)

any material representation or warranty made by Tenant in this Lease or any
other document delivered in connection with the execution and delivery of this
Lease or pursuant to this Lease proves to be incorrect in any material respect;
and

(f)

Tenant shall be liquidated or dissolved or shall begin proceedings towards its
liquidation or dissolution.

23.2. Landlord’s Remedies; Termination. In the event of any such default by
Tenant, in addition to any other remedies available to Landlord under this
Lease, at law or in equity, Landlord shall have the immediate option to
terminate this Lease and all rights of Tenant hereunder. In the event that
Landlord shall elect to so terminate this Lease, then Landlord may recover from
Tenant:

(a)

the worth at the time of award of any unpaid rent which had been earned at the
time of such termination; plus

(b)

the worth at the time of the 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 be 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 including, but not limited to: unamortized Tenant Improvement costs;
attorneys’ fees; brokers’ commissions; the costs of refurbishment, alterations,
renovation and repair of the Premises; and removal (including the repair of any
damage caused by such removal) and storage (or disposal) of Tenant’s personal
property, equipment, fixtures, Tenant Changes, Tenant Improvements and any other
items which Tenant is required under this Lease to remove but does not remove.

As used in Sections 23.2(a) and 23.2(b) above, the “worth at the time of award”
is computed by allowing interest at the Interest Rate set forth in Section 1.14
of the Summary. As used in Section 23.2(c) above, the “worth at the time of
award” is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one percent
(1%).

-24-

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

 

23.3. Landlord’s Remedies; Re-Entry Rights. In the event of any such default by
Tenant, in addition to any other remedies available to Landlord under this
Lease, at law or in equity, Landlord shall also have the right, with or without
terminating this Lease, to re-enter the Premises and remove all persons and
property from the Premises; such property may be removed, stored and/or disposed
of pursuant to Section 12.4 of this Lease or any other procedures permitted by
applicable law. No re-entry or taking possession of the Premises by Landlord
pursuant to this Section 23.3, and no acceptance of surrender of the Premises or
other action on Landlord’s part, shall be construed as an election to terminate
this Lease unless a written notice of such intention be given to Tenant or
unless the termination thereof be decreed by a court of competent jurisdiction.

23.4. Continuation of Lease. Landlord shall have the remedy described in
California Civil Code Section 1951.4 (lessor may continue lease in effect after
lessee’s breach and abandonment and recover rent as it becomes due, if lessee
has the right to sublet or assign, subject only to reasonable limitations).
Accordingly, if Landlord does not elect to terminate this Lease on account of
any default by Tenant, Landlord may, from time to time, without terminating this
Lease, enforce all of its rights and remedies under this Lease, including the
right to recover all rent as it becomes due.

23.5. Landlord’s Right to Perform. Except as specifically provided otherwise in
this Lease, all covenants and agreements by Tenant under this Lease shall be
performed by Tenant at Tenant’s sole cost and expense and without any abatement
or offset of rent. If Tenant shall fail to pay any sum of money (other than
Monthly Basic Rent) or perform any other act on its part to be paid or performed
hereunder and such failure shall continue for five (5) days with respect to
monetary obligations (or thirty (30) days with respect to non-monetary
obligations, except in case of emergencies, in which such case, such shorter
period of time as is reasonable under the circumstances) after Tenant’s receipt
of written notice thereof from Landlord, Landlord may, without waiving or
releasing Tenant from any of Tenant’s obligations, make such payment or perform
such other act on behalf of Tenant. All sums so paid by Landlord and all
necessary incidental costs incurred by Landlord in performing such other acts
shall be payable by Tenant to Landlord within five (5) days after demand
therefor as additional rent.

23.6. Interest. If any monthly installment of Rent or Operating Expenses, or any
other amount payable by Tenant hereunder is not received by Landlord by the date
when due, it shall bear interest at the Interest Rate set forth in Section 1.14
of the Summary from the date due until paid. All interest, and any late charges
imposed pursuant to Section 23.7 below, shall be considered additional rent due
from Tenant to Landlord under the terms of this Lease.

23.7. Late Charges. Tenant acknowledges that, in addition to interest costs, the
late payments by Tenant to Landlord of any Monthly Basic Rent or other sums due
under this Lease will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of such costs being extremely difficult and impractical
to fix. Such other costs include, without limitation, processing, administrative
and accounting charges and late charges that may be imposed on Landlord by the
terms of any mortgage, deed of trust or related loan documents encumbering the
Premises, the Building or the Project. Accordingly, if any monthly installment
of Monthly Basic Rent or Operating Expenses or any other amount payable by
Tenant hereunder is not received by Landlord by the due date thereof, Tenant
shall pay to Landlord an additional sum of ten percent (10%) of the overdue
amount as a late charge, but in no event more than the maximum late charge
allowed by law. The parties agree that such late charge represents a fair and
reasonable estimate of the costs that Landlord will incur by reason of any late
payment as hereinabove referred to by Tenant, and the payment of late charges
and interest are distinct and separate in that the payment of interest is to
compensate Landlord for the use of Landlord’s money by Tenant, while the payment
of late charges is to compensate Landlord for Landlord’s processing,
administrative and other costs incurred by Landlord as a result of Tenant’s
delinquent payments. Acceptance of a late charge or interest shall not
constitute a waiver of Tenant’s default with respect to the overdue amount or
prevent Landlord from exercising any of the other rights and remedies available
to Landlord under this Lease or at law or in equity now or hereafter in effect.

23.8. Intentionally Deleted.

23.9. Rights and Remedies Cumulative. All rights, options and remedies of
Landlord contained in this Section 23 and elsewhere in this Lease (including
Section 28 below) shall be construed and held to be cumulative, and no one of
them shall be exclusive of the other, and Landlord shall have the right to
pursue any one or all of such remedies or any other remedy or relief which may
be provided by law or in equity, whether or not stated in this Lease. Nothing in
this Section 23 shall be deemed to limit or otherwise affect Tenant’s
indemnification of Landlord pursuant to any provision of this Lease.

23.10. Tenant’s Waiver of Redemption. Tenant hereby waives and surrenders for
itself and all those claiming under it, including creditors of all Kinds,
(i) any right and privilege which it or any of them may have under any present
or future law to redeem any of the Premises or to have a continuance of this
Lease after termination of this Lease or of Tenant’s right of occupancy or
possession pursuant to any court order or any provision hereof, and (ii) the
benefits of any present or future law which exempts property from liability for
debt or for distress for rent.

-25-

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

 

23.11. Costs Upon Default and Litigation. Tenant shall pay to Landlord and its
mortgagees, as additional rent, all the expenses incurred by Landlord or its
mortgagees in connection with any default by Tenant hereunder or the exercise of
any remedy by reason of any default by Tenant hereunder, including reasonable
attorneys’ fees and expenses.

24. Landlord’s Default. Landlord shall not be in default in the performance of
any obligation required to be performed by Landlord under this Lease unless
Landlord has failed to perform such obligation within thirty (30) days after the
receipt of written notice from Tenant specifying in detail Landlord’s failure to
perform; provided however, that if the nature of Landlord’s obligation is such
that more than thirty (30) days are required for its performance, then Landlord
shall not be deemed in default if it commences such performance within such
thirty (30) day period and thereafter diligently pursues the same to completion.
Upon any such uncured default by Landlord, Tenant may exercise any of its rights
provided in law or at equity; provided, however: (a) Tenant shall have no right
to offset or abate rent in the event of any default by Landlord under this
Lease, except to the extent offset rights are specifically provided to Tenant in
this Lease; (b) Tenant’s rights and remedies hereunder shall be limited to the
extent (i) Tenant has expressly waived in this Lease any of such rights or
remedies and/or (ii) this Lease otherwise expressly limits Tenant’s rights or
remedies, including the limitation on Landlord’s liability contained in
Section 31 hereof; and (c) in no event shall Landlord be liable for
consequential damages or loss of business profits.

25. Subordination. Without the necessity of any additional document being
executed by Tenant for the purpose of effecting a subordination, and at the
election of Landlord or any mortgagee of a mortgage or a beneficiary of a deed
of trust now or hereafter encumbering all or any portion of the Building or Site
(a “Mortgagee”), or any lessor of any ground or master lease now or hereafter
affecting all or any portion of the Building or Site, this Lease shall be
subject and subordinate at all times to such ground or master leases (and such
extensions and modifications thereof); provided, however, that a condition
precedent to the subordination of this Lease to any future ground or underlying
lease or to the lien of any future mortgage or deed of trust is that Landlord
shall obtain for the benefit of Tenant a subordination, non-disturbance and
attornment agreement from the landlord or lender of such future instrument, and
to the lien of such mortgages and deeds of trust (as well as to any advances
made thereunder and to all renewals, replacements, modifications and extensions
thereof). Notwithstanding the foregoing, Landlord and any Mortgagee and/or
ground lessor of Landlord, as applicable, shall have the right to subordinate or
cause to be subordinated any or all ground or master leases or the lien of any
or all mortgages or deeds of trust to this Lease. In the event that any ground
or master lease terminates for any reason or any mortgage or deed of trust is
foreclosed or a conveyance in lieu of foreclosure is made for any reason, at the
election of Landlord’s successor in interest, Tenant shall attorn to and become
the tenant of such successor. Tenant hereby waives its rights under any current
or future law which gives or purports to give Tenant any right to terminate or
otherwise adversely affect this Lease and the obligations of Tenant hereunder in
the event of any such foreclosure proceeding or sale. Upon Landlord’s request,
Tenant covenants and agrees to execute and deliver to Landlord within ten
(10) days after receipt of written demand by Landlord a subordination agreement
in the form of Exhibit “H” attached hereto, and in the form reasonably required
by Landlord, any additional documents evidencing the priority or subordination
of this Lease with respect to any such ground or master lease or the lien of any
such mortgage or deed of trust or Tenant’s agreement to attorn. Should Tenant
fail to sign and return any such documents within said ten (10) day period,
Tenant shall be in default hereunder without the benefit of any additional
notice or cure periods specified in Section 23.1 above. Within sixty (60) days
after the execution of this Lease, Landlord shall use its commercially
reasonable efforts to obtain a non-disturbance agreement from the holder of any
pre-existing mortgage encumbering the Project (in the form of Exhibit “H”
attached hereto). In the event that Landlord is unable to provide the
non-disturbance agreement within said sixty (60) days, then Tenant may, at
Tenant’s option, directly contact lender and attempt to negotiate for the
execution and delivery of a non-disturbance agreement.

26. Estoppel Certificate.

26.1. Tenant’s Obligations. Within ten (10) business days following Landlord’s
written request, Tenant shall execute and deliver to Landlord an estoppel
certificate, in a form substantially similar to the form of Exhibit “F” attached
hereto, certifying: (a) the Commencement Date of this Lease; (b) that this Lease
is unmodified and in full force and effect (or, if modified, that this Lease is
in full force and effect as modified, and stating the date and nature of such
modifications); (c) the date to which the rent and other sums payable under this
Lease have been paid; (d) that there are not, to the best of Tenant’s knowledge,
any defaults under this Lease by either Landlord or Tenant, except as specified
in such certificate; and (e) such other matters as are reasonably requested by
Landlord. Any such estoppel certificate delivered pursuant to this Section 26.1
may be relied upon by any mortgagee, beneficiary, purchaser or prospective
purchaser of any portion of the Site, as well as their assignees.

26.2. Tenant’s Failure to Deliver. Tenant’s failure to deliver such estoppel
certificate within such time shall constitute a default hereunder without the
applicability of the notice and cure periods specified in Section 23.1 above and
shall be conclusive upon Tenant that: (a) this Lease is in full force and effect
without modification, except as may be represented by Landlord; (b) there are no
uncured defaults in Landlord’s or Tenant’s performance (other than Tenant’s
failure to deliver the estoppel certificate); and (c) not more than one
(1) month’s rental has been paid in advance. Tenant shall indemnify, defend
(with counsel reasonably approved by Landlord in writing) and hold Landlord
harmless from and against any and all claims, judgments, suits, causes of
action, damages, losses, liabilities and expenses (including attorneys’ fees and
court costs) attributable to any failure by Tenant to timely deliver any such
estoppel certificate to Landlord pursuant to Section 26.1 above.

-26-

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

 

27. Building Planning. Except during the initial Lease Term, Landlord shall have
the right to move Tenant to other space in the Building or Project comparable in
size to the Premises (including similar views), and all terms hereof shall apply
to the new space with equal force; provided, however, that Landlord shall only
have the right to relocate Tenant in the event Landlord elects (in its sole
discretion) to re-hab or re-skin the Building. In such event, Landlord shall
give Tenant prior notice of Landlord’s election to so relocate Tenant, and shall
move Tenant’s effects to the new space at Landlord’s sole cost and expense at
such time and in such manner as to inconvenience Tenant as little as reasonably
practicable, and shall reimburse Tenant for the actual, documented and
reasonable costs of printing new stationery and business cards related to the
change of Tenant’s address. The new space shall be delivered to Tenant with
improvements substantially similar to those improvements existing in the
Premises at the time of Landlord’s notification to Tenant of the relocation.
Simultaneously with such relocation of the Premises, the parties shall
immediately execute an amendment to this Lease stating the relocation of the
Premises.

28. Modification and Cure Rights of Landlord’s Mortgagees and Lessors.

28.1. Modifications. If, in connection with Landlord’s obtaining or entering
into any financing or ground lease for any portion of the Building or Site, the
lender or ground lessor shall request modifications to this Lease, Tenant shall,
within ten (10) days after request therefor, execute an amendment to this Lease
including such modifications, provided such modifications do not increase the
obligations of Tenant hereunder, or adversely affect the leasehold estate
created hereby or Tenant’s rights hereunder.

28.2. Cure Rights. In the event of any default on the part of Landlord, Tenant
will give notice by registered or certified mail to any beneficiary of a deed of
trust or mortgagee covering the Premises or ground lessor of Landlord whose
address shall have been furnished to Tenant, and shall offer such beneficiary,
mortgagee or ground lessor a reasonable opportunity to cure the default
(including with respect to any such beneficiary or mortgagee, time to obtain
possession of the Premises, subject to this Lease and Tenant’s rights hereunder,
by power of sale or a judicial foreclosure, if such should prove necessary to
effect a cure).

29. Quiet Enjoyment. Landlord covenants and agrees with Tenant that, upon Tenant
performing all of the covenants and provisions on Tenant’s part to be observed
and performed under this Lease (including payment of rent hereunder), Tenant
shall have the right to use and occupy the Premises in accordance with and
subject to the terms and conditions of this Lease as against all persons
claiming by, through or under Landlord.

30. Transfer of Landlord’s Interest. The term “Landlord” as used in this Lease,
so far as covenants or obligations on the part of the Landlord are concerned,
shall be limited to mean and include only the owner or owners, at the time in
question, of the fee title to, or a lessee’s interest in a ground lease of, the
Site. In the event of any transfer or conveyance of any such title or interest
(other than a transfer for security purposes only), the transferor shall be
automatically relieved of all covenants and obligations on the part of Landlord
contained in this Lease accruing after the date of such transfer or conveyance,
provided that the transferee has assumed all of the obligations of the Landlord
in writing. Landlord and Landlord’s transferees and assignees shall have the
absolute right to transfer all or any portion of their respective title and
interest in the Site, the Building, the Premises and/or this Lease without the
consent of Tenant, and such transfer or subsequent transfer shall not be deemed
a violation on Landlord’s part of any of the terms and conditions of this Lease.

31. Limitation on Landlord’s Liability. Notwithstanding anything contained in
this Lease to the contrary, the obligations of Landlord under this Lease
(including any actual or alleged breach or default by Landlord) do not
constitute personal obligations of the individual partners, directors, officers,
members or shareholders of Landlord or Landlord’s partners, and Tenant shall not
seek recourse against the individual partners, directors, officers, members or
shareholders of Landlord or against Landlord’s partners or any other persons or
entities having any interest in Landlord, or any of their personal assets for
satisfaction of any liability with respect to this Lease. In addition, in
consideration of the benefits accruing hereunder to Tenant and notwithstanding
anything contained in this Lease to the contrary, Tenant hereby covenants and
agrees for itself and all of its successors and assigns that the liability of
Landlord for its obligations under this Lease (including any liability as a
result of any actual or alleged failure, breach or default hereunder by
Landlord), shall be limited solely to, and Tenant’s and its successors’ and
assigns’ sole and exclusive remedy shall be against, Landlord’s interest in the
Building, and no other assets of Landlord.

32. Miscellaneous.

32.1. Governing Law. This Lease shall be governed by, and construed pursuant to,
the laws of the State of California.

32.2. Successors and Assigns. Subject to the provisions of Section 30 above, and
except as otherwise provided in this Lease, all of the covenants, conditions and
provisions of this Lease shall be binding upon, and shall inure to the benefit
of, the parties hereto and their respective heirs, personal representatives and
permitted successors and assigns; provided, however, no rights shall inure to
the benefit of any Transferee of Tenant unless the Transfer to such Transferee
is made in compliance with the provisions of Section 14, and no options or other
rights which are expressly made personal to the original Tenant hereunder or in
any rider attached hereto shall be assignable to or exercisable by anyone other
than the original Tenant under this Lease.

-27-

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

 

32.3. No Merger. The voluntary or other surrender of this Lease by Tenant or a
mutual termination thereof shall not work as a merger and shall, at the option
of Landlord, either (a) terminate all or any existing subleases, or (b) operate
as an assignment to Landlord of Tenant’s interest under any or all such
subleases.

32.4. Professional Fees. If either Landlord or Tenant should bring suit against
the other with respect to this Lease, including for unlawful detainer or any
other relief against the other hereunder, then all costs and expenses incurred
by the prevailing party therein (including, without limitation, its actual
appraisers’, accountants’, attorneys’ and other professional fees and court
costs), shall be paid by the other party.

32.5. Waiver. The waiver by either party of any breach by the other party of any
term, covenant or condition herein contained shall not be deemed to be a waiver
of any subsequent breach of the same or any other term, covenant and condition
herein contained, nor shall any custom or practice which may become established
between the parties in the administration of the terms hereof be deemed a waiver
of, or in any way affect, the right of any party to insist upon the performance
by the other in strict accordance with said terms. No waiver of any default of
either party hereunder shall be implied from any acceptance by Landlord or
delivery by Tenant (as the case may be) of any rent or other payments due
hereunder or any omission by the non-defaulting party to take any action on
account of such default if such default persists or is repeated, and no express
waiver shall affect defaults other than as specified in said waiver. The
subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a
waiver of any preceding breach by Tenant of any term, covenant or condition of
this Lease other than the failure of Tenant to pay the particular rent so
accepted, regardless of Landlord’s knowledge of such preceding breach at the
time of acceptance of such rent.

32.6. Terms and Headings. The words “Landlord” and “Tenant” as used herein shall
include the plural as well as the singular. Words used in any gender include
other genders. The Section headings of this Lease are not a part of this Lease
and shall have no effect upon the construction or interpretation of any part
hereof. Any deletion of language from this Lease prior to its execution by
Landlord and Tenant shall not be construed to raise any presumption, canon of
construction or implication, including, without limitation, any implication that
the parties intended thereby to state the converse of the deleted language.

32.7. Time. Time is of the essence with respect to performance of every
provision of this Lease in which time or performance is a factor. All references
in this Lease to “days” shall mean calendar days unless specifically modified
herein to be “business” days.

32.8. Prior Agreements; Amendments. This Lease (and the Exhibits attached
hereto) contain all of the covenants, provisions, agreements, conditions and
understandings between Landlord and Tenant concerning the Premises and any other
matter covered or mentioned in this Lease, and no prior agreement or
understanding, oral or written, express or implied, pertaining to the Premises
or any such other matter shall be effective for any purpose. No provision of
this Lease may be amended or added to except by an agreement in writing signed
by the parties hereto or their respective successors in interest. The parties
acknowledge that all prior agreements, representations and negotiations are
deemed superseded by the execution of this Lease to the extent they are not
expressly incorporated herein.

32.9. Separability. The invalidity or unenforceability of any provision of this
Lease (except for Tenant’s obligation to pay Monthly Basic Rent and Excess
Expenses under Sections 3 and 4 hereof) shall in no way affect, impair or
invalidate any other provision hereof, and such other provisions shall remain
valid and in full force and effect to the fullest extent permitted by law.

32.10. Recording. Except as otherwise provided in this Lease, neither this
Lease, nor any memorandum, affidavit or other writing with respect thereto,
shall be recorded by Tenant or by anyone acting through, under or on behalf of
Tenant, and the recording thereof in violation of this provision shall make this
Lease null and void at Landlord’s election.

32.11. Exhibits. All Exhibits attached to this Lease are hereby incorporated in
this Lease as though set forth at length herein.

32.12. Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a
lesser amount than the rent payment herein stipulated shall be deemed to be
other than on account of the rent, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord’s right to recover the balance of such rent or pursue any
other remedy provided in this Lease. Tenant agrees that each of the foregoing
covenants and agreements shall be applicable to any covenant or agreement either
expressly contained in this Lease or imposed by any statute or at common law.

-28-

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

 

32.13. Financial Statements. Upon ten (10) days prior written request from
Landlord (which Landlord may make at any time during the Term but no more often
that two (2) times in any calendar year), Tenant shall deliver to Landlord
(a) its most recent financial statement of Tenant and any guarantor of this
Lease, and (b) financial statements of Tenant and such guarantor for the two
(2) years prior to the current financial statement year. Such statements shall
be prepared in accordance with generally acceptable accounting principles and
certified as true in all material respects by Tenant (if Tenant is an
individual) or by an authorized officer of Tenant (if Tenant is a corporation or
limited liability company) or a general partner of Tenant (if Tenant is a
partnership).

32.14. No Partnership. Landlord does not, in any way or for any purpose, become
a partner of Tenant in the conduct of its business, or otherwise, or joint
venturer or a member of a joint enterprise with Tenant by reason of this Lease.

32.15. Force Majeure. In the event that either party hereto shall be delayed or
hindered in or prevented from the performance of any act required hereunder by
reason of strikes, lock-outs, labor troubles, inability to procure materials,
failure of power, governmental moratorium or other governmental action or
inaction (including failure, refusal or delay in issuing permits, approvals
and/or authorizations), injunction or court order, riots, insurrection, war,
fire, earthquake, flood or other natural disaster or other reason of a like
nature not the fault of the party delaying in performing work or doing acts
required under the terms of this Lease (but excluding delays due to financial
inability) (herein collectively, “Force Majeure Delays”), then performance of
such act shall be excused for the period of the delay and the period for the
performance of any such act shall be extended for a period equivalent to the
period of such delay. The provisions of this Section 32.15 shall not apply to
nor operate to excuse Tenant from the payment of Monthly Basic Rent, Operating
Expenses, additional rent or any other payments strictly in accordance with the
terms of this Lease.

32.16. Counterparts. This Lease may be executed in one or more counterparts,
each of which shall constitute an original and all of which shall be one and the
same agreement.

32.17. No Press Release. Landlord shall not issue a press release disclosing the
terms of the Lease.

32.18. Independent Covenants. This Lease shall be construed as though the
covenants herein between Landlord and Tenant are independent and not dependent
and Tenant hereby expressly waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its obligations set forth herein,
Tenant shall not be entitled to make any repairs or perform any acts hereunder
at Landlord’s expense or to any setoff of the Rent or other amounts owing
hereunder against Landlord; provided, however, that the foregoing shall in no
way impair the right of Tenant to commence a separate action against Landlord
for any violation by Landlord of the provisions hereof so long as notice is
first given to Landlord and any holder of a mortgage or deed of trust covering
the Building, Project or any portion thereof, of whose address Tenant has
theretofore been notified, and an opportunity is granted to Landlord and such
holder to correct such violations as provided above.

32.19. Tenant’s Authority. If Tenant executes this Lease as a limited liability
company, partnership or corporation, then Tenant represents and warrants that:
(a) Tenant is a duly organized and validly existing limited liability company,
partnership, or corporation, as the case may be, and is qualified to do business
in the state in which the Premises are located; (b) such persons and/or entities
executing this Lease are duly authorized to execute and deliver this Lease on
Tenant’s behalf in accordance with the Tenant’s operating agreement (if Tenant
is a limited liability company), Tenant’s partnership agreement (if Tenant is a
partnership), or a duly adopted resolution of Tenant’s board of directors and
the Tenant’s by-laws (if Tenant is a corporation); and (c) this Lease is binding
upon Tenant in accordance with its terms. Concurrently with Tenant’s execution
and delivery of this Lease to Landlord and/or at any time during the Lease Term
within ten (10) days of Landlord’s request, Tenant shall provide to Landlord a
copy of any documents reasonably requested by Landlord evidencing Tenant’s
representations and warranties hereunder.

32.20. Joint and Several Liability. If more than one person or entity executes
this Lease as Tenant: (a) each of them is and shall be jointly and severally
liable for the covenants, conditions, provisions and agreements of this Lease to
be kept, observed and performed by Tenant; and (b) the act or signature of, or
notice from or to, any one or more of them with respect to this Lease shall be
binding upon each and all of the persons and entities executing this Lease as
Tenant with the same force and effect as if each and all of them had so acted or
signed, or given or received such notice.

32.21. No Option. The submission of this Lease for examination or execution by
Tenant does not constitute a reservation of or option for the Premises and this
Lease shall not become effective as a Lease until it has been executed by
Landlord and delivered to Tenant.

32.22. Building Name and Signage. Landlord shall have the right at any time to
designate and/or change the name and/or address of the Project, the Building
and/or any other building in the Project, and to install, affix and maintain any
and all signs on the exterior and on the interior of the Project, the Building
and/or any other building in the Project, as Landlord may, in Landlord’s sole
discretion, desire. Tenant shall not use the name of the Project, the Building
or any other building in the Project, or use pictures or illustrations of the
Project, the Building or any other building in the Project, in advertising or
other publicity, without the prior written consent of Landlord.

-29-

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

 

32.23. Landlord’s Title; Air Rights. Landlord’s title is and always shall be
paramount to the title of Tenant. Nothing herein contained shall empower Tenant
to do any act which can, shall or may encumber the title of Landlord. No rights
to any view or to light or air over any property, whether belonging to Landlord
or any other person, are granted to Tenant by this Lease.

32.24. Time of Essence. Time is of the essence of this Lease and each of its
provisions.

33. Waiver of Jury Trial. TO THE EXTENT ALLOWED UNDER APPLICABLE LAW, EACH PARTY
HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION SEEKING SPECIFIC
PERFORMANCE OF ANY PROVISION OF THIS LEASE, FOR DAMAGES FOR ANY BREACH UNDER
THIS LEASE, OR OTHERWISE FOR ENFORCEMENT OF ANY RIGHT OR REMEDY HEREUNDER.

34. Tenant’s Early Termination Right. Tenant shall have the one (1) time right
to terminate and cancel this Lease effective as of the date (“Termination Date”)
which is the last day of the thirty-sixth (36th) month of the initial Lease
Term, which right is contingent upon Tenant paying to Landlord the Termination
Consideration (as defined below) in a timely manner in accordance with the
following provisions of this Section 34. To exercise such termination right,
Tenant must deliver to Landlord, on or before the date which is six (6) months
prior to the Termination Date, written notice of Tenant’s exercise of such right
(the “Termination Notice”), along with payment of the Termination Consideration.
As used herein, the “Termination Consideration” shall mean an amount equal to
three (3) months of Monthly Basic Rent calculated at the rate that is payable by
Tenant for the Premises for the thirty-sixth (36th) month of the Lease Term. If
Tenant properly and timely exercises its termination option in this Section 34
in strict accordance with the terms hereof, this Lease shall expire at midnight
on the Termination Date, and Tenant shall be required to surrender the Premises
to Landlord on or prior to the Termination Date in accordance with the
applicable provisions of this Lease. If Tenant fails to timely pay the
Termination Consideration prior to such time period, then Landlord shall have
the option to either deem the Termination Notice rescinded in which case the
Lease shall continue in full force and effect for the remainder of the Term or
deem the Lease terminated as of the Termination Date and pursue any remedies
that Landlord may have against Tenant for failure to make such payment. The
termination right set forth in this Section 34 is personal to the Original
Tenant and any Affiliate Assignee and may only be executed by the Original
Tenant or such Affiliate Assignee (and not any other assignee, sublessee or
other transferee of Original Tenant’s interest (or Affiliate Assignee’s
interest) in this Lease) if no Event of Default (beyond the expiration of all
applicable notice and cure periods) has occurred under this Lease at the time
Tenant provides the Termination Notice to Landlord.

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

 

TENANT:

 

LANDLORD:

 

 

 

THOMAS, MCNERNEY & PARTNERS MGT., LLC,

a Delaware limited liability company

 

MULLROCK 3 TORREY PINES, LLC, a Delaware

limited liability company

 

 

 

By:

 

/s/ PRATIK SHAH

 

By:

 

/s/ Jon Mullen

 

 

Print Name:

PRATIK SHAH

 

 

 

Print Name:

Jon Mullen

 

 

Print Title:

Manager

 

 

 

Print Title:

Co-Managing Member

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

Print Name:

 

 

 

 

 

 

 

 

Print Title:

 

 

 

 

 

 

 

 

 

-30-

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

 

EXHIBIT “A”

SITE PLAN

 

logo [g2014051321043708584.jpg]

 

 

 

-1-

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

 

EXHIBIT “B”

PREMISES

 

logo [g2014051321043714785.jpg]

 

 

 

-1-

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

 

EXHIBIT “C”

WORK LETTER AGREEMENT

This Work Letter Agreement (“Work Letter Agreement”) sets forth the terms and
conditions relating to the construction of improvements for the Premises. All
references in this Work Letter Agreement to “the Lease” shall mean the relevant
portions of the Lease to which this Work Letter Agreement is attached as Exhibit
“C”.

SECTION 1

BASE, SHELL AND CORE

Landlord has constructed, through its contractor, the base, shell and core of
the Premises and of the Building (collectively, the “Base, Shell and Core”), and
Tenant shall accept the Base, Shell and Core in its current “As-Is” condition
existing as of the date of the Lease and the Commencement Date, except that
Landlord, at Landlord’s sole cost and expense and using Building-standard
materials, shall perform the following work in and outside the Premises (as
applicable): (i) provide base building air-conditioning in conformance with
applicable standards and ensure that the HVAC system (as applicable) is in good
working order, (ii) ensure that Building standard window coverings and drapery
pockets (if applicable) are in good working order, (iii) ensure that the
Premises and all common areas on the floor of the Premises (including without
limitation the restrooms and elevators (including call buttons)) are in
compliance with the American With Disabilities Act (“ADA”) and has a level of
finish as in current condition, (iv) ensure that existing fire protection alarm
and communication systems are in compliance with building code, (v) ensure that
all life safety, life support systems and security systems are in compliance
with building code (including the connection of such systems to the Building’s
main system, if applicable), and (vi) separate the Premises from the balance of
the second (2nd) floor (collectively, “Landlord’s Work”). Landlord shall install
in the Premises certain “Tenant Improvements” (as defined below) pursuant to the
provisions of this Work Letter Agreement. Except for the Tenant improvement work
described in this Work Letter Agreement, Landlord shall not be obligated to make
or pay for any alterations or improvements to the Premises, the Building or the
Project.

SECTION 2

CONSTRUCTION DRAWINGS FOR THE PREMISES

Prior to the execution of this Lease, Landlord and Tenant have approved a
detailed space plan for the construction of certain improvements in the Premises
(the “Final Space Plan”), which Final Space Plan is attached hereto as Schedule
“1.” Based upon and in conformity with the Final Space Plan, Landlord shall
cause its architect and engineers to prepare and deliver to Tenant, for Tenant’s
approval, detailed specifications and engineered working drawings for the tenant
improvements shown on the Final Space Plan (the “Working Drawings”). The Working
Drawings shall incorporate modifications to the Final Space Plan as necessary to
comply with the floor load and other structural and system requirements of the
Building. To the extent that the finishes and specifications are not completely
set forth in the Final Space Plan for any portion of the tenant improvements
depicted thereon, the actual specifications and finish work shall be in
accordance with the specifications for the Building’s standard tenant
improvement items, as determined by Landlord. Within three (3) business days
after Tenant’s receipt of the Working Drawings, Tenant shall approve or
disapprove the same, which approval shall not be unreasonably withheld;
provided, however, that Tenant may only disapprove the Working Drawings to the
extent such Working Drawings are inconsistent with the Final Space Plan and only
if Tenant delivers to Landlord, within such three (3) business days period,
specific changes proposed by Tenant which are consistent with the Final Space
Plan and do not constitute changes which would result in any of the
circumstances described in items (i) through (iv) below. If any such revisions
are timely and properly proposed by Tenant, Landlord shall cause its architect
and engineers to revise the Working Drawings to incorporate such revisions and
submit the same for Tenant’s approval in accordance with the foregoing
provisions, and the parties shall follow the foregoing procedures for approving
the Working Drawings until the same are finally approved by Landlord and Tenant.
Upon Landlord’s and Tenant’s approval of the Working Drawings, the same shall be
known as the “Approved Working Drawings.” The tenant improvements shown on the
Approved Working Drawings shall be referred to herein as the “Tenant
Improvements.” Once the Approved Working Drawings have been approved by Landlord
and Tenant, Tenant shall make no changes, change orders or modifications thereto
without the prior written consent of Landlord, which consent may be withheld in
Landlord’s sole discretion if such change or modification would: (i) directly or
indirectly delay the Substantial Completion of the Premises; (ii) increase the
cost of designing or constructing the Tenant Improvements above the cost of the
tenant improvements depicted in the Final Space Plan; (iii) be of a quality
lower than the quality of the standard tenant improvement items for the
Building; and/or (iv) require any changes to the Base, Shell and Core or
structural improvements or systems of the Building. The Final Space Plan,
Working Drawings and Approved Working Drawings shall be collectively referred to
herein as, the “Construction Drawings.”

-1-

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

 

SECTION 3

CONSTRUCTION AND PAYMENT FOR COSTS OF TENANT IMPROVEMENTS

Landlord shall cause a contractor designated by Landlord (the “Contractor”) to
(i) obtain all applicable building permits for construction of the Tenant
Improvements (the “Permits”), and (ii) construct the Tenant Improvements as
depicted on the Approved Working Drawings, in compliance with such building
permits and all applicable laws in effect at the time of construction, and in
good workmanlike manner. Except as otherwise provided in this Work Letter
Agreement, Landlord shall pay for the entire cost of the design and construction
of the Tenant Improvements. The cost of the design and construction of the
Tenant Improvements shall include Landlord’s construction supervision and
management fee in an amount equal to the product of (i) five percent (5%) and
(ii) the total cost of the design and construction of the Tenant Improvements.
In the event Tenant requests any changes, change orders or modifications to the
Working Drawings and/or the Approved Working Drawings (which Landlord approves
pursuant to Section 2 above) which increase the cost to construct the Tenant
Improvements above the cost of the tenant improvements as described in the Final
Space Plan, Tenant shall pay such increased cost to Landlord immediately upon
Landlord’s request therefor, and, in any event, prior to the date Landlord
causes the Contractor to commence construction of the changes, change orders or
modifications. In no event shall Landlord be obligated to pay for any of
Tenant’s furniture, computer systems, telephone systems, equipment or other
personal property which may be depicted on the Construction Drawings; such items
shall be paid for by Tenant. In any event, Tenant shall be responsible to pay
for the following: (i) any specialized HVAC for the IT room and (ii) any
built-in cabinets in the conference room (as well as any contingency, overhead
and general conditions associated with these items). Such payment shall be made
within ten (10) days of Landlord’s written request.

SECTION 4

SUBSTANTIAL COMPLETION

4.1 Substantial Completion. For purposes of the Lease, including for purposes of
determining the Commencement Date (as set forth in Section 1.7 of the Summary to
the Lease), “Substantial Completion” of the Premises shall occur upon (i) the
completion of construction of the Tenant Improvements in the Premises pursuant
to the Approved Working Drawings, with the exception of any punch list items
that do not materially and adversely affect Tenant’s use and occupancy of the
Premises (which must be completed as soon as possible, but in any case no later
than thirty (30) calendar days after the Substantial Completion date (or as soon
thereafter as reasonably possible)) and any tenant fixtures, work-stations,
built-in furniture, or equipment to be installed by Tenant or under the
supervision of Contractor (ii) the Building systems are operational to the
extent necessary to service the Premises allowing Tenant to conduct its daily
business operations in the Premises; (iii) Landlord has completed Landlord’s
Tenant Improvement work and Landlord’s Work, (iv) Landlord has received a
temporary certificate of occupancy or similar approval to occupy the Premises;
(v) Tenant has been provided its parking spaces; and (vi) Landlord is not in
default under any terms of the Lease. Landlord agrees to use good faith efforts
to provide Tenant with ten (10) business days prior written notice of
Substantial Completion of the Premises.

4.2 Delay of the Substantial Completion of the Premises. If there shall be a
delay or there are delays in the Substantial Completion of the Premises as a
direct, indirect, partial, or total result of any of the following
(collectively, “Tenant Delays”):

4.2.1 Tenant’s failure to timely approve the Working Drawings or any other
matter requiring Tenant’s approval;

4.2.2 a breach by Tenant of the terms of this Work Letter Agreement or the
Lease;

4.2.3 Tenant’s request for changes in any of the Approved Working Drawings;

4.2.4 Tenant’s requirement for materials, components, finishes or improvements
which are different from, or not included in, Landlord’s standard tenant
improvement items for the Building; or

4.2.5 any other acts or omissions of Tenant, or its agents, or employees to the
extent the same result in an actual delay of Substantial Completion of the
Premises;

Then (provided that Landlord has delivered written notice to Tenant stating the
nature of such delay and Tenant fails to cure such delay within one (1) business
day thereafter), notwithstanding anything to the contrary set forth in the Lease
and regardless of the actual date of Substantial Completion, the Commencement
Date (as set forth in Section 1.7 of the Summary) shall be deemed to be the date
the Commencement Date would have occurred if no Tenant Delays, as set forth
above, had occurred.

-2-

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

 

SECTION 5

MISCELLANEOUS

5.1 Tenant’s Entry Into the Premises Prior to Substantial Completion. Subject to
the terms hereof and provided that Tenant and its agents do not interfere with
Contractor’s work in the Building and the Premises, at Landlord’s reasonable
discretion, Contractor shall allow Tenant access to the Premises prior to the
anticipated Substantial Completion of the Premises for the purpose of Tenant
installing overstandard equipment or fixtures (including Tenant’s data and
telephone equipment) and Tenant’s furniture in the Premises. Prior to Tenant’s
entry into the Premises as permitted by the terms of this Section 5.1, Tenant
shall submit a schedule to Landlord and Contractor, for their approval, which
schedule shall detail the timing and purpose of Tenant’s entry. In connection
with any such entry, Tenant acknowledges and agrees that Tenant’s employees,
agents, contractors, consultants, workmen, mechanics, suppliers and invitees
shall fully cooperate, work in harmony and not, in any manner, interfere with
Landlord or Landlord’s Contractor, agents or representatives in performing work
in the Building and the Premises, or interfere with the general operation of the
Building and/or the Project. If at any time any such person representing Tenant
shall not be cooperative or shall otherwise cause or threaten to cause any such
disharmony or interference, including, without limitation, labor disharmony, and
Tenant fails to immediately institute and maintain corrective actions as
directed by Landlord, then Landlord may revoke Tenant’s entry rights upon
twenty-four (24) hours’ prior written notice to Tenant. Tenant acknowledges and
agrees that any such entry into and occupancy of the Premises or any portion
thereof by Tenant or any person or entity working for or on behalf of Tenant
shall be deemed to be subject to all of the terms, covenants, conditions and
provisions of the Lease, excluding only the covenant to pay Basic Rent (until
the occurrence of the Commencement Date). Tenant further acknowledges and agrees
that Landlord shall not be liable for any injury, loss or damage which may occur
to any of Tenant’s work made in or about the Premises in connection with such
entry or to any property placed therein prior to the Commencement Date, the same
being at Tenant’s sole risk and liability. Tenant shall be liable to Landlord
for any damage to any portion of the Premises, including the Tenant Improvement
work, caused by Tenant or any of Tenant’s employees, agents, contractors,
consultants, workmen, mechanics, suppliers and invitees. In the event that the
performance of Tenant’s work in connection with such entry causes extra costs to
be incurred by Landlord or requires the use of any Building services, Tenant
shall promptly reimburse Landlord for such extra costs and/or shall pay Landlord
for such Building services at Landlord’s standard rates then in effect. In
addition, Tenant shall hold Landlord harmless from and indemnify, protect and
defend Landlord against any loss or damage to the Premises or Project and
against injury to any persons caused by Tenant’s actions pursuant to this
Section 5.1.

5.2 Tenant’s Representative. Tenant has designated Mr. Pratik Shah, Ph.D., as
its sole representative with respect to the matters set forth in this Work
Letter Agreement, who shall have full authority and responsibility to act on
behalf of the Tenant as required in this Work Letter Agreement.

5.3 Landlord’s Representative. Landlord has designated Maya Hausmann as its sole
representative with respect to the matters set forth in this Work Letter
Agreement, who, until further notice to Tenant, shall have full authority and
responsibility to act on behalf of the Landlord as required in this Work Letter
Agreement.

5.4 Time of the Essence in This Work Letter Agreement. Unless otherwise
indicated, all references herein to a “number of days” shall mean and refer to
calendar days. If any item requiring approval is timely disapproved by Landlord,
the procedure for preparation of the document and approval thereof shall be
repeated until the document is approved by Landlord. Both Landlord and Tenant
shall use commercially reasonable, good faith, efforts and all due diligence to
cooperate with each other to complete all phases of the Construction Drawings
and the permitting process and to receive the permits, as soon as possible after
the execution of the Lease, and, in that regard, shall meet on a scheduled basis
to be determined by Landlord and Tenant, to discuss progress in connection with
the same.

5.5 Tenant’s Lease Default. Notwithstanding any provision to the contrary
contained in the Lease, if an event of default by Tenant as described in
Section 23 of the Lease or any default by Tenant under this Work Letter
Agreement has occurred at any time on or before the Substantial Completion of
the Premises and remains after the expiration of applicable notice and cure
periods, then (i) in addition to all other rights and remedies granted to
Landlord pursuant to the Lease, at law and/or in equity, Landlord shall have the
right to cause Contractor to suspend the construction of the Premises (in which
case, Tenant shall be responsible for any delay in the Substantial Completion of
the Premises caused by such work stoppage as set forth in Section 4.2 of this
Work Letter Agreement), and (ii) all other obligations of Landlord under the
terms of this Work Letter Agreement shall be forgiven until such time as such
default is cured pursuant to the terms of the Lease (in which case, Tenant shall
be responsible for any delay in the Substantial Completion of the Premises
caused by such inaction by Landlord).

 

 

 

-3-

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

 

SCHEDULE “1”

FINAL SPACE PLAN

 

 

 

-1-

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

 

 

logo [g2014051321043746086.jpg]

 

 

 

-2-

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

 

EXHIBIT “D”

SAMPLE FORM OF NOTICE OF LEASE TERM DATES

 

To:

 

 

 

 

 

Date:

 

 

 

 

 

 

 

 

 

 

 

Re: Project Lease dated                     , 200     between MULLROCK 3 TORREY
PINES, LLC, a Delaware limited liability company (“Landlord”),
and                                  (“Tenant”), concerning
Suite                     (“Premises”) located at
                                                                                          
.

Gentlemen:

In accordance with the above-referenced Lease, we wish to advise and/or confirm
as follows:

1. That the Premises have been accepted by Tenant as being substantially
complete in accordance with the Lease, and that there is no deficiency in
construction.

2. That Tenant has accepted and is in possession of the Premises, and
acknowledges that under the provisions of the Lease, the Term of the Lease is
for                      (            ) years, with                     
(            ) options to renew for                      (            ) years
each, and commenced upon the Commencement Date of                        ,
200     and is currently scheduled to expire on                     , subject to
earlier termination as provided in the Lease.

3. That in accordance with the Lease, rental payment has commenced (or shall
commence) on                                  .

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

5. Rent is due and payable in advance on the first day of each and every month
during the Term of the Lease. Your rent checks should be made payable to
                        at                                              .

6. The exact number of rentable square feet within the Premises is
                                  square feet.

7. Tenant’s Monthly Operating Expense Charge is currently $            .

 

AGREED AND ACCEPTED

 

 

 

 

 

 

 

 

 

TENANT:

 

LANDLORD:

 

 

 

 

 

 

 

 

 

MULLROCK 3 TORREY PINES, LLC, a Delaware limited liability company

By:

 

 

 

 

 

 

 

 

Name:

 

 

 

By:

  

 

 

Title:

 

 

 

 

Its:

 

By:

 

  

 

 

 

  

 

 

Name:

 

 

 

 

 

 

 

Title:

 

 

 

 

 

SAMPLE ONLY [NOT FOR EXECUTION]

 

 

 

-1-

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

 

EXHIBIT “E”

RULES AND REGULATIONS

To the extent there are any inconsistencies between the Lease and this Exhibit
E, the Lease shall control.

1. No sign, advertisement, name or notice shall be installed or displayed on any
part of the outside or inside of the Building without the prior written consent
of Landlord. Landlord shall have the right to remove, at Tenant’s expense and
without notice, any sign installed or displayed in violation of this rule. All
approved signs or lettering on doors and walls shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved by Landlord,
using materials and in a style and format approved by Landlord.

2. Tenant shall not place anything or allow anything to be placed near the glass
of any window, door, partition or wall which may appear unsightly from outside
the Premises. No awnings or other projection shall be attached to the outside
walls of the Building without the prior written consent of Landlord. No
curtains, blinds, shades or screens shall be attached to or hung in, or used in
connection with, any window or door of the Premises, other than Building
standard materials, without the prior written consent of Landlord.

3. Tenant shall not obstruct any sidewalks, halls, passages, exits, entrances,
elevators, escalators or stairways of the Building. The halls, passages, exits,
entrances, elevators, escalators and stairways are not for the general public,
and Landlord shall in all cases retain the right to control and prevent access
thereto of all persons whose presence in the judgment of Landlord would be
prejudicial to the safety, character, reputation and interests of the Building
and its tenants; provided, that nothing herein contained shall be construed to
prevent such access to persons with whom any tenant normally deals in the
ordinary course of its business, unless such persons are engaged in illegal
activities. Tenant and no employee, invitee, agent, licensee or contractor of
Tenant shall go upon or be entitled to use any portion of the roof of the
Building.

4. The directory of the Building will be provided exclusively for the display of
the name and location of tenants only, and Landlord reserves the right to
exclude any other names therefrom.

5. All cleaning and janitorial services for the Building and the Premises shall
be provided exclusively through Landlord or Landlord’s janitorial contractors in
accordance with the provisions of Section 18.1(d) of the Lease. No person or
persons other than those approved by Landlord shall be employed by Tenant or
permitted to enter the Building for the purpose of cleaning the same. Tenant
shall not cause any unnecessary labor by carelessness or indifference to the
good order and cleanliness of the Premises. Landlord shall not in any way be
responsible to Tenant for loss of property on the Premises, however occurring,
or for any damage to Tenant’s property by the janitors or any other employee or
any other person.

6. Landlord will furnish Tenant, free of charge, with two keys to each door lock
in the Premises. Landlord may impose a reasonable charge for any additional
keys. Tenant may not make or have made additional keys, and Tenant shall not
alter any lock or install a new additional lock or bolt on any door or window of
its Premises. Tenant, upon termination of its tenancy, shall deliver to Landlord
the keys of all doors which have been furnished to, or otherwise procured by
Tenant, and, in the event of loss of any keys, shall pay Landlord the cost of
replacing the same or of changing the lock or locks opened by such lost key if
Landlord shall deem it necessary to make such change.

7. Electric wires, telephones, telegraphs, burglar alarms or other similar
apparatus shall not be installed in the Premises except with the approval and
under the direction of Landlord. The location of telephones, call boxes and any
other equipment affixed to the Premises shall be subject to the approval of
Landlord. Any installation of telephones, telegraphs, electric wires or other
electric apparatus made without permission shall be removed by Tenant at
Tenant’s own expense. No machines other than standard office machines, such as
typewriters and calculators, photo copiers, personal computers and word
processors, and vending machines permitted by the Lease, shall be used in the
Premises without the approval of Landlord.

8. No furniture, freight, or equipment of any kind shall be brought into the
Building without prior notice to Landlord and all moving of the same into or out
of the Building shall be done at such time and in such manner as Landlord shall
designate. No furniture, equipment or merchandise shall be received in the
Building or carried up or down in the elevator, except between such hours as
shall be designated by Landlord. Deliveries during normal office hours shall be
limited to normal office supplies and other small items. No deliveries shall be
made which impede or interfere with other tenants or the operation of the
Building.

9. Tenant shall not place a load upon any floor of the Premises which exceeds
the load per square foot which such floor was designed to carry and which is
allowed by law. Landlord shall have the right to prescribe the weight, size and
position of all equipment, materials, furniture or other property brought into
the Building. Heavy objects, if such objects are considered necessary by Tenant,
as determined by Landlord, shall stand on such platforms as determined by
Landlord to be necessary to properly distribute the weight. Business machines
and mechanical equipment which cause noise or vibration that may be transmitted
to the structure of the Building or to any space therein to such a degree as to
be objectionable to Landlord or to any tenants in the Building, shall be placed
and maintained by Tenant, at Tenant’s expense, on vibration eliminators or other
devices sufficient to eliminate noise or vibration. Landlord will not be
responsible for loss of, or damage to, any such equipment or other property from
any cause, and all damage done to the Building by maintaining or moving such
equipment or other property shall be repaired at the expense of Tenant.

-1-

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

 

10. Tenant shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited quantities
necessary for the operation or maintenance of office equipment. Tenant shall not
use or permit to be used in the Premises any foul or noxious gas or substance,
or permit or allow the Premises to be occupied or used in a manner offensive or
objectionable to Landlord or other occupants of the Project by reason of noise,
odors or vibrations, nor shall Tenant bring into or keep in or about the
Premises any birds or animals.

11. Tenant shall not use any method of heating or air-conditioning other than
that supplied by Landlord.

12. Tenant shall not waste electricity, water or air-conditioning and agrees to
cooperate fully with Landlord to assure the most effective operation of the
Building’s heating and air-conditioning and to comply with any governmental
energy-saving rules, laws or regulations of which Tenant has actual notice, and
shall not adjust controls other than room thermostats installed for Tenant’s
use. Tenant shall keep corridor doors closed and shall close window coverings at
the end of each business day.

13. Landlord reserves the right to exclude from the Building between the hours
of 6:00 p.m. and 8:00 a.m., or such other hours as may be established from time
to time by Landlord, and on legal holidays, any person unless that person is
known to the person or employee in charge of the Building and has a pass or is
properly identified. Landlord shall not be liable for damages for any error with
regard to the admission to or exclusion from the Building of any person. Tenant
shall be responsible for all persons for whom it requests passes and shall be
liable to Landlord for all acts of such persons. Landlord reserves the right to
prevent access to the Building in case of invasion, mob, riot, public excitement
or other commotion by closing the doors or by other appropriate action.

14. Tenant shall close and lock all doors of its Premises and entirely shut off
all water faucets or other water apparatus, and, except with regard to Tenant’s
computers and other equipment which reasonably require electricity on a 24-hour
basis, all electricity, gas or air outlets before Tenant and its employees leave
the Premises. Tenant shall be responsible for any damage or injuries sustained
by other tenants or occupants of the Building or by Landlord for noncompliance
with this rule.

15. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not
be used for any purpose other than that for which they were constructed, and no
foreign substances of any kind whatsoever shall be thrown therein.

16. Tenant shall not sell, or permit the sale at retail, of newspapers,
magazines, periodicals, theater tickets, or any other goods or merchandise to
the general public in or on the Premises. Tenant shall not make any room-to-room
solicitation of business from other tenants in the Project. Tenant shall not use
the Premises for any business or activity other than that specifically provided
for in the Lease.

17. Tenant shall not install any radio or television antenna, loudspeaker or
other device on the roof or exterior walls of the Building. Tenant shall not
interfere with radio or television broadcasting or reception from or in the
Building or elsewhere.

18. Except as expressly permitted in the Lease, Tenant shall not mark, drive
nails, screw or drill into the partitions, window mullions, woodwork or plaster,
or in any way deface the Premises or any part thereof, except to install normal
wall hangings. Tenant shall repair any damage resulting from noncompliance under
this rule.

19. Tenant shall not install, maintain or operate upon the Premises any vending
machines without the prior written consent of Landlord, which shall not be
unreasonably withheld.

20. Canvassing, soliciting and distribution of handbills or any other written
material, and peddling in and around the Project or the Building are expressly
prohibited, and each tenant shall cooperate to prevent same.

21. Landlord reserves the right to exclude or expel from the Project and/or the
Building any person who, in Landlord’s judgment, is intoxicated or under the
influence of liquor or drugs or who is in violation of any of the Rules and
Regulations of the Project or Building.

22. Tenant shall store all its trash and garbage within its Premises. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of trash and garbage disposal.
All garbage and refuse disposal shall be made in accordance with directions
reasonably issued from time to time by Landlord.

23. The Premises shall not be used for the storage of merchandise held for sale
to the general public, or for lodging or for manufacturing of any kind. No
cooking shall be done or permitted by Tenant on the Premises, except that use by
Tenant of Underwriters’ Laboratory-approved equipment for brewing coffee, tea,
hot chocolate and similar beverages shall be permitted and the use of a
microwave shall be permitted, provided that such equipment and use is in
accordance with all applicable federal, state, county and city laws, codes,
ordinances, rules and regulations.

24. Tenant shall not use in any space, or in the public halls of the Building,
any hand trucks except those equipped with rubber tires and side guards, or such
other material-handling equipment as Landlord may approve. Tenant shall not
bring any other vehicles of any kind into the Building.

25. Tenant shall not use the name of the Project or Building in connection with,
or in promoting or advertising, the business of Tenant, except for Tenant’s
address.

-2-

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

 

26. Tenant agrees that it shall comply with all fire and security regulations
that may be issued from time to time by Landlord, and Tenant also shall provide
Landlord with the name of a designated responsible employee to represent Tenant
in all matters pertaining to such fire or security regulations. Tenant shall
cooperate fully with Landlord in all matters concerning fire and other emergency
procedures. Landlord shall provide additional life safety information to Tenant
under separate cover.

27. Tenant assumes any and all responsibility for protecting its Premises from
theft, robbery and pilferage. Such responsibility shall include keeping doors
locked and other means of entry to the Premises closed.

28. Landlord may waive any one or more of these Rules and Regulations for the
benefit of Tenant or any other tenant, but no such waiver by Landlord shall be
construed as a waiver of such Rules and Regulations in favor of Tenant or any
other such tenant, nor prevent Landlord from thereafter enforcing any such Rules
and Regulations against any and all of the tenants in the Building.

29. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify or amend, in whole or in part, the terms, covenants,
agreements and conditions of any lease of premises in the Project or Building.

30. Landlord reserves the right to make such other and reasonable Rules and
Regulations as, in its judgment, may from time to time be needed for safety,
security, care and cleanliness of the Project and/or Building and for the
preservation of good order therein. Tenant agrees to abide by all such Rules and
Regulations hereinabove stated and any additional rules and regulations which
are adopted.

31. Tenant shall be responsible for the observance of all of the foregoing rules
by Tenant’s employees, agents, clients, customers, invitees or guests.

32. Tenant shall not lay linoleum, tile, carpet or other similar floor covering
so that the same shall be affixed to the floor of the Premises in any manner
except by a paste, or other material which may easily be removed with water, the
use of cement or other similar adhesive materials being expressly prohibited.
The method of affixing any such linoleum, tile, carpet or other similar floor
covering shall be subject to the approval of Landlord. The expense of repairing
any damage resulting from a violation of this rule shall be borne by Tenant.

PARKING RULES AND REGULATIONS

In addition to the parking provisions contained in the Lease to which this
Exhibit “E” is attached, the following rules and regulations shall apply with
respect to the use of the Building’s parking facilities. To the extent there are
any inconsistencies between the Lease and these Parking Rules and Regulations,
the Lease shall control.

1. Every parker is required to park and lock his/her own vehicle. Ail
responsibility for damage to or loss of vehicles is assumed by the parker and
Landlord shall not be responsible for any such damage or loss by water, fire,
defective brakes, the act or omissions of others, theft, or for any other cause.

2. Tenant shall not park or permit its employees to park in any parking areas
designated by Landlord as areas for parking by visitors to the Project. Tenant
shall not leave vehicles in the parking areas overnight nor park any vehicles in
the parking areas other than automobiles, motorcycles, motor driven or non-motor
driven bicycles or four wheeled trucks.

3. Parking stickers or any other device or form of identification supplied by
Landlord as a condition of use of the parking facilities shall remain the
property of Landlord. Such parking identification device must be displayed as
requested and may not be mutilated in any manner. The serial number of the
parking identification device may not be obliterated. Devices are not
transferable and any device in the possession of an unauthorized holder will be
void.

4. No overnight or extended term storage of vehicles shall be permitted.

5. Vehicles must be parked entirely within painted stall lines of a single
parking stall.

6. All directional signs and arrows must be observed.

7. The speed limit within all parking areas shall be five (5) miles per hour.

8. Parking is prohibited: (a) in areas not striped for parking; (b) in aisles;
(c) where “no parking” signs are posted; (d) on ramps; (e) in cross-hatched
areas; and (f) in reserved spaces and in such other areas as may be designated
by Landlord or Landlord’s parking operator.

9. Loss or theft of parking identification devices must be reported to the
Management Office immediately, and a lost or stolen report must be filed by the
Tenant or user of such parking identification device at the time. Landlord has
the right to exclude any vehicle from the parking facilities that does not have
an identification device.

10. Any parking identification devices reported lost or stolen found on any
unauthorized car will be confiscated and the illegal holder will be subject to
prosecution.

11. Washing, waxing, cleaning or servicing of any vehicle in any area not
specifically reserved for such purpose is prohibited.

-3-

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

 

12. The parking operators, managers or attendants are not authorized to make or
allow any exceptions to these rules and regulations.

13. Tenant’s continued right to park in the parking facilities is conditioned
upon Tenant abiding by these rules and regulations and those contained in this
Lease. Further, if the Lease terminates for any reason whatsoever, Tenant’s
right to park in the parking facilities shall terminate concurrently therewith.

14. Tenant agrees to sign a parking agreement with Landlord or Landlord’s
parking operator within five (5) days of request, which agreement shall provide
the manner of payment of monthly parking fees and otherwise be consistent with
the Lease and these rules and regulations.

15. Landlord reserves the right to refuse the sale or use of monthly stickers or
other parking identification devices to any tenant or person who willfully
refuse to comply with these rules and regulations and all city, state or federal
ordinances, laws or agreements.

16. Subject to the Lease, Landlord reserves the right to establish and change
parking fees, and to modify and/or adopt such other reasonable and
non-discriminatory rules and regulations for the parking facilities as it deems
necessary for the operation of the parking facilities. Landlord may refuse to
permit any person who violates these rules to park in the parking facilities,
and any violation of the rules shall subject the vehicle to removal, at such
vehicle owner’s expense.

 

 

 

-4-

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

 

EXHIBIT “F”

SAMPLE FORM OF TENANT ESTOPPEL CERTIFICATE

The undersigned (“Tenant”) hereby certifies to                                
 , a                                                                          
                       (“Landlord”), and                                
                         , as follows:

1. Attached hereto is a true, correct and complete copy of that certain Office
Lease dated                              ,            between Landlord and
Tenant (the “Lease”), which demises Premises which are located at
                         . The Lease is now in full force and effect and has not
been amended, modified or supplemented, except as set forth in Section 6 below.

2. The term of the Lease commenced on                      ,            .

3. The term of the Lease is currently scheduled to expire on
                         ,             .

4. Tenant has no option to renew or extend the Term of the Lease except:
                                .

5. Tenant has no preferential right to purchase the Premises or any portion of
the Building or Site upon which the Premises are located, and Tenant has no
rights or options to expand into other space in the Building except:
                                                        .

6. The Lease has: (Initial One)

(            ) not been amended, modified, supplemented, extended, renewed or
assigned.

(            ) been amended, modified, supplemented, extended, renewed or
assigned by the following described agreements, copies of which are attached
hereto:                                
                                                                              .

7. Tenant has accepted and is now in possession of the Premises and has not
sublet, assigned or encumbered the Lease, the Premises or any portion thereof
except as follows:                              
                                         
                                                                           .

8. The current Monthly Basic Rent is $          ; and current monthly parking
charges are $            .

Tenant’s Percentage is             %, and Tenant’s Percentage of Operating
Expenses currently payable by Tenant is $             per month, which amount is
Landlord’s current estimate of Tenant’s Percentage of Operating Expenses in
excess of the Operating Expenses incurred in calendar year
                                               .

9. The amount of security deposit (if any) is $            . No other security
deposits have been made.

10. All rental payments payable by Tenant have been paid in full as of the date
hereof. No rent under the Lease has been paid for more than thirty (30) days in
advance of its due date.

11. All work required to be performed by Landlord under the Lease has been
completed and has been accepted by Tenant, and all tenant improvement allowances
have been paid in full.

12. To the best of Tenant’s knowledge, as of the date hereof, there are no
defaults on the part of Landlord or Tenant under the Lease.

13. Tenant has no defense as to its obligations under the Lease and claims no
set-off or counterclaim against Landlord.

14. Tenant has no right to any concession (rental or otherwise) or similar
compensation in connection with renting the space it occupies, except as
expressly provided in the Lease.

15. All insurance required of Tenant under the Lease has been provided by Tenant
and all premiums have been paid.

16. There has not been filed by or against Tenant a petition in bankruptcy,
voluntary or otherwise, any assignment of creditors, any petition seeking
reorganization or arrangement under the bankruptcy laws of the United States or
any state thereof, or any other action brought pursuant to such bankruptcy laws
with respect to Tenant.

17. Tenant pays rent due Landlord under the Lease to Landlord and does not have
any knowledge of any other person who has any right to such rents by collateral
assignment or otherwise.

-1-

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

 

The foregoing certification is made with the knowledge that is about to [fund a
loan to Landlord or purchase the Building from Landlord], and that is relying
upon the representations herein made in [funding such loan or purchasing the
Building].

Dated:                              ,             .

“TENANT”

 

 

a

 

By:

 

Print Name:

 

Title:

 

 

By:

 

Print Name:

 

Title:

 

 

 

 

-2-

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

 

EXHIBIT “G”

INTENTIONALLY OMITTED

 

 

 

-1-

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

 

ASSIGNMENT AND ASSUMPTION AGREEMENT

This Assignment and Assumption Agreement (this “Agreement”) is made as of
February 28, 2014, by and between THOMAS, MCNERNEY & PARTNERS MGT., LLC, a
Delaware limited liability company (“Assignor”), and AUSPEX PHARMACEUTICALS,
INC., a Delaware corporation (“Assignee”).

R E C I T A L S :

A. Reference is hereby made to that certain Office Lease dated June 6, 2011,
between Mullrock 3 Torrey Pines, LLC, a Delaware limited liability company
(“Landlord”) and Assignor (the “Lease”), pertaining to the lease of space known
as Suite 220 (the “Leased Premises”) located on the second floor of a three
story office building commonly known as 3366 North Torrey Pines Court, San
Diego, California 92037 (the “Building”). A true, correct and complete copy of
the Lease is attached hereto as Exhibit A. Capitalized terms used but not
defined herein shall have the meanings given such terms in the Lease.

B. Assignor desires to assign to Assignee, and Assignee desires to assume from
Assignor, all of Assignor’s rights, title, interests and obligations under the
Lease.

A G R E E M E N T :

1. Assignment of Lease. Effective as of the Effective Date (as hereinafter
defined), Assignor hereby assigns to Assignee, and Assignee hereby assumes from
Assignor, all of Assignor’s rights, title, interests and obligations in the
Lease and the Leased Premises

2. Assumption of Obligations. Effective as of the Effective Date, Assignee does
hereby accept this assignment and further covenants and agrees to be bound by
and to faithfully perform all of the terms, covenants, conditions, provisions,
duties and agreements of the Assignor under the Lease and/or related to the
Leased Premises (the “Assumed Obligations”).

3. Effective Date. This Assignment shall be effective as of March 1, 2014 (the
“Effective Date”), and continue until the present term of the Lease expires on
August 31, 2016.

4. Assignor’s Representations and Warranties. Assignor hereby represents and
warrants to Assignee that, as of the date hereof:

(a) To Assignor’s knowledge, Assignor is in compliance with all terms, covenants
and conditions of the Lease and there are no breaches or defaults under the
Lease by Landlord or Assignor, and that Assignor knows of no events or
circumstances which, given the passage of time or the giving of notice (or
both), would constitute a default under the Lease by either Landlord or
Assignor.

(b) Assignor is the lawful and sole owner of the interest assigned under this
Assignment and this interest is free from all encumbrances;

(c) To Assignor’s knowledge, Assignor has performed all duties and obligations
and made all payments required under the terms and conditions of the Lease; and

(d) To Assignor’s knowledge, any Tenant Changes and/or Tenant Improvements
performed by Assignee under the Lease (i) were performed in accordance with the
terms of the Lease, (ii) there are no costs owing to Landlord in connection with
any such Tenant Changes or Tenant Improvements, and (iii) Tenant has not
received any notice from Landlord in connection with any Tenant Changes or
Tenant Improvements which would require such Tenant Changes or Tenant
Improvements to be removed upon the termination of the Lease.

5. Non-Release of Assignor; Further Transfers. Nothing contained in this
Agreement shall release or discharge Assignor from any liability to Landlord
under the Lease accruing prior to the Effective Date. Nothing contained in this
Agreement shall be construed as a waiver of Landlord’s right to consent to any
further assignment by Assignee of its rights, title, interest and obligations
under the Lease.

6. Indemnification and Operating Expenses. Assignor hereby agrees to indemnify,
defend and hold harmless Assignee and its respective successors and assigns from
and against any and all claims, losses, liabilities and expenses, including
reasonable attorneys’ fees, suffered or incurred by Assignee by reason of any
breach by Assignor, prior to the Effective Date, of any of Assignor’s
obligations under the Lease and this Agreement. If any Operating Expenses or
Excess Expenses become due pursuant to an Actual Statement received from
Landlord in accordance with Section 4.7 of the Lease, which Operating Expenses
and/or Excess Expenses are allocable to the period of time prior to the
Effective Date, Assignor shall promptly reimburse Assignee any such amounts upon
written request therefor from Assignee.

 

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

 

7. Security Deposit. The parties acknowledge that Landlord currently holds a
security deposit in the amount of $8,069.12 made by Assignor (the “Security
Deposit”) pursuant to the terms of the Lease. On the Effective Date Assignee
shall make a payment to Assignor in the amount of the Security Deposit, and from
and after the Effective Date the Security Deposit shall be deemed held for the
benefit of Assignee, and Assignor shall be deemed to have released all claims to
the Security Deposit.

8. General Provisions.

8.1 Controlling Law. The terms and provisions of this Assignment Agreement shall
be construed in accordance with and governed by the laws of the State of
California.

8.2 No Brokers. Each party to this Agreement warrants and represents to the
other that such party has not retained any real estate broker, finder or any
other person whose services would form the basis for any claim for any
commission or fee in connection with this Agreement or the transactions
contemplated hereby.

8.3 Notices. Any notices or other communications required or permitted under
this Agreement will be in writing and delivered as follows:

 

If to Assignor: 

Auspex Pharmaceuticals, Inc.

3366 N. Torrey Pines Court, Suite 226

La Jolla, CA 92037

Attention: John P. Schmid 

If to Assignee: 

Thomas McNerney & Partners, LLC

60 South Sixth Street, Suite 3620

Minneapolis, MN 55402

Attention: Susan Haedt

8.4 Binding Effect. This Assignment Agreement shall be binding upon and inure to
the benefit of the parties hereto, their heirs, successors and assigns.

8.5 Captions. The paragraph captions utilized herein are in no way intended to
interpret or limit the terms and conditions hereof; rather, they are intended
for purposes of convenience only.

8.6 Further Actions. Each of the parties covenants and agrees, at its own
expense, to execute and deliver, at the request of any other party, such further
instruments and to take such other action as such other party may request to
more effectively consummate the assignment contemplated by this Agreement.

8.7 Partial Invalidity. If any term, provision or condition contained in this
Assignment Agreement shall, to any extent, be invalid or unenforceable, the
remainder of this Assignment Agreement, or the application of such term,
provision or condition to persons or circumstances other than those with respect
to which it is invalid or unenforceable, shall not be affected thereby, and each
and every other term, provision and condition of this Assignment Agreement shall
be valid and enforceable to the fullest extent possible permitted by law.

[Signature page follows]

 

 

 

-2-

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

 

IN WITNESS WHEREOF, the parties have executed this Assignment and Assumption
Agreement as of the day and year first above written.

 

ASSIGNOR:

 

THOMAS, MCNERNEY & PARTNERS MGT., LLC,

a Delaware limited liability company

By:

 

/s/ James Thomas

Name:

 

James Thomas

Title:

 

Manager

 

ASSIGNEE:

 

AUSPEX PHARMACEUTICALS, INC.,

a Delaware corporation

 

By:

 

/s/ John Schmid

Name:

 

John Schmid

Title:

 

Chief Financial Officer

 

 

 

 

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

 

EXHIBIT A

Lease Agreement

 

 

 

 

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

 

CONSENT TO ASSIGNMENT OF LEASE

(Torrey Pines Court)

THIS CONSENT TO ASSIGNMENT OF LEASE AGREEMENT (the “Agreement”) is made as of
February 28, 2014, by and among MULLROCK 3 TORREY PINES, LLC, a Delaware limited
liability company (“Landlord”) and THOMAS MCNERNEY & PARTNERS MGT., LLC, a
Delaware limited liability company (“Assignor” or “Tenant”), and AUSPEX
PHARMACEUTICALS, INC., a Delaware corporation (“Assignee”).

R E C I T A L S :

A. Reference is hereby made to that certain Office Lease dated June 6, 2011 by
and between Landlord and Assignor (as tenant) (“Lease”), pertaining to certain
space commonly known as Suite 220 (the “Premises”) located at 3366 North Torrey
Pines Court, San Diego, California (the “Building”).

B. Pursuant to the terms of Section 14 of the Lease, Tenant has requested
Landlord’s consent with respect to the assignment by Tenant of its rights,
title, interest and obligations under the Lease to Assignee pursuant to that
certain Assignment and Assumption of Lease Agreement dated February 28, 2014 by
and between Assignor and Assignee (the “Assignment”). Landlord is willing to
consent to the Assignment on the terms and conditions contained herein.

C. All defined terms not otherwise expressly defined herein shall have the
respective meanings given in the Lease.

A G R E E M E N T :

1. Landlord’s Consent. Landlord hereby consents to the Assignment; provided,
however, such consent is granted by Landlord only upon the terms and conditions
set forth in this Agreement. Except as expressly provided herein, this Agreement
shall not be construed to modify, waive or amend any of the terms, covenants and
conditions of the Lease or to waive any breach thereof or any of Landlord’s
rights or remedies thereunder or to enlarge or increase any obligations of
Landlord under the Lease. Except as expressly provided herein, any terms of the
Assignment which are inconsistent with the terms of the Lease or this Agreement
shall be of no force or effect.

2. Release of Tenant; Further Transfers. Effective as of March 1, 2014
(“Assignment Effective Date”), Assignee hereby assumes all of Tenant’s
obligations under the Lease accruing after the Assignment Effective Date and
Tenant shall be relieved from all obligations under the Lease accruing after the
Assignment Effective Date; provided, however, that neither the Assignment nor
this consent thereto shall release or discharge Tenant from any liability under
the Lease prior to the Assignment Effective Date.

3. Additional Provisions; Lease Amendment. Landlord and Assignee hereby agree,
from and after the Assignment Effective Date, as follows:

a. The Lease shall be amended by deleting Section 27 from the Lease in its
entirety;

b. Landlord hereby agrees that after the Effective Date, any notices to be sent
to “Tenant” shall be sent to Assignee at the following address:

Auspex Pharmaceuticals, Inc.

3366 N. Torrey Pines Court, Suite 226

La Jolla, CA 92037

Attention: John P. Schmid

c. Notwithstanding the terms of Section 6.3 of the Lease, the rights associated
with “Tenant’s Name Sign” shall continue and be in full force as if Assignee
were the “Original Tenant” under the Lease; provided, however, that Assignee
shall be responsible for the costs associated with changing such sign after the
Assignment Effective Date, and Assignee shall assume the obligations of Tenant
under Section 6.3 in connection therewith, including, without limitation, the
payment to Landlord of a Two Hundred Dollar ($200.00) monthly fee.

 

 

 

 

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

 

4. General Provisions.

4.1 Brokerage Commission. Tenant and Assignee covenant and agree that under no
circumstances shall Landlord be liable for any brokerage commission or other
charge or expense in connection with the Assignment and Tenant and Assignee
agree to protect, defend, indemnify and hold Landlord harmless from the same and
from any cost or expense (including, but not limited to, attorneys’ fees and
costs) incurred by Landlord in resisting any claim for any such brokerage
commission.

4.2 Controlling Law. The terms and provisions of this Agreement shall be
construed in accordance with and governed by the laws of the State of
California.

4.3 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their heirs, successors and assigns. As used
herein, the singular number includes the plural and the masculine gender
includes the feminine and neuter.

4.4 Captions. The paragraph captions utilized herein are in no way intended to
interpret or limit the terms and conditions hereof; rather, they are intended
for purposes of convenience only.

4.5 Partial Invalidity. If any term, provision or condition contained in this
Agreement shall, to any extent, be invalid or unenforceable, the remainder of
this Agreement, or the application of such term, provision or condition to
persons or circumstances other than those with respect to which it is invalid or
unenforceable, shall not be affected thereby, and each and every other term,
provision and condition of this Agreement shall be valid and enforceable to the
fullest extent possible permitted by law.

4.6 Attorneys’ Fees. If either party commences litigation against the other for
the specific performance of this Agreement, for damages for the breach hereof or
otherwise for enforcement of any remedy hereunder, the parties hereto agree to
and hereby do waive any right to a trial by jury and, in the event of any such
commencement of litigation, the prevailing party shall be entitled to recover
from the other party such costs and reasonable attorneys’ fees as may have been
incurred.

4.7 Landlord’s Costs. Within thirty (30) days after the earlier of (i) written
request by Landlord or (ii) the date of this Agreement, Tenant shall pay to
Landlord the transfer fee in the amount of Five Hundred Dollars ($500.00) as
well as Landlord’s reasonable attorneys’ fees in connection with this Agreement
(all as provided in Section 14.2 of the Lease).

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

 

“LANDLORD”

 

MULLROCK 3 TORREY PINES, LLC, a Delaware limited liability company

 

 

 

By:

 

 

Mullrock 3 Torrey Pines Manager, LLC,

a Delaware limited liability company

Its Non-Member Manager

 

 

 

By:

 

Mullrock 3, LLC,

a Delaware limited liability company

Its Sole Member

 

 

 

 

 

By:

 

Muller-Rock 3, LLC,

a California limited liability company

Its Managing Member

 

 

 

 

 

 

 

By:

 /s/ Stephen J. Muller

 

 

 

 

 

 

Name:

 

Stephen J. Muller

 

 

 

 

 

 

Title:

 

Managing Member

-b-

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

 

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

“ASSIGNOR”

 

THOMAS, MCNERNEY & PARTNERS MGT.,

LLC, a Delaware limited liability company

 

 

 

By:

 

/s/ James Thomas

 

 

Name:

 

James Thomas

 

 

Title:

 

Manager

 

 

Dated:

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

 

Dated:

 

 

 

“ASSIGNEE”

 

AUSPEX PHARMACEUTICALS, INC., a

Delaware corporation

 

 

 

By:

 

/s/ John Schmid

 

 

Name:

 

John Schmid

 

 

Title:

 

Chief Financial Officer

 

 

Dated:

 

March 4, 2014

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

 

Dated:

 

 

 

 

 

-c-

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

 

COMMENCEMENT LETTER

Date: August 24, 2011

To: Thomas McNerney & Partners, LLC, a Delaware limited liability company

Re: Project Lease dated June 6, 20011, between MULLROCK 3 TORREY PINES, LLC, a
Delaware limited liability company (“Landlord”), and Thomas McNerney & Partners,
LLC, a Delaware limited liability company (“Tenant”), concerning Suite 220
(“Premises”) located at 3366 North Torrey Pines Court, La Jolla, CA 92037.

Gentlemen:

In accordance with the above-referenced Lease, we wish to advise and/or confirm
as follows:

1. That the Premises have been accepted by Tenant as being substantially
complete in accordance with the Lease and that there is no deficiency in
construction.

2. That Tenant has accepted and is in possession of the Premises, and
acknowledges that under the provisions of the Lease, the Term of the Lease is
for Five (5) years, with One (1) option to renew for Three (3) years, and
commenced upon the Commencement Date of September 1, 2011 and is currently
scheduled to expire on August 31, 2016, subject to earlier termination as
provided in the Lease.

3. That in accordance with the Lease, rental payment has commenced (or shall
commence) on September 1, 2011.

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

5. Rent is due and payable in advance on the first day of each and every month
during the Term of the Lease. Your rent checks should be made payable to
Mullrock 3 Torrey Pines, LLC at File #749440, Los Angeles, CA 90074-9440.

6. The exact number of rentable square feet within the Premises is 2,048 square
feet.

7. Tenant’s Monthly Operating Expense Charge is currently $0.00.

 

AGREED AND ACCEPTED

 

 

 

 

TENANT:

 

LANDLORD:

 

Thomas McNerney & Partners, LLC, a Delaware limited liability company

 

MULLROCK 3 TORREY PINES, LLC, a Delaware limited liability company

 

By:

 

/s/ PRATIK SHAH

 

By:

 

                                                     9/9/11

 

 

Name:

 

PRATIK SHAH

 

 

 

Its:

 

 

Title:

 

Manager 

 

 

 

Managing Member 

 

By:

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

Title: